One of the staple arguments of the advocates of the single gold standard
is, that if our stock of gold were greatly reduced we should be unable
to make payments to foreign countries in case the balance of trade
turned against us. It is only through an excess of imports over exports
that gold could go, and this country now produces of nearly all articles
almost all that it consumes. With the exception of two years there has
not been a balance of trade against us for fourteen years, as the
following table will show:
_Value of merchandise imported into, and exported from, the United
States, from 1876 to 1889, inclusive; also annual excess of imports
or of exports--specie values._
------+------------+------------+--------------+-----------+----------
Year | | | | Excess of |Excess of
ending| Total | Total |Total exports | exports | imports
June | exports. | imports. | and imports. | over | over
30-- | | | | imports. | exports.
------+------------+------------+--------------+-----------+----------
| _Dollars._ | _Dollars._ | _Dollars._ |_Dollars._ |_Dollars._
1876 |540,384,671 |460,741,190 |1,001,125,861 | 79,643,481| --
1877 |602,475,220 |451,823,126 |1,053,798,346 |151,152,094| --
1878 |694,865,766 |437,051,532 |1,131,917,298 |257,814,234| --
1879 |710,439,441 |445,777,775 |1,156,217,216 |264,661,666| --
1880 |835,638,658 |667,954,746 |1,503,593,404 |167,683,912| --
1881 |903,377,346 |642,664,628 |1,545,041,974 |259,712,718| --
1882 |750,542,257 |724,639,574 |1,476,181.831 | 25,902,683| --
1883 |823,839,402 |723,180,914 |1,547,020,316 |100,658,488| --
1884 |740,513,609 |667,697,693 |1,408,211,302 | 72,815,916| --
1885 |742,189,755 |577,527,329 |1,319,717,084 |164,662,426| --
1886 |679,524,830 |635,436,136 |1,314,960,966 | 44,088,694| --
1887 |716,183,211 |692,319,768 |1,408,502,977 | 23,863,443| --
1888 |695,954,507 |723,957,114 |1,419,911,621 | -- |28,002,607
1890 |742,401,375 |745,131,652 |1,487,533,027 | -- | 2,730,277
------+------------+------------+--------------+-----------+----------
This table shows that while for last year there was a balance against us
of $2,730,277, and the year before of $28,002,607, for all former years
from 1887 back to 1874 the balances were in our favor--all the way from
$23,000,000 in 1887 to $265,000,000 in 1881. But the total want of
significance so far as the movement of gold is concerned attaching to
any figures showing a balance of trade against the United States will be
seen by an analysis of the figures for any one year. Let us take for
example the imports and exports for 1889 and analyze them by countries.
I now present a table in which I place in one group the gold-using
countries, and in another the silver and paper-using countries.
_Exports and imports of the United States to and from the various
gold-using and silver-using or paper-using countries of the world
for the fiscal year ending June 30, 1889._
------------------------------------+---------------+---------------
Countries. | Exports. | Imports.
------------------------------------+---------------+---------------
Gold-using countries: | |
Canada | $42,141,156 | $43,009,473
Belgium | 23,345,219 | 9,816,435
Denmark | 3,903,937 | 846,904
France | 46,120,041 | 69,566,618
Germany | 68,002,594 | 81,742,546
Great Britain | 382,981,674 | 178,269,067
Greece | 165,079 | 988,923
Italy | 12,604,848 | 17,992,149
Netherlands | 15,062,939 | 10,950,843
Portugal and its possessions | 3,266,814 | 1,282,556
Spain | 11,946,348 | 4,636,661
Sweden and Norway | 2,615,569 | 2,983,319
Turkey | -- | 4,687,731
British possessions in Africa | 2,936,213 | 895,344
British possessions in Australia | 12,321,980 | 5,998,211
| |
Silver and paper using countries: | |
Austria-Hungary | 726,156 | 7,642,297
Russia | 8,364,545 | 2,985,631
Mexico | 11,486,896 | 21,253,601
Central America | 4,325,923 | 8,414,019
Hawaii | 3,375,661 | 12,847,740
Argentine Republic | 9,293,856 | 5,454,618
Brazil | 9,351,081 | 60,403,804
Chili | 2,972,794 | 2,622,625
Peru | 780,835 | 314,032
Colombia | 3,821,017 | 4,263,519
Uruguay | 2,192,848 | 2,986,964
Venezuela | 3,738,961 | 10,392,569
Cuba | 11,691,311 | 52,130,623
Hayti | 5,340,270 | 5,211,704
Porto Rico | 2,224,931 | 3,707,373
British West Indies | 10,453,973 | 20,723,268
Dutch West Indies | 887,778 | 654,320
China | 6,477,512 | 18,508,678
India, British | 4,330,413 | 20,029,601
India, Dutch | 2,249,604 | 5,207,254
Japan | 4,619,985 | 16,687,992
------------------------------------+---------------+---------------
By this table it is seen that the only gold-using countries having a
balance of trade against us are Canada, $868,317; France, $23,446,577;
Greece, $823,824; Germany, $13,739,952; Italy, $5,387,301; Sweden and
Norway, $367,850; Turkey, $4,687,731--making a total balance against us
in gold-using countries, $49,321,452--against which we have a balance in
our favor with Great Britain alone of over $200,000,000.
