From the End of the First Cycle of American Influences to the Present
Day, 1660-1894
Up to the close of the eighteenth century the production of silver shows
a remarkable steadiness and uniformity--the decrease on the yield of the
Potosi mines being compensated by the increased output of Mexican
silver. In the condition of the output of gold, however, there is a
perceptible alteration, due to the increasing imports of that metal from
Brazil. The change in the relative production of the two metals appears
from the table on p. 155.
The effect on the ratio of this increased relative and absolute amount
of gold was, however, considerably diminished by the increasing favour
with which gold came to be regarded for currency purposes, from the end
of the seventeenth century onwards. In general terms this process or
tendency in favour of gold continued through the first sixty years of
the eighteenth century, at which time the proportion of gold to the
production of the two metals had risen as high as 40 per cent., whereas
in 1600 it had only formed 17.2 per cent. of the total.
[Sidenote: PRODUCTION OF THE PRECIOUS METALS, 1660-1893]
From 1760, however, such relative preponderance of gold was not
maintained. It gradually sank back until, by the beginning of the
present century, it had come to form only a little over 23 per cent. of
the total. From 1820 to 1840 a recovery took place, but it was not until
the Californian gold discoveries that the second great disturbance in
the relative production of gold and silver took place; such a
disturbance, i.e., as can be fitly compared with that which the
sixteenth century witnessed.
+-----------+--------------+---------------+-----------+--------------+
| | Annual | Annual |Percentage | Percentage |
| Period. | Production | Production |of Gold to | of Silver to |
| | of Gold. | of Silver. | Total. | Total. |
+-----------+--------------+---------------+-----------+--------------+
| 1661-1680 | L1,291,750 | L3,134,150 | 29.2 | 70.7 |
| 1681-1700 | 1,501,700 | 3,179,650 | 31.1 | 67.9 |
| 1701-1720 | 1,788,400 | 3,253,750 | 35.5 | 64.5 |
| 1721-1740 | 2,661,650 | 3,988,600 | 40.0 | 60.0 |
| 1741-1760 | 3,433,100 | 5,038,200 | 40.5 | 59.5 |
| 1761-1780 | 2,888,350 | 6,201,550 | 31.8 | 68.2 |
| 1781-1800 | 2,481,700 | 8,131,300 | 23.4 | 76.6 |
| 1801-1810 | 2,480,000 | 8,002,650 | 23.7 | 76.3 |
| 1811-1820 | 1,596,100 | 4,966,950 | 24.7 | 75.3 |
| 1821-1830 | 1,983 150 | 4,075,950 | 32.4 | 67.6 |
| 1831-1840 | 2,830,300 | 5,278,600 | 34.5 | 65.5 |
| 1841-1850 | 7,638,800 | 6,867,650 | 52.1 | 47.9 |
| 1851-1855 | 27,815,400 | 8,019,350 | 77.6 | 22.4 |
| 1856-1860 | 28,149,950 | 8,235,950 | 77.4 | 22.6 |
| 1861-1865 | 25,816,300 | 9,965,400 | 72.1 | 27.9 |
| 1866-1870 | 27,256,950 | 11,984,800 | 69.4 | 30.6 |
| 1871-1875 | 24,250,000 | 17,250,000 | 58.5 | 41.5 |
| 1876 | 23,150,000 | 18,250,000 | 55.9 | 44.1 |
| 1877 | 25,050,000 | 19,350,000 | 56.4 | 43.6 |
| 1878 | 25,950,000 | 19,750,000 | 56.8 | 43.2 |
| 1879 | 23,350,000 | 19,050,000 | 55.1 | 44.9 |
| 1880 | 22,800,000 | 19,100,000 | 54.4 | 45.6 |
| 1881 | 22,450,000 | 19,800,000 | 53.1 | 46.9 |
| 1882 | 21,450,000 | 20,900,000 | 50.7 | 49.3 |
| 1883 | 20,750,000 | 20,800,000 | 49.9 | 50.1 |
| 1884 | 21,750,000 | 21,850,000 | 49.9 | 50.1 |
| 1885 | 21,750,000 | 21,850,000 | 49.9 | 50.1 |
| 1886 | 22,450,000 | 20,300,000 | 52.5 | 47.5 |
| 1887 | 22,050,000 | 21,950,000 | 50.1 | 49.9 |
| 1888 | 22,950,000 | 23,850,000 | 49.0 | 51.0 |
| 1889 | 24,600,000 | 26,750,000 | 47.9 | 52.1 |
| 1890 | 24,360,000 | 26,620,000 | 47.8 | 52.2 |
| 1891 | 29,000,000 | 36,567,629 | 42.4 | 57.6 |
| 1892 | 30,164,536 | 40,668,247 | 42.5 | 57.5 |
| 1893 | 32,066,591 | 42,963,027 | 42.7 | 57.3[D] |
+-----------+--------------+---------------+-----------+--------------+
[Footnote D: The figures for the last three years are taken from the
Report of the Hon. R.E. Preston, director of the United States Mint,
1893 (_Report on the Production of the Precious Metals_, pp. 274-5). See
_ibid_. for a most carefully compiled table of the production of the
precious metals from 1493 to 1893, differing from the above in material
details.]
As far as this _relative_ production is concerned, the period,
1660-1840, is one of gradual and not abnormal variation, neither small
nor inconsiderable in effect, but certainly not revolution-working, as
had been the case in the sixteenth century with American silver, and as
was to be in the nineteenth century with Californian and Australian
gold, and in our own days with American silver for the second time.
With regard to the _absolute_ production--gold shows a rise up to 1760,
then a steady decline to 1820, followed by a second rise up to 1840. In
the case of silver the decline in the absolute amount was steady from
1600 to 1680, then ensued a steady and strong rise to 1800, followed by
an abrupt drop in the second decade of the present century, and then by
a strong and steady recovery, commencing from 1830 and continuing until
the present.
[Sidenote: WIDE EFFECT OF MINT LAWS]
The larger question of the relative distribution of this mass of
precious metals depends for its determination upon a full understanding
of the law of the various Mints. Speaking in large, during the
eighteenth century the Mint ratio was in favour of silver in France, and
her currency was almost entirely silver throughout the century;
conversely the Mints favoured gold in England and Spain, and gold was
almost the only constituent of the currency of either country for the
greater part of the century. There can be little doubt that these simple
facts had a great influence in actually determining the great currency
legislation which closed the century and finally decided England in
favour of gold, and France and the United States in favour of a
bimetallism strongly favouring silver.
The statement of the ratio is as follows:--
South-West Germany.
1657-80 15.10
Netherlands.
1663 14.43
England.
1663 14.48
1690 15.39
1715 15.21
France.
1679 14.91
COMMERCIAL STATEMENT OF THE RATIO (FROM 1687-1832, FROM THE HAMBURG
EXCHANGE RATIO; FROM 1833 ONWARDS, FROM THE LONDON BULLION
BROKERS' RATIO).
+----------+---------+
| 1687-8 | 14.94 |
| 1689-90 | 15.02 |
| 1691 | 14.98 |
| 1692 | 14.92 |
| 1693 | 14.83 |
| 1694 | 14.87 |
| 1695 | 15.02 |
| 1696 | 15.00 |
| 1697 | 15.20 |
| 1698 | 15.07 |
| 1699 | 14.94 |
| 1700 | 14.81 |
| 1701 | 15.07 |
| 1702 | 15.52 |
| 1703 | 15.17 |
| 1704 | 15.22 |
| 1705 | 15.11 |
| 1706 | 15.27 |
| 1707 | 15.44 |
| 1708 | 15.41 |
| 1709 | 15.31 |
| 1710 | 15.22 |
| 1711 | 15.29 |
| 1712 | 15.31 |
| 1713 | 15.24 |
| 1714 | 15.13 |
| 1715 | 15.11 |
| 1716 | 15.09 |
| 1717 | 15.13 |
| 1718 | 15.11 |
| 1719 | 15.09 |
| 1720 | 15.04 |
| 1721 | 15.05 |
| 1722 | 15.17 |
| 1723 | 15.20 |
| 1724-25 | 15.11 |
| 1726 | 15.15 |
| 1727 | 15.24 |
| 1728 | 15.11 |
| 1729 | 14.92 |
| 1730 | 14.81 |
| 1731 | 14.94 |
| 1732 | 15.09 |
| 1733 | 15.18 |
| 1734 | 15.39 |
| 1735 | 15.41 |
| 1736 | 15.18 |
| 1737 | 15.02 |
| 1738-9 | 14.91 |
| 1740 | 14.94 |
| 1741 | 14.92 |
| 1742-3 | 14.85 |
| 1744 | 14.87 |
| 1745 | 14.98 |
| 1746 | 15.13 |
| 1747 | 15.26 |
| 1748 | 15.11 |
| 1749 | 14.80 |
| 1750 | 14.55 |
| 1751 | 14.39 |
| 1752-3 | 14.54 |
| 1754 | 14.48 |
| 1755 | 14.68 |
| 1756 | 14.94 |
| 1757 | 14.87 |
| 1758 | 14.85 |
| 1759 | 14.15 |
| 1760 | 14.14 |
| 1761 | 14.54 |
| 1762 | 15.27 |
| 1763 | 14.99 |
| 1764 | 14.70 |
| 1765 | 14.83 |
| 1766 | 14.80 |
| 1767 | 14.85 |
| 1768 | 14.80 |
| 1769 | 14.72 |
| 1770 | 14.62 |
| 1771 | 14.66 |
| 1772 | 14.52 |
| 1773-4 | 14.62 |
| 1775 | 14.72 |
| 1776 | 14.55 |
| 1777 | 14.54 |
| 1778 | 14.68 |
| 1779 | 14.80 |
| 1780 | 14.72 |
| 1781 | 14.78 |
| 1782 | 14.42 |
| 1783 | 14.48 |
| 1784 | 14.70 |
| 1785 | 14.92 |
| 1786 | 14.96 |
| 1787 | 14.92 |
| 1788 | 14.65 |
| 1789 | 14.75 |
| 1790 | 15.04 |
| 1791 | 15.05 |
| 1792 | 15.17 |
| 1793 | 15.00 |
| 1794 | 15.37 |
| 1795 | 15.55 |
| 1796 | 15.65 |
| 1797 | 15.41 |
| 1798 | 15.59 |
| 1799 | 15.74 |
| 1800 | 15.68 |
| 1801 | 15.46 |
| 1802 | 15.26 |
| 1803-4 | 15.41 |
| 1805 | 15.79 |
| 1806 | 15.52 |
| 1807 | 15.43 |
| 1808 | 16.08 |
| 1809 | 15.96 |
| 1810 | 15.77 |
| 1811 | 15.53 |
| 1812 | 16.11 |
| 1813 | 16.25 |
| 1814 | 15.04 |
| 1815 | 15.26 |
| 1816 | 15.28 |
| 1817 | 15.11 |
| 1818 | 15.35 |
| 1819 | 15.33 |
| 1820 | 15.62 |
| 1821 | 15.95 |
| 1822 | 15.80 |
| 1823 | 15.84 |
| 1824 | 15.82 |
| 1825 | 15.70 |
| 1826 | 15.76 |
| 1827 | 15.74 |
| 1828-9 | 15.78 |
| 1830 | 15.82 |
| 1831 | 15.72 |
| 1832 | 15.73 |
+----------+---------+
[Sidenote: STATEMENT OF THE RATIO, 1660-1893]
+---------+------------+--------++---------+------------+--------+
| | Price of | || | Price of | |
| Year. |Silver Pence| Ratio. || Year. |Silver Pence| Ratio. |
| | per Oz. | || | per Oz. | |
+---------+------------+--------++---------+------------+--------+
| 1833 | 59-3/16 | 15.93 || 1864 | 61-3/8 | 15.37 |
| 1834 | 59-15/16 | 15.73 || 1865 | 61-1/16 | 15.44 |
| 1835 | 59-11/16 | 15.80 || 1866 | 61-1/8 | 15.43 |
| 1836 | 60 | 15.72 || 1867 | 60-9/16 | 15.57 |
| 1837 | 59-9/16 | 15.83 || 1868 | 60-1/2 | 15.59 |
| 1838 | 59-1/2 | 15.85 || 1869 | 60-7/16 | 15.60 |
| 1839-40 | 60-3/8 | 15.62 || 1870 | 60-9/16 | 15.57 |
| 1841 | 60-1/16 | 15.70 || 1871 | 60-8/16 | 15.57 |
| 1842 | 59-7/16 | 15.87 || 1872 | 60-1/4 | 15.65 |
| 1843 | 59-3/16 | 15.93 || 1873 | 59-1/4 | 15.92 |
| 1844 | 59-1/2 | 15.85 || 1874 | 58-5/16 | 16.17 |
| 1845 | 59-1/4 | 15.92 || 1875 | 56-3/4 | 16.62 |
| 1846 | 59-5/16 | 15.90 || 1876 | 53-1/16 | 17.77 |
| 1847 | 59-11/16 | 15.80 || 1877 | 54-3/4 | 17.22 |
| 1848 | 59-1/2 | 15.85 || 1878 | 52-5/8 | 17.92 |
| 1849 | 59-3/4 | 15.78 || 1879 | 51-1/4 | 18.39 |
| 1850 | 60-1/16 | 15.70 || 1880 | 52-1/4 | 18.04 |
| 1851 | 61 | 15.46 || 1881 | 51-11/16 | 18.24 |
| 1852 | 60-1/2 | 15.59 || 1882 | 51-5/8 | 18.25 |
| 1853 | 61-1/2 | 15.33 || 1883 | 50-9/16 | 18.65 |
| 1854 | 61-1/2 | 15.33 || 1884 | 50-5/8 | 18.63 |
| 1855 | 61-5/16 | 15.38 || 1885 | 48-5/8 | 19.39 |
| 1856 | 61-5/16 | 15.38 || 1886 | 45-3/8 | 20.73 |
| 1857 | 61-3/4 | 15.27 || 1887 | 44-5/8 | 21.13 |
| 1858 | 61-5/16 | 15.38 || 1888 | 42-7/8 | 21.99 |
| 1859 | 62-1/16 | 15.19 || 1889 | 42-11/16 | 22.09 |
| 1860 | 61-11/16 | 15.29 || 1890 | 47-11/16 | 19.17 |
| 1861 | 60-13/16 | 15.26 || 1891 | 45-1/16 | 20.92 |
| 1862 | 61-7/16 | 15.35 || 1892 | 39-3/4 | 23.74 |
| 1863 | 61-3/8 | 15.37 || 1893 | 35-9/16 | 26.49 |
+---------+------------+--------++---------+------------+--------+
| |
| Up to 1878 this table is derived from Soetbeer, |
| _Edelmetall-Produktion_, pp. 130-2. |
| From 1878-1890 I have calculated simply in accordance with |
| Soetbeer's method. |
| |
| The figures for 1891-3 are taken from the United States Mint |
| Report, 1893, already referred to, p. 251. In the table there |
| printed the director of the Mint gives slightly different |
| figures for several years from 1872 onwards. |
+----------------------------------------------------------------+
As far as the conditions of production of the precious metals are
concerned, and the connection between those conditions and the ratio,
there is historic and understandable continuity between the period
already passed in review and modern times. In the method of expressing
that ratio, however, there is a remarkable difference.
[Sidenote: EVOLUTION OF THE MODERN SYSTEM]
With the close of the seventeenth century the advantage of the process
of altering the denomination of the coinage, of diminishing the content
and reducing the standard of fineness, began to be impugned on theoretic
grounds, and in the course of the eighteenth century that process itself
fell into disuse. Since that time no Mint or legislative change such as
we have hitherto described was made on the expressed value or content of
any European coinage. Bearing in mind the twofold importance which was
attached to that process of legislative guarding of the currency, this
change must be regarded as of vital import. The legislator, from the
middle of the fourteenth century, had attempted two things by this
mechanism--(1) to follow the general rise of prices, and meet it by
reducing the contents of the coins in such proportion as he thought fit;
(2) to prevent any disastrous outflow of the precious metals by altering
the ratio. The control of the Mint rates of metal-purchase and
metal-coinage was, therefore, a matter of importance financially and
politically to the nation, and economically to international commerce.
