question of protection is to be introduced into the discussion, then it
will be found to tell more forcibly against our opponents. What do they
seek for, but the protection of gold as against silver? They wish, as far
as lies in their power, to boycott silver and throw the world upon gold
alone, even though such a course should change the value of gold. In
trying to boycott silver, they are giving protection to the wealthy
capital class, just as truly as the old corn laws did to the landed owners
of this country. The only difference is that the amounts involved are much
larger and the protected class much richer and the confiscation of the
fruits of the toiler much greater than under the old system of the corn
laws. When the masses of this country awake as those of America have
awakened to the magnitude of this question, they will brush away this idle
talk that we are trying to restore protection." If Mr. Smith were in
Congress instead of Parliament, what a howl there would be about him as an
anarchist!
It being now the unanimous opinion of English statesmen and financiers
that gold has greatly appreciated, and that such enhancement has already
wrought great evil, the important question arises, Will this process
continue? In the speech already quoted Mr. Giffen says: "I am bound to say
that all the evidence seems to me to point to a continuance of the
appreciation. It is impossible to suppose that the movement will not
extend to other countries. All these facts point to a continued pressure
on gold. The better probability seems to be, that the increase of the
purchasing power of gold will continue from the present time."
The Right Hon. A. J. Balfour, now the head of the British Cabinet, in a
speech delivered at Manchester, October 27, 1892, said: "We want two
things of our currency. We require that it shall be a convenient medium of
exchange between different countries, and we require of it that it shall
be a fair and permanent record of obligation over long periods of time. In
both of these great and fundamental requirements of a currency, our
existing currency totally and lamentably fails." After showing that within
fifteen years the money of Great Britain and Ireland had advanced in
purchasing power no less than 30 or 35 per cent., he went on to say that
of its further progressive appreciation "No living man can prophesy the
limit." A little later he spoke of it as progressing "steadily,
continuously, indefinitely," and closed his remarks on that subject in
these words: "If you will show me a system which gives absolute
permanence, I will take it in preference to any other. But of all
conceivable systems of currency, that system is assuredly the worst which
gives you a standard steadily, continuously, indefinitely appreciating,
and which by that very fact throws a burden on every man of enterprise,
upon every man who desires to promote the agricultural or industrial
resources of the country, and benefits no human being whatever but the
owner of fixed debts in gold."
In his work "The Bimetallic Question" Hon. Samuel Smith, M. P., presents
as an evidence of the hardships due to the increasing purchasing power of
money these facts: "The English landlords who borrowed £400,000,000 on
their property, agreeing to pay, let us say, £16,000,000 a year, interest
at 4 per cent., supposing that it represented one-quarter of their rents,
now find, owing to the fall of prices, that it represents one-third, or
even in some cases one-half of their rent.... The factory owner, the mine
owner, the ship owner, who thought it safe twenty years ago to borrow half
the value of his plant in order to find capital for his business, now
finds that the mortgagee is the virtual owner. Nearly all the profits go
to pay the mortgagee's claim, and in many cases he has foreclosed, and
sold out the unhappy borrower, ruined through no fault of his own, but
through the extraordinary sinking of prices. As a matter of fact, I
believe that if all the fixed capital engaged in trade in England could be
valued to-day at its real selling price, it would be found that it would
do little more than pay the mortgages and debts upon it. Trade is very
greatly and injuriously affected by sudden alterations in the standard of
value, especially when the alteration is, as now, towards increased
values. It arises in this way: trade is largely carried on by borrowed
capital, or, in other words, by the use of credit in some shape or other;
the vast banking deposits are mainly loaned to traders; a very great deal
of the invested capital of this country is lent upon mortgages upon
trading property such as ships, factories, and warehouses. A prudent
trader usually considers it safe to draw considerably beyond his floating
capital, and to borrow say 50 per cent. upon his plant or a fixed capital.
