If further proof were needed that gold has risen in value, it is, as I
maintain, to be found in the coincident fact of a decrease of rates of
interest on first-class securities. That decrease has kept even step and
pace with the rise in the value of money.
The rise in the value of gold, as shown by comparison with large numbers
of articles of commerce, has been between 35 and 40 per cent. The rate
of interest on gilt-edged securities shows a corresponding decline. But
unfortunately for the struggling people of the country, the fall in the
rate of interest on farm mortgages and on property remote from money
centers has been nothing like so great, nor has it been so great as the
fall in the price of agricultural lands, and in the products of labor.
I hold, therefore, that a new axiom should be added to the science of
political economy; namely, that as the purchasing power of money
increases, its income producing power decreases, and in about the same
ratio; and conversely, when the purchasing power of money decreases, its
income-producing power increases. In other words, when prices rise
interest rises; when prices fall interest falls. When money is
increasing in volume and decreasing in value, prices rise, and its
investment in productive enterprises becomes more profitable, and as a
consequence interest rises. When it is decreasing in volume and
consequently increasing in value, prices fall, investment in property
and productive enterprises become precarious and unprofitable, and, as a
consequence, it avoids them, and seeks investment in bonds and
gilt-edged securities, aptly termed "money-futures," which for years
have been increasing and continue to increase.
Some thirteen years ago I indulged in a little prophecy concerning the
rates of interest. I take no great credit to myself for it, but in
1877--four years after the demonetization of silver--before the rates of
interest had materially fallen, and when the same contention was made
that is made now, namely, that money was cheap because interest was low,
and that the policies of the country were wise because our credit stood
on such a high plane, I submitted to Congress the report of the Monetary
Commission, from which I quote:
Money can be borrowed readily only upon such securities as bonds
which are based on the unlimited tax-levying power of the
Government, or upon the bonds and stocks of first-class
trunk-lines of railroad corporations, whose freight and fare rates
are practically a tax upon the entire population and resources of
the regions which they traverse and supply. The competition among
capitalists to loan money on these more ample securities has
become very keen, and such securities command money at
unprecedentedly low rates. These low and lowering rates of
interest, instead of denoting financial strength and industrial
prosperity, are a gauge of increasing prostration. Large
accumulations of money in financial centers, instead of being
caused by the overflow of a healthful circulation, or even a proof
of a sufficient circulation, are unmistakable evidence of a
congested condition caused by a decreasing and insufficient
circulation. The readiness with which Government bonds bearing a
very low rate of interest are taken, instead of showing that the
credit of the Government has improved, is melancholy evidence of
the prostrated condition to which industry and trade have been
reduced.
There need be no haste in refunding the public debt at the rates
now proposed and considered low. Unless the progress of the
commercial world in the policy of contracting money by
demonetizing silver is checked, bonds bearing a much lower rate of
interest than any yet offered will be gladly accepted by
capitalists here and in Europe. When the money stock is
diminishing and prices are falling, the lender not only receives
interest, but finds a profit in the greatly increased value of the
principal when it is returned to him. A loan of money made in
1809, if repaid in 1848, would have been repaid with an addition
of 145 per cent. in the purchasing power of principal and
interest, besides all the interest paid. Those who have loaned
money to this Government since 1861 have already received nearly
as much in the increased value of their principal as in interest,
and all the probabilities are, in respect to the four per cent.
thirty-year national bonds now being negotiated, if they are
redeemed in gold, that more profit will be made by the
augmentation in the value of principal through interest. Indeed
the signs of the times are, that the bonds of a country possessing
the unbounded resources and stable institutions of the United
States, payable in gold at the end of thirty years without any
interest whatever, would, through the increase of the value of
that metal, prove a most profitable investment.
All the facts of the situation to-day fully bear out the statements I
then made.
So determined are the advocates of the single gold standard in defending
the wisdom of its maintenance that facts whose existence would at
ordinary times be readily admitted, are, during a discussion of the
money question, pointedly denied. For example, within the past few weeks
we have seen in various eastern newspaper contributions from prominent
writers taking direct issue with the advocates of silver as to the
prevalence of general distress throughout the country. They declare that
there is no such distress, assert that they have looked for it in vain,
and derisively inquire where it is.
Perhaps the best authority I can cite in response to this inquiry is the
principal commercial daily journal of the east, the New York Journal of
Commerce, itself one of the most ardent and uncompromising advocates of
the gold standard. In an editorial article in its issue of January 11,
1890, that journal said: