1873 15.92

1882 18.19 1874 16.17

1883 18.64 1875 16.59

1884 18.57 1876 17.88

1885 19.41 1877 17.22

1886 20.78 1878 17.94

1887 21.13 1879 18.40

1888 21.99 1880 18.05

1889 22.10 1881 18.16

The foregoing figures show that it is only since the legislative proscription of silver by Germany and the United States, and the closing of all the European mints to its coinage, that any material change took place in the ratio between the two metals, which conclusively demonstrates that the present divergence in the relative values of the two metals is directly due to the legal outlawry of silver and not to natural causes.

Not only has the concurrent use of the two metals as money had the sanction of all time, but the approval of the greatest minds of history, and, when not blinded by self-interest, the approval of practical and experienced financial minds. So well recognized is this fact that I need only cite a few instances of such approval.

Alexander Hamilton said:

To annul the use of either of the metals as money is _to abridge the quant.i.ty of circulating medium_, and is liable to all the objections which arise from a comparison of the _benefits of a full with the evils of a scanty circulation_. (Report to Congress, 1791.)

Thomas Jefferson, in a letter to Hamilton, indorsed this view, saying:

I return you the report on the mint. I concur with you that the unit _must stand on both metals_. (Letter to Hamilton, February, 1792.)

In his "Recherches sur l'or et sur l'argent," 1843, Leon Fanchet said:

If all the nations of Europe adopted the system of Great Britain, the price of gold would be raised beyond measure, and we should see produced in Europe a most lamentable result. The Government can not decree that legal tender shall be only gold, in place of silver, for that would be to decree a revolution, and the most dangerous of all, because it would be a revolution leading to unknown results (_qui marcherait vers l'inconnu_).

In a memoir read before the French Inst.i.tute in 1868, M. Wolowski said:

The suppression of silver would bring on a veritable revolution.

Gold would augment in value with a rapid and constant progress, which would break the faith of contracts and aggravate the situation of all debtors, including the nation. It would add at one stroke of the pen at least three milliards to the twelve milliards of the public debt.

In a debate in the French Senate on January 28, 1870, Senator Dumas eloquently pleaded for caution in dealing with a subject of such farreaching importance as the demonetization of one of the money metals.

He said:

Those who approach these questions for the first time decide them at once. Those who study them with care hesitate. Those who are obliged practically to decide doubt and stop, overwhelmed with the weight of the enormous responsibility.

The quant.i.ties of the precious metals which are now sufficient may become insufficient, and we should proceed with great prudence before we diminish that which const.i.tutes a part of the riches of the human race. Sometimes gold takes the place of silver. Sometimes silver takes the place of gold. _This keeps up the general equilibrium._ n.o.body can guaranty that the present vast production of gold will continue. The _placers_ are found on the surface of the earth, and may be exhausted by the very facility of working them. Silver presents itself in the form of subterranean veins. Science may contribute to accelerate its extraction. In presence of the unknown, which dominates the future, we should practice a prudent reserve.

Before a French monetary convention in 1869 testimony was given by M.

Wolowski, by Baron Rothschild, and by M. Rouland, governor of the Bank of France.

M. Wolowski said:

The sum total of the precious metals is reckoned at fifty milliards, one-half gold and one-half silver. If, by a stroke of the pen, they suppress one of these metals in the monetary service, they double the demand for the other metal, to the ruin of all debtors.

M. Rouland, governor of the Bank of France, said:

We have not to do with ideal theories. The two moneys have actually co-existed since the origin of human society. They co-exist because the two together are necessary, by their quant.i.ty, to meet the needs of circulation. This necessity of the two metals, has it ceased to exist? Is it established that the quant.i.ty of actual and prospective gold is such that we can now renounce the use of silver without disaster?

Baron Rothschild said:

The simultaneous employment of the two precious metals is satisfactory and gives rise to no complaint. Whether gold or silver dominates for the time being, it is always true that the two metals concur together in forming the monetary circulation of the world, and it is the general ma.s.s of the two metals combined which serves as the measure of the value of things. The suppression of silver would amount to a veritable destruction of values without any compensation.