Now, the constant decline in prices within the last few years has
virtually swept away his own portion of the capital, and only left him
enough to pay the loans and mortgages. For instance, a ship or a factory
built at a cost of twenty thousand pounds, of which ten thousand were
borrowed, is now worth only twelve thousand pounds, or 40 per cent. less;
and so the mortgage represents five-sixths of the value instead of
one-half, the trader's interest having sunk to two thousand pounds in
place of ten thousand. Probably, if trade is unprofitable, he fails to pay
the interest and the mortgage is foreclosed; the property is forced off at
just sufficient to cover the loan and he is ruined. I have no doubt that
this exactly describes the condition that confronts numbers of traders in
this country and other countries having the gold standard. A great portion
of the commercial capital of the country has passed into the hands of the
mortgagees and bondholders who have neither toiled or spun. The
discouragement this state of things produces is intense. After it has gone
on for several years, a kind of hopelessness oppresses the commercial
community, all enterprise comes to a standstill, many works are closed,
labor is thrown out of employment, and great distress is felt, both among
laborers and the humbler middle class. Indeed, it strikes higher than
this; for multitudes of people who were once prosperous traders have now
become dependent on charity. I know many such myself."
How fitly that describes the condition of the United States to-day. This
was written some years ago, and so rapid has been the subsequent decline
in prices that it almost equals the decline he had estimated for the
fifteen or twenty years preceding the date of his work. And the end is not
yet.
In his comments upon Mr. Goschen's address, delivered in 1883, wherein he
pointed out that in the decade from 1873 to 1883 the annual supply of gold
had decreased in a marked degree, and concurrent with this there was a
marked increase in the demands upon the world's stock of gold, which was
intensified by the substitution of gold for silver as money in Germany and
other countries, Mr. Smith makes the following observations:
"The gold production, which for some years exceeded £30,000,000
annually, has fallen to 19,000,000 a year; and the best
continental authorities, such as Soetbeer and Laveleye, reckon
that more than half that amount is consumed in the arts.
"It may, therefore, be reckoned that since 1873 only some
10,000,000 on the average has been available for currency
purposes.
"But Germany during that period has introduced a gold currency of
80,000,000, the United States has used up 100,000,000, and Italy
has drawn some 20,000,000 for a similar purpose.
"So that 200,000,000 have been drawn for these special purposes,
whereas the whole supply of new gold for coinage has not exceeded
in that time 130,000,000.
"The balance must have been drawn out of existing stocks. Besides,
a steady drain of some 4,000,000 a year has gone to India, further
depleting stock in Europe.
"While trade and population constantly grow and demand more
metallic currency, there is a steadily diminishing quantity to
meet it. If you put the present product of gold at £19,000,000 a
year, and the requirements of the arts at 8,000,000 or 10,000,000
a year, while the India demand is 4,000,000, there is only left
5,000,000 to 7,000,000 a year for Europe, America, and the British
Colonies.
"It will seem to subsequent ages the height of folly that just at
this period, when gold was running short, the chief states of the
world decided to close their mints against silver, and cut off, so
to speak, one-half the money supply of the world from performing
its proper functions.
"Had the world continued to use both metals as freely as before,
the painful crisis we have passed through would have been much
mitigated. But by a suicidal policy silver was cut off at the very
time it was most needed, and a double burden thrown upon gold just
when it was able to bear only half of its former burden.
"As Bismarck has well said, two men were struggling to lie under a
blanket only big enough for one."
Bad as have been the effects of monometallism in England, they have been
far worse in Ireland; and dark as is the future of the former, it is light
itself compared with that evidently in store for the latter. Those
familiar with Irish affairs know that after a long agitation several acts
have been passed to enlarge the rights of tenants and to secure them a
larger share of what they produce. The Act of 1881 reduced the rents and
fixed the amount to be paid at a specific annual sum in money for a long
term of years; and the subsequent Ashbourne Act (so called from Lord
Ashbourne, who introduced it) gave tenants a chance to buy and pay for
lands in fixed yearly installments for forty-nine years. The intent was to
create a peasant ownership somewhat like that of France. It was the end of
a long fight, and was supposed to be a great victory and the inauguration
of a very great reform.
