[Sidenote: CLOSE OF THE SECOND PERIOD: ReSUMe]

In broadest and hastiest resume, and this by way of justification of the length to which this chapter has been drawn out, the influence of American gold and silver makes itself perceptible in 1520. For forty years a level and equal advance in each of the precious metals and in prices records itself, then the relative and absolute production of silver increases enormously over that of gold, and the ratio is disturbed. The inequality of the rate at which this change of ratio spreads to successive countries, and is adopted in their various Mint regulations, is the bullionist's or exchanger's opportunity, and the disastrous effect of their activity results in the crisis of 1570 in France, and 1622 in England and Germany. Properly speaking there has been no subsequent crisis in European history fitly comparable with the latter of these. If at all, there is only one comparison possible, and that is the currency situation in which the monetary world is at this moment, or which has come upon it since 1850--a period of bullion inflation in which silver has, finally as yet, outweighed gold, to the violent disturbance of the ratio. But, as will be seen, the other conditions of the comparison are not reducible to, or expressible in, similar terms, and so far the legitimate deduction fails. None the less, the currency history of Europe during the sixteenth and seventeenth centuries has a vital didactic importance.

FOOTNOTES:

[Footnote 9: The only accounts accessible are in Cabrera (see Philippson's "Estimate of the Revenues of Spain," in his _Henrich IV.

and Philipp III._, vol. ii. p. 44), and relate only to the years 1599-1610. The amounts given are not the total yield of the American mines, which is out of the question, but the amount of metal brought yearly to Spain by the Silver Fleet. The amounts (without distinction of the metals) were as follow:--

1599 8,000,000 Ducats.

1600 9,926,192 "

1600 10,000,000 "

1601 1,000,000 "

1602 10,000,000 "

1603 7,000,000 "

1604 14,500,000 "

1606 9,000,000 Ducats.

1606 4,500,000 "

1607 12,200,000 Pesos.

1608 9,000,000 Ducats.

1609 10,600,000 "

1610 10,000,000 "

[Footnote 10: For further details of the troubles of 1632-36, see Vicomte D'Avenel, _Histoire de la propriete, etc._, i. 120, 121.]

[Footnote 11: Such is the statement of the proclamation itself. The difference between the ratios as there proclaimed and the ratios given in the table, pp. 40 and 69, is presumably due to the calculation being made on the mark of pure metal. For the character of these figures of ratios see the Preface.]

[Footnote 12: See Hirsch, i. 318.]

[Footnote 13: "The second (cause for the decay of the trade of Spain) is the residence of many Genoa merchants amongst them, who are found in good numbers to abide in every good city, especially on the sea coasts, whose skill and acuteness in trade far surpa.s.sing the native Spaniards and Portuguese, and who, by means of their wealth and continual practice of exchanges, are found to devour that bread which the inhabitants might otherwise be sufficiently fed with; and by reason that the King of Spain is ever engaged to their commonwealth for great and vast sums at interest, he is their debtor, not only for their moneys, but also for their favour, which by many immunities throughout his kingdom he is found continually to requite them, and amongst the rest it is observed that there is no Genoa merchant resident in Spain, or any part, but has a particular licence to transport the _rials_ and _plate_ of this kingdom to a certain round sum yearly, which they seldom use really to do, but sell the same to other nations that are constrained to make their returns in plate for want of other more beneficial commodities, which, for the certain profit it is found ever to yield in other countries, is often preferred before all the other commodities of the kingdom."--_Lewis Robert's Map of Commerce_, p. 165.]

[Footnote 14: By the action of bimetallic law is meant any action of bad money on good--of worn money on new--of higher rated (or lower valuable) money on lower rated (or higher valuable) money. It does not at all matter, especially in cases of debas.e.m.e.nt, whether there are two metals in the process or only one or even three. If a currency is silver, and part of it is debased and part left good there is bimetallic action, and the good disappears. Of course, the case is argumentatively and for deduction's sake much clearer if a currency is truly bimetallic in the ordinary sense.]

CHAPTER III

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 | 1,291,750 | 3,134,150 | 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 ma.s.s 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 const.i.tuent 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 pa.s.sed 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 l.u.s.ty 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."