The balance against us in favor of all the silver using countries could
of course be readily settled in silver; and by carefully noting the
figures of the table last given it will be seen that it is in the last
degree improbable that there will ever be a balance of trade against us
in the gold using countries, taken as a whole.
Hence it is clear that if we had no gold at all we could readily settle
all foreign balances that might be against us.
Nations, however, ultimately, and on the whole, square their accounts
with commodities. Every nation must buy what it wants with its own
products. In this country especially have we nothing to fear, because
any temporary balance against us could always be met by the yield from
our own mines. No country has any difficulty by reason of my difference
in money systems in buying what any other nation has to sell.
This view is supported by all writers on political economy. I need
quote but one. Professor Cairnes, professor of political economy in
the University College of London, in his able work on "Some unsettled
questions in political economy" (1874), says:
It appears to me that the influence attributed by many able
writers in the United States to the depreciation of the paper
currency as regards its effects on the foreign trade of the
country is, in a great degree, purely imaginary. An advance in the
scale of prices, _measured in gold_, in a country, if not shared
by other countries, will at once affect its foreign trade, giving
an impulse to importations and checking the exportation of all
commodities other than gold. A similar effect is very generally
attributed by American writers to the action on prices of the
greenback inconvertible currency.
But it may easily be shown that this is a complete illusion.
Foreigners do not send their products to the United States to take
back greenbacks in exchange. The return which they look for is
either gold or the commodities of the country; and if these have
risen in price in proportion as the paper money has been
depreciated, how should the advance in paper prices constitute an
inducement for them to send their goods thither? The nominal gain
in greenbacks on the importation is exactly balanced by the
nominal loss when those greenbacks came to be converted into gold
or commodities. The gain may, in particular cases, exceed the
loss, but, if it does, the loss will also, in other cases, exceed
the gain. On the whole, and on an average, they can not but be the
equivalents of each other.
Mr. President, the best place in the world where we can have gold is not
in the Treasury of the United States, not in any sub-treasury, but in
circulation, if not in our own country, then, in the foreign countries
where our surplus products are sold. That is where gold would do us the
most good by making money plentiful and prices correspondingly high. It
does us no good here whatever, locked up as it always is, and doing none
of the work of money, but simply reduces to the minimum the tax-paying
and debt-paying power of our wheat- and cotton-growing communities.
An unjust money should not be tolerated, whatever the material of which
it may be composed, and the people of this country will not tolerate it.
They do not fear the outflow of gold. If, in order to retain it, they
must continue to lose as they have been losing for the past fifteen
years, they will favor its going, and raise a shout of joy when it does
go. With a perfect money system in our own country the range of our
domestic prices would continue stable and equitable without regard to
the prices of foreign countries. Our foreign trade would take care of
itself, and whatever the balances might be, they would be much oftener
in our favor than against us, and in reality concern only the importing
merchant and not the Government or the people of the United States. The
difficulty of gold-using countries to get our money, in which to pay us
the balances they would owe us, would be much greater than our
difficulty in getting their money, in which to pay them the occasional
balances we might owe them.
Much the more serious question, (if it be a serious question at all,
which I deny) is how they shall get our money, not how we shall get
theirs. As the balances would be for the most part in our favor, it is
for them to take such steps as may be necessary in order to pay us. But
there is no just reason to apprehend difficulty in either case. A great
country like the United States will have no trouble in buying the money
of any other country at equitable rates--at rates regulated by the
purchasing powers of the moneys of the two countries, respectively.
No country in the history of the world, having a money local to itself,
has ever found the slightest difficulty in buying, upon ratios
determined by the relative purchasing powers of the two kinds of money,
a sufficient amount of foreign exchange (which simply means the money of
another country) to meet all adverse balances of trade.
While earnestly advocating the full remonetization of silver and the
maintenance in this country of a money volume sufficient to insure a
steady level of prices and an unchanging value in the money unit, I
entirely disclaim any desire for an inflation of the currency. My
contention is that without silver we can not keep prices from further
decline, and can not have enough money to serve the growing needs of
population, industry, and commerce.