Scarcely, however, was the great victory won and the great reform
inaugurated when it became evident that, owing to the demonetization of
silver and increased purchasing power of gold, the tenants were, in
reality, bound to much heavier payments than before. Whatever may have
been the intent, the tenant, who bound himself to pay a fixed annual sum
as rent for a long term of years, found himself bound to deliver a much
larger share of produce; and the purchaser under the Ashbourne Act found
that what looked so easy in figures soon became impossible in fact, as the
prices of his produce fell so rapidly that each successive payment became
more oppressive until it finally became impossible. Thus it looks now as
if by the appreciation of gold all that was gained for the tenant is more
than lost, and that in the future his condition may be worse than in the
worst days of rack-renting. In recent years this has become plain to those
who have the good of Ireland at heart; they have taken the alarm, and are
outspoken on the threatening evils. Among these is the Most Reverend Dr.
Walsh, Archbishop of Dublin. In a recent interview he says, referring to
the rise in the value of gold:
"All this is indisputable; it is now fully in the public view; yet
not even an attempt is being made in Parliament, or even out of
it, to bring about an equitable readjustment of the conditions
which are proving so disastrous in other nations, conditions too
that are imposed under the provisions of statutes enacted as
measures of protection for the tenants. The Irish Land Acts of
1881, 1885, and 1891 have, nevertheless--as a result of the
increased and increasing value of our present unbalanced and
consequently untrustworthy monetary standard of value--become
fruitful sources of difficulty, and may very soon become fruitful
sources of disaster, to those for whose benefit they were
intended."
Again, referring to the importance of some remedy, possibly that which
bimetallism might provide, he says:
"The adoption of bimetallism or of some equivalent remedy, if
there be any equivalent remedy, is, I am convinced, a matter of
imperative necessity; that is, if the agricultural tenants of
Ireland--and I do not limit this to Ireland--are to be saved from
otherwise irretrievable ruin. If things go on as they are, even
the excellent land purchase scheme, which is associated with the
name of Lord Ashbourne, may become, before many years are over, a
source of widespread disaster to the tenants who have purchased
under it."
Again, in view of the steady and dangerous increase in the burdens of the
obligations entered into under either of the acts referred to, by reason
of the continued enhancement in the price of gold, he says:
"The bimetallists may be right or they may be wrong; but, at all
events, if they are right, then it is noticeably plain that the
Irish tenants who have the misfortune to have their rents fixed
for terms of ten or fifteen years under the Act of 1881, and in
much the same way the Irish tenant purchasers who have the
misfortune to have found themselves saddled with the obligation of
making annual payments fixed for forty-nine years, are simply
sliding down an inclined plane with bankruptcy awaiting them at
the bottom of it."
And again:
"The point, as I have already stated it, is that so long as our
monetary system remains what it is, every one who is placed under
an obligation to make yearly payments of a fixed amount of money
is thereby placed under a burden which is growing heavier from
year to year."
In discussing the question of variability in the purchasing power of gold,
he says:
"The reason of the liability to fluctuation in the purchasing
power of the sovereign is plain: When gold rises in value a larger
quantity of any other commodity, say of corn, of meat, of butter,
or of cloth, will have to be given in exchange for any given
quantity of gold, such, for example, as the quantity contained in
a sovereign. On the other hand, when gold falls in value a smaller
quantity of any other commodity, say of corn, of meat, of butter,
or of cloth, will suffice to obtain in exchange any given quantity
of gold, such as that which is contained in the sovereign. It is
an obvious inference that our gold coinage, however useful as a
medium of exchange, does not furnish us with a standard of value
fixed and unalterable. It does not furnish us, for example, with
such a standard as the yard is of length or as the pound troy is
of weight. The popular notion that the pound sterling constitutes
a fixed standard of value is merely a popular delusion. The sole
foundation for that delusion manifestly is that in these countries
the values of all commodities are commonly stated in terms of a
pound sterling; in other words, in pounds, shillings, and pence; a
shilling being a twentieth part of the pound, and a penny the
twelfth part of that again.
