PUBLISHED BY THE SOUND CURRENCY COMMITTEE OF THE REFORM CLUB.

Publication Office, No. 52 William St., New York City.

Vol. II., No. 3.

NEW YORK, JANUARY 1, 1895.

Price, 5 Cents.

Each number contains a special discussion of some Sound Currency question.

"Now these are the names of the different pieces of their gold, and of their silver, according to their value. And the names are given by the Nepnites: for they did not reckon after the manner of the Jews who were at Jerusalem; neither did they measure af'er the manner of the Jews, but they altered their reckoning and their measure, according to the minds and the circumstances of the people, in every generation, until the reign of the Judges; they having been established by King Mosiah."-BOOK OF MORMON, BOOK OF ALMA, chap*er VIII; verse 8.

1792-1834 SILVER MONOMETALLISM UNDER DOUBLE STANDARD..... 180 1834-1873 GOLD MONOMETALLISM UNDER DOUBLE STANDARD..

181

BIMETALLISM IN HISTORY.

The only supernatural authority which has been found for the almost universal practice of trying to make two unequal things equal is that which is printed above from the Book of Mormon. The authority must stand on its merits. The fact, however, of the failure of the efforts to use silver and gold as the standard of value, as if their equality could be compelled, leaves this solitary utterance of alleged inspiration in a bad way.

I.

FROM 1600 TO 1792.

When the Puritans came to Massachusetts Bay in 1630, England alone of all the nations of Europe was endeavoring to maintain the double standard. In France the standard of value was the livre-a pound of silver-just as the standard in England was the sterling pound of gold. Elsewhere on the Continent silver was frankly the standard. That great commercial country, Holland, maintained the silver standard from 1609 until recent years.

When this country was discovered the store of gold and silver in the world was very small. According to Dr. Soetbeer's tables, there were produced from 1493 to 1520 about 200,000 ounces of gold and about 1,600,000 ounces of silver. The quantity of the product was 8 of silver to 1 of gold, but the ratio of value was 10.75 of silver to 1 of gold. This difference may be accounted for by the greater comparative difficulty of obtaining gold. At this period gold came from West Africa, while silver was mined in Saxony and Bohemia. The relative values of the two metals have changed with the relative products of the mines. At the same time, the use of silver as money, which is as old as the coinage of the precious metals, shows that there are other causes than varying production that govern the price of the white metal, and when we come to the era of demonetization of silver we shall find the most potent of all causes, except, perhaps, the discovery of the great silver mines of the West.

In 1630 when the Puritans came to Massachusetts, and when the commercial Hollanders were in New Amsterdam, the world's supply of the two metals was still very small. There were, according to Dr. Soetbeer's tables, in 1640, 1,837,000 ounces of gold and 69,400,000 ounces of silver.

In the meantime while gold had been discovered in New Granada, silver mines that had been worked by the Aztecs had been discovered by the Spaniards in Mexico, the still celebrated mines of Potosi, in Bolivia, had been found, and the patio process of working ore had been invented. Between 1601 and 1620 more than three times as much silver was produced as had been mined up to 1545, and the price had fallen until 12.95 ounces of silver were required for the purchase of an ounce of gold. In the next twenty years there was a slight decline of product, but the output of both gold and silver was stil! very large, while the price of silver fell so that the ratio between it and gold was 14 to 1. Here was a relative decrease in the product of silver, accompanied by an important fall in price.

In the meantime England was struggling with bimetallic difficulties in its attempt to sustain the two metals. Gold was rising in value when James ì. came to the throne, and during the period which we are now considering-1600 to 1792-gold rose or silver fell until the ratio between the two increased from 11.80 to 15.17. In the intervening years it had not been less than 12.25, but several times it had been higher than 15.17. An attempt was made in this reign to fix the ratio by law at 13 to 1 at a time when the market ratio was really about 12 to 1, and the consequence

was the exportation of silver from the kingdom and general distress among the working people. In 1614 the King ordered that the exportation of coin should cease. This was naturally ineffective. Proclamation after proclamation followed, and Charles I. continued the absurd financial policy of his father. The Star Chamber undertook the enforcement of the proclamations, and in 1636 there was a further demonstration of Gresham's law. The guineas were selling for a premium in clipped shillings, and the law undertook to fix their value, decreeing that a guinea. should not be taken for more than a certain number of shillings. The good shillings were worth more than this and at once disappeared in the melting pot, the worn and clipped shillings alone appearing in circulation. Trade sprang up in the good shillings, and in the case before the Star Chamber seven persons were convicted of "culling out the most weighty pieces of the coin of this realm and melting them down and exporting the same, as well as foreign coin and bullion, to foreign ports." The culprits were fined £8,100, it having been shown to the satisfaction of the Star Chamber that they had made a profit of between £7,000 and £8,000 a year by their practices.

