The History of Bimetallism in the United States
2. These arguments may be most conveniently found in F. A. Walker's "Political Economy," and "Money, Trade, and Industry"; and in S. Dana Horton's "Silver and Gold," and the "Report of the International Monetary Conference of 1873." See also the French Report of the Mon. Confer. of 1881, in index "Bimétallisme."
3. "Providence seems to have originally adjusted the relative values of the precious metals."—Sir Roderick Murchison, quoted by Ernest Seyd in "Decline of Prosperity," title-page. The following words of Turgot are often quoted: "Gold and silver were constituted, by the nature of things, money and universal money, independently of all convention and all law."
4. "Between gold and silver, therefore, there is not any fixed proportion as to value, established by Nature, any more than there is a fixed proportion established by Nature between lead and iron, or between wheat and tobacco. Nature does not say that one ounce of gold shall always be worth so many ounces of silver any more than she says that a certain number of pounds of iron shall always be worth so many pounds of lead, or that a bushel of wheat shall always be worth a fixed quantity of tobacco."—Raguet, "Currency and Banking," p. 219.
Part I, Chapter II
6. The Spanish dollar equaled 5 shillings in Georgia; 8 shillings in North Carolina and New York (12½ cents); 6 shillings in Virginia, Connecticut, New Hampshire, Massachusetts, and Rhode Island (16 2/3 cents); 7 shillings 6 pence in Maryland, Delaware, Pennsylvania, and New Jersey; 32 shillings 6 pence in South Carolina. This accounts for the present reckoning of 12½ cents to a "shilling" in New York, Ohio, etc., and of 16 2/3 cents in New England and Virginia ("nine pence" still being used as the equivalent of 12½ cents). The persistence, to the present day, of the units of account of a century ago, although the coins representing them have long passed out of existence, is one of the striking facts in monetary history.
10. Ibid., pp. 437-443. "The unit or dollar is a known coin, and the most familiar of all to the mind of the people. It is already adopted from South to North, has identified our currency, and therefore happily offers itself as a unit already introduced."
15. "Gold may, perhaps, in certain senses, be said to have a greater stability than silver; as, being of superior value, less liberties have been taken with it in the regulations of different countries. Its standard has remained more uniform, and it has, in other respects, undergone fewer changes; as, being not so much an article of merchandise, owing to the use made of silver in the trade with the East Indies and China, it is less liable to be influenced by circumstances of commercial demand. And if, reasoning by analogy, it could be affirmed that there is a physical probability of greater proportional increase in the quantity of silver than in that of gold, it would afford an additional reason for calculating on greater steadiness in the value of the latter."
16. "But our situation in regard to the west India Islands, into some of which there is a large influx of silver directly from the mines of South America, occasions an extraordinary supply of that metal, and consequently [since our trade with the west Indies was important] a greater proportion of it in our circulation than might have been expected from its relative value."
17. In the Report of the Committee to Congress in 1785 (see p. 12) the same idea was uppermost. They saw that the French ratio of 1:15 attracted silver to France from England and Spain, where silver had a less value (viz, 1:15.2 in England and 1:16 in Spain); consequently it was urged that a ratio like the French, or even 1:14.75, would be likely to draw silver to the United States from England and Spain, and thereby increase the chances of gaining enough of this metal to satisfy our needs. Jefferson also, in 1782, seeing that France lost gold, but England and Spain lost silver, thought it well to adopt a ratio of 1:15, because, as our commerce was chiefly with Spain, we should receive silver readily from Spain, where the ratio was unfavorable to silver [1:16].
18. Mr. Upton, it seems to me, is in error when he says ("Money in Politics," p. 39): "He admitted that if the ratio between the metals should not prove to be the commercial one, there was hope of retaining only the overvalued metal in circulation. He asserted his belief, however, that 1:15 would prove to be the commercial ratio."
19. Hamilton explains the prevalence of this ratio by the fact that it arose from a custom existing in years before of comparing gold coins with earlier issues of Spanish Seville pieces (386¾ grains of pure silver), which contained more pure silver than the Spanish dollars current in 1791. The Board of Treasury also ("Report of 1878," p. 449) gave 1:15.6 as the ratio in common use in 1786.
