Part 3 (1/2)

Consider the following facts, which I have condensed from Mulhall: In 1800 the total yearly international commerce of the world was estimated at $1,510,000,000. Forty years later it had only increased 90 per cent., amounting in 1840 to $2,865,000,000, and in that year there were in all the world but 4,315 miles of railroad and no electric telegraph. The total horse-power of all the steams.h.i.+ps of the world was but 330,000, and the carrying power of all the s.h.i.+pping but 10,482,000 tons. To-day the international commerce of the world is almost $20,000,000,000, and increasing at the rate of $1,000,000,000 per year; there are in the world over 400,000 miles of railway and a very much greater mileage of magnetic telegraph, including 14 intercontinental cables; the ocean tonnage of Great Britain alone is very much greater than was that of the whole world in 1840; and tremendous as this increase of international trade has been, it is the merest trifle compared with the increase of the internal trade in several of the greater nations.

What then has caused the ”great depreciation”? Nothing has caused it.

There has been but a trifling depreciation indeed. It is as clearly proved as anything unseen can be that if the nations had left silver and gold as they were in 1870, both would have gained materially in value, that is, in the power to command commodities, because of the vastly greater relative increase of the latter; but by demonetization all the increase has been concentrated in gold, leaving silver almost exactly as it was. At present, however, I devote myself to the question whether there has been such an increase in the production as would normally cheapen it. On this point we have evidence to convince any unbiased mind, for the relative production of silver and gold has in former ages varied very much more than in the last twenty-three years, and the variation has extended over much longer periods, without causing more than the most trifling divergences in value.

And the explanation is simple: the two metals received equal recognition at the mint and in legal tender laws; the greatly increased use of the cheaper maintained its value in coinage, while disuse of the dearer tended equally to check its appreciation. In this sense government can ”create value” by creating a use.

From 1660 to 1700, for instance, the production of silver averaged in value much more than twice that of gold, and in quant.i.ty some thirty-three times as much; yet all those years, the highest mint ratio was 15.20 to 1 and the lowest 14.81--a variation in money value of but .39 or 2.6 per cent. From 1701 to 1760 inclusive, the proportion of gold produced gradually rose from a little over a third to 40 per cent. in values, yet the money ratio remained remarkably constant, the highest being 15.52 of silver to 1 of gold and the lowest 14.14. In other words, for sixty years there were produced on an average about 28 ounces of silver to 1 of gold, yet the widest variation of their money values in all those years was less than 9 per cent. In the face of such facts as these, we are asked to believe that while an average of over 30 ounces to 1 created an average variation of less than 6 per cent., and a greatest variation of less than 9 per cent., a production of some 20 ounces to 1 since 1882 has created a variation of 100 per cent. And that the variation began nine years before the value production of silver exceeded that of gold! It is an affront to our common sense.

[Ill.u.s.tration: The above diagram shows the relative annual production of gold and silver from 1493 to 1870, and also average ratio of values of the two metals.]

I should say, at this point, that my figures are taken from the latest, and in my opinion the most scholarly work in favor of monometallism, ”The History of Currency,” by Prof. W. A. Shaw, Fellow of the Royal Historical and Royal Statistical Societies. As the ratio between silver and gold varied considerably in the different marts of Europe, I follow his plan (which is Soetbeer's) of taking it as it stood at any particular time in the city which might then be called the greatest commercial centre, whether Venice, Hamburg, Antwerp, or London. His history comprises the entire period from 1252 to 1894. It is only fair that I should also give his explanation of the stability of the metals, which is extremely interesting.

He begins his second chapter with the statement that the discovery of America was ”the monetary salvation and resurrection of the Old World”; that it was a time of unexampled increase in the precious metals and equally unexampled rise of prices, but there was also ”feverish instability and want of equilibrium in the monetary systems of Europe.” He shows how the first great import was of gold, which began to affect prices in 1520; how this was followed by a very much greater increase in silver, and how, while prices were rising so rapidly as to stimulate trade and incidentally do damage by causing great fluctuations, yet there must have been some great regulator preventing the evil which we should _a priori_ have expected. He finds it in the fact that Antwerp had taken the place of Venice and Florence, and conducted a great trade with the far East. His language is: ”The centre of European exchanges--Antwerp in the sixteenth century as London to-day--has always performed one supremest function, that of regulating the flow of metals from the New World by means of exporting the overplus to the East. The drain of silver to the East, discernible from the very birth of European commerce, has been the salvation of Europe, and in providing for it Antwerp acted as the safety-valve of the sixteenth century system as London has done since. The importance of the change of the centre of gravity and exchange from Venice to Antwerp, therefore, lies in this fact. Under the old system of overland and limited trade, Venice could only provide for such puny exchange and flow as the mediaeval system of Europe demanded; she would have been unable to cope with such a flood of inflowing metal as the sixteenth century witnessed, and Europe would have been overwhelmed.”