In the reigns of William III. and George I. various efforts were made to stop the traffic in gold and good silver coin. French louis-d'or and moidores were found circulating in England at a valuation greater than their intrinsic worth. The law, therefore, decreed that they should pass for their real worth, and they immediately disappeared from circulation. Under an act of William III. (1696), which endured for sixteen days, the guinea was made worth twenty-six shillings. At the end of that brief time another act made the guinea worth twenty-two shillings. Both were ineffectual.

Nothing but clipped or cheap money passed. Gold was undervalued as to worn shillings, and overvalued as to good shillings, while the good shillings were melted into bullion and bought and sold as a commodity. In 1699 the silver of the kingdom was recoined at an enormous loss to the Government, and at about the same time John Locke came to the conclusion, which he stated in a letter to Sir John Somers, Keeper of the Great Seal, that there should be only one metal coined, and that should be silver, for, notwithstanding the theoretical double standard of Great Britain, silver was "the money of the world," as Locke stated it to be, just as much in the time of William III. and George I. as it had been in the days when the patriarchs of the Old Testament bought their fields and flocks with silver shekels.

Notwithstanding the recoinage, clipped silver continued to circulate and the new and good coins disappeared. In the last forty years of the seventeenth century only £64,000 was brought to the mint to be coined. The speculative character of the currency brought great distress. In 1717 Sir Isaac Newton, then Master of the Mint, was asked by George I. for an opinion, and he recommended the reduction of the guinea to twenty-one shillings. This did not retain the good silver, for then the guinea was worth only 20s. 8d.

In the meantime the currency difficulties of the mother country were experienced in the American colonies, where, in 1651, a mint had been illegally established at Boston for the coinage of light "Pine-tree" shillings. Finally the evil became so great that, in 1774, an act of Parliament was passed limiting the right to coin silver to the Government and making it a legal tender by tale to the amount of of £25. Above that it was legal tender by weight only.

This was the state of the silver question when the first coinage act of this country was passed in 1792. The act of 1774 was powerless to fix the mutual ratio of gold and silver values. The ratio in 1773 and 1774 was 14.62 to 1. In 1775 it rose to 14.72, but in 1776, when the act was extended, for at first it was only temporary, the ratio fell to 14.55, and in 1777 it fell still further, to 14.54. Silver grew dearer, notwithstanding adverse legislation in Great Britain.

II.

A SINGLE STANDARD ADOPTED IN EUROPE.

The first coinage act for the United States was passed in 1792. Silver was actually first coined in 1794, and gold in 1795. The first silver dollar contained the same number of grains of fine silver as the standard dollar of to-day. Gold was coined in 1795, and the gold dollar contained 24.75 grains of pure gold.

England was still struggling with the currency question. Her commerce, manufactures and working people were suffering by reason of uncertainty as to the value of her circulating coins. Although the gold sovereign was the standard of value, silver was a legal tender for all debts. It is true that it was a legal tender by tale only to the amount of £25, but for amounts above that it was legal tender by weight. In the early part of the eighteenth century silver was generally supposed in commercial circles to be the English standard, and Adam Smith, in his explanation of the principle of foreign exchange, assumed that the metallic currencies of England and France were the same, and that both were silver. In this country we began by undervaluing gold, making the ratio 15 to 1, whereas the true ratio, in 1792, was 15.17 to 1. The latter was the ratio in England.

England adopted the single gold standard in 1798, six years after the enactment of our first coinage law. The temporary law of 1774 having been continued in 1776, was again extended in 1798 by acts which prohibited the importation of light silver coin, restrained the tender thereof beyond a certain sum, suspended the coinage of silver and prohibited the reception of any silver to be coined, or any silver already coined to be delivered. The first of the acts of 1798 ran by its terms to January 1, 1799, and in that year the two coinage and currency acts of 1798 were revived and made perpetual.

Thus England passed under the gold standard; for gold becomes the single standard of a country when the mints are closed to private coinage of other metals. The silver that was in circulation continued to pass from hand to hand at the established rate of 21 to the guinea, much to its advantage, for the suspension of further coinage of silver bullion raised the value of both the gold and the current silver coins. Silver was overrated by the mint laws, for while its market price was ranging from 5s. an ounce to 5s. 1 1-2d., it would have become worth 5s. 2d. by being coined.

The effect of the act of 1798 on the comparative prices of silver and gold was not serious. Silver rose from 5s. 4d. to 5s. 6d. under the act of 1797, restricting the payment of specie by the Bank of England in anticipation of a possible discount on bank notes, but in September of the same year it fell back to 5s. 1d., and it remained in that neighborhood for some time. The following are the ratios of values for the ten years following the passage of the act of 1798 :

From this statement, taken from Dr. Soetbeer's tables, it appears that the market value of silver during the five years following 1799 was higher than the price obtaining that year. In 1803 France adopted by law the silver franc as the monetary unit, and Belgium, Italy and Switzerland followed. These nations then fixed the ratio at 15 1-2 to 1. The product of silver between 1801-1810 was a little more than 50 per cent. of the total product of the two metals, and while the price decreased in 1805, probably in consequence of the increased output, it increased in

1806 and 1807, presumably in consequence of the acts of the Continental Governments. In 1808 the price fell to a point lower than it had ever yet reached, but it recovered in 1809, 1810, and 1811, although it did not reach the prices of 1801 and the year immediately following.

The gold standard was not formally adopted by England until 1816, and even that act was followed by a general rise in the price of silver. Gold seems to have been chosen instead of silver, because the "common people" had found it more convenient. Transactions of any importance required so great a weight of silver that the burden of transportation became onerous and expensive. Native gold coins were not circulating in England in the last years of the seventeenth century, but the French gold, undervalued at home, as we have already seen, was circulating at more than its intrinsic worth. Lord Liverpool, speaking of this era, said:

"It is evident that * * * the common people had become accustomed to the use of gold coins, and the reason which induced them still to prefer them was, perhaps, the convenience of making large payments in coins of that metal."

The monetary unit of Great Britain became the sovereign or pound sterling. The legal gold coins are the sovereign, half-sovereign, two-sovereign and fivesovereign pieces. Actually the gold coins are sovereigns and half-sovereigns.

Silver is still legal tender in Great Britain, but only to the amount of £2, and the legal ratio is 14.28781 to 1. Silver is coined on account of the Government only. Gold is coined at private account at the fixed rate of £3 17s. 101⁄2d. per ounce. Practically the Bank of England alone sends gold bars to the mint for coinage, paying individual owners of bullion £3 17s. 9d., the 11⁄2d. being supposed to compensate the bank for the loss of interest while the bars are being transformed into coin. Most of the English colonies have adopted the gold standard and the monetary system of the mother country. The monetary unit in Canada, however, is the gold dollar of the United States. The Straits Settlements and Hong Kong have adopted the single silver standard, because it is in harmony with the currency of the adjoining peoples.

The British India currency law dates back to 1835. It makes the country silver monometallic, and the rupee the monetary unit. The mohur is a gold coin, but gold is not a legal tender. The ratio of coinage is 15 to 1. The recent suspension of silver coinage for private account places India on a gold basis, and unless there is a return to the old order the gold standard must be formally adopted. A money standard that cannot be coined on private account is an anomaly that will not endure.

It will be seen from an examination of the various coinage laws of Europe that Locke's dictum was growing in favor, and that the experiences of the commercial countries of the world had gradually led men of affairs to the conclusion that no nation could maintain a double standard. The growth of international commerce had led to the invention of bills of exchange. The rate for bills of exchange was easily computed if the countries between which they circulated possessed the same standard of value, the same ratio and coins of like intrinsic value; but as this was never the case, and the price varied with fluctuations in the market values of the two metals, with their exports and imports, with legislative acts and with increase or diminution of product, the trade in bills of exchange became a speculation in gold and silver. Foreign commerce and domestic trade became unsettled. Therefore, at the beginning of the present century there was a general tendency in Europe towards monometallism. England chose gold and France silver. But although it was the intention of the French to establish a single silver standard, the law of 1803 was bimetallic, and gold was not driven out of circulation until under the Napoleonic wars the price of gold rose, and silver alone circulated. From 1820 to 1847 gold was constantly at a premium in France.

When England adopted the single gold standard the Netherlands was a silver