20. In 1782, Robert Morris reported that the best assays to his knowledge made the dollar in general circulation to contain about 373 grains of pure silver. In 1785, a committee reported, and Congress adopted, a plan for a dollar of 362 grains, but it was not carried out. The Board of Treasury, in 1786, proposed a dollar of 375.64 grains. See "Report of 1878," pp. 431, 447, 449.
21. Gallatin, in a letter to Mr. Ingham, Secretary of the Treasury (December 31, 1829), says: "The present rate (1:15) was the result of information clearly incorrect respecting the then relative value of gold and silver in Europe, which was represented as being at the rate of less than 15 to 1, when it was in fact from 15.5 to 15.8 to 1" ("Report of 1878," p. 591). But Hamilton did not attempt to adjust his ratio according to the ratio prevalent in Europe.
24. These tables are collected and given in full in Appendix II, together with Cashier White's figures, and critical notes on some of the ratios. All the evidence we have goes to confirm the Hamburg quotations as generally reliable, and to show White's figures to be almost utterly worthless.
27. "Standard" is the term applied to the pure metal mixed with the alloy. The actual weight of a finished coin, of course, contains a certain weight of fine or pure metal, plus the alloy. England, Spain, Portugal, and France then put an alloy of one twelfth of the total, or standard, weight into their gold coins. (See "Report of 1878," p. 466.) The origin of this fraction is in the use of carats. Twenty-four carats fine is a standard of pure gold, and these countries adopted as the standard of fineness in their gold coins twenty-two carats, or 22/24, or 11/12. Reduced to the decimal system, 11/12 is 916.66 thousandths fine.
28. Although Hamilton recommended the same alloy for silver as for gold coins, for some reason Congress did not carry out the suggestion. Instead of adding alloy to 371½ grains of pure silver, so as to make the standard weight 405 grains (which would have been one twelfth alloy), Congress fixed the standard weight of the silver dollar at 416 grains, thus establishing a fraction a little more than one ninth of alloy (or, in the decimal system, 892.43 thousandths fine). The same was true of the subsidiary silver coins, or denominations below one dollar.
31. Even if we take the untrustworthy figures of white, we find that the ratio was below 1:15, and had been since 1786. Therefore it can not be charged by Benton that Hamilton favored silver by the ratio of 1:15, since this ratio gave gold an exchange value in the coins greater than that in the market (so far as White's table goes).
32. Mr. Baring, the banker, testified: "A very slight difference of one tenth or one fourth per cent would determine the use of one metal or another."—Quoted by C. P. White, p. 43 of "H. R. Report No. 278," vol. ii, 1833-1834, 1st session, 23d Congress. In speaking again of this report I shall describe it as "Report No. 278, 1833-1834."
33. A vivid illustration of this fact is given in Macaulay's "History of England," chap. xxi. About 1691, new coins were issued of full weight to take the place of the worn and clipped coins which caused so much wrangling in every bargain; but the old coins and the new were equally received by the state for government dues. There was, therefore, a premium on clipping the new coins, if the old and clipped coins were an equally good tender for taxes. The new coins disappeared as fast as they came from the Mint. Men and women were hanged in numbers for this kind of money-making, but the trouble went on as before, until the proper remedy was applied in 1695 by ceasing to receive the worn and clipped coins for more than their value by weight.
34. "The most extreme instance which has ever occurred was the case of the Japanese currency. At the time of the treaty of 1858, between Great Britain, the United States, and Japan, which partially opened up the last country to European trades, a very curious system of currency existed in Japan. The most valuable Japanese coin was the kobang, consisting of a thin oval disk of gold about two inches long and one inch and a quarter wide, weighing two hundred grains, and ornamented in a very primitive manner. It was passing current in the towns of Japan for four silver itzebus, but was worth in English money about 18s. 5d., whereas the silver itzebu was equal only to about 1s. 4d. Thus the Japanese were estimating their gold money at only about one third of its value, as estimated according to the relative values of the metals in other parts of the world. The earliest European traders enjoyed a rare opportunity for making profit. By buying up the kobangs at the native rating they trebled their money, until the natives, perceiving what was being done, withdrew from circulation the remainder of the gold."—Jevons, "Money and Mechanism of Exchange," p. 84.
38. "It is believed that gold, when compared with silver, has been for many years appreciating in value."—In a "Report on the Currency," February 24, 1820. Cf. "Report of 1878," p. 519. "In the autumn of the year 1820 [November 25] an article, written by me, was published in your gazette ['National Gazette'] explaining the cause of the disappearance of gold from the United States."—Condy Raguet, "Currency and Banking," p. 207.
40. "It is a notorious fact that there is at this moment a traffic carried on between the United States and Canada more destructive to our national interest than an evasion of the embargo, or even partially supplying the enemy with provisions, as its effects are so much more extensive. We mean the taking from this country an immense quantity of GOLD to Canada, and receiving therefor British Government bills. It is well known that thousands of pounds sterling are daily offered on the exchange; and such is the demand at this moment for gold that it will bring upward of 4 per cent advance for the purpose of the above-mentioned traffic."—From the "Boston Patriot," in "Niles' Register," vi, p. 46, 1814.
41. 3 "Finance," p. 399. Mr. Ingham (Secretary of the Treasury, in a report to the Senate, May 4, 1830), in discussing this, says that, although Lowndes attributed the fact to an error in the selection of a ratio by Hamilton, "it does not appear from the market price in the United States, during the whole of that time [1792-1819], that gold was more valuable for exportation than silver. On the contrary, it will be observed, by reference to Table B [White's untrustworthy table], that in England, prior to 1810, the ratio of gold to silver had for fifty years averaged at less than 1 to 14.75, and at no period of ten years as high as 1 to 15." He then admits "the fact that it [gold] did not then [prior to 1819] circulate." Cf. "Report of 1878," p. 576, for the context.
43. C. P. White says, in 1832: "For the last fifteen years our currency has been exclusively banknotes (except for small change), subject to redemption, on demand, with silver."—"Report No. 278," p. 24, 1833-1834.
Part I, Chapter III
47. "It was in the early part of the year 1818—when the subject of the resumption of cash payments by the Bank of England (which had been suspended since 1797) occupied the attention of the British public and prepared the way for the act of Parliament to that effect, which was adopted in 1819—that a change in the relative value of gold and silver in the market of the trading world first became generally apparent in the United States."—"Currency and Banking," p. 222. Bolles, following Raguet, says on one page: "Not until 1818, when the question arose of resuming cash payments by the Bank of England, did the fact clearly appear in this country that a change had occurred in the relative value of gold and silver"; but on the next page he asserts that "of the two metals it was apparent, even before the war of 1812, that gold was more desirable for exportation than silver."—"Financial History of the United States," pp. 502, 503.
48. "Report of 1878," p. 460, note. Cf. also ibid., pp. 701-709. In these pages Horton gives a short statement of his position in convenient form. In his volume, "Gold and Silver" (1877), pp. 74-98, he developed this theory more fully.
52. Gallatin also denies the validity of Horton's theory in the following words: "It is erroneously that the exportation of American gold coins, which commenced in the year 1821, has been ascribed to that extraordinary demand [in England for purposes of resumption]. That exportation has been continued uninterruptedly after that cause had ceased to operate, and, as will be seen hereafter, is due to the alteration from that epoch in the rate of the exchanges."—Quoted by C. P. White in "Report No. 278," 1833-1834, p. 42.
53. "The Resumption Act of 1819 continued the restriction of cash payment to February, 1820, and thereafter ordered the redemption by the bank of its notes, when demanded, in a quantity of not less than sixty ounces of gold (over $1,000) in gold bullion, at a discount for paper of about 3 7/8 per cent till October, 1820; from that date till May, 1821, at about 2 per cent discount; and thereafter, till May, 1823, at par, but still in bullion; while after the latter date all notes were to be paid in gold coin on presentation.
"The bank was, however, permitted to pay in bullion at higher rates in fixed periods, and in gold coin after May 1, 1822. A subsequent law permitted full redemption after May 1, 1822."—Horton, "Gold and Silver," p. 80.
63. Mr. Horton has even quoted the figures of Soetbeer from 1761-1830, and strangely says they show no "change of relative quantity" sufficient to cause a rise in the value of gold due to consumption by the arts ("Report of 1878," p. 702).