Professor Shaw argues that without the Eastern safety-valve Europe would have been ruined by an excess of the precious metals, that India furnished the needed reservoir--did she not take gold as well as silver?--and that Venice was so far limited to an overland trade that she could not have performed the function Antwerp did. Later he sets forth the current monometallist position that the nations are now as one in trade and the interchange of the precious metals, and therefore even the partial equilibrium of the sixteenth and seventeenth centuries could not be maintained. Let us, then, bring the figures down to the present, and it will be found, I think, that the farther down we come the weaker does the monometallist contention appear.

The improved, more extended, and more intimate intercourse of the nations brought about by the introduction of steam, electricity, and other agencies tends to minimize the fluctuations of the two metals, and indicates that the divergences of the metals in mediaeval times was due rather to the want of speedy, easy, and certain intercourse and communication of the nations than to an innate commercial tendency of the two metals to diverge. Had the same intimate and speedy commercial relation existed between the nations of the world in those times as now exists, the equalizing tendencies of trade would evidently have prevented not only the ratio of divergence to which the metals attained at different periods, but would have prevented a difference of ratio existing between the different nations at the same period of time.

From 1761 to 1800, inclusive, the relative production of gold decreased steadily, until it was but 23.4 per cent. of the total value, to 76.6 per cent. of silver. In other words, there were for many of the later years over 50 ounces of silver produced to 1 of gold, and yet the ratio stood long at 15.68 to 1. This is almost exactly the ratio fixed by Hamilton and Jefferson, fixed because of its long-continued maintenance in European markets. During these forty years the production of silver in proportion to gold was never for even one year as low as the highest proportion of any year since 1873, and yet the money value only varied from 14.42 to 15.72, or a fraction over 8 per cent. In the face of such figures as these, the change in relative production since 1873 seems too trifling to be taken into account, especially since in that year and some time after the value production of gold at 16 to 1 was much the greater, nor was it till 1883 that the world's silver product exceeded that of gold.

In 1800-10 the annual production of gold was $12,069,000 and of silver almost exactly $39,000,000, or some 50 ounces to 1; yet the highest ratio was 16.08, and the lowest 15.26. This relative production changed very slowly, and in 1831-40 of the total in values produced 34.5 per cent. was gold and 65.5 per cent. silver.

That is, there were, for ten years, about thirty times as many ounces of silver mined as of gold, and during these years the change in the ratio was so minute that it can only be calculated in small fractions of 1 per cent. In 1841-50, for the first time since the middle of the sixteenth century, we find the production of gold the greater, that metal being 52.1 per cent. of the total product, and silver but 47.9 per cent. During the decade the lowest value ratio of silver to gold was 15.70, and the highest 15.93, a variation of only 1.4 per cent. Then California and Australia poured out their wonderful golden flood, and all the world was changed. In 1851-55 the gold yield was 77.6 per cent. of the total, and the silver yield 22.4, and for the next five years the change was but .2 of 1 per cent. In other words, during those ten years the average annual yield of silver was less than 5 ounces to 1 of gold; so if the ”overproduction theory” laid down by the _Times_ were correct, gold should have lost--well, at least 70 per cent. of its value in silver. The actual variation was from a ratio of 15.98 to one of 15.46, or a relative depreciation of gold of considerably less than 3 per cent. Now, it is alleged by many who have made a study of prices during that period, that in actual value gold depreciated 25 per cent.; so it is plain that it carried down silver with it, and the only logical explanation is that the mints were equally open to both.