At the session (October 30, 1873) of the Belgian Monetary Commission, Professor Laveleye, one of the most luminous writers on economic subjects, said:

Debtors, and among them the state, have the right to pay in gold or silver, and this right can not be taken away without disturbing the relation of debtors and creditors, to the prejudice of debtors, to the extent of perhaps one-half, certainly of one-third. To increase all debts at a blow (_brusquement_) is a measure so violent, so revolutionary, that I can not believe that the Government will propose it or that the Chambers will vote it.

WHY WAS THE AUTOMATIC SYSTEM INTERFERED WITH?

Some thirteen years ago, as Chairman of the Monetary Commission appointed by Congress to investigate the causes of the changes in the relative values of the precious metals, I submitted to this body a report, in which I took occasion to refer to the motives which evidently influenced the creditor cla.s.ses of the western world in destroying the automatic system of money. From that Report I quote as follows:

The world has generally favored, theoretically if not practically, the automatic metallic system, and adjusted its business to it. Some nations adopted one metal as their standard, and some the other, and some adopted both. Those that adopted both metals served as a balance-wheel to steady with exactness their relative value. The practical effect of all of this was the same as if all nations had adopted both, because it secured the entire stock of both at a fixed equivalency for the transaction of the business of the world. While some nations have changed their money metal, or, having had paper money, have resumed specie payments in one metal, the policy of a general demonetization of one of the metals was first broached only about twenty years ago. About ten years later a formidable propaganda was organized to fasten that policy upon the commercial world.

This new school of financial theorists advocate the retention of metal as the material of money, but favor its subjection to governmental interference in every respect. Whenever new mines are discovered, or old ones yield or promise to yield more abundantly, instead of freely accepting their product in accordance with the automatic theory, they advocate its rejection through the restriction or the absolute prohibition of the coinage of either or both metals, or through the limitation or the abolition of the legal-tender function of one of them.

Whenever the interests of the creditor and income cla.s.ses seem to be in danger of being impaired by an increase in the volume and decrease in the value of money, or in other words, by a general rise in prices, these modern theorists are clamorous in double-standard countries for the demonetization of one of the money metals, and in single-standard countries for the shifting of the money function from the metal which promises the most to the one that promises the least abundant supply. They are extremely anxious for the retention of the _material_ of which the money-standard is composed when such material is rising in value and prices are falling, and exceedingly apprehensive of the evil and inconvenience which they predict as sure to result from changing it.

Whenever a fall in prices occurs, through either a natural or artificial contraction in the volume of money, they maintain that it is due to antecedent inflation and extravagance, or to overproduction through persistent and reckless industry; if the contraction be natural, that it can not be helped, and if artificial, that though it may inflict great temporary losses on the ma.s.ses of the people, it will be sure to result in their ultimate benefit, and they console the sufferers with the comforting a.s.surance that such contraction is necessary in order to reach the lowest depths of that "_hard pan_" whose foundations they have previously undermined by demonetizing one of the metals, and upon which alone they claim that money, capital, and labor can securely and harmoniously rest. But when the material composing the standard is falling in value and prices are rising, they immediately discover that the maintenance of the value of the standard is the all-important consideration, and that its material is of no importance whatever and should be at once changed to "_redress the situation_." After having reduced one of the metals to a commodity by depriving it of the money function, these theorists complacently point to the resulting fluctuations in the value as a justification of the act producing them, and as a conclusive proof of the unfitness for money of the demonetized metal. * * *

Metallic money, on this theory, is no longer automatic, but is as completely subjected to governmental control for all injurious purposes as paper money. But, unlike paper money, the control over this kind of metallic money can only be exercised in the baneful direction of decreasing its volume, and thereby making property cheaper and money scarcer and dearer.

This is a one-sided system, which can operate only in the interest of the security creditor, the usurer, and p.a.w.nbroker, whom it enables, through the falling prices which itself occasions, to swallow up the shrunken resources of the debtor, but is impotent to protect the interests of the unsecured business creditor, the debtor, or society, when, from any cause, the supply of the money metals becomes deficient.

The world has expended a vast amount of labor in the production of the precious metals, and has made great sacrifices in upholding the automatic metallic system of money, and has a right to insist that it shall be consistently let alone to work out its own conclusions, or that it be abandoned.