"The natural result of this method of enhancing the value of
commodities other than gold is that when prices rise or fall the
impression is conveyed to a superficial observer that it is the
value of other things that changes, the value of the sovereign
remaining fixed."
Under this head he says again:
"The price of things estimated in gold--their gold price--may
change, whilst their price estimated in silver--their silver
price--remains unaltered. This will occur if the value or
purchasing power of gold goes up or down, while the value or
purchasing power of silver remains unaltered. Suppose, for
instance, that gold is in any way scarce in relation to the
demands upon it. Then, in any country where gold is the standard
metal of the currency, those who wish to obtain, a certain
quantity of gold, whether in coin or in bullion, will have to give
a larger quantity of other commodities in exchange for it; or, to
put the matter in another light, those who have only a definite
commodity to part with will receive less gold in return for that;
in other words, there is a fall in gold prices. Suppose, on the
contrary, that gold is abundant in relation to the demands upon
it, then those who wish to obtain a certain quantity of gold,
whether in currency or in bullion, will not have to give so large
a quantity of other commodities to obtain the quantity of gold
they require; or, to put the matter as before in another light,
those who have a definite quantity of other commodities to dispose
of will obtain more gold in return for them; in other words, there
is a rise in gold prices. If in either case there is no change in
the value of silver, then the price of commodities stated in
silver, that is, their silver price, will remain unchanged."
In referring to the very prevalent notion, especially among the uneducated
classes, that the gold unit of measure of value does not vary, he says:
"As for the tenant purchaser, he probably thinks that after the
extra pressure of the first few years he may look forward to easy
times for the rest of his life. He little knows what is before
him. If things go on as they are, it will be harder for him, ten
or fifteen years hence, to pay forty pounds a year than it would
be to pay fifty pounds a year now; but of all this he knows
nothing--how could he? His only idea is that a pound is always a
pound, and a sovereign is always a sovereign; so, in the belief
that the yearly payment, when it is reduced to forty pounds, will
be well within his reach, he puts his head into the halter."
THE "DUMP" OF SILVER.
All the world will dump its silver on us if we adopt free coinage, says
the monometallist. How much, and where will it come from? asks the
bimetallist. Oh, the world has billions of it ready for us, is the vague
general reply; but when we ask for a bill of particulars we get instead a
fine confusion of prophecy.
One answers that it will come from Spanish America. But we have already
shown that all nations from the Rio Grande to Cape Horn have but
$100,000,000 for their 60,000,000 people. The South Americans have but 83
cents apiece. The Mexicans have $4.54. The Central Americans have $2.14.
And the South Americans have $550,000,000 in paper money, to bring which
to par and maintain it there will require at least $300,000,000 more in
silver than they now have. No "dump" from there.
From France, says another. Well, France has $487,000,000 in silver coin,
and some bullion; only $12.94 per capita in coin, and valued at 15-1/2 to
1 of gold. At her ratio an ounce is worth $1.3336; at ours $1.2929. Will
she rob herself of coin, when she has none too much for business, and sell
it to us at a loss of 4 cents on the dollar and freight charges? Germany
has but $215,000,000 in silver coin, less than half as much as France,
though having 13,000,000 more people, and Great Britain has but half as
much as Germany. All the other Europeans together have much less than
these three nations, and used at a higher valuation than ours. How then
can they "dump" any on us?