In just such measure, therefore, was the entire ceasing of this State
control of the mechanism of international exchange and currency a matter
of almost incalculable significance in the history of the European
monetary system. In the domain of finance it effected a revolution as
signal as that produced in the relations of labour to capital by the
disuse of the old labour laws. The ceasing of the artificial arbitrary
Mint rates made way for a naturally determined or _commercial_ ratio,
and the regulation of the international flow of the precious metals was
left to the oscillation of trade balances, and to the action of interest
rates and discount. The change is one from a mediaeval, State-bound,
merely legislative system to the modern system, in which the flow of
precious metals is determined by the perfectly natural and automatic
action of international trade--is indeed the index and safety-valve of
it, and of the whole present commercial world-circle.
This was not merely a change of fact and practice, it was a revolution
of theory.
For before the old State belief in the necessity of safeguarding the
supply of precious metals at any cost and consideration could go by the
board, the whole Mercantile Theory must have lost its force in men's
minds.
In the domain of theory the transition from the Mercantile to the modern
system was gradual, through the various intermediate steps of
Physiocratic and Smithian economics, and the complete abandonment of
that system for our own can only be put very late, if indeed its period
can at all yet be written, for modern Protectionist ideas are only a
lusty survival of it. In the domain of financial practice, however,
it--the mercantile system--ceased from the moment that the Governments
of Europe left their Mint rates stationary, and gave the flow of the
precious metals and the declaration of the ratio to the free unhampered
natural action of international trade. The steps of the completed
process can hardly be detailed, for there was much fear attending it,
and the various Governments frequently retraced their steps in
uncertainty. The earliest direct enactment was made by England. By the
Act of 15 Charles II., chap. 7, sect. 12 (1663), the statutes forbidding
the exportation of bullion were removed at one blow of astounding
boldness. "Forasmuch," says this Act, "as several considerable and
advantageous trades cannot be conveniently driven and carried on without
the species of money or bullion, _and that it is found by experience
that they are carried in greatest abundance (as to a common market) to
such places as give free liberty for exporting the same_, and the better
to keep in and increase the current coin of this kingdom, be it enacted
that from and after the 1st day of August 1663 it shall and may be
lawful to and for any person or persons whatsoever to export out of any
port of England and Wales in which there is a customer or collector, or
out of the town of Berwick, all sorts of foreign coin or bullion of gold
or silver, first making an entry thereof in such customhouse
respectively, without paying any duty, custom, poundage, or fee for the
same, any law, statute, or usage to the contrary notwithstanding."
[Sidenote: FREE TRADE IN THE PRECIOUS METALS]
Standing so early and so almost completely alone as it does, this Act
evinces an unexampled prescience and boldness. It doubtless reflects the
commercial traditions of Holland, but that it should have been at a
single stroke transferred to England at a time when she was so
economically different and distant from Holland, needs make us pause in
admiration. The only parallel to it, if any, would arise if France
should suddenly, and by a single enactment, adopt to the full the Free
Trade policy of England. As a matter of fact this Act of 1663 proved
itself for a long time, and through many oscillations, impossible of
execution, and far into the eighteenth century the British Government
meddled, by legislation and proclamation, with the export of the
precious metals, and with the tariff of the coins, as will be seen
immediately. It was not till 1780 that a similar Act was passed for
Ireland.
In 1803 the Lords of the Treasury were by statute authorised to grant
licences for the exportation of silver bullion without any such
certificate or document whatsoever as had been required by the statute
of 6 and 7 Wm. III. c. 17, sect. 5.
It was almost a century after this action of England that France
followed in the same path. By a proclamation of 7th October 1755,
permission was given to the free commerce in precious metals and in
foreign monies. But in the case of France, as in that of England, the
enactment was not immediately nor fully realisable. The exportation of
the national specie was still forbidden, and more than once the State
found itself obliged to return to the question of the tariffing of its
coinage.
It is this vacillation--a vacillation, however, which must in every
instance be attributed to sheer State necessity--which makes it
impossible to trace in detail and point by point the fall of so much of
the Mercantile System as concerned the regulating of international
movements of metals. The _practice_ of the commercial world was
doubtless in advance of the legislator's standpoint, as indicated by
such detached references, and was effectual in completing the revolution
silently and under the surface, whether by the aid or in spite of laws
and proclamations. The same had been the case, e.g., with the old usury
laws.
When effected there are two highly important results which stand as the
outcome of this change in the theory of international commerce.
1. The perception of a right theory of international balances opened the
way to the separation of finance or currency phenomena pure and simple,
and so prepared the ground for a scientific conception and treatment of
them. In one direction this treatment resulted in the evolution of a
theory and practice of a monometallic system--one, i.e., in which a
single metal was made the legal tender, and a second or third metal
bound to it in a hard-and-fast, subordinate relationship, so that they
could not by their oscillations injuriously affect the tenderable metal.
In another direction the same scientific conception and treatment
resulted in the evolution (and after a time the practice) of a
bimetallic theory. Modern currency history hinges on the antagonism of
these two systems.
[Sidenote: FUNCTION OF DISCOUNTS IN MODERN SYSTEM]
This statement of the case will serve to show the enormous difference
between nineteenth-century currency situations and problems and those of
mediaeval and seventeenth-century Europe. To-day the point at issue is
between definitely and scientifically conceived rival theories, and the
_practical_ difficulty before the world is how to provide, not so much a
permanent ratio, as a permanent rate of international settlement between
countries using different monetary systems, between silver-using and
gold-using countries. In the seventeenth century there was no conception
of theory at all, and the practical difficulty was how to frustrate the
operations of the bullionist and arbitragist and politicians, and the
depletion of national treasure due to their activity, and based on a
difference of ratio prevailing in different countries.
2. The second practical outcome of the revolution was the development of
the modern system of control of the flow of gold balances, viz. by means
of the bank rate and the arbitrage transactions depending thereon, and
on interest and discount rates generally.
The modern theory of international trade does not say that between two
particular countries, or at any one particular point of time there is an
equivalence of exchange, but that between a circle of commercially
interconnected countries, and over a certain cycle of time or
operations, there is an equivalence of exchange of goods and services.
Movements of currency in the most elementary form assist the process, as
far as immediate settlements are concerned; bills of exchange assist it
when there is need of deferred payments, as, for instance, when a
country imports steadily all the year round, but has only one export
time, say after harvest; and, finally, bank and discount rates assist
the process by providing currency media at times and places which would
otherwise be unable to attract a supply. Over the whole circle of
completed operations there is equilibrium of exchange, and the machinery
by which that equilibrium is accomplished is currency in the widest
sense. The index or indicator and safety-valve of the whole is the rate
of interest. On these bank rates are based the operations of the modern
bullion dealers or arbitragists, which serve to equalise or economise
the distribution of the precious metals all over the world.
It will be seen at a glance, therefore, that they fulfil, in an
automatic and perfectly natural manner, all that was vainly attempted to
be accomplished by the repressive savage action of the State, and the
interfering unscientific handling of the Mint and coinage rates. It is
in this feature that the great distinction between the modern and the
seventeenth-century world consists. Such a difference can only be based
upon, and have arisen from, a true theory of international trade. But
the process of development which alone made it possible--the development
of modern banking, the invention of paper currency media, the breaking
down of international trade restrictions, all the mechanical and
scientific inventions which have resulted in the binding of the world
together in one whole as far as commerce is concerned,--all this would
comprise in brief the essential features of the complete commercial
development of two centuries or more, and how far they are related as
cause or effect it would be hard to say.
In this secondary period, therefore, the separate history of each
individual state gradually loses its distinct or isolated importance, as
far as mere Mint edicts are concerned. As a consequence the bimetallic
action which we have hitherto sought in the history of each individual
currency must now increasingly be sought in the wider field of the world
currency, that congeries or completed whole of currency of which each
national system now forms only a part, and that not an independent part.
France.
In this third period the first change which France made in her silver
monies was in 1674, when she for a time coined 4-sol. pieces of a
quality below that of the _ecus blancs_ by more than a fifth. A great
outcry was made by the Mint officers and mercantile community against
this money as implying a debasement.
In 1679 there was a noticeable quantity of Spanish _pistoles_ and large
_ecus d'or_ in circulation, and as a remedy it was ordered that they
should be recoined into _louis d'or_ and _louis d'argent,_ the King
offering to forego the seignorage as an inducement to bring them to the
Mint. In 1686, however, the louis d'or itself was raised from 10 livres
to 11 livres 10 sols., and the ratio thus changed to 15-1/2. This being
found greatly in excess, in the following year it was lowered to 11
livres 5 sols. (a ratio of 15-1/4). In 1689 both silver and gold were
again raised, the _louis d'or_ to 11 livres 12 sols. and the _louis
d'argent_ to 3 livres 2 sols., but almost immediately a general
recoinage was resolved upon. In this great operation, effected towards
the close of 1689, the weight and standard of the previous coinage was
exactly retained, but the louis d'or was issued at 12 livres 10 sols.
and the louis d'argent at 3 livres 6 sols. Only two years later again
the standard had to be altered, and the value of 1693 somewhat raised.
It will give some slight idea of the sapping of the coinage that the
pieces which in 1691 were minted at 12 livres 10 sols. were, in 1693,
called in at a valuation of 11 livres 14 sols. The new species of 1693
were issued at 13 livres and 3 livres 8 sols. respectively.
[Sidenote: FRANCE: THE REFORM OF 1726]
Ten years later a third recoinage was ordered, the louis d'or being
issued at 15 livres, and the louis d'argent at 4 livres. By 1709 these
species had sunk in equivalence to 12 livres 15 sols. and 3 livres 8
sols. respectively. In that same year, however, their issue value was
raised to 20 livres and 5 livres. This extraordinary and arbitrary
action was greatly to the detriment of French commerce, and the idea was
entertained of gradually reinducing the standard of 14 livres and 3
livres 10 sols. This was ordered by proclamation of 30th September 1713,
which was to continue in force till 1715. In the latter year a
reformation of the coinage was again undertaken, the reformed species
rising to 20 livres and 5 livres, and the worn species remaining at 16
livres and 4 livres. From this latter date up to 1721 the operations of
the financier John Law wrought great disasters in the monies. At the
time of the erection of the bank, 2nd May 1716, there were four species
of _louis d'or_ and three of _louis d'argent_. By 1720 the former had
grown to forty in number and the latter to ten. (For the disorders of
the period of John Law, see the account of French monetary system,
Appendix VI.) It was to remedy this disorder that the great edict of
1726 was enacted. This edict, which formed the basis of the French
currency system almost up to the days of the Revolution, prescribed the
minting of louis d'or at a tale of 30 to the mark, and issued at a value
of 20 livres; and of silver ecus at 8-3/10 to the mark and issued at 5
livres--divisional coins in proportion. The legal ratio was therefore
14-5/8. All foreign coins and the ancient species of gold and silver
were decried, and ordered to be brought in for reminting. All the
prohibitive regulations of an old regime against cutting and export,
etc., were re-enacted with severest penalties. But as the rate at which
the Mint was ordered to take in the old coinage did not represent the
commercial value at the moment, the old coins were not brought in, and
up to as late as 1749 the recoinage had not been accomplished, although
the Mint prices had been at different times advanced on the whole a
matter of 30 per cent. or more. In 1759 the want of currency had become
so great that the King sent his plate to the Mint, and numbers of
private individuals followed his example, receiving in reimbursement
part payment at the rate of 861 livres 5 sols. 10 den. for the mark of
fine gold, and of 59 livres 5 sols. 10 den. for the mark of fine silver.
This latter tariff underwent no change until 1771, when, under the
pretext of the changes which foreign coinage tariffs had undergone,
those terms were fixed respectively at 709 livres and 48 livres 9 sols.
In this resume the mention of billon money has been generally avoided,
as unduly complicating the subject. But in the legislative action of
France in the eighteenth century there is one act which necessitates a
momentary departure from this standpoint.
In 1738 the Government of the United Provinces diminished the value of
their _sols._ by one-half. The French Government fearing that this
diminution would lead to an immense influx of such sols. decided to
follow suit. By a decree of August 1st of the same year, 1738, it was
ordered that the _Douzains_ and pieces of thirty deniers should have
course only for eighteen deniers. The important point to notice in
connection with this is that, in order to mitigate the effect of this
reduction, the same decree limited the tender of such billon money. It
was ordered that in payments up to 400 livres not more than 10 livres
should be tenderable in billon, and for payments of more than 400 livres
not more than 1/40 of the total. The restriction was ineffectual in
preventing either the import of foreign billon specie or the operations
of billonage or arbitrage, based on the differentiated value of the
various kinds of billon circulating. This is quite evident from the
preamble of the edict of the following October, 1738, which attempted
the calling in of the 30-denier pieces, in order to put a stop to the
process.
[Sidenote: FRANCE: THE REFORM OF 1785]
Such a failure is quite in keeping with all previous experience as
recorded in these pages, and deserves no special reference. The point to
note is rather the gradual evolution and adoption of the idea of
limiting the tender of the lower species, so as to contract their action
on the main species of the currency. This idea forms the complement of
the idea of an agio, involved in the issue of fractional coins on a
lower standard or basis than that of the greater specie. The one idea
was--in long, over-long, periods i.e.--impracticable without the other;
but together, when finally evolved, thoroughly seized and put in
practice, they formed the main basis of the truest modern currency
system.
To return to the pure gold and silver species. The basis of 1726
remained at law unaltered until 1785. The edict of the 30th October of
that year commanded a recoinage; no change was made in the silver
coinage, which remained according to the tariff of May 1773, namely, 52
livres 9 sols. 2 den. to the mark fine. By the alteration of the tariff
of gold, however, to 828 livres 12 sols. to the mark fine, the ratio of
14-5/8, which had nominally prevailed since 1726, was altered to the
memorable 15-1/2. The reason was explicitly stated to be the increase in
the value of gold during several preceding years--an increase which had
banished or detained gold from the French Mint and even from France.
Writing in 1785, the minister, Calonne, who proposed and executed the
recoinage in that year, spoke thus:--
"In 1726 the legal ratio was fixed in France at 14 marks 5 oz. of
silver, to a mark of gold, and that which proves with how much sagacity
this point was seized is the fact that during a long course of years
France retained in her circulating medium a sufficiently large
proportion of each metal. Nevertheless, her gold gradually became less
common, and for some years this scarcity has rapidly increased, and this
precisely because its legal value has always remained the same, while
its metallic value has increased from year to year."
He estimated the amount of livres in _louis d'or_ existing in the
country at the time of the recoinage, 1785, as 650 million livres, which
amounted to only a half of the total coinage (1300 million livres) of
the period 1726-85. What seems to have determined Calonne to adopt
15-1/2 was the fact that Spain had the legal ratio of 16, and that there
was a probability that, in future, gold would rise in value. As for the
market price, he admits that it was only 15.08-15.12 in 1785. The
recoinage, therefore, brought a profit of 7,255,216 livres to the King's
purse, and a profit of 21,600,000 livres to the holders of the old
_louis d'or_.
[Sidenote: FRANCE: CALONNE'S POLICY IN 1785]
His policy was severely criticised in a report made in 1790 to the
National Assembly, which proposed a silver standard, with an authorised
circulation of gold coins at the ratio of 14-7/9 and the abolition of
seigniorage. It is well known that this was nearer to the market rate.
Calonne's ratio, therefore, must be regarded as arbitrary and designing.
Practically, the latter recommendation of the committee's paper of 1790
had been conceded in the decree of 30th October 1785, as the seigniorage
was by it allowed to be no more than the net cost of reminting.
By this celebrated edict of Calonne's, which also enacted a recoinage,
the right of seigniorage was practically finally relinquished for
France. Fixity was given to silver as the principal money, and a
definite ratio was established at which gold was to circulate by its
side. In these, its chief points or characteristics, it formed the exact
model for the later Act of Republican France, which is ignorantly looked
upon as having created the bimetallic system. The Act of 7 Germinal an
XI. did but re-enact and perpetuate the edict of 1785.
It is important to reaffirm and emphasise this point, as quite wild and
blind estimates have been formed of the later action of Republican
France. In merest fact, that later action created no new order, it
instituted no new idea, it did not even promulgate its own theory.
[Sidenote: FRANCE: CURRENCY LEGISLATION AT REVOLUTION]
Republican France began her reform of the currency in a very temporary
and opportunist manner by issuing a mass of inferior monies of 15 and
30 sous pieces to form the basis of the assignats, and to replace the
gold and silver which had almost entirely disappeared from circulation.
In the decree of 16 Vendemiere an II. (7th October 1793), however, the
question of standard was approached, and decided in a remarkable manner.