64. "The entire foreign trade of the greatest commercial nation then in existence [in the sixteenth century] probably did not much exceed that which is now carried on in a single English or American port. The total tonnage of the united galleons which constituted the Spanish mercantile marine only amounted, a century later, as we are informed by Robertson, to 27,500 tons, little more than the tonnage of the Great Eastern steamship. Some of the most populous and wealthy communities of the present day had not yet begun to exist; and the whole quantity of the precious metals then in use was probably less than that which now circulates in some second-rate European kingdoms."—Cairnes's "Essays," p. 111.
65. The mines of Valenciana in 1760, of Catorce in 1773, and the districts of Zacatecas in 1710 and Guanaxuato in 1766, began the movement. "The vein of Biscaina, though it began to be worked at the beginning of the sixteenth century, did not become enormously productive till 1762, though in twelve years from that period the owner of it had gained a profit of more than a million sterling, with part of which he presented to the King of Spain two ships of war, one of them of 120 guns, and besides lent him upward of 200,000 pounds." Jacob, "Precious Metals," pp. 382, 383.
66. Even Tooke, who is quoted by C. P. White, had little knowledge of what was going on, although he suspects the truth. He "is inclined to doubt the correctness of the opinion that the British demand increased the relative value of gold; and he remarks: 'These circumstances, collectively' (diminution in the export of silver to Asia and the emancipation of Spanish America), 'are likely to have increased the supply of silver, and give reason to expect that the fall in the price of silver arose from a relative increase of its quantity and consequent diminution, of its value rather than from a diminished quantity and increased value of gold.' He admits, however, that 'all information hitherto accessible relating to the proportion of the supply and demand of the precious metals is vague, and insufficient to build any practical conclusions upon; and the only object of the arguments brought forward is to afford grounds for calling in question the opposite presumption, which, in my opinion, has been much too generally and hastily admitted.' "—"Report No. 278," 1833-1834, p. 42.
68. Secretary Ingham ("Report on the Relative Value of Gold and Silver," May 4, 1830) makes a point in 1830 that the comparative demand for silver had fallen off, and that this had produced a fall in the value of silver: "(1) That which has the most direct influence upon it is the revolution in the India trade; some of the chief manufactures of that country are no longer consumed in the United States, and England pays for her whole consumption of India fabrics in fabrics of her own manufacture. It was stated by Mr. Huskisson, in 1829, that in the commerce with India the difficulty was not, as formerly, to find precious metals to remit in payment of the balance, but to find returns from India to Europe. (2) The change adopted in the monetary system of England in 1816, by which payments in silver were limited to forty shillings, has also diminished the comparative demand." See also "Report of 1878," pp. 562, 563. There is no ground, I believe, for supposing that from 1780-1820 there was any change in the absorptive power of Eastern nations for silver at all commensurate with the change in the relative values of gold and silver. No such change in the comparative demand mentioned by Secretary Ingham is claimed for the period of 1780-1820. His point, therefore, even if substantial, applies to a period later than we have in view.
70. Mr. Seyd says, in examining Dr. Soetbeer's tables: "Indeed, the objection urged against the concurrent use of gold and silver is based on a mathematical theory, which asserts that as one metal is produced at one time in greater quantity than the other, so it must fall in relative value to that other. The actual facts utterly contradict this axiom.... It will be admitted that this table does not in any way bear out the theory that the greater supply of the one metal over another causes its decline in relative value.... In 1810 the production of silver [relatively to gold] was eleven times as high as in 1851 and 1860, and yet no change [in the relative values] took place.... Can anything be more conclusive as to the utter fallacy of the supposed 'mathematical' principle?
"Those in favor of the monometallic system have hitherto contented themselves with asserting that the varying supply must have the effect they suppose, without even examining the actual results. At a meeting of the Statistical Society of the 1st of April, 1879, Prof. Jevons, after using the ordinary platitudes, said: 'The value of silver, of course, falls as the ratio of weight given rises.' Like Dr. Soetbeer, Mr. Jevons belongs to the class of men who violate the rules of supply and demand by their one-sided view respecting them."—"Decline of Prosperity," pp. 81, 82.