At the same time I can not refrain from expressing the conviction that,
as between inflation and contraction, no careful student of history and
of economic science can for a moment hesitate in deciding that the evils
inflicted on society by contraction have been longer in duration and
infinitely greater in degree than any that have ever resulted from
inflation. During all periods in which there has been a generous
increase in the money-volume of a country or of the world, activity and
prosperity have been its accompaniment. I challenge the citation of an
instance to the contrary.
With a volume of money increasing at a rate sufficient to meet the
demands of a growing population, and especially if the money be such as
will not leave the country, but, under all circumstances, will remain in
it, to sustain prices, preserve equities, and reward labor, no country
with a proper coordination of its industries can be otherwise than
prosperous.
The property of mobility--of fluidity--which is so much lauded in gold,
is precisely the property least to be desired in the money of a country,
if that property of mobility or fluidity is to keep alternately bringing
money into and taking it out of the country, disturbing prices and
disarranging equities. When it comes, if it enters into circulation,
prices rise; when it goes, prices fall, and thus, instead of having a
steady and level platform of prices on which the trade and industry of
the Republic may rest, like the firm and level platform of liberty upon
which all our citizens stand, we whose business it is to "see that the
Republic take no harm," furnish our people with an "inclined plane" of
finance on which all their business must be conducted. Men buying this
month at the elevated end of the platform find themselves selling next
month at the depressed end.
Whenever in the history of a country there has been least reliance on
international money (gold) and more reliance on merely national money
(even of paper when reasonable limits were placed upon its quantity),
prosperity has been everywhere present. I need not recall to the minds
of Senators the wave of prosperity that swept over this country when it
was without any international money and resorted to the "greenback"
currency.
When, as a result of the Franco-German war, France was deprived of
international money, suspended specie payments, and resorted to a
properly limited paper currency, her progress was unbounded.
No period in the history of Great Britain can compare for activity,
prosperity, or achievement, with the twenty years preceding 1816, when
specie payments were suspended, and during which period, as testified to
by witnesses before the secret committee of Parliament, the discount
rate of the Bank of England did not buffer a single change; whereas from
that period to 1847 the rate was changed sixteen times, and from 1847 to
1874 as many as 274 times, the fluctuations being sometime of the most
violent character.
When gold threatens to leave Great Britain the rate of discount at the
Bank of England is raised, with the view of discouraging, if not
preventing, the outflow. Raising the rate of discount is like putting
the brakes on a railroad train; lowering the rate is like letting off
the brakes.
These changes were not due to any greater demand for money but to the
movements of gold. There was frequently, in the condition of business,
no warrant whatever for a rise in the rate of discount. The only reason
for it was to prevent gold from performing what "our most conservative
financiers" denominate its "noble" function of "mobility"--of
"fluidity"--namely, the function of going "where it was wanted." This
function of going "where it is wanted" is described as the great
"mission" of gold, and it is assumed that it will never be wanted at
more than one place at a time. Yet hear what the chancellor of the
exchequer of Great Britain said a few days ago in the House of Commons:
I admit that, as interested in the commerce and monetary system
of this country I feel a kind of shame that on the occasion of
L2,000,000 or L3,000,000 of gold being taken from this country
to Brazil, or any other country, it should immediately have the
effect of causing a monetary alarm throughout the country. (Speech
of the chancellor of the exchequer in the House of Commons, April
18, 1890.)
This is a suggestive admission, from so well-informed a source, as to
the operation of the single gold standard. I commend it to those who
would circumscribe and hamper the prosperity of this country by making
gold alone the standard of all values.
I have thought it necessary, Mr. President, to state what I conceive to
be the true principles of the science of money, the principles that,
with the progress of time and growth of intelligence, must prevail the
world over; because, without a clear understanding of the relation which
the quantity of money in a country bears to the prosperity and happiness
of its people, there would be no justification for an addition of either
silver, gold, or any other form of money to the quantity already in
circulation. If the value of money depends on quantity, then, as long as
the world adheres to the automatic theory of money, my contention is
that all the silver produced from all the mines of the world should be
transmuted into coin; and even then, if the wants of the world continue
to increase as they have been increasing, it is only a question of time,
and that not far distant, when the combined supply of both metals will
be insufficient to maintain the equities in time transactions.
The world having decreed to stand by the automatic system we are now
dealing with the question as a practical one.
The only relief that can be had is to adhere strictly to that system,
and give it full scope. Remove all legislative restrictions and let the
world have the full benefit of all the precious metals that are yielded
by the mines.