The monetary unit was decreed to consist of the hundredth part of a
kilogram, named _grave_, represented (1) by a piece of silver 9/10 fine
and weighing 10 grms., (2) by a piece of gold of the same weight and
standard, to be current at 15 times the value of the silver piece.
This decree remained a dead letter, and two years later the _franc_ was
definitively adopted as the base of the French system. As determined by
the two laws of 28 Thermidor an III. (15th August 1795), that system was
based upon the silver franc (weighing 5 grms. 9/10 fine). A gold coinage
was ordained, of the same fineness, in a piece of 10 grms. weight, but
the ratio of value of the gold to the unit franc was not fixed. This was
exactly the monetary system which Mirabeau had counselled in his memoirs
to the Assembly in 1790. The silver _5-franc_ pieces prescribed under
this system found acceptance, the bronze pieces were refused and had to
be withdrawn, and as to the gold piece, its issue was not even
attempted. Two years later the "Directoire" pronounced in favour of
maintaining the 10-grm. piece of gold, but demanded the fixation of its
value, proposing a ratio of 16:1. In opposition to this scheme, Prieur
submitted to the "Council of the Five Hundred" a project adopting the
silver and gold coinage, as already determined as above, but leaving the
value of the gold piece to fluctuate according to the market, its value
being declared twice annually by public announcement. After being
materially altered in the "Council of the Five Hundred," this scheme was
definitively rejected by the "Council of Senators," and for several
years the question of the monetary system of the Republic was allowed to
slumber. When, in the year X., the consideration of the subject was
resumed, it was at the instigation of the Consuls. At their desire the
Minister of Finance, Gaudin, laid before the Council of State a scheme
in which he proposed the issue of 20 and 40-franc gold pieces, of a
value based on the ratio enunciated in the edict of 1785, namely,
15-1/2. He was, at the same time, careful to explain that silver
remained the basis of the currency, and that the gold money could be
reissued if a different market compelled a change in the ratio. In his
report to the Consuls, Gaudin admits that the commercial ratio had for a
long time been under 15. The decisive point which led him to maintain
the ratio established in 1785 was, that to change the _status quo_ by
the adoption of 15 as a ratio would occasion great loss to the holder of
gold coins, and that there was no sufficient reason for so great a
change.
The Financial Committee of the Council of State at first rejected the
scheme, preferring that of Prieur, already described, but on an
inquest, ordered by the First Consul, who insisted on pressing the
matter to a conclusion, M. Gaudin carried his propositions through the
Council of State, but with the important difference that the reference
to any future change in the ratio of gold to the basis of silver was
tacitly dropped. These propositions became the foundation of the law of
7-17 Germinal an XI. (28th March 1803), on which the monetary system of
Republican France was finally built.
The _expose des motifs_ of this law speaks of the gold coins in these
words:--
"The gold pieces up to the present in circulation are the pieces of 24
and 48 livres tournois. Article 6 of this law substitutes in their place
pieces of 20 and 40 francs. The adoption of the decimal system
necessitates this change, which brings all parts of the system into
accord. It is on the same consideration that the standard is fixed at
9/10, like that of silver."
Not a word is said as to the ratio, and much more stress is laid upon
the suppression of billon money and on the abolition of seigniorage, as
of greater importance and benefit to the nation's interests. By this law
of Germinal XI. the monetary unit of the French system was declared to
be the silver franc, weighing 5 grms. of 9/10 standard. By the side of
this franc and its multiples, were to be issued gold pieces of 20 and 40
francs, valued on a basis ratio of 15-1/2 to the silver.
[Sidenote: FRANCE: THE REFORM OF 1803]
It will be seen at a glance from the course of this previous history
that this law instituted no new principle, or theory, or system in
French currency. The decimal system was adopted in place of the old
system of livres tournois, seigniorage was abolished, and fixation of
value given to the unit money, and billon money discontinued. But in
matter of standard and system there was not even innovation. The system
of Republican France, as established by this law, was no more and no
less bimetallic than in 1785, or than in 1610, or in the days of Francis
I. Theories as such did not occupy the mind of the legislator, and of
any conception of a bimetallic theory or system such as we have learned
to know there is no trace. The First Consul found at hand the two metals
which had formed the currency of his country for centuries. The problem
of their regulation was the same which had been faced by his
predecessors for centuries, and he settled it in the same practical
untheoretic way.
It was only gradually that in its totality of coins the French monetary
system was made to conform to the metric system thus established. The
old gold coins of 12, 24, and 48 livres were not suppressed until June
1829, the actual extinction of billon money was only accomplished in
1845, and the recoinage of the inferior monies in 1852-56. But such are
mere matters of detail and apart from the subject.
The experience of France under this new regime is, therefore, in no wise
different _in kind_ from such experience as has been described for the
preceding centuries. It is not until the broaching of a bimetallic
theory as such, and until the expression of that theory, as a theory, in
the formation of the Latin Union, that anything like a special
significance attaches to the monetary system and experience of France in
the nineteenth century, any more, e.g., than in the seventeenth. The
main difference in the situation was not that France had changed her
system, and that her experience was henceforth different and of
different signification, but that England had changed hers, and that the
brunt of the fluctuations of the precious metals about a fixed ratio was
left to be borne by a smaller area. The influence and the instance is,
therefore, more telling in degree, but in no way different in kind.
The second idea which is commonly entertained with regard to the action
of France during this later period, viz. that her action secured for the
world at large a fixed and steady ratio, is equally--indeed, still
more--fallacious. At no point of time during the present century has the
actual market ratio, dependent on the commercial value of silver,
corresponded with the French ratio of 15-1/2, and at no point of time
has France been free from the disastrous influence of that want of
correspondence between the legal and the commercial ratio. The opposite
notion, which prevails and finds expression in the ephemeral bimetallic
literature of to-day, is simply due to ignorance. From 1815 England has
been withdrawn from this action of a bimetallic law, and the modern
insular pamphleteer has before his eyes no sign of its workings in his
own country. He therefore assumes an universality of such experience,
and attributes it to the French legislative ratio. It is in no polemic
spirit, but simply in the interest of science that this particular
misapplication of history to the squaring of a theory is to be branded.
The plainest facts of history are thereby absolutely misrepresented, and
the assumption of cause and effect is so far from being true that the
repose of the English currency history in the nineteenth century is to
be attributed to the _absence_ of a bimetallic system; to its despite
rather than its presence and influence. To instance only by France for
the moment.
[Sidenote: FRANCE: COURSE OF THE RATIO]
The course of the actual or market ratio has been already stated in the
table (_supra_, pp. 157-59). In the graphic representation of this
(_opposite_) the legal ratio of 15-1/2 is represented by the fixed line
_x.y._, the actual ratio by the fluctuating black line _z_. At no point
do these lines coincide. After three years of fluctuations, 1803-06, now
above and now below, the ratio sinks persistently below for seven years,
1807-13, touching the lowest point (a ratio of 16.24) in 1813. For the
succeeding five or six years, 1813-19, the ratio was as consistently
above the legal rate, though with less violence and width of divergence.
From the latter year, 1819, up to 1850, its course was undeviatingly
below 15-1/2, then from 1851-67--the period, i.e., of the great gold
outputs of Australia and America--as undeviatingly above. From the
last-named date until the close of the bimetallic system in France, and,
indeed, up to our own days, the course of the commercial ratio has been
again unbrokenly below the 15-1/2 ratio, and, as is too well known, with
an ever-increasing enormity of divergence.
So much for the claim that the French law has dowered the world with a
steady ratio.
_Secondly_, what has been the influence of this divergence of the
commercial from the legal ratio upon France's store of precious metals?
It has been exactly similar in effect and force with that wielded by
similar trains of event and circumstance, in the monetary history of
France during the four preceding centuries. The exact official figures
of the import and export of gold and silver are not obtainable before
1822, and in a continuous stream not before 1830 (separably for the two
metals, that is to say).[15]
[Sidenote: FRANCE: BIMETALLIC EXPERIENCE, 1803-75]
From the latter date, however, the testimony of the figures is as
explicit as it is forceful. From 1830 to 1850, while the ratio remained
continually below the legal 15-1/2, there was a profit on the import of
silver, and a persistent and heavy import took place. In 1830 the
(balance of the) silver imported amounted to a matter of 6 millions
sterling, in 1831 to 7-1/4 millions, in 1834 to 4 millions, in 1837 to
over 5-1/2 millions, in 1838 to nearly 5 millions, in 1841 to nearly 5
millions, in 1843 over 4 millions, in 1848 to over 8-1/2 millions, and
in 1849 to nearly 10 millions. There was not a single year that was not
accompanied by this import, and over the whole twenty-two years the
total of importations reached the enormous figure of, approximately, 92
millions sterling. It must be clearly understood that this sum
represents not the gross but the net importation or balance of imports
over exports, and that the money passed into the currency of the
country, taking its place as such and displacing gold _pari passu_. The
movement of gold in the same time is represented by the red line in the
accompanying diagram. Within the limits of very considerable exceptions,
the correspondence of its fluctuations with those of gold is clearly
perceptible. The silver, on whose coinage a profit or premium was
offered by the existing French law to individuals, could only be bought
or paid for by the export of gold or services and goods. During these
years, 1830-50, it was quite apparently by the latter method, namely, by
remittance of goods, as on the whole period there is a slight gain of
gold, nearly 3 millions, contrary to what bimetallic law would have led
to expect. The correspondence, however--a simultaneity--of the two
movements, of import of silver and export of gold, is strongly marked in
the years 1834-39 and 1841-48, and the failure of correspondence of the
totals is to be explained by the statistics of French foreign trade
balances during the years named.
With the year 1852, the decisive change in the ratio sets in with the
new gold influx. The ratio rises above the 15.5 of the French law, and
the profit on the importation and coining of silver vanishes. Its place
is taken by a corresponding profit on the importation and coinage of
gold. The fourteen years during which the ratio remained above the legal
15-1/2 witnessed the importation into France of a total net (or balance)
of gold to the amount of 135 millions sterling, and a total net or
balance of exportation of silver of 66-2/3 millions sterling. The
coincidence of actual fluctuation will best be seen by the graphic
representation of it in the table. With 1865 the final and, so far as
the nineteenth century is concerned, the fatal change of the commercial
ratio sets in. It sinks persistently and increasingly below the legal
15-1/2, in face and spite of the united mintings of the Latin Union, and
at once the premium on the importation and coinage of gold changes into
one on silver. From 1865 to 1875, one year before the abandonment of the
coinage of the 5-franc piece and the consequent relinquishment by France
of the bimetallic system, her net imports of silver amounted to 56
millions sterling.
As far as these figures of import and export are concerned, they show
only the _final_ results of the action of bimetallic law. The metal on
whose importation and minting a premium was obtainable _was_ imported,
and in large quantities. That is the single fact standing out in large.
The reciprocal fact--of a corresponding export of the metal over whose
head the premium offered--does not emerge so distinctly, simply by
reason of the complication of the subject of exports of metals with the
wider general movement of trade balances. It also is, however,
distinctly perceptible and demonstrable. But this is to speak only in
large and of final results. What the intermediate course of events--of
see-saw and flux, was, can only be adequately grasped from the records
of the mintings, conjoined with the records of net import or export of
the two metals.
TABLE OF THE NET IMPORTS OR EXPORTS OF GOLD IN FRANCE UNDER THE
BIMETALLIC LAW, 1822-75.
+------+------------+------------++------+-------------+-------------+
| | Net | Net || | Net | Net |
| Year.| Import | Export || Year.| Import | Export |
| | (Francs). | (Francs). || | (Francs). | (Francs). |
+------+------------+------------++------+-------------+-------------+
| 1822 | 4,000,000 | ... || 1852 | 17,000,000 | ... |
| 1823 | ... | 19,000,000 || 1853 | 289,000,000 | ... |
| 1824 | 37,000,000 | ... || 1854 | 416,000,000 | ... |
| 1830 | 10,000,000 | ... || 1855 | 218,000,000 | ... |
| 1831 | 10,000,000 | ... || 1856 | 375,000,000 | ... |
| 1832 | ... | 39,000,000 || 1857 | 446,000,000 | ... |
| 1833 | 24,000,000 | ... || 1858 | 488,000,000 | ... |
| 1834 | ... | 7,000,000 || 1859 | 539,000,000 | ... |
| 1835 | ... | 20,000,000 || 1860 | 311,000,000 | ... |
| 1836 | ... | 14,000,000 || 1861 | ... | 24,000,000 |
| 1837 | ... | 6,000,000 || 1862 | 165,000,000 | ... |
| 1838 | ... | 4,000,000 || 1863 | 12,000,000 | ... |
| 1839 | 24,000,000 | ... || 1864 | 125,000,000 | ... |
| 1840 | 49,000,000 | ... || 1865 | 150,000,000 | ... |
| 1841 | ... | 5,000,000 || 1866 | 465,000,000 | ... |
| 1842 | ... | 12,000,000 || 1867 | 409,000,000 | ... |
| 1843 | ... | 41,000,000 || 1868 | 212,000,000 | ... |
| 1844 | ... | 6,000,000 || 1869 | 275,000,000 | ... |
| 1845 | ... | 14,000,000 || 1870 | 119,000,000 | ... |
| 1846 | ... | 9,000,000 || 1871 | ... | 214,000,000 |
| 1847 | ... | 13,000,000 || 1872 | ... | 53,000,000 |
| 1848 | 38,000,000 | ... || 1873 | ... | 108,000,000 |
| 1849 | 6,000,000 | ... || 1874 | 431,000,000 | ... |
| 1850 | 17,000,000 | ... || 1875 | 454,000,000 | ... |
| 1851 | 85,000,000 | ... || | ... | ... |
+------+------------+------------++------+-------------+-------------+
TABLE OF THE MOVEMENT OF SILVER DURING THE SAME PERIOD.
+------+-------------+-----------++------+-------------+-------------+
| | Net | Net || | Net | Net |
| Year.| Import | Export || Year.| Import | Export |
| | (Francs). | (Francs). || | (Francs). | (Francs). |
+------+-------------+-----------++------+-------------+-------------+
| 1822 | 125,000,000 | ... || 1852 | ... | 3,000,000 |
| 1823 | 114,000,000 | ... || 1853 | ... | 117,000,000 |
| 1824 | 124,000,000 | ... || 1854 | ... | 164,000,000 |
| 1830 | 151,000,000 | ... || 1855 | ... | 197,000,000 |
| 1831 | 181,000,000 | ... || 1856 | ... | 284,000,000 |
| 1832 | 60,000,000 | ... || 1857 | ... | 360,000,000 |
| 1833 | 75,000,000 | ... || 1858 | ... | 15,000,000 |
| 1834 | 101,000,000 | ... || 1859 | ... | 171,000,000 |
| 1835 | 74,000,000 | ... || 1860 | ... | 157,000,000 |
| 1836 | 27,000,000 | ... || 1861 | ... | 62,000,000 |
| 1837 | 144,000,000 | ... || 1862 | ... | 86,000,000 |
| 1838 | 120,000,000 | ... || 1863 | ... | 68,000,000 |
| 1839 | 75,000,000 | ... || 1864 | ... | 42,000,000 |
| 1840 | 96,000,000 | ... || 1865 | 72,000,000 | ... |
| 1841 | 117,000,000 | ... || 1866 | 45,000,000 | ... |
| 1842 | 92,000,000 | ... || 1867 | 189,000,000 | ... |
| 1843 | 103,000,000 | ... || 1868 | 109,000,000 | ... |
| 1844 | 82,000,000 | ... || 1869 | 112,000,000 | ... |
| 1845 | 90,000,000 | ... || 1870 | 35,000,000 | ... |
| 1846 | 47,000,000 | ... || 1871 | 15,000,000 | ... |
| 1847 | 53,000,000 | ... || 1872 | 102,000,000 | ... |
| 1848 | 214,000,000 | ... || 1873 | 181,000,000 | ... |
| 1849 | 244,000,000 | ... || 1874 | 360,000,000 | ... |
| 1850 | 73,000,000 | ... || 1875 | 194,000,000 | ... |
| 1851 | 78,000,000 | ... || | | |
+------+-------------+-----------++------+-------------+-------------+
TABLE OF THE COINAGE OF GOLD IN FRANCE, 1803-75, DURING THE BIMETALLIC
REGIME.