71. After long years of peaceful mining the annual production of silver began to fall off by 1810, owing to the revolutions and intestinal wars in Mexico, New Granada, Peru, and Bolivia. The mines and mints often changed hands, and, as a consequence, the Mexican dollars coined from 1810 to 1829 were of various degrees of fineness, owing to the ignorant haste and carelessness with which the silver was mined and mixed with other substances; and they were accordingly discounted from 15 to 20 per cent. See Jacob, "Precious Metals," chap. xxv.
Part I, Chapter IV
2. The Bank of the United States had arranged to import some specie from London through Messrs. Baring and Reed. "Under this contract, gold and silver were to be furnished, if it were practicable, in equal amounts, according to the American relative value of 1:15. Upward of $2,000,000 of silver have been accordingly supplied, but not one ounce of gold."—Lowndes, 1819, 3 "Finance," p. 399. "It is ascertained, in one of our principal commercial cities quite in the vicinity of the Mint, that the gold coin in an office of discount and deposit of the Bank of the United States there located, in November, 1819, amounted to $165,000, and the silver coin to $118,000; that since that time the silver coin has increased to $700,000, while the gold coin has diminished to the sum of $1,200, one hundred only of which is American."—Report, February 2, 1821, by Whitman, 3 "Finance," p. 660.
3. C. P. White, "Report No. 278," 1833-1834, pp. 66-72. The foreign dollars contained about 373½ to 374 grains pure silver. Secretary Crawford said "Spanish milled dollars compose the great mass of foreign silver coins which circulate in the United States, and generally command a premium when compared with the dollar of the United States."—Quoted by Talbot, January 6, 1819, 3 "Finance," p. 395.
4. Cf. C. P. White, ibid., p. 85. I find no reason whatever to suppose that this action of President Jefferson was as represented by Mr. Upton ("Money in Politics," p. 199). "He desired that gold should circulate as well as silver, and, to prevent the expulsion of gold, he peremptorily ordered the Mint to discontinue the coinage of the silver dollar." He did it to stop the exchange of our dollars for foreign silver dollars.
9. In 1836 there were in circulation, of denominations below a dollar, pieces of 6¼ cents, of 12½ cents, of 6d. sterling, pistareens (of 16 cents and 18 cents), English shillings, Spanish quarters, half-crowns, two-and-sixpence sterling, five-franc pieces, etc.
12. January 21, 1834, a law was also passed fixing the value of certain gold coins of Great Britain, Portugal, and Brazil at 94.8 cents per dwt.; those of France at 93.1 cents per dwt.; and those of Spain, Mexico, and Colombia at 89.9 cents per dwt.
16. "We may experiment on our gold coins without fear...; though a legal tender, they have never been a measure of value" (white, "Report No. 278," 1833, 1834, p. 87). "Our gold coins are withdrawn from circulation soon after they are issued from the Mint" (Sanford, 1830, "Senate Doc. No. 19," p. 19.)
18. "The very fact that gold and silver have departed from the proportions established by our laws is ample proof that no such laws should ever have been enacted; and the certainty of a future change is equally conclusive against any further legislation on the subject. Even since the date of the report of the committee above referred to a more wide separation between the two metals has taken place; and had a law been enacted a year ago, agreeably to their suggestion, it might possibly have required an additional one in the present year to give it effect.—Condy Raguet, "Currency and Banking," p. 203, written January 26, 1822.
21. The silver dollar was to be reduced to 356.4 grains pure silver and 399.36 grains standard, and the gold eagle was to contain 237.98 grains pure gold and 259.61 grains standard weight. A seigniorage of 14.85 grains of silver was to be exacted on each dollar coined, which would have made the ratio less than 15:1.
24. "Silver is the ancient currency of the United States, the metal in which the money unit is exhibited, the money generally used in foreign commerce, and that description of the precious metals in the distribution of which we exercise an extensive agency. The committee, upon due consideration of all attendant circumstances, are of opinion that the standard of value ought to be legally and exclusively, as it is practically, regulated in silver."—"Report of 1878," p. 675, and "Report No. 278," p. 8.
25. "Report of 1878," p. 568. "The fluctuations in the value of gold and silver can not be controlled; and even the attempt to conform the Mint to the market values must produce a change in the latter."