The history of the subsequent struggle to remonetize silver only serves to ill.u.s.trate and emphasize the correctness of that statement of the case.

Between 1810 and 1849, according to Tooke and Newmarch (recognized authorities on the subject), gold increased in value 145 per cent. which is equivalent to a fall in the general range of prices of 59 per cent.

No movement was then made or suggestion offered by the debtors, or by any cla.s.s of the community, to add any new money-metal to the metals already in use, with the view of increasing the volume of money, so that the equity of time contracts might be maintained, and the value of the unit of money kept at a steady and unchanging level.

But as soon as the discoveries of gold were made in the alluvial deposits of California and Australia, or rather as soon as it was suspected that money would thereby become considerably increased in volume, the annuitants and income cla.s.ses, the creditors everywhere, took steps to avert what they characterized as a great calamity. They openly declared their purpose, by every means in their power, to prevent a decline in the value of money, so that the purchasing power of their incomes might not be reduced. They determined to go to any length in order to prevent the rise of prices which their aggressive instincts led them to fear would follow the additions to the money volume of the world by the natural and much needed yield of the mines.

The fiat therefore went forth that one of the metals must be discarded.

THE PROPOSITION FIRST MADE TO DEMONETIZE GOLD.

If anything were needed to demonstrate that the reason for the demonetization of silver was the cupidity of the creditor cla.s.ses--the money-lenders, annuitants, and those in receipt of fixed incomes--and that it was not any defect inhering in the metal silver, nor any change in its adaptability to subserve the purposes of money, it is to be found in the significant fact that the metal first selected for demonetization was not silver but gold--that metal which has since become the idol of the money-changers, and which is now declared to be the only "natural"

money. The openly-avowed determination was to increase the value of money, and in order to accomplish that purpose the metal which promised the largest yield was to be condemned and stripped of its ancient monetary function. So strongly was this determination set forth, so earnestly was it presented, and so urgently pressed on the ground of duty that its achievement came to be regarded as the fulfillment of a high moral purpose.

It was with gold then as it came to be with silver afterward, and as it always is with whatever interferes with the interests of privileged cla.s.ses, intrenched in power and prerogative,--the determination to destroy it being arrived at, measures were taken to prove that the public good required its destruction. While the purpose was to discard the metal, whether gold or silver, which threatened most immediately and seriously to reduce the purchasing power of money, the argument was that a decrease in the purchasing power of money was a calamity against the happening of which every energy should be directed.

The privileged cla.s.ses found then, as they find now, able and ingenious advocates and defenders among the literary and educated guilds of the period. The celebrated De Quincy, in England, attempted to prove, and to his own satisfaction did prove upon figures drawn from his fears and a brilliant imagination, that the least yield of gold to be expected from the mines of California and Australia for an indefinite period in the future, was the yearly sum of $350,000,000.

M. Chevalier, in France, vehemently proclaimed the necessity of discarding one of the money metals, and that one not silver but gold. In his work upon the "Fall of Gold" M. Chevalier, in 1856, said:

The quant.i.ty of gold annually thrown on the general market approaches in round numbers a milliard of francs ($200,000,000).

Those two countries (California and Australia) must yet for a long series of years produce gold in such quant.i.ties and on such conditions as to render a marked decline in its value inevitable.

It is absolutely certain that so vast a production should be accompanied with a great reduction in value.

In no direction can a new outlet be seen sufficiently large to absorb the extraordinary production of gold which we are now witnessing, so as to prevent a fall in its value.

Unless, then, we possess a very robust faith in the immobility of human affairs, we must regard the fall in the value of gold as an event for which we should prepare without loss of time.

The "preparation" which Chevalier advocated was the discarding of that metal which gave promise of the greatest abundance. He did not attempt to hide his purpose. He boldly stated that his object was to enhance the value of money. This object was also clearly expressed on a later occasion by another distinguished advocate of dear money, Mr. Victor Bonnet, of France, in the Journal des Economistes. He said:

The world is now saturated with the precious metals, and if there is any danger against which it is necessary to guard, it is that this saturation should become greater. * * *