+------+-------------+-------------++------+-------------+-------------+
| | | || | | |
| Year.| Gold | Silver || Year.| Gold | Silver |
| | (Francs). | (Francs). || | (Francs). | (Francs). |
+------+-------------+-------------++------+-------------+-------------+
| 1803 | 10,209,840 | 23,171,988 || 1810 | 46,070,600 | 57,170,216 |
| 1804 | 38,463,980 | 47,517,195 || 1811 | 132,135,740 | 256,399,040 |
| 1805 | 20,474,500 | 46,385,909 || 1812 | 97,717,880 | 160,786,409 |
| 1806 | 38,533,760 | 25,241,651 || 1813 | 62,659,680 | 134,900,313 |
| 1807 | 18,019,920 | 5,008,903 || 1814 | 64,544,720 | 61,244,121 |
| 1808 | 32,311,260 | 67,833,922 || 1815 | 55,379,840 | 37,673,806 |
| 1809 | 15,206,440 | 44,296,494 || 1816 | 15,151,280 | 34,917,526 |
+------+-------------+-------------++------+-------------+-------------+
TABLE OF THE COINAGE OF GOLD IN FRANCE, 1803-75, DURING THE BIMETALLIC
REGIME--_continued_.
+------+-------------+-------------++------+-------------+-------------+
| | | || | | |
| Year.| Gold | Silver || Year.| Gold | Silver |
| | (Francs). | (Francs). || | (Francs). | (Francs). |
+------+-------------+-------------++------+-------------+-------------+
| 1817 | 52,197,080 | 37,143,579 || 1847 | 7,706,020 | 78,285,157 |
| 1818 | 95,410,460 | 12,406,076 || 1848 | 39,697,740 | 119,731,095 |
| 1819 | 52,410,660 | 21,235,077 || 1849 | 27,109,560 | 206,548,663 |
| 1820 | 28,781,080 | 18,436,620 || 1850 | 85,192,390 | 86,458,485 |
| 1821 | 404,140 | 67,533,866 || 1851 | 269,709,570 | 59,327,308 |
| 1822 | 4,718,100 | 100,679,137 || 1852 | 27,028,270 | 71,918,445 |
| 1823 | 408,180 | 82,911,680 || 1853 | 312,964,020 | 20,099,488 |
| 1824 | 7,071,700 | 114,476,007 || 1854 | 526,528,200 | 2,123,887 |
| 1825 | 45,616,360 | 75,203,291 || 1855 | 447,427,820 | 25,500,305 |
| 1826 | 925,540 | 90,835,623 || 1856 | 508,281,995 | 54,422,214 |
| 1827 | 3,160,940 | 153,868,978 || 1857 | 572,561,225 | 3,809,611 |
| 1828 | 8,025,740 | 161,466,133 || 1858 | 488,689,635 | 8,663,568 |
| 1829 | 1,118,180 | 102,642,617 || 1859 | 702,697,790 | 8,401,813 |
| 1830 | 23,516,640 | 120,187,089 || 1860 | 428,452,425 | 8,034,198 |
| 1831 | 49,641,380 | 205,223,764 || 1861 | 98,216,400 | 2,518,049 |
| 1832 | 2,046,260 | 141,353,915 || 1862 | 214,241,990 | 2,519,397 |
| 1833 | 16,799,780 | 157,482,863 || 1863 | 210,230,640 | 329,610 |
| 1834 | 30,231,200 | 218,288,304 || 1864 | 273,843,765 | 7,296,609 |
| 1835 | 4,550,060 | 99,966,149 || 1865 | 161,886,835 | 9,222,394 |
| 1836 | 5,097,040 | 43,242,399 || 1866 | 365,082,925 | 44,821,409 |
| 1837 | 2,026,740 | 111,858,697 || 1867 | 198,579,510 | 113,758,539 |
| 1838 | 4,940,140 | 88,489,324 || 1868 | 340,076,685 | 129,445,268 |
| 1839 | 20,670,000 | 73,637,742 || 1869 | 34,186,190 | 68,175,897 |
| 1840 | 40,998,240 | 63,795,527 || 1870 | 55,394,800 | 69,051,256 |
| 1841 | 12,375,060 | 77,517,941 || 1871 | 50,169,880 | 23,878,499 |
| 1842 | 1,852,720 | 68,391,170 || 1872 | -- | 26,838,369 |
| 1843 | 2,826,600 | 74,148,998 || 1873 | -- | 156,270,160 |
| 1844 | 2,742,260 | 69,134,980 || 1874 | 24,319,700 | 60,609,988 |
| 1845 | 119,140 | 89,967,609 || 1875 | 234,912,000 | 75,000,000 |
| 1846 | 2,086,420 | 47,886,145 || | | |
+------+-------------+-------------++------+-------------+-------------+
During the years 1820-50, when the ratio remained below the legal 15-1/2
and there was a profit on the import of silver, the total silver coinage
of the French Mint amounted to L127,458,322, while that of gold reached
only L19,333,854. In the succeeding period, 1850-66, when the ratio
changed and remained for fifteen or sixteen years in favour of gold,
the total gold coinage reached L292,416,951, while the total silver
coinage was scarcely more than 1-1/4 millions (L1,315,532).
At the beginning of this second period, 1851, the Bank of France held in
its reserves approximately only 3-1/2 millions sterling of gold, whereas
its silver amounted to more than 19 millions. At the close of the period
indicated, 1866, the bank was holding 23 millions sterling of gold
against nearly 5-1/2 millions of silver. In the former case the
proportion of silver formed 85 per cent. of the total, in the latter
only 19 per cent.
TABLE OF THE RESERVES OF THE BANK OF FRANCE, 1851-76.
+------+--------+--------+-----------++------+--------+--------+-----------+
| | Gold | Silver | Percent || | Gold | Silver | Percent |
| Year.|(Million|(Million| of Silver || Year.|(Million|(Million| of Silver |
| |Francs).|Francs).| to Total. || |Francs).|Francs).| to Total. |
+------+--------+--------+-----------++------+--------+--------+-----------+
| 1851 | 83 | 478 | 85 || 1864 | 273 | 94 | 27 |
| 1852 | 69 | 442 | 86 || 1865 | 238 | 208 | 44 |
| 1853 | 102 | 214 | 67 || 1866 | 576 | 136 | 19 |
| 1854 | 301 | 193 | 39 || 1867 | 697 | 318 | 31 |
| 1855 | 72 | 147 | 66 || 1868 | 662 | 474 | 42 |
| 1856 | 94 | 104 | 53 || 1869 | 461 | 798 | 63 |
| 1857 | 110 | 126 | 52 || 1870 | 429 | 69 | 14 |
| 1858 | 294 | 260 | 47 || 1871 | 554 | 80 | 13 |
| 1859 | 250 | 329 | 56 || 1872 | 656 | 134 | 17 |
| 1860 | 144 | 272 | 65 || 1873 | 611 | 148 | 19 |
| 1861 | 225 | 100 | 30 || 1874 | 1013 | 314 | 24 |
| 1862 | 187 | 108 | 36 || 1875 | 1168 | 504 | 30 |
| 1863 | 119 | 72 | 37 || 1876 | 1349 | 540 | 28-1/2 |
+------+--------+--------+-----------++------+--------+--------+-----------+
The statistics of the Latin Union, up to the suspension of the
bimetallic system will be separately dealt with.
Speaking only of the experience of France during these years of
bimetallic regime, the ebbing and flowing experience which has
throughout been instanced as the chief characteristic of such regime is
most strongly marked. The legal ratio did not give the market ratio, and
so far was it from giving France a stable currency, it was the one thing
which unsettled it and made a stable currency impossible. The _expose
des motifs_ of the law of 1876, which will be referred to in another
connection below, puts the matter with official brevity. "The variations
of the commercial from legal 15-1/2 ratio remained normal during the
years 1824-67. All the same they sufficed to modify greatly the
composition of the French circulation. After the predominance of silver,
which became marked in 1847, the ratio from 1847-67 introduced gold in a
large proportion, and measures had to be taken to retain in France the
smaller silver coinage. Our silver _monnaie d'appoint_ of .835 fine was
created for this purpose."
To regard this question from a theoretic and international point of
view, to the exclusion of any regard for the separate national interests
of France, is a sheer absurdity. It mattered little or nothing to France
that by unloading the stores of silver she happened to possess at the
time of the gold discoveries of the Fifties she helped to steady the
ratio for the world at large. It did however matter, and very much, that
this process of exchange from the one metal to the other was attended
with public loss, balanced only by illicit private gain, and with a
disturbance of trade in every town of France through the disappearance
of the smaller silver specie. Whether or not France or any other country
is called upon to sacrifice herself thus--not once but every time the
ratio fluctuates from below to above the legal ratio or _vice
versa_--for the sake of an ideal, bimetallic, regulating, function, let
common sense decide.
The French monetary commission of 1867 speaks thus of the situation--
"It is well known by all that this ratio [of 1803] by the simple reason
of its being fixed could not remain correct. There was quickly a premium
on gold, and silver remained almost alone in circulation until near
1850. The discovery of the mines of California and Australia suddenly
changed this situation by throwing into the European market a very
considerable quantity of gold. By the side of this force, which tended
to create a divergence from the legal ratio by lowering gold, there was
another which occasioned a rise of silver. Under the influence of
various circumstances, too long to enumerate, the needs of the extreme
East had grown in unusual proportions, and as silver is alone in favour
there, it was exported in enormous masses. There was a premium on silver
to the extent of 8 per mille, and it disappeared almost completely from
circulation, yielding place to gold.
"Preoccupied by the situation the Government charged a commission to
study the measures to be taken. Its labours are summed up in the report
of M. de Bosredon (1857). After examining the system tending to
preserve silver money intact by lowering the value of gold money, and
conversely the system tending to the adoption of the gold standard by
reducing the silver money to the state of billon, the commission did not
decide between them. It confined itself, in fact, to counselling the
Government to a transitory step--the raising of the export duties on
silver.... The exportation of silver, therefore, continued; and if the
disappearance of 5-franc pieces was not remarked, because they were
replaced by gold, it was not the same with the scarcity of pieces of a
smaller value employed in petty payments.
"Being informed of the obstruction to retail commerce by complaints
carried before the Senate, and instructed by the example of Switzerland,
which had in 1860 reduced the standard of its divisional money, the
Minister of Finance appointed a commission, 1861, to study the remedy to
be applied to the evil. This commission counselled the reduction of the
standard of pieces of less than 5-francs to .834 fine. It did this in
complete knowledge of the cause, fully recognising that in so doing the
monetary unity of silver, characteristic of our system, would be thereby
broken, at anyrate for its circulating form; for while the franc no
longer existed in law, the 5-franc was disappearing in fact, so that the
change was equivalent to the establishment of a gold standard."
This advice of the commission was however, by the law of 1864, applied
only to pieces of 50 or 20 centimes.
The next step in the process was the formation of the Latin Union in the
year following. The above-quoted commission speaks of the intentional
aspect of this Union in these words: "This convention places in the
front rank gold money, and reduces the pieces of silver of 2 francs and
less to the _role_ of token money. It therefore definitely determines
[_consacre_] the ascendency of the gold francs, and solves practical
difficulties arising from the double standard."
This was written in 1867, less than two years after the formation of the
Latin Union. It is not the view which prevails among bimetallists to-day
as to the purpose and intentional bearing of that Union; but it is the
historic truth none the less, and it was only the complete revolution in
the conditions of production of the precious metals which made itself
felt from 1871, which has given the Latin Union the aspect of a
theoretic concert for the maintenance of, rather than as a defence
against, a bimetallic system. If silver had not fallen in 1871 the Latin
Union would still be the bulwark of defence of bimetallic France against
the action of bimetallic law.
[Sidenote: THE LATIN UNION]
The formation of the Latin Union, therefore, was a measure of defence
against the action of the bimetallic system in those countries which had
adopted the monetary system of France, and lay exposed to all its
disastrous fluctuations. The first and moving factor in its formation
was Belgium. So far as related to silver, Belgium had adopted the French
system by her monetary law of 5th June 1832. By the first article of
this law the monetary unit was fixed at the silver franc of 5 grms.
weight, and 9 fineness. For years Belgium endeavoured to maintain this
law in its integrity. Public opinion, however, demanded the admission of
French gold at its normal value, and this was conceded and decreed by
the law of 4th June 1861. From that moment she felt all the oscillating
movement which France was experiencing. The declaration of Article 1. of
the law of 1832 became a dead letter; the gold standard took the place
of the silver standard, and equally with France, Italy, and Switzerland,
Belgium had to witness the disappearance of her small silver coins. To
the previous abundance there succeeded a penury of small change,
although the drain was not so immediately felt because of large reserve
of silver 5-franc pieces (amounting to 48 millions of francs) held by
the National Bank. In slightly over a year, 1st June 1861 to 8th
November 1862, this stock of 48,645,000 francs had sunk to 14,629,000
francs, and in alarm the National Bank ceased, on the latter date, all
payments in 5-franc pieces. Concurrently with this drain of the 5-franc
pieces, the reserve of silver coins of less value began to be seriously
affected by the sapping influence. During the two following years,
1861-63, there was little commerce in the precious metals owing to the
American war. But in 1863 the movement of drain recommenced. The
reserve of 5-franc pieces and the stock of divisional coins of lower
denomination fell rapidly, to so low a point indeed as to become quite
insufficient for the ordinary trade and small change demanded of the
country. After a slight recovery in September 1865, the same downward
course continued. The smaller coins, of 1-franc piece, and 50 centimes
became so scarce that the bank could not supply the demands of
manufacturers for the payment of wages, and the Government had to have
resort to the coinage of nickel for small divisional money. The
simultaneous experience of Switzerland and Italy is not so capable of
statement and exact expression. But it was similar in kind. Previous to
1865 a net balance of over 12 millions sterling (consisting almost if
not entirely of silver) had left Italy, and it was known to be the
danger of entirely losing her silver which led Italy to the suspension
of cash payments on 30th April 1866, and to her acquiescence in the
Latin Union. It was not, however, Italy, but Belgium who first raised
the note of alarm. Conscious that her monetary community with France
made any independent efforts quite futile, the Belgium Government
proposed to France a monetary union for all the countries which had
adopted the franc as the basis of their currency. Taking up the
proposition France invited Italy and Switzerland, together with Belgium,
to send delegates to a monetary conference at Paris. At this conference
Belgium proposed the adoption of the single gold standard--the silver
pieces including the 5-franc pieces to be lowered by an agio, and made
divisional money. Italy and Switzerland were of the same opinion, but
their scheme failed before the opposition of France, and the final
outcome of the conference was the establishment of the convention of
23rd December 1865.
This convention, which instituted the Latin Union, came into force on
the 17th of August 1869; and under it one slight change was made in the
internal currency system of France. The hitherto full-valued silver
coinage from 2 francs downwards was changed into token money (being
reduced to .835 fine), the 5-franc piece remaining as full legal tender.
The union was to last for fifteen years. It established an identity in
the monetary system of the four powers, as far as weight and standard
were concerned, and prescribed free coinage for any individuals bringing
metals to the Mints--of gold into any form, and of silver into 5-franc
pieces; and reciprocal acceptance of those pieces in any of the States
of the union. Finally the minting of each State for national or currency
purposes was limited to 6 francs per head.
This limitation, together with the regulation adopted, that the
divisional coins should be issued at a rate inferior to that of the
monetary standard, must be regarded as a measure of mutual defence
against the sapping of the small coinage which had previously been
experienced. According to this clause the maximum of mintings for
national or currency purposes was presented thus--
Francs.
For Belgium 32,000,000
France 239,000,000
Italy 141,000,000
Switzerland 17,000,000
For a time everything bloomed, the minting went merrily on, and private
individuals (foreigners) reaped a profit at the expense of France. With
the heavy fall in the ratio which made itself marked in 1873, however,
events became too strong even for the Union, and Belgium took the
initiative by passing a law enabling her Government to suspend or limit
the coinage of the 5-franc piece. This principle was subsequently
adopted by all the states of the Latin Union. During the years, 1874-76,
three annual conferences of the Union were held at Paris, with the
result that the limitation of the coinage of the 5-franc piece was fixed
thus--
1874. 1875. 1876.
Belgium 12,000,000 15,000,000 10,800,000
France 60,000,000 75,000,000 54,000,000
Italy 60,000,000 50,000,000 36,000,000
Switzerland 8,000,000 10,000,000 7,200,000
Greece (which had acceded to the Union in 1868) 12,000,000
Of these states Switzerland alone did not coin up to her total, and at
the conference in February 1876 her delegates pressed strongly for the
entire cessation of the coinage of the 5-franc piece, and for the
adoption of a gold standard. In this she was strongly opposed by Italy.
The latter state, on account of the disappearance of her metallic
currency before the inconvertible paper, had no interest in the
limitation of the mintings of the Union. In the conference of 1874 she
even sought and was authorised to coin beyond the quota accorded her, by
a sum of not less than L800,000 in 5-franc pieces, on condition that
such amount should be deposited as a metallic reserve of the Bank of
Italy.
The force of circumstances, however, soon broke down even this policy of
limitation. In the course of 1876 the fall of silver became more
disastrously pronounced. In addition, it was no secret that the amounts
accorded by the conferences of 1874-75-76 for the mintings of each
state, had been assigned as maximum, not minimum limits, under the Latin
Union.[16]
The next Mint convention of November 1878 would determine the Latin
Union on the 31st December 1885, if not prolonged by further treaty. As
the time approached the smaller states, such as Belgium, which had
committed themselves to a large minting and thereby to the liability of
having to liquidate or take back its own mintings--such 5-franc pieces
as happened to be beyond its frontiers--at full value, in the face of a
greatly fallen silver market, shrank from the responsibility, and sought
and obtained a prolongation of the _status quo_ until the end of 1891,
and thenceforward by yearly agreement.
Finding that individuals treated the agreed amounts of mintings as a
minimum limit, the French Government resolved to suspend the minting of
the 5-franc pieces entirely. Accordingly, on the 21st March 1876, M.
Leon Say, Minister of Finance, submitted to the Senate a Bill to that
effect. It was followed, eight days later, by a proposition of a law
suspending the emission of "_bons_" for the coining of silver money 9/10
fine. The _expose des motifs_ of this Act is most remarkable:--
"The events which have happened for some time past in the relations of
the precious metals have brought to a head the monetary question amongst
us, although from 1815 Great Britain has laid down principles which have
attracted round her an ever-increasing circle of nations.
"The theory of the double standard, on which our monetary law of the
year XI. reposes, has been called in question ever since its origin.
"It is, to our conception, less a theory than the result of the
primitive inability of the legislators to combine together the two
precious metals otherwise than by way of an unlimited
concurrence--metals, both of which are destined to enter into the
monetary system, but which recent legislators have learned to
co-ordinate by leaving the unlimited function to gold alone and
reducing silver to the role of divisional money. From 1857 the French
Government has studied the question, and it may be stated that since
that date the principle of the gold standard has won increasing favour
through our several administrations."
Then follows an account of the monetary history of France during the
period, as in brief resume already given. "If," the preamble continues,
"from 1874, certain precautions had not been taken to arrest the effects
of that grave perturbation in the ratio, France and her monetary allies
would have seen their monetary circulation invaded by silver and
correspondingly drained of gold." Hence the conventions of 1874-75-76,
limiting the mintings of the members of the Latin Union, although,
"according to us, the fall of silver in 1875 prescribed a complete
cessation even for that year rather than a simple limitation."
Germany.
Until the unification of Germany in our own days, and the adoption of
the present imperial currency system, German monetary history reproduces
perpetually all the elements of that mediaeval system, bimetallic in fact
though not theoretically so conceived, which England flung away in 1816,
and from the toils of which France has not as yet completely emerged.
As safeguards against the evils of that system which she had felt with
such bitter experience, and which had culminated in the crisis closing
the Thirty Years' War, Germany could only feebly employ the mechanism of
ineffectual Mint conventions. For a century she persevered in the effort
to establish a common standard and Mint system, but in vain. The attempt
had to be abandoned, and the reeling system left to its own process of
disintegration; and when at last the events of 1871 came to give her
unity in her coinage, as well as political life, there were not less
than nine distinct and independent coinage systems in existence.
Hardly had the crisis of the Thirty Years' War passed out of mind before
again the currency system had begun to work its baneful effects.
[Sidenote: GERMANY: THE ZINNAISCHE STANDARD]
In 1665 complaints were loudly made of the corrupt and debased state of
the coin, due to export and culling. There is, indeed, quite a
literature of these same complaints. The language of the
_Reichstattisches conclusum_ (Ratisbon, 12th September 1666) expressly
attributes this export to the higher value set upon the gold in foreign
countries, especially Venice. And the statement of the warden of the
Mint of the three corresponding circles--Franconia, Bavaria, and
Swabia--delivered in his _Gutachten_ of the preceding May, was that the
place of these good German ducats had been taken by very depreciated
coins of Italy, France, England, and Holland. The three higher circles,
accordingly--Franconia, Bavaria, and Swabia--met in conference and
determined on a thorough investigation. The advice submitted to them
was to raise the thaler from 90 to 96-kreutzer (see account of German
coinage, Appendix V.), implying a lowering of the ratio from 15 to
14-1/8. This proposed scheme was accepted, _in comitia_, in 1667, the
fifth article of the resolution specially mentioning the infliction of
numerous intruding base foreign divisional money. From this scheme
Brandenburg and Saxony held off, maintaining that the ratio had not been
sufficiently lowered, considering the condition of the production of
gold; and, in the same year, by a Mint treaty between Frederick William
of Brandenburg and the Elector of Saxony, the so-called _Zinnaische_
standard was adopted for those two states. According to this standard,
the Reichs thaler was raised to 105-kreutzer (1 florin 45 kreutzers) and
a ratio of 13-5/9 was established.
The result of this action of Saxony and Brandenburg was to strip the
three higher circles of their silver, and in two years (1669) they
anxiously met again to consider the question, not only of the foreign
base coin everywhere prevalent, but also of the damaging exchange "and
ceaseless melting down and exchange of proper coin from the circles."
By a strenuous effort the three circles carried through the Reichstag of
1680 their resolution to reduce the Reichs thaler to 90 kreutzer (ratio
15-1/4). From this decision the Emperor stood apart, with Bavaria and
Salzburg, in putting the Reichs thaler at 96 kreutzer.
In view of such contrariety the impossibility of any general regime for
the empire became apparent, and further attempts at it were practically
abandoned. It was the perception by the mercantile community, as well as
by the various Governments, of the consequences of such disorder, that
led to the establishment of the so-called Leipzig standard in 1690. This
standard was promoted by John George III. of Saxony, and established by
treaty between Saxony, Brandenburg, and Brunswick-Luneburg. According to
it the Reichs thaler was raised to 120 kreutzers, or 2 florins, the mark
being minted into 12 thalers or 18 guldens.
The result of the introduction of this standard was that in a few years
the raising of the Reichs thaler to 120 kreutzers prevailed all over the
empire. Sweden accepted it in the same year, 1690, and three years later
the three upper circles acquiesced. At the same time the gold gulden was
advanced to 2 florins 56 kreutzers. The previous ratio of 15 was thereby
advanced to 15.1 (15-128/1278).
In 1738 the Reichstag determined on the adoption of the Leipzig standard
for the whole empire; no alteration was made in the Reichs thaler, which
was still retained at 2 florins and minted at 12 to the mark fine; but a
graduated scale of agio was adopted for the divisional coins, which were
minted at an equivalence of from 12-3/8 to 13-2/3 thalers to the mark
fine. The difference (varying from 3/8 to 1-2/3 thalers) represented the
agio.
[Sidenote: GERMANY: THE CONVENTION STANDARD]
From the first, however, the Leipzig standard had no more real success
than any of its predecessors. Although theoretically accepted by all
North Germany, and adopted in the Reichstag in 1738, it could obtain no
actual general adoption through the empire. Even from the moment of the
inception of the system in 1690, the process of competitively raising
the course of the coinage had still continued, and pieces of 30, 20, 15,
and 10-kreutzers were struck on a basis of from 20 to 21-1/3 gulden to
the mark. The result was to put upon the _carolus_, which from 1730
onwards was minted in great quantities in South-West Germany, an agio of
10 per cent., a differentiation which was much increased by the
disorders of the war of the Austrian succession. Such an agio swiftly
drove the larger, full-valued specie out of currency, and during the
continuance of that war the currency of Austria and South Germany was
almost entirely reduced to depreciated fractional pieces, while the
exchangers reaped untold advantage. It was on the close of this war, in
1748, that, with characteristic Austrian selfishness, though also with a
boldness none of his predecessors had approached, the Emperor, Francis
I., determined on the erection of the 20-gulden standard as a separate
Austrian independent system, minting the mark of fine silver into 13-1/2
Reichs thalers, or 20 guldens. This latter system, after the accession
to it of Bavaria, obtained the name of the Convention Standard, and the
2-gulden pieces minted under it are styled the Species or Convention
Thaler. The convention system remained in force in Austria until the
Vienna Coinage Convention of 1857, a period during which the _Convention
Thaler_ found wide circulation through South Germany.
The currency was eked out by the Austrian gold ducats and by vast
quantities of foreign silver, French _6-livre thalers_ (current for 2
florins 48 kreutzers) and the _crown_ or _Brabant thaler_ (current for 2
florins 42 kreutzers). From 1807 onwards this latter coin was imitated
by the South German States, Bavaria especially, in their _crown thaler_,
minted on a fresh basis of 24-1/2 guldens to the mark of fine silver.
The selfish initiative of Austria was followed by Prussia and the South
German States. The latter, the Rhenish and South German States, adopted
in 1761-65 the 24-gulden; subsequently changed into the 24-1/2-gulden
standard (see Appendix VI.). The overvaluation of the _Kronthaler_,
which led to that latest development from a 24 to a 24-1/2-gulden
standard, was the result of the immense circulation of French 6-livre
pieces (known in Germany as _Laubthalers_) in South-West Germany.
Graumann quite discredits the theory that the overswimming of South
Germany by these French pieces, with all the confusion in the currency
which resulted, was due to the wars and the progress of French arms, and
directly attributes it to the depreciation of the French specie, and to
their quite deliberate departure from the standard of French coinage as
fixed in 1726.
[Sidenote: SOUTH GERMAN AND PRUSSIAN SYSTEMS]
In Prussia the reform of the coinage system was undertaken by her first
King, Frederick I., father of Frederick the Great. In 1750 the latter
adopted the 14-thaler or 21-gulden standard, subdividing the thaler into
24 groschens of 12 pfennige each. The measure was undertaken expressly
to stop the export of gold which was going on. The adoption of a
standard lower than the Convention standard effectually prevented the
outflow of Prussian money, and it was not until the beginning of the
present century, through the new Mint confusion which arose from the
French Revolution, that Prussian money spread into Saxony, Hanover,
Hesse, and even into the south-west. The second idea of Frederick's
reform was to buy gold cheap, but in this it did not succeed. The
intention was to obtain for five Prussian thalers the gold _pistoles_,
which were purchasable for five convention thalers. This rate, however,
never prevailed in the market, as from the first the _pistole_ was
valued at 5-1/4 Prussian thalers. During the Seven Years War, when
Frederick was driven to a depreciation of his coinage, his system went
to pieces. But an active reform was undertaken upon the conclusion of
the peace of Hubertsburg, 1763. The 14-thaler system was re-established,
although, as far as the smaller divisional silver coinage was concerned,
the depreciation, in which Frederick had been imitated by the pettier
states round him, continued into the present century.
In 1821 a minor alteration was made in the Prussian system, by
subdividing the thaler into 30 instead of as previously 24 groschen,
the former being distinguished from the latter by the title of _silver
groschen_. To this Prussian or 14-thaler system Saxony acceded, as did
also, in 1848, Mecklenburg and Oldenburg, with many minor differences of
detail,--Saxony, for example, dividing the silver groschen into 10
pfennige; Mecklenburg dividing the thaler into 48 schillings of 12
pfennige each; and Oldenburg dividing it into 72 grotens of 5 schwarens
each. The gold coin was supplied by the Prussian and Hanoverian 5 and
10-thaler pieces, the Friedrichs _d'or_, a favourite trade coin even in
South Germany, and by Spanish _pistoles_ circulating at an equivalence
of 4 6-livre thalers.
[Sidenote: CONFERENCE OF MUNICH, 1837]
The confusion of these various German systems was further increased by
the uncertainty and difference which had come to prevail in the unit of
weight. In Austria alone there were 2 marks in use, the Vienna mark (=
288.644 grs.), and the Cologne mark (= 243.870 grs.). While in North
Germany, and subsequently in the south-west, the Prussian mark (=
233.855 grs.) prevailed. It was as the outcome of a desire to remedy at
once the evil condition and confusion of the currency, and the
uncertainty as to weight standard, which led to the conference of Munich
on 25th August 1837. At that conference, Bavaria, Wuertemberg, Baden,
Hesse, Darmstadt, and the Free State of Frankfort, adopted the
24-1/2-gulden standard as the standard for their several states. At the
same time the Prussian mark (233.855 grms. = half the Prussian pound),
was established as the Mint mark for the contracting members. For the
divisional coinage (6 and 3-kreutzer pieces) a standard of 27 guldens to
the mark was adopted, the details of the various fractional pieces being
left to the different states. To this convention Hesse, Hamburg, and the
two Hohenzollerns acceded in the following years.
This movement of South Germany gave a new impetus to the idea of Mint
unification, and led to the General Mint Convention of the States of the
Zollverein, agreed upon in full assembly of delegates at Dresden, 30th
July 1838, and ratified also at Dresden on the 7th January 1839. The
Dresden Convention was practically the first renewed attempt at Mint
unification which Germany had seen since 1738. The contracting members
to this general Mint convention were Prussia, Bavaria, Saxony,
Wuertemburg, Baden, Hesse, Saxe-Weimar, Eisenach, Saxe-Meiningen,
Saxe-Altenburg, Saxe-Coburg and Gotha, Nassau, Schwarzburg-Rudolstadt,
Schwarzburg-Sondershausen, Reuss, Reuss-Schleiz, Reuss-Lobenstein,
Ebersdorf, and Frankfurt.
Briefly, the articles of the convention were as follow:----
"1. The Mint mark of all these contracting states of the Customs Union
shall be the Prussian Mint mark = 233.855 grms.
"2. On this common weight standard the coinages of the contracting
states shall be in accordance with the two systems in existence among
the said states, viz. by thalers and groschen, according to the
14-thaler (or Prussian) system; or by gulden and kreutzer, according to
the 24-1/2-gulden (or South German) standard. For the purpose of
assimilation or equivalating, the thaler to be reckoned = 1-3/4-gulden,
and the gulden = 4/7-thaler.
"3. The 14-thaler system to be that of Prussian Saxony, Hesse, Saxony,
and Saxe-Altenburg, Saxe-Coburg and Gotha (Gotha),
Schwarzburg-Rudolstadt (Unterherrschaft), Schwarzburg-Sondershausen, and
Reuss; the 24-1/2-gulden system to prevail in Bavaria, Wuertemberg,
Baden, Hesse, Saxe-Meiningen, Saxe-Coburg and Gotha (Coburg), Nassau,
Schwarzburg-Rudolstadt (Oberherrschaft), and the Free State of
Frankfurt.
"4. Each state will confine its mintings to such pieces as prevail in
the system of which it forms part.
"5. In larger specie, and also in divisional coin, each state to bind
itself to exercise the greatest care to preserve the standard and
weight.
"7. For the purpose of the commerce of the contracting states _union_ or
_convention_ coins (_vereinsmuenze_) shall be minted seven to the mark of
fine silver, at an equivalence of 2 thalers or 3-1/2 guldens, fully
tenderable throughout the Union.
"8. Alloy to be .9 silver, .1 copper; so that 6-3/10 pieces = 1 Mint
mark in weight; remedy = .003.
[Sidenote: THE DRESDEN CONVENTION, 1838]
"9. From 1st January 1839 to 1842, at least 2,000,000 of these
_vereinsmuenze_ to be coined, one-third part each year, and by the
various states _pro rata_ of their population. From 1842 onwards, in
case of no new treaty, the rate of minting to be two millions
_vereinsmuenze_ every four years, _pro rata_ as before; each state to
give an account of its mintings.
"10. Also of their separate trials of standard and weight.
"11, 13. None of the contracting states to set its particular internal
specie at any different value except on a three months' notice, and to
renew its currency at face value in case of depreciation.
"12. The states bind themselves not to issue divisional coins in excess
of such _pro rata_ requirements as above.
"14. For the divisional coinage the standard of the convention of
Munich, 1837 (viz. 27 gulden), is adopted.
"18. The treaty to endure till the end of 1858. States intending to
retire then to give two years' notice. From that date, if not discarded,
the treaty to be periodically renewed (five-yearly)."