29. C. P. White felt the force of this reason in 1832 ("Report No. 278," p. 56): "It may be fairly concluded that the amount of silver annually furnished is not upon the increase, while, on the other hand, we have positive evidence of a rapid increase (as yet, to be sure, not comparatively on a great scale) in our own country, in the production of gold from mines represented to be of great territorial extent, and of encouraging and fruitful appearance."
31. "The committee are finally of opinion that the rate proposed by the Secretary of the Treasury, of 1 of gold for 15.625 of silver, is the utmost limit to which the value can be raised, with a due regard to the paramount interest; the preservation of our silver as the basis of circulation."—"Report No. 278," p. 56.
32. "It is true that all who approved the gold bill were not friends of General Jackson, and that all who opposed it were not his foes, but as the vote in Congress was made, in a great degree, a party vote, the party which so turned it to account are using every effort to reap the fruits of their policy."—Raguet,"Currency and Banking," p. 218.
33. "Cong. Debates," 1833-1834, vol. x, Part IV, p. 4671. Mr. Jones, of Georgia (where gold had been discovered), held: "If the gentleman is correct in saying our gold coins will return to us again after they have once left us, I can only say this is a consummation most devoutly to be wished...: If this ratio (1:16) will have the additional effect to bring them [gold coins] back again, it must be considered an additional recommendation to the substitute"—Ibid., p. 4654.
34. "Mr. White gave up the bill which he had first introduced, and adopted the Spanish ratio. Mr. Clowney, of South Carolina, Mr. Gillet and Mr. Cambreleng, of New York, Mr. Ewing, of Indiana, Mr. McKim, of Maryland, and other speakers gave it a warm support. Mr. John Quincy Adams would vote for it, though he thought the gold was overvalued; but if found to be so, the difference could be corrected hereafter. The principal speakers against it and in favor of a lower rate, were Messrs. Gorham, of Massachusetts; Selden, of New York; Binney, of Pennsylvania; and Wilde, of Georgia. And eventually the bill was passed by a large majority—145 to 36. In the Senate it had an easy passage [35 to 7]. Messrs. Calhoun and Webster supported it; Mr. Clay opposed it, and on the final vote there were but seven negatives: Messrs. Chambers, of Maryland; Clay; Knight, of Rhode Island; Alexander Porter, of Louisiana; Silsbee, of Massachusetts; Southard, of New Jersey; Sprague, of Maine."—"Report of 1878," p. 696, chap. cviii, 1834—"Thirty Years' View"; and see "Cong. Debates," p. 2122, vol. x, Part II, 1833-1834. The bill seems to have been little discussed in the Senate.
35. "Cong. Globe," vol. i, p. 467. John Quincy Adams voted for the bill "reluctantly and in the hope that the ratio would be amended elsewhere. He considered it entirely too high."—"Cong. Debates," vol. x, Part IV, p. 4673.
36. The Washington "Globe" said with some party rancor: "Contrary to their will, the bank party, even in the Senate, have been obliged to vote for the measures of the Administration, deemed essential to carry out its policy. By public opinion they have been forced to vote for the GOLD BILL, which is a measure of deadly hostility to the interests of the bank, will supersede its notes, and is the harbinger of a real SOUND CURRENCY. The people are now enabled to understand the policy of the Administration, and to see that it would give them GOLD instead of PAPER. The great bank attorney, Mr. Clay, was bold enough to vote against this bill; but he could carry only six of the bank Senators with him. The mass of them, although they voted for the bill with the utmost reluctance, dared not to tell the people, 'We will deny you gold, and force you to depend for a general currency on the notes of the mammoth bank.' Thus were they forced to minister to the triumph of the Administration."—Quoted in "Niles's Register," vol. x, fourth series.
38. "Cong. Debates," 1833-1834, vol. x, Part IV, pp. 46, 51, 52: "It was admitted there must be a concurrent circulation of silver and gold. The difficulty of fixing the ratio of their relative value arose from the various causes which concurred perpetually to alter the value of both, and which no one could control. If the ratio should be fixed to-day, these causes would change it to-morrow." Gorham was one of the earliest to propose that for every payment, beyond a small amount, one half should be paid in gold, and one half in silver. Cf. also Selden, ibid., pp. 44, 46.