We have seen that in all the century and a half when the mines were pouring forth silver at the rate of from 20 ounces to 1 of gold up to 55 ounces to 1, the greatest variation in their value was less than 9 per cent., and in the twenty years when the silver production was to that of gold as less than 5 ounces to 1, the value of gold produced being more than three times that of silver, their money value varied less than 3 per cent., and yet we are coolly asked to believe that since 1873 silver is to be rated among variable commodities like potatoes, the size of the crop each year determining the value. Monometallists have had much to say about the relative cheapness of gold during those years, and have laid much stress upon the fact that it was an era of great prosperity and rapid development, with rise of wages and the prices of farm produce. In this argument they admit three things: that we have a moral and const.i.tutional right to use the cheaper metal at any time; that we did use gold for all those years simply because it was easier to pay debts with it, that is, it was cheaper, and that the use of the cheaper metal aided greatly in making prosperity. That is all that any bimetallist claims. As the entire burden was not then thrown upon silver, we claim that it should not now be thrown upon gold, doubling or trebling the rate of its advancing value; and as the privilege to use the cheaper metal then checked the advance of the dearer and enhanced prosperity, we insist that the system of that time shall be restored.

The subsequent figures are equally convincing. In 1861-65 the gold products were 72.1 per cent. of the total, the silver 27.9 per cent., the variation in ratio from 15.26 to 15.44. In 1866-70 the production stood 69.4 to 30.6, the variation in ratio 15.43 to 15.60. In 1871-75 production was still 58.5 to 41.5, but the variation in coin value was from 15.57 to 16.62. That something had happened quite aside in its effects from relative production was evident, but the people did not find out what it was till late in 1875. At the time the demonetization act was pa.s.sed, the ratio was still 15.55 to 1, and one of the reasons given for the act of February 12,1873, was that the silver dollar was worth $1.03 in gold; yet before the close of that year, and before it was known that there was to be any great increase in the product of silver, its relative value ran down till it was below that of gold. Can any one doubt the cause? Surely not if he observes the additional fact that the relative decline of silver continued despite the greater value production of gold, and that 1882, ten years after demonetization, was actually the first year since 1849 in which the world's production of silver exceeded that of gold. What one hundred and ninety years of continuous and often enormous relative overproduction of silver had not done, ten years of demonetization had accomplished, and that while the relative supply of gold was still the greater. Is it possible to miss the real cause? Is there in Euclid a demonstration more conclusive?

[Ill.u.s.tration: The above diagram shows the relative annual production of gold and silver from 1870 to 1893, and ratio of values.]

Monometallists have exhausted the resources of verbal gymnastics to make these figures fit their theories. Determined not to admit that demonetization was the cause, they have given so many explanations that, expressed in the briefest words, they would cover many pages like this.

The first was that the opening of the ”Big Bonanza” on the Comstock lode had given notice that silver was coming in a flood; but that was only for popular use in this country. Scientific men knew that to be a rare find indeed, not likely to occur again for centuries. The next explanation was that China and India, so long the reservoir into which the surplus flowed, had ceased to absorb it; and the next, demonetization of silver by Germany and her throwing her old silver on the market. And with this the people began to get at the true reason--the general demonetization by so many nations.

The following table gives the annual production of gold and silver from the discovery of America to and including the year 1892; and the highest and lowest ratio of silver to gold from 1681 to and including the year in which silver ceased to be in this country primary money:

YEARS. GOLD. SILVER. RATIO.