This treaty continued in force nominally until the later and still more
famous convention of Vienna in 1857, before which date Hanover,
Brunswick, and Oldenburg had also given in their adherence to it.
At the time of the Mint Conference and Convention of Vienna, therefore,
there were, broadly speaking, three competing systems in Germany, viz.
of Austria, Prussia, and South Germany or Bavaria.
One aspect of this latter conference of 1857, viz. its deliberations
with regard to gold coinage, will be referred to separately. As far as
relates to its attempted systematisation of these three German
currencies the agreement took the following form:--
1. The pound of 500 grammes decimally subdivided, to be used as the
basis of the coinage.
2. The competing systems to be assimilated to this basis by the
following regulation:--
The thaler (or Prussian) standard of 30 thalers to the pound of silver
to take the place of the 14-thaler standard, and to prevail in Prussia,
Saxony, Hanover, Hesse, and a string of minor states.
The Austrian standard to be on the basis of 45 guldens out of a pound of
fine silver, and to prevail in the Empire of Austria and the
principality of Lichtenstein.
The South German standard to be on the basis of 52-1/2-gulden to the
pound of silver (instead of the 24-1/2-florin standard formerly used),
and to prevail in Bavaria, Wuertemburg, Baden, Hesse, Frankfurt, and a
few other places of South Germany.
The equivalence of the systems was to be--
One-thaler convention piece (1/30 pound) = 1-1/2 florins in Austrian
currency = 1-3/4 florin in South German currency.
All the coins to be of unlimited validity in all the states, divisional
coinage to be of a lighter standard than the coinage standard of the
country, but lighter only within limits fixed. The tender of these
latter to be limited to 20-thaler or 40-gulden.
[Sidenote: THE VIENNA CONFERENCE, 1857]
The regulations adopted by this Vienna Convention as to the gold coinage
are very significant, and deserve special note.
The advance in the gold price of silver, due to the Californian and San
Franciscan gold finds, acted on the silver-using countries. As soon as
the price of bar silver exceeded 60-7/8-pence per standard oz., there
resulted a melting down and export of the silver, in the countries which
had adopted bimetallism at the 15-1/2-ratio.
It was this experience in France, and the allied group of countries,
which led to the formation of the Latin Union in 1865. In mere point of
date, that union had been preceded by the Vienna Conference and
Convention by a matter of eight years. And as far as the regulations of
this latter relating to gold coinage are concerned, there is evidence
that the bimetallic action of France had driven Germany to her union of
1857, as a mere matter of self-defence, just as it later drove the Latin
states to their union of 1865. In both cases the underlying motive was a
wish to protect that part of their currency system which was threatened
by bimetallic law. The premium on gold, on its minting, i.e. the profit
to be made on minting it at 15-1/2 in France, while its market value was
considerably less in Germany and elsewhere, drew the gold to France. It
is a mistake to think that France attracted gold simply from California
and Australia. She attracted it by the action of bimetallic law from her
neighbour Germany, and replaced it by 5-franc silver mintings. The
circulation of French 5-franc pieces was so extensive in South Germany,
in the period preceding the Vienna Convention, that the cash reserve of
the Frankfort bank was at one moment composed almost entirely of them.
The manner in which the Vienna Convention met the difficulty has the
appearance of plausibility, though it proved in the end ineffectual. It
determined not to establish a fixed ratio but to follow the market price
of gold, apparently in the hope of attracting a natural or market
supply.
"For the purpose of further facilitating mutual transactions, and for
the promotion of trade with neighbouring countries, the contracting
powers may coin convention trade coins in gold, under the names _crown_,
and _half-crown_.
"1. The crown = 1/50 of a pound of fine silver.
"2. The half-crown = 1/100.
"The contracting powers may not coin any other gold piece, except
Austria, which retains the right of coining _ducats_ of the present
value, to the end of 1865.
"The silver value of the convention gold coins in ordinary intercourse
is entirely fixed by the relation of the supply to the demand. They must
not, therefore, be considered as a medium of payment of the same nature
as the legal silver currency of the country, and no one is legally bound
to receive them as such.
[Sidenote: THE VIENNA CONVENTION, 1857]
"Each state is at liberty to permit convention gold coins to be paid
into their offices instead of silver, according to a previously settled
fixed rate, and to extend this permission either to all transactions and
offices, or only to some. Such previous settlement of the rate is,
however, never to last more than six months, and must at the expiration
of the last month always be renewed for the following official treasury
period of exchange. The rate cannot be fixed at a higher value than that
given to such coinage by the average of the official commercial rate of
exchange during the previous six months. Each government also reserves
to itself the right to alter the rate at any time within the period
fixed, and to suspend it when it thinks proper.
"A treasury rate of exchange shall henceforth only be fixed for
convention gold coins, and not for other kinds of coined gold.
"The widest circulation to be given to the notices by which the official
rate of exchange is fixed. They must be published beforehand, even when
a change in rate for the next fixed period is not intended, and must
contain--
"1. The statement of the average trade exchange at the principal places
of exchange, during the six months immediately preceding.
"2. The treasury rate fixed accordingly.
"3. The duration of the value of the same.
"4. The reservation to alter or recall this rate of exchange if
necessary, even before the expiration of the term named.
"5. The declaration that such rate of exchange only affects payments to
be made into offices of the state.
"In the countries of the contracting powers pay-offices of the State, as
well as public institutions, banks, etc., shall not be allowed in
future, in payments to be made by them, to make any proviso with regard
to the medium of payment in silver or gold, in such a way that for the
latter a certain fixed relative value should be expressed beforehand in
silver money."
From the point of view of Austria, this convention had been entered upon
with the desire of effecting a gradual adoption of gold coinage,
together with a concurrent ceasing of the compulsory note circulation.
The outcome of the conference was, however, in quite distinct opposition
to this desire, as the agreement which was finally arrived at
established the maintenance of a pure silver currency. The continuance
of the gold _crown_ of 10-grs. fine gold was recognised only as a trade
medium. This experiment of a trade gold coin failed completely, though
it is none the less interesting intrinsically, as well as for its reflex
bearing on the similar schemes which were proposed in the early years of
the French Revolution. The premium on the minting of gold drew it to
France, in preference to any other place where a simple market price
prevailed. And the 20-franc gold pieces of France overflowed, while the
German crowns could not struggle into existence.
[Sidenote: GERMANY: ATTEMPTS AT REFORM, 1860-70]
The attempt which was made by a commercial conference at Hamburg, at the
time of the meeting of the Vienna Conference, to secure the introduction
by the Hamburg Bank of a gold instead of a silver _valuta_, remained
equally ineffectual.
As far as concerns the establishment of a simple and single monetary
system for Germany was concerned, this Vienna Convention, the last great
convention which Germany saw previous to the reconstruction of her
system in 1871, was as futile as that of Dresden in 1838, or as all the
conventions of the seventeenth and eighteenth centuries previously.
The consciousness of the need of such simplification and unification,
however, became thereby only the more apparent. Four years later the
first German Handelstag, which met in May 1861 at Heidelberg, turned its
first and special attention to the erection of some common currency
system. The recommendation which it finally concluded upon was the
adoption of the _Drittelthaler_ as the unit mark, with a decimal
subdivision. Four years later the third Handelstag, which met at
Frankfort (September 1865), confirmed the resolution, with the
additional proposition of the minting of a gold piece identical with the
20-franc piece, the value of which should be regulated from time to
time; the scheme being, therefore, as before, that of a silver standard,
with gold as trade money. The fourth Handelstag met at Berlin in October
1868, and again the matter was most seriously discussed. With the
single exception of the Berlin members, all the deputies declared for
the adoption of the gold standard. As, in the preceding year, Austria
had withdrawn from the German Monetary Union of 1857, she no longer
stood in the way of this proposition, and the erection of the North
German Union distinctly favoured the project.
In June 1870 the Bundesrath of the North German Union resolved upon a
reform and unification of the paper money, as preparatory to a complete
currency reform, and in the same month the Chancellor of the North
German Union had decided to call a Mint Convention. The outbreak of the
Franco-German War immediately afterwards put a short stop to the
proposal.
A long train of preparation had thus been laid, and there can be little
doubt as to what the ultimate direction of German monetary legislation
would have been, even without the war, and the consequent erection of
the Empire. That the latter event, however, enormously facilitated the
process cannot for a moment be questioned.
[Sidenote: GERMANY: NEW IMPERIAL SYSTEM, 1871]
When the subject was taken up after the Franco-German War, the
determination to adopt a gold coinage was only gradually arrived at. In
the original plan, as drafted soon after the conclusion of peace, the
new gold coinage proposed was intended not to be tenderable, for the
meantime, in private commerce. Such a provision roused all the
opposition of the mercantile community, and in consequence of the
agitation the scheme, as finally submitted to the Reichstag, was for a
gold monometallic system. The law passed on the 4th December 1871, and
the great operation of recoinage and conversion was immediately entered
upon. It was greatly favoured by the ratio existing at the moment, and
by the metallic condition of the world. The ratio taken as the basis of
the computation was the French 15.5, accepted because of its long and
present wide employment.
The previous silver standard thalers were taken as equivalent to 3
marks.
30 thaler = 90 mark = 1 pound fine silver.
90 x 15.5 = 1395 marks.
The gold piece of 10 marks was therefore coined at a tale of 139-1/2 to
the pound of fine gold.
Propositions were made to the Reichstag that the 20-franc piece should
be made equivalent to the English sovereign, or to the 25-franc piece,
giving respectively a ratio of 15.17 or 15.31, but at the moment the
price of silver in the London market ruled between 60-7/8 and 60-3/4
pence per ounce, i.e. at a mercantile ratio of 15.49-15.52. It was this
fact which decided the adoption of the French ratio.
The chief Acts which have accomplished the reform are of dates 5th
December 1871 and 9th July 1873, the first declaring the monetary system
and the latter the law of tender.
The unit of the system is the mark, which is the 1/1255.5 part of a
pound of gold of 500 grammes at 9/10 fine, and is coined into pieces of
20 and 10 marks. The gold crown is a 10-mark piece, is 9/10 fine, and
struck at a tale of 139-1/2 pieces to the German pound; charge for
coinage, 3 marks per pound of fine gold.
The pound of fine silver is struck into 100 marks, 9/10 fine. The total
amount of silver coin not to exceed 10 marks per head of population. No
individual need accept more than 20 marks of imperial silver coin in
payments. They are accepted in any amount by the Empire and by the
Federal States.
All other German coins are no longer legal tender, and have been
withdrawn, with the single exception of the thaler pieces. Whatever
pieces of this kind still exist are legal tender to any amount, like the
imperial gold coins, each being equal to 3 marks. An Act of 20th April
1870 provides that _Vereinsthalers_ coined in Austria before 1867 should
also be full legal tender. An Act of 6th January 1876 has authorised the
Bundesrath to put the thaler pieces and the Austrian _Vereinsthalers_ on
the same footing as imperial silver coins, i.e. to make them legal
tender only up to 20 marks, the thaler being still reckoned at 3 marks.
Since the suspension of silver sales and of the withdrawal of the silver
thalers (May 1879) there is no likelihood that the Bundesrath will make
use of this authority conferred upon it.
In briefest resume, the course of the silver coinage during the
preceding century may be presented thus:--
GERMANY--COURSE OF THE 1-THALER PIECES.
Thalers.
Total minted during 1750-1816 64,380,936
Withdrawn by the Government of the States 27,788,956
" under the new Imperial System, 1871-3 5,652,999
" " 1874 6,319,170
" " 1875 2,900,202
" " 1876 2,582,123
" " 1877 1,465,424
" " 1878 864,253
---------- 47,573,127
-----------
Leaving a balance not accounted for of 16,807,809
===========
Thalers.
Total minted during 1817-22 24,261,735
Withdrawn under the new Imperial System, 1871-3 3,623,511
" " 1874 5,147,970
" " 1875 2,580,580
" " 1876 2,373,496
" " 1877 1,421,719
" " 1878 766,908
---------- 15,914,184
-----------
Leaving a balance not accounted for of 8,347,551
===========
Thalers.
Total minted during 1823-1856 91,031,741
Withdrawn under the new Imperial System, 1874 40,000
" " 1875 566,677
" " 1876 11,250,277
" " 1877 5,753,269
" " 1878 4,640,068
---------- 22,250,291
-----------
Leaving a balance not accounted for of 68,781,450
===========
Thalers.
Total minted during 1857-71 215,863,120
Withdrawn by the Government of the States 2,538
" under the new Imperial System, 1875 3,000
" " 1876 25,958
" " 1877 64,806,347
" " 1878 18,915,167
---------- 109,635,938
-----------
Leaving a balance not accounted for of 106,177,182
===========
Thalers.
On the whole period, 1750-1871, the total minted 1-thaler
pieces amounted to 395,537,532
Total withdrawn 195,423,540
-----------
Leaving a balance not accounted for of 200,113,992
===========
Allowing 83,062,882 thalers as a rough equivalent for the loss by
attrition, there is still a deficit of 117,051,000 thalers, or about
L17,557,650 sterling to be accounted for (and laid to the account of
remintings and loss by arbitrage).
ACCOUNT OF THE MINTING OF THE RECONSTRUCTED GERMAN EMPIRE--GOLD--FROM
1872 TO DEC. 1878
+--------------------------------+--------------------+----------------------+
| | Supplied for the | Supplied for Private |
| | Empire. | Accounts. |
| Origin of the Bullion supplied +--------------------+----------------------+
| to the Mint. | Pounds Weight Fine | Pounds Weight Fine |
| | Gold. | Gold. |
+--------------------------------+--------------------+----------------------+
| German gold coin of the old | | |
| type | 64,092.3 | 11.4 |
| Bars | 402,382.6 | 214,825.7 |
| Austrian gold coins | 381.7 | 711.9 |
| Francs and Napoleons | 391,166.5 | 809.7 |
| Sovereigns | 30,181.3 | 223.1 |
| Russian gold coins | 28,252.3 | 20,862.1 |
| Isabellas | 12,822.9 | ... |
| Dollars and Eagles | 16,860.1 | 20,548.8 |
| Turkish gold coins | 51.0 | 1,084.0 |
| +--------------------+----------------------+
| | 946,191.2 | |
+--------------------------------+--------------------+----------------------+
Making a complete total, with odd amounts from various sources, and
including imperial gold coins minted in 1877-78 but now no longer
current, of 1,205,786 lbs. weight = L84,103,584.
SALES OF SILVER BY THE GERMAN GOVERNMENT FROM 1873 TO THE SUSPENSION OF
THE SALES IN MAY 1879
+-------+----------------+----------------+---------------+
| | Pounds of Fine | Product. | Price Per oz. |
| Date. | Silver. +----------------+---------------+
| | | Marks. | Pence. |
+-------+----------------+----------------+---------------+
| 1873 | 105,923.372 | 9,296,682.77 | 59-5/16 |
| 1874 | 703,685.175 | 61,135,670.29 | 58-3/4 |
| 1875 | 214,898.594 | 18,208,449.08 | 57-1/4 |
| 1876 | 1,211,759.204 | 93,936,482.37 | 52-3/8 |
| 1877 | 2,868,095.533 | 230,424,238.51 | 54-5/16 |
| 1878 | 1,622,696.403 | 126,203,852.08 | 52-9/10 |
| 1879 | 377,744.712 | 27,934,417.89 | 50 |
+-------+----------------+----------------+---------------+
| | 7,104,895.993 | 567,139,992.99 | |
+-------+----------------+----------------+---------------+
The total silver withdrawn from circulation up to the close of 1880 was
1,080,486,138 marks.
Of this amount 382,684,841 marks were delivered to the Mint for coinage
into the new imperial silver coins.
The remaining 696,797,069 marks were melted into silver and produced
7,474,644 pounds of fine silver. Of this quantity 7,102,862 were sold up
to May 1879. The balance of unsold silver still in the hands of the
Imperial Government is 339,353 pounds of fine silver.
England.
Charles II. began his regulation of the currency by the proclamation of
29th January 1661, fixing the coins to be current and their tariff. This
proclamation was followed by another, of 10th June 1661, against the
export of gold or silver, and against buying or selling the metals at
higher rates than were given at the Mint, a practice to which the
proclamation attributed the scarcity of money. This edict proved of no
avail, for, in spite of it, the gold coins were exported in such
quantities that they were current more abundantly in foreign parts than
in England. As the result of deliberation of the Privy Council, assisted
by the Commissioners of Trade and officers of the Mint, who all
attributed the export to the higher price of gold abroad, it was
determined to raise the price of the gold coins to or near the value
which they had on the Continent at the moment. Accordingly, by
proclamation of the 26th August 1661, the value of the gold _unite_ was
raised from 22s. to 23s. 6d., and other gold coins in proportion, the
silver currency being left unaltered.