39. "We have seen that there is a continual increase in the value of gold, and if the increase of the legal value cause any increase in the market value, it must be evident that 1:16 will, in a short time, be only equal to the increased market value. If we stop short of this [1:16], we shall soon be compelled again to increase the value of that metal, or to struggle with the same difficulties which now prevent the circulation of our precious metals."—Jones (Georgia), "Cong. Debates," vol. x, Part IV, 1833-1834, pp. 46, 56.
40. Early in the fall of 1834 (September 6th) it is recorded that 50,000 English sovereigns were imported into the United States, and the statement given that arrangements had been made for the importation of 2,000,000 more ("Niles's Register," fourth series, vol. xi, p. 1). Another record was made of the arrival of 40,000 English sovereigns. In the last week of July 400,000 sovereigns had been shipped from Liverpool (ibid., pp. 20, 21). A large part of this specie, it was said, belonged to the Bank of the United States.
September 13th, the Washington "Globe" reports the presentation of $208,000 in the form of foreign gold coins at the United States Mint.
In the third quarter of 1834, $2,800,000 in gold coin or bullion was imported into the United States. The movement of gold to the United States was so considerable that it excited alarm in London as to the condition of the Bank of England. The drain, however, soon ceased.
41. Says the "New York Star": "The keeper of one of our principal hotels sent on Saturday a $100 note to one of the pet banks for silver, but was refused it, only $10 being given, and $90 in gold. He then sent the gold to a broker, who charged ½ per cent. to exchange it for half-dollars." The cashier of an Albany bank said, "My table is literally loaded with applications from the country banks for change."—"Niles's Register," fourth series, vol. xiii, p. 132, October 24, 1835.
42. "The gold coins were so reduced in weight that it was now cheaper to pay debts in them than in silver coins. In consequence no more silver was coined for circulation, and the amount then in circulation, upward of $50,000,000, at once disappeared, being sent abroad in payment of obligations, or melted down for other uses at home. This sudden contraction of the currency [but it was filled by gold] created considerable distress, and the loss of the small silver pieces caused no little inconvenience. The panic of 1837 followed. Depreciated bank bills, 'shin-plasters,' and a few worn Mexican pieces came into circulation to take the place of full-weight silver pieces, which had been superseded by the cheaper gold coins."—Upton, "Money in Politics," p. 175.
44. Except possibly the charge that England "discriminated" against silver by confining it to her subsidiary coinage in 1816, which could have had no effect such as has been described, between 1780-1820, on the fall of silver. And the desire of the Jackson party for gold was not accompanied by any "hatred" of silver, but by only opposition to bank issues.
46. Whitman ("Report of 1878," p. 556) recognized this fact in 1821: "It will, of course, be objected that, if we should now render gold four per cent better, we shall thereby put into the hands of its present holders a clear net gain to that amount, provided they hold it with an intent to use it in this country. But it is not perceived how this will injure the public or individuals. And it will not be regretted by the benevolent that individuals should be benefited, if no one be injured." As if a change of standard could benefit some without at the same time injuring others! He goes on to say: "If, however, individual wealth be a public blessing, all will be benefited. At any rate, this is an incident utterly unavoidable, to a certain extent, in this case. It must be submitted to, as otherwise a positive national evil of great magnitude, as your committee deem it, must be encountered." The national evil he referred to was the disappearance of gold, which was due to a ratio which drove out silver. But he did not think the debasement of the standard should be considered in comparison with the disappearance of gold; without seeming to reflect that gold could have been restored equally well by increasing the weight of the silver dollar, and that thereby we could have escaped the charge of a debasement of the coinage.
48. Before 1834 the gold eagle was worth in silver coin 10.66½. The act of 1834 reduced its value to $10.—"I may remark that the total United States [gold] coin returned to us from the change of standard to the close of this year (1852) is but $1,534,963, showing that, of over twelve millions issued prior to 1834, but a small portion had remained in the country."—G. N. Eckert, Director of the Mint, January 17, 1853.
49. Mr. Binney said: "If [gold is] overvalued