1493-1520........ $3,855,000 $1,953,000 1521-1544........ 4,759,000 3,749,000 1545-1560........ 5,657,000 12,950,000 1561-1580........ 4,546,000 12,447,000 1581-1600........ 4,905,000 17,409,000 1601-1620........ 5,662,000 17,538,000 1621-1640........ 5,516,000 16,358,000 1641-1660........ 5,829,000 15,223,000 1661-1680........ 6,154,000 14,006,000 1681-1700........ 7,154,000 14,209,000 14.81-15.20 1701-1720........ 8,520,000 14,779,000 15.04-15.52 1721-1740........ 12,681,000 17,921,000 14.81-15.41 1741-1760........ 16,356,000 22,158,000 14.14-15.26 1761-1780........ 13,761,000 27,128,000 14.52-15.27 1781-1800........ 11,823,000 36,534,000 14.42-15.74 1801-1810........ 11,815,000 37,161,000 15.26-16.08 1811-1820........ 7,606,000 22,474,000 15.04-16.25 1821-1830........ 9,448,000 19,141,000 15.70-15.95 1831-1840........ 13,484,000 24,788,000 15.62-15.93 1841-1850........ 36,393,000 32,434,000 15.70-15.93 1851-1855........ 131,268,000 36,827,000 15.33-15.59 1856-1860........ 136,946,000 37,611,000 15.19-15.38 1861-1865........ 131,728,000 45,764,000 15.26-15.44 1866-1870........ 127,537,000 55,652,000 15.43-15.60 1871-1872........ 113,431,000 81,849,000 15.57-15.65 1873............. 96,200,000 81,800,000 1874............. 90,750,000 71,500,000 1875............. 97,500,000 80,500,000 1876............. 103,700,000 87,600,000 1877............. 114,000,000 81,000,000 1878............. 119,000,000 95,000,000 1879............. 109,000,000 96,000,000 1880............. 106,500,000 96,700,000 1881............. 103,000,000 102,000,000 1882............. 102,000,000 111,800,000 1883............. 95,400,000 115,300,000 1884............. 101,700,000 105,500,000 1885............. 108,400,000 118,500,000 1886............. 106,000,000 120,600,000 1887............. 105,000,000 124,366,000 1888............. 109,900,000 142,107,000 1889............. 118,800,000 162,690,000 1890............. 118,848,700 172,234,500 1891............. 126,183,500 186,446,880 1892............. 138,861,000 196,458,800

Thus we see that, for twenty-seven years after the discovery of America, the gold production was double that of silver; for the next eighty years the production of silver was considerably more than double that of gold; for the next one hundred years the production of silver was more than 2-1/2 times that of gold, and for the next century and a half, to wit, from 1701 to 1850, inclusive, despite the fact of the tremendous gain of gold in the last few years, the production of silver fell but little short of twice that of gold. And yet, the variations in coin value were of the trifling character previously stated. When taken by shorter periods, the argument is still more startling. Thus in 1801-20 the production was almost exactly 4 of silver to 1 of gold; for the next twenty years a minute fraction less than 2 of silver to 1 of gold; for the next twenty 2-1/2 of gold for 1 of silver; and for the next twenty nearly 2 of gold for 1 of silver, while during these awful years since 1873, in which there has been so much said about the ”flood of silver,” its production has never once been twice that of gold, and for the entire period has exceeded it by the merest trifle. Is it any wonder that Dr. Eduard Suess, the great German authority on the metals, and Professor of Geology at the University of Vienna, concluded his recent work with these strong statements:

”Present legislative inst.i.tutions are at variance with the conditions established by nature. Even now agriculture and in part industry in Europe are sorely at a disadvantage against silver countries such as India and Mexico. The advantage of this situation accrues in England to the holders of interest-bearing notes, the productive value of which increases with the growing scarcity of gold.... As soon as the figure 23.75 shall have been reached, all gold obligations will have increased in value one-half; but nothing prevents that figure from rising to 31. [It has since risen even above that.] ... You say a regulation cannot be international, but you overlook how long the ratio of 1 to 15-1/2 was upheld and worked beneficently. We wish, say the London bankers, to receive our interest in gold and not in depreciated silver; but silver would not be depreciated the moment an agreement went into effect. Why, you ask, shall we cast such profit into the hands of the owners of silver mines? Remember that you are now casting the same profit into the hands of the owners of gold mines and was.h.i.+ngs. No man would lose by rehabilitation, and the whole world would be richer.... Europe is laboring under a grave delusion. The economy of the world cannot be arbitrarily carried on in the hope that somewhere a new California, and at the same time a new Australia, will be found whose alluvial lands will give relief for a decade. ... The question is no longer whether silver will again become a full value coinage metal over the whole earth, but what are to be the trials through which Europe is to reach that point.”

At this point it seems to me well to present the figures of relative production for the last century in a more compact shape, with a view to bringing out the contrast:

Silver produced 1792-1850............ $1,690,217,000 Gold produced........................ 848,186,000 Excess of silver production.......... 842,031,000

Gold produced 1850-73................ $2,724,825,000 Silver produced...................... 1,150,025,000 Excess of gold....................... 1,574,800,000

Gold produced 1873-92, inclusive..... $2,060,897,000 Silver produced...................... 2,264,419,000 Excess of silver..................... 203,522,000