In referring to the Act for the free trade in gold and silver (_supra_,
p. 162), mention has already been made of the motive of the legislator,
namely, to increase the importation of the metals to the Mint. Exactly
similar was the intention, as expressed in the preamble of the
succeeding Act of 1666 (8 Charles II. c. 5), which abolished the right
of seigniorage, thereby establishing free and gratuitous coinage in
England--the principle of minting still in force in this country.[17]
[Sidenote: ENGLAND: CHARLES II]
The testimony of both Act and declaration as to the scarcity of money is
confirmed by actual record. In the following year, 1667, there was a
great scarcity of money, and _dollars_ and _pieces of eight_ were bought
up by the goldsmiths and bankers for 4s. 3d. each, and instead of being
brought to the Mint were at once exported to France for 4s. 10d. and to
Ireland and Scotland for 5s.
According to the new indenture for the coinage of 1670, a slight
reduction in the standard of the gold took place, the pound of crown
gold (22 carats fine) being to be minted at a tale of L44, 10s. The
scarcity of money still continued, however, and the separate experience
of Ireland only corroborated that of England. The general statement of
the case as to the fate of the coined money since the Act of 18 Car II.,
which instituted free coinage, is thus put by Sir Dudley North, in his
_Discourses upon Trade_: "I call to witness the vast sums that have been
coined in England since the free coinage was set up. What is become of
it all? Nobody believes it to be in the nation, and it cannot well be
all transported, the penalties for so doing being so great. The case is
plain--the melting-pot devours it all; and I know no intelligent man who
doubts but the new money goes this way. Silver and gold, like other
commodities, have their ebbings and flowings; upon the arrival of
quantities from Spain, the Mint commonly gives the best price, i.e.
coined silver for uncoined silver, weight for weight. Wherefore it is
carried into the Tower and coined. Not long after there will come a
demand for bullion to be exported again. If there is none, but all
happens to be in coin, what then? Melt it down again; there's no loss in
it, for the coining costs the coiners nothing. Thus the nation hath been
abused and made to pay for the twisting of straw for asses to eat."
By the time of the accession of William III. the scarcity of silver had
become so great as to cause a petition from divers working goldsmiths in
and about the City of London to the House of Commons (9th April 1690).
It stated "that upon search at the Customs they found that since last
October entries had been made of 286,102 oz. of silver in bullion, and
89,949 _dollars_ and _pieces of eight_ for exportation by divers private
persons, and they doubted not but it would appear that not only the East
India Company, but also divers Jews and merchants, had of late bought up
great quantities of silver to carry out of the kingdom, and had given
1-1/2d. per oz. above the value, which had encouraged the melting down
of much plate and milled monies; whereby for six months past, not only
the petitioners in their trade, but the Mint itself had been stopped
from coining."
[Sidenote: ENGLAND: THE EXPORT IN 1690]
The petition was referred to a committee of the Lower House, which
reported on the 8th May that great quantities of silver had been
exported, of which seven-eighths had been shipped off by the Jews, who
would do anything for their profit. The reason for the exportation, too,
was plain, for the French king, of late finding his money very scarce,
had raised his coin 10 per cent., which was an encouragement to send
silver to fill his coffers, and therefore the Jews exported it daily in
very great quantities. The melting down of L1000 of milled money for
exportation was attended with a profit of L25 ready money and upwards,
silver being coined at the Mint at 5s. 2d. per oz., but at the time of
exportation sold generally at 5s. 3-1/2d. The remedies proposed to the
committee were either a prohibition of export or the enhancing of the
English monies.
Not less than three measures were presented to the House for the
prohibition of export--one of them by Sir Richard Temple--but were all
lost; and, meanwhile, the exports to Holland and France continued. In
November 1690 it was calculated that during the preceding sixteen months
about 140,000 oz. had been exported.
In addition to this actual drain of coinage, the processes of culling,
clipping, and counterfeiting, which had been going on through the reigns
of Charles II. and James II., had resulted in an unexampled depreciation
of so much of the coinage as remained. A large portion of the currency
consisted of iron, brass, or copper-pieces plated, and such coins as
were of good silver were worth scarcely one-half their current value.
This statement is more than borne out by quite reliable computations
which were made in the process of the recoinage five years later. A
medium lot of 5-1/2 bags, containing in tale L57,200 of the called-in
currency, and which should have weighed 221,418 oz. 16 dwt. 8 grs., was
found to weigh only 113,771 oz. 5 dwt. According to the accounts of
Neale, then master and warden of the Mint, 4,695,303 dwt. 15 oz. 2 grs.
of the clipped silver money produced only 790,860 lbs. 1 oz. 19 grs.,
implying a depreciation in weight alone of over 47.75 per cent.
The process of stripping the country of currency was increased by the
continual pouring out of money in aid of William's wars, and the loss in
exchange on such large remittances made the evil only too apparent. The
one or two millions yearly remitted to the Continent for the British
armies were negotiated in Holland in a thousand ways to England's
prejudice. Partisan statements were made that whereas in the beginning
of the war the Dutch allowed 43 schillings for an English pound they
gradually lowered the exchange to 28 schillings. Guineas, which were
equal in value to 21s. 6d. in silver, rose to 30s.; and they would have
risen to a still higher rate if the officers of the exchequer and the
receivers of public revenue had not refused to receive them in payment
at the increased value.
In 1695 the matter was taken up in the House of Commons, and a committee
appointed. The report of this committee, which was never passed, was
based on the proposition of a reduction of standard. By Montague's
influence the proposals were dropped, and it was not till the 22nd
November that the Act for remedying the ill state of the coins passed.
It is well known that the unwise determination of the Government of
William III. to adhere to the pre-existing standard was due to the
action and contrivance of Montague as Chancellor of the Exchequer, and
to the influence of Locke's writings. By a subsequent series of Acts,
based on the complaints of merchants representing the evils resulting
from the unsettled price of gold, the price of the guinea was ordered to
be gradually reduced from 30s. to 28s., 26s., and finally 22s., before
10th April 1696.
[Sidenote: ENGLAND: RECOINAGE OF 1696]
This great recoinage scheme was only completely accomplished in 1699,
having occupied the greater part of four years, and after a long series
of Acts and proclamations of, occasionally, very doubtful wisdom.
According to the accounts of the officers of the Mint, the new silver
coin amounted in tale to L6,882,908, 19s. 7d. The worn and clipped money
called in was estimated roughly at L4,000,000, on which the loss was
about L2,000,000; the whole charge and loss being stated at not less
than L2,700,000. It is significantly affirmed that, in a manner, all the
called-in silver was found to consist only of pieces coined between the
days of Edward VI. and 1662, a sure indication of the fate which had
befallen the coinage issued since the Restoration.
Before the transaction was finally complete the last safeguard and
complement of the system had been adopted, in fixing the relation of the
gold coinage to the new silver issue. On the 22nd September 1698, a
report was given in to the House of Commons, signed by four names,
including that of John Locke, stating that the value of gold in Holland
and the neighbouring countries was, as near as could be computed upon a
medium, 15:1 in silver; and that, according to this value, the currency
of the guinea at 22s. was too high, and occasioned a disproportionate
importation of gold and an exportation of silver. The bringing down of
the guinea to 21s. 6d. would make the value of English gold and coin
very near 15-1/2:1 to silver, which, though not so low as the rate in
Holland, would in their opinion be sufficient to correct the error.
In consequence of this report the Commons resolved that, under the Act 7
and 8 William III. chap. 19, no person was obliged to take guineas at
22s. a piece. The price then fell to 21s. 6d., at which rate they were
received by the officers of the revenue. With the exception of this
merely declaratory tariffing of the guinea, it is to be borne in mind
that this recoinage of William's reign was carried out on the principle
enunciated by Montague, and backed by the authority of Locke, namely,
that of a retention of the old standard, although in the face of a
clearly established advance in the value of silver, and in face of quite
irrefutable answers to all Locke's arguments. Momentarily the scheme
succeeded; the adverse exchange was instantly redressed, while the
renewal of the coinage and the ratio of 1698 was sufficiently above the
continual ratio to turn the flow of gold, as doubtless was the
(unexpressed) design in adopting it. According to Burnet the packet-boat
from France seldom came over during the following winter without
bringing 10,000 _louis d'or_, and often more. "The nation was indeed
filled with them, and in six months a million of guineas was coined out
of them. The merchants in fact said that the balance of trade was then
so much turned to our side that whereas we were wont to carry over a
million of our money in specie, we then sent no money to France, and had
at least half that sum sent over to balance the trade."
[Sidenote: ENGLAND: EFFECTS OF THE RATIO OF 1698]
The circulation of French and other foreign gold became so great that on
the 5th February 1701 the Council issued a proclamation that the _louis
d'or_ and Spanish _pistole_ should not pass for above 17s. Such action
at once brought those coins to the Mint, and nearly 1-1/2 millions were
coined out of them.
It was not seen at the moment that the establishment of this ratio so
favourable to gold was _pari passu_ unfavourable to silver. The idea was
entertained that the French gold came over to bribe English members,
i.e., on mere political causes. The hypothesis was needless as it was
incorrect. Gold came over because it was higher priced in England than
abroad through the ratio of 1698, and for the same reason silver left
the country to pay for the gold. The one movement was the essential
counterpart of the other, and made itself at last only too visible.
As early as the seventh year of Anne's reign--only nine years after the
completion of this great recoinage, it was found necessary to give
further encouragement to the coinage of silver by offering a premium on
every ounce of foreign coins which should be brought to the Mint within
a limited time. The premium was not to exceed 2-1/2d. per oz., and the
time limited was from the 17th April to the 1st December 1709.
Such a measure has been already noticed in the history of France; it was
indeed a design frequently employed there under the title of _Surachat_,
and it always proved as futile as the Government of Anne found it to be.
As the drain continued, representations were made by the officers of the
Mint to the Treasury, and in 1717 the House of Commons requested these
representations to be laid before it (December 20th). On the same and
following day a remarkable speech was made by a member, Mr. Aislabie,
who took notice of the great scarcity of the silver species, and
proposed the remedy of lowering the gold species. On the second day he
was seconded by Mr. Caswall, who suggested that the overvaluation of
gold in the current coins of Great Britain had caused the export of
great quantities of silver species, "and to that purpose [i.e. the
purpose of his argument] laid open a clandestine trade, which of late
years had been carried on by the Dutch, Hamburgers and other foreigners,
in concert with the Jews and other traders here, which consisted in
exporting silver coins and importing gold in lieu thereof; which being
coined into guineas at the Tower, near 15 pence was got by every
guinea, which amounted to about 5 per cent.; and as these returns might
be made five or six times in a year considerable sums were got by it, to
the prejudice of Great Britain, which thereby was drained of silver and
overstocked with gold." He concluded by proposing to lower the price of
guineas and all other gold specie.
[Sidenote: ENGLAND: SIR ISAAC NEWTON'S REPORT, 1717]
His speech was received with applause, and the House unanimously
petitioned the King to call the guinea down to 21s., and other gold
species in proportion. To this George I. immediately acceded, and the
proclamation to that effect _verbatim_ was issued on the following day,
22nd December 1717.
The report for which the House had called two days earlier, and which
was produced on the 21st December, was the celebrated report made some
months before by Sir Isaac Newton as master of the Mint, at the demand
of the Commissioners of the Treasury. It is a document deserving the
careful attention of every student of currency history. Newton reviews
the ratio in each of the then commercial nations, and shows the effect
of difference of ratio in producing export and disturbance of one or
other metal. "Gold in Spain and Portugal is of sixteen times more value
than silver of equal weight and alloy; at which rate a guinea is worth
21s. 1d. net; this high price keeps their gold at home in good plenty,
and carries away the Spanish silver into all Europe. So that at home
they make their payments in gold, and will not pay in silver without a
premium. Upon the coming in of a plate [silver] fleet the premium ceases
or is but small, but as their silver goes away and becomes scarce the
premium increases and is most commonly about six per cent."
In France the ratio was 15:1, and the guinea therefore worth 20s.
8-1/2d. In Holland it was worth 20s. 7-1/2d., in Italy, Germany, Poland,
Denmark and Sweden, from 20s. 7d. to 20s. 4d. "In China and Japan the
pound weight of fine gold is worth but 9 or 10 lbs. weight of fine
silver, and in East India it may be worth 12 lbs., and the low price of
gold in proportion to silver carries away the silver from all Europe."
"If gold were lowered only so as to have the same proportion to the
silver money in England, which it hath in the rest of Europe, there
would be no temptation to export silver rather than gold to any part of
Europe, and to compass this last there seems nothing more requisite than
to take off about 10d. or 12d. from the guinea."
[Sidenote: ENGLAND: THE STATE OF COINAGE IN 1760]
In a subsequent report of the 21st September 1717, Newton stated that,
since the beginning of 1702 to September 1717, the gold coined at the
Mint amounted to L7,127,835, while the silver within the same period
only amounted to L223,380, of which L143,086 had been brought to the
Mint in response to the premium offered; in 1709 and 1711, of their own
free will, the goldsmiths had only brought a matter of L21,220 to the
Mint. In the House of Lords, early in the following year, it was proved
that during the year 1717 the East India Company had exported nearly
3,000,000 oz. of silver.
The immediate purpose of the above proclamation of 22nd December 1717
was for a time thwarted by a speculative hoarding of silver in
expectation of a further calling down of the gold species; and it was to
cut the ground from under this speculation that in January 1718 both
Houses declared their determination not to alter the standard of gold
and silver coins in the kingdom, and proceeded in place of such
alteration to prepare a bill for preventing the melting down of the
coins of the kingdom.
It is demonstrable, even from Sir Isaac Newton's own figures, that the
calling down of the guinea to 21s., though largely, was not completely
effective in destroying the profit of arbitrage transactions with
Holland. With the guinea at 21s., the ratio was still 15-14295/68200
while in France and Holland the ratio was 15 or under. That the process
of culling and exporting the heaviest silver specie still continued is
proved by the state of silver coinage twenty years later, when shillings
were found to be deficient in weight, by between 6 and 11 per cent., and
sixpences between 11 and 22 per cent., and all species so scarce as to
threaten greatest confusion in every branch of trade. At the accession
of George III., 1760, the silver coinage was found in so imperfect a
state that the crown pieces had almost entirely disappeared, though
minted since 1795 to the amount of over a million and a half sterling.
Of half-crowns, likewise minted to the value of L2,329,370, only defaced
and impaired specimens remained current, while shillings and sixpences
had lost every sign of impression. Up to 1763 only a matter of L5791 in
silver had issued from the Mint--practically no coinage at all.
Gradually however, owing to the force of wider principles at work, the
matter of the ratio righted itself. Ever since 1756 the value of gold
had been rising all over Europe. In 1759 the continental ratio was still
calculated at 14-1/2, as compared with 15-1/5 in England; but by 1773
the continental ratio had overtaken the English, and the market price of
standard silver had risen to 5s. 2d. per oz.--the English Mint rate. In
the greatly depreciated state of the silver coinage--three-fourths of it
was said to be base--even the approach of a fair ratio acted
prejudicially on gold. Already, in 1771, the export of gold to Holland
had become noticed, and it was asserted that the gold coins had never
before been so deficient. They were sent over to Holland, and there
filed and returned and put into circulation--a bimetallic phenomenon
that always recurs in a currency containing two differently depreciated
elements.
[Sidenote: ENGLAND: STATE OF THE COINAGE IN 1774]
The idea that bimetallic action replaces one good metal by another, an
equal weight of one metal for that of the other, a good undepreciated
coinage of silver for a good undepreciated coinage of gold, or _vice
versa_, is not borne out by a single instance in history. Bimetallic
action always substitutes the less for the greater, whether weight or
value, the more depreciated for the less, or the depreciated for the
perfect standard coin. In this particular instance, 1774, the
depreciation of silver had been the result of the action of a too high
ratio from 1717 onwards; the depreciation of gold was effected in a much
less time between 1770 and 1773, simply because the already depreciated
state of the silver causing that differentiation of value, which is the
bullionist's opportunity, happened to coincide with a natural rise of
the value of gold all over the Continent. The result, therefore, of
fifty years of bimetallic regime left England with a currency
depreciated in both its limbs, in both gold and silver, and as deficient
in the quantity current as in the weight of the individual pieces. This
is not in keeping with the theory of bimetallism as developed to-day,
according to which the transition from one coin to the other would only
be made at the point of equation, and the substituted metal would
equalise that displaced. This is theory. The facts of the situation in
1774 are not theory but history, and tell a different tale.