From India, say a few. Well, India has a deal of silver--$950,000,000,
according to our Director of the Mint. But she has 296,000,000 people, so
it is but $3.21 apiece. And the best evidence that she has not too much is
found in the fact that she is importing more. China has but $2.08 per
capita; Japan has but $4, and is importing heavily; Australia but $1.49,
and the black and brown races still less. In short, all the world outside
of the United States has but $3,444,900,000 in silver coin, or $2.46 per
capita. It is a plain case that there will be no "dump" from the coined
silver.
But the bullion, the old silver, the scrap heap, will they not ship that
to us by billions? Well, how much is there, and where is it? Will the
nobility and gentry of Europe melt down their family plate, the plain
people everywhere their silver ornaments, and the Hindoos their household
gods, to send us the silver? If so, why did they not do it when a cup, a
watch, or a silver god would buy twice as much gold as now? But the
supposition is absurd. The manufactured articles are worth very much more
than the metal in them, to say nothing of the sentimental value. A prize
silver cup, for instance, won in a great race or regatta, could not be
bought for ten times its weight in gold. There remain, then, only the
scrap heap and the stored bullion, and nobody has been able to locate any
great mass of it. Is it reasonable to suppose that moneyed men have been
storing away silver for years, making no profit on it and losing the
interest, and doing it in the face of a falling market? No, the timid may
be reassured; there will be no "dump."
Another class threaten us that a great mass of securities will be
"unloaded on us." Well, Great Britain, Germany, and Holland, all gold
countries, are the nations which hold practically all the American stock
and bonds held abroad. Of course they did not invest expecting to be paid
principal and interest in coin, for they know that there is not enough in
this country to pay it; it is in commodities that we must pay. So far as
these securities are bad, as we are sorry to say very many are, foreigners
having been badly "plucked" by some of our operators, they will be
returned anyhow. In fact, they are coming back now. As to those which are
good, being held against property capable of earning a steady and reliable
income, they will not be returned. Held in gold countries, the interest
and dividends on them will be paid in our products measured in the
currency of those countries, no matter what our monetary system may be.
But suppose the "prophets" of evil are correct to this extent that silver
and securities will be "dumped" on us to the amount of a billion or two.
Will the foreigners give us all these good things? Assuredly not. They
must all be paid for; and with what? Manifestly with agricultural
products, for there is little or nothing else. The farmer must furnish the
stuff, and he is ready and willing to do it--yes, anxious. At least
three-fourths of our exports are agricultural, and of the new exports
probably seven-eighths would be. We find, moreover, that in 1891
55,131,948 bushels of wheat exported brought us $51,420,272, and in 1892,
157,280,351 bushels brought us $161,399,132, while in 1894 the 88,415,230
bushels exported brought us only $59,407,041, and in 1895, 76,102,704
bushels brought us but $43,805,663. Similarly it may be shown that our
largest cotton exports have brought us the least money; but this is an old
story. It goes without saying, that to the farmer there are three great
factors in the present situation: a ruinously low price for his products,
a tremendous surplus left over from last year, and an immense crop for
this year now adding to the surplus, with no possible home consumption to
give an adequate outlet. Suppose then the "dump" should come and the farm
produce go--what then?
First of all there must come as a result a rise in prices. Farmers
receiving much more money would immediately pay their most pressing debts;
the release of idle money would break the deadlock which now paralyzes
trade, and from the farmer the money would at once be poured into the
channels of rural business. The consumptive demands would be tremendous
because of the long and forced abstinence, and the farmer would supply
himself with those things he has so long wanted. The railroads would have
a vastly increased business, and as a result there would be a greatly
increased demand for labor. Instead of the ruinous "cut in rates" which we
read of almost every day, made in order to stimulate the movement of
crops, we should soon hear of vastly increased shipments at profitable
rates; these of course would soon be followed by increased net earnings,
which would in time create increased values of securities, which again
would check foreign sales and stimulate purchases. There would be a boom
in stocks to dispel the gloom of Wall Street, and we should do the
money-mongers good in spite of themselves.