"The evil was so great," says Lord Liverpool, "that the Government found
it necessary to take this difficult subject into their immediate
consideration. On this occasion I addressed a letter to a noble Lord,
who was then Chancellor of the Exchequer, suggesting what appeared to me
the proper remedy for this evil. I proposed that, with a view to the
general reform of the coins of the realm, all the deficient gold coins
should in the first place be called in and recoined, and that in future
the currency of the gold coin should be regulated by weight as well as
by tale, and that the several pieces should not be legal tender if
diminished below a certain weight. Your Majesty was pleased to approve
of this advice and to propose to your Parliament, on 13th January 1774,
the calling in and recoining of all the deficient gold coins; and the
Chancellor of your Exchequer opened the whole of this plan to the House
of Commons, who approved of the measure, which was carried into
immediate execution without any complaint and with great success. The
defects which had previously existed in this species of coins were
thereby removed, and the regulation, then established, of weighing the
gold coin has been the means of preserving it at nearly the state of
perfection to which it was then brought."
[Sidenote: ENGLAND: RECOINAGE OF 1774]
The resolutions of the House of Commons on which this recoinage depended
were passed on the 10th May 1774. After stating the depreciation
existing in the gold coinage the House asserted--(3) that it has been a
practice to export and melt down the new and perfect gold coin soon
after it is issued for private advantage, to the great detriment of
England; (4) that while pieces of gold coin, differing so greatly in
weight, are allowed to be current under the same denomination and at the
same rate and value, great quantities of the new and perfect pieces will
continue to be exported and melted down, and, there is reason to
apprehend, will be recoined into pieces the most deficient that are
allowed to be current."
The House then goes on to adopt the principle of limiting the
depreciation to be allowed on any single coin, i.e. of making the coins
current by weight as well as tale within the limits allowed.
The House next turned its attention to the silver element of the
currency. At the outset it was met by the patent fact that the
depreciated silver coinage had been made the handle or lever, or _point
d'avantage_, in all the operations against gold. "Whereas," is the
recital of the Act of 14 George III. c. 42, "considerable quantities of
old silver coin of this realm, or coin purporting to be such, greatly
below the standard of the Mint in weight, have been lately imported into
this kingdom, and it is expedient that some provision should be made to
prevent the practice," etc. The Act therefore decrees the prohibition of
importation of light silver coinage into the kingdom, and its
confiscation in case of discovery as such. "And be it further enacted
... that no tender in the payment of money made in the silver coin of
the realm, of any sum exceeding the sum of L25 at any one time, shall be
reputed in law or allowed to be a legal tender within Great Britain or
Ireland for more than according to its value by weight, after the rate
of 5s. 2d. per oz. of silver, and no person to whom such tender shall be
made shall be any way bound thereby or obliged to receive the same in
payment in any manner than as aforesaid; any law, statute, or usage to
the contrary notwithstanding."
The importance of this latter epoch-making clause is vital. It is the
first enactment of a law of tender in the history of English monetary
legislation, and it was the first step towards the shaking off the
incubus of that mediaeval currency system which was even then only coming
to be understood in all its fatal perniciousness. For statesmanship, the
only parallel to it is that Act of Henry III. of France, which proved so
shortlived in its adoption (see _supra_, pp. 87-88). It was the first
step in the evolution of that system of a safeguarded currency which was
finally constructed in 1816.
This Act prohibiting the importation of light silver was renewed in 1776
for a further two years, and was again, in 1778, continued until the 1st
day of May 1783, and from thence to the end of the next session of
Parliament. On the 21st June 1798 the Act, being then expired, was
revived and further continued to the 1st day of June 1799 by a new
statute, and on the 12th July 1799 the Act was made perpetual by statute
of 39 Geo. III. c. 75.
The later legislative action with regard to silver belongs to the final
construction of the English currency system. In the main, the recoinage
of gold was accomplished in the year 1774, though it lingered over the
three succeeding years as appears by the items in the Appropriation
Acts.
The accounts of grants for recoinage were as follows:--
1774. The first grant L250,000 0 0
1775. To the bank for receiving the
deficient gold coin 46,846 0 0
For extraordinary charges
of the Mint 22,824 19 0
1776. Further grant 92,421 14 1-1/4
1778. " " 105,227 8 3
------------------
L517,320 2 2-1/4
==================
The scope of this series of Acts of 1774 will be seen at a glance; as
well as the tendency in policy, namely, in favour of gold, which it
indicated. The gold coinage was renewed, and as a safeguard against its
future depreciation the existing depreciated coin was cut off from any
sapping action upon it by the above restriction as to tender by weight.
For the renewal of the silver coinage itself no actual measures were
taken save the prohibition of the import of light coins.
For more than twenty years the defective state of the silver coin
continued quite unheeded; evidently as no longer causing international
embarrassment, now that its function and differentiating action upon the
companion metal had been partially tied down and limited.
In 1787 the depreciation of the silver coinage was ascertained
experimentally, when it was found that half-crowns were defective by
over 9 per cent., shillings by over 24 per cent., and sixpences by more
than 38 per cent. of their proper weight. To this depreciation was
added an exterior cause of drain by the action of France, who in 1792
increased the scarcity of silver coins and bullion by the issue of her
assignats. In that year not less than 2,909,000 oz. of silver were
purchased with assignats and sent into France. Five years later an
attempt was made to supply the deficiency of the silver coins by the
issue of Spanish _dollars_, countermarked with the hall mark of the
King's head. This was after the Bank of England had, in accordance with
the minute of the Privy Council of 26th February 1797, suspended cash
payments.
[Sidenote: ENGLAND: ACT OF 1798]
On the 7th of February of the following year, 1798, the subsisting
Committee of Council for Coins was dissolved, and a new committee
appointed to consider the state of the coins and Mint. During its
deliberations, and until it established the new rule, the further
coining of silver was suspended by the Act already spoken of, which
(21st June 1798) revived the old law against importation of light
silver. This suspension of silver coinage was simply a temporary
precaution. "Whereas," says the Act, "His Majesty has appointed a
committee of his Privy Council to take into consideration the state of
the coins of this kingdom, and the present establishment and
constitution of His Majesty's Mint, and inconvenience may arise from any
coinage of silver until such regulations may be framed as shall appear
necessary; and whereas from the present low price of silver bullion,
owing to temporary circumstances, a small quantity of silver bullion
has been brought to the Mint to be coined, and there is reason to
suppose that a still further quantity may be brought, and it is
therefore necessary to suspend the coining of silver for the present, be
it therefore enacted that no silver bullion shall be coined at the Mint,
nor shall any silver coin that may have been coined there be delivered."
There can be little doubt that this enactment was due to Lord Liverpool,
and if so that it was intended as an arrest, with a particular intent or
bearing; for Liverpool had formed his conception of a monetary theory as
early as 1773. None the less it is quite inadmissible to state, as has
been done, that this restriction, so evidently and expressly only a
temporary or interim measure of self-defence, was equivalent to a
placing upon the statute-book of Lord Liverpool's gold monometallical
theory. There was as yet no restriction on the legal tender of silver.
It was still legal tender to any amount,--it was indeed the standard
coin of the realm,--only, in order to avoid the effects of depreciation,
and to prevent further depreciation, it was now the law of the land that
payments of silver of sums over L25 should be made by weight, and the
further coinage of silver was temporarily stopped.
This was not a gold monometallic system, and the Act which established
that system was passed eight years after the death of Lord Liverpool,
and six years after the Bullion Report of 1810 had been printed.
[Sidenote: ENGLAND: THE BANK RESTRICTION]
Further than incidentally it is inconsistent with the design of this
book to refer to the period of suspension of cash payments and the
Bullion Report. These latter are banking phenomena, and will find their
place in a treatise of currency in the fuller acceptance of the term,
rather than in a treatise definitely restricted to the subject of the
metallic currencies. The events of 1797 which led to the
suspension,--the remittances to the Continent for war purposes, a
failure of credit, a run on the country banks, and then upon the London
banks,--had been experienced in 1793 as acutely as in 1797; and,
according to the express statement of the report itself, even in the
years 1796 and 1797, when the country bankers were making great demands
in order to increase their deposits, the market price of gold never rose
above the Mint price. These events were therefore one phase of the
internal experiences of the country, and have no relation to an
international outflow of gold, caused by the heightened ratio which
definitely set in in 1794. On the mere ground of first principles,
therefore, it is inadmissible to make argumentative use of this event,
known as the Bank Restriction, for judgment and illustration in the
wider question of bimetallism. Further, the argumentative use that has
been made of it--viz. that if from 1773 to 1797 England had possessed a
true rather than a halting bimetallic regime, she would have been
supplied by its means with an amount of silver that would have increased
the metallic reserve and strength of the country, and enabled it to
avoid suspension--is inadmissible: and the argument itself is untenable.
Such bimetallic action supplying silver could only have begun to operate
in 1794, three years before the suspension. It could only have operated
by substituting one metal for the other, not by adding silver to gold,
but by taking away higher valued gold, and furnishing lower valued
silver, i.e. by actually decreasing the metallic strength and reserve of
the kingdom. And, lastly, there is the peculiar fact still requiring
explaining, that the years of the bank restriction, until, that is, the
new Mint law of 1816, saw the heaviest export of silver probably that
England has ever experienced. During the ten years, 1801-10, nearly 10
millions sterling of silver was exported from England (over 38,176,016
oz.), while the gold exports amounted only to L2,088,483, so that, of
the total export, silver formed 82 per cent. (net amounts used in both
cases). It is still well known to what straits this export of silver put
the country. In almost every town where there was any employment of
labour the tradesmen were obliged to issue token money of their
own--shilling tokens, sixpenny tokens, half-crown and five-shilling
promissory-notes. Every conceivable form of hand-to-mouth unauthorised
currency was resorted to, in order to relieve the needs of the situation
caused by the want of silver coins. And stories are still remembered of
the straits to which the working classes were driven in order to make
their purchases at the week end with one pound notes, for which they
could get no change. The explanation of such a phenomenon can only be
that the one pound notes having driven gold out of circulation, by a law
which is merely another form of the bimetallic law, left only silver
available for remittance to the Continent for loans and war purpose.
But, whatever the explanation, the fact cuts the ground from under the
argument that bimetallism would have saved England from the bank
restriction. If silver had not been legal tender to any amount (up to
L25 by tale, and beyond that by weight), or again if it had been
protected by an agio in 1808 as it was in 1816, it could not have left
the country. The straits of the poorer classes in those years of
hardship were _due_ to the existing bimetallic system, and to it must,
therefore, be attributed the aggravation rather than alleviation of the
bank restriction.
If anything is required to confirm such view it can be found in the very
terms of that statute of 1816 (56 Geo. III. c. 68), which established
the gold standard in England. They reveal the fact that the Act was not
so much a philosophical or theoretical declaration of monometallism,
such as might have been expected if Lord Liverpool had still lived to
dictate it, but a measure for the protection of and relating almost
entirely to silver.
[Sidenote: ENGLAND: THE ACT OF 1816]
"Whereas the silver coins of the realm have, by long use and other
circumstances, become greatly diminished in number and deteriorated in
value, so as not to be sufficient for the payments required in dealings
under the value of the current gold coins, by reason whereof a great
quantity of light and counterfeit silver coin and foreign coin has been
introduced into circulation within this realm, and the evils resulting
therefrom can only be remedied by a new coinage of silver money...."
The Act therefore prescribes the coining of silver, 11 oz. 2 dwts. fine,
at a tale after the rate of 66s. per Troy pound, whether the same be
coined in crowns, half-crowns, shillings, or sixpences, or pieces of a
lower denomination, but to be issued to the importer of the silver, or
to the public, after a rate of 62s. per pound Troy.
"And whereas at various times heretofore the coins of this realm of gold
and silver have been usually a legal tender for payments to any amount,
and great inconvenience has arisen from both these precious metals being
concurrently the standard measure of value and equivalent of property,
it is expedient that the gold coin made according to the indentures of
the Mint should henceforth be the sole standard measure of value and
legal tender for payment, without any limitation of amount, and that the
silver coin should be a legal tender to a limited amount only, for the
facility of exchange and commerce." The Act therefore prescribes the
limit of 40s. for the tender of silver.
This Act was repealed, but in substance re-enacted by the Coinage Act of
1870, and is still in principle and fact the law of the land and the
basis of our monometallic system.
From the date of its enactment England has been withdrawn from that
action of bimetallic law which had been her bane for centuries. The flow
of gold in or out became automatic, representing the natural flow of
world-balances, and therefore proving the greatest trade help and
indicator; and such commercial crises as have come upon her have arisen
from the peculiarly sensitive organisation of credit which distinguishes
the modern system, and are to be classed with banking rather than
metallic currency phenomena.
The total coinage in England from 1816 to 1875 inclusive was
L234,139,886 gold and L24,663,309 silver.
[Sidenote: ENGLAND: 1816-93]
+-------+-------------+-------------------+-------------------+
| | Coinage of | Imports of Gold | Exports of Gold |
| Year. | Gold. | Bullion and | Bullion and |
| | | Specie. | Specie. |
+-------+-------------+-------------------+-------------------+
| 1855 | 9,008,663 | ? | 11,847,000 |
| 1856 | 6,002,114 | ? | 12,038,000 |
| 1857 | 485,980 | ? | 15,062,000 |
| 1858 | 1,231,023 | 22,793,000 | 12,567,000 |
| 1859 | 2,649,509 | 22,298,000 | 18,081,000 |
| 1860 | 3,121,709 | 12,585,000 | 15,642,000 |
| 1861 | 8,190,170 | 12,164,000 | 11,238,000 |
| 1862 | 7,836,413 | 19,904,000 | 16,012,000 |
| 1863 | 6,607,456 | 19,143,000 | 15,303,000 |
| 1864 | 9,535,597 | 16,901,000 | 13,280,000 |
| 1865 | 2,367,614 | 14,486,000 | 8,493,000 |
| 1866 | 5,076,676 | 23,510,000 | 12,742,000 |
| 1867 | 496,397 | 15,800,000 | 7,889,000 |
| 1868 | 1,653,384 | 17,136,000 | 12,708,000 |
| 1869 | 7,372,204 | 13,771,000 | 8,474,000 |
| 1870 | 2,313,384 | 18,807,000 | 10,014,000 |
| 1871 | 9,919,656 | 21,619,000 | 20,698,000 |
| 1872 | 15,261,442 | 18,469,000 | 19,749,000 |
| 1873 | 3,384,568 | 20,611,000 | 19,071,000 |
| 1874 | 1,461,565 | 18,081,000 | 10,642,000 |
| 1875 | 243,264 | 23,141,000 | 18,648,000 |
| 1876 | 4,696,648 | 23,476,000 | 16,516,000 |
| 1877 | 981,468 | 15,442,000 | 20,374,000 |
| 1878 | 2,265,069 | 20,871,000 | 14,969,000 |
| 1879 | 35,050 | 13,369,000 | 17,579,000 |
| 1880 | 4,150,052 | 9,455,000 | 11,829,000 |
| 1881 | ... | 9,963,000 | 15,499,000 |
| 1882 | ... | 14,377,000 | 12,024,000 |
| 1883 | 1,403,713 | 7,756,000 | 7,091,000 |
| 1884 | 2,324,015 | 10,744,000 | 12,013,000 |
| 1885 | 2,973,453 | 13,377,000 | 11,931,000 |
| 1886 | ... | 13,392,000 | 13,784,000 |
| 1887 | 1,908,686 | 9,955,000 | 9,324,000 |
| 1888 | 2,277,424 | 15,000,000 | 14,250,000 |
| 1889 | 7,257,455 | 17,570,000 | 14,000,000 |
| 1890 | 7,662,898 | 23,900,000 | 14,250,000 |
| 1891 | 6,869,119 | 29,500,000 | 25,000,000 |
| 1892 | 13,944,963 | 21,250,000 | 15,450,000 |
| 1893 | 9,318,021 | 23,630,000 | 18,800,000 |
+-------+-------------+-------------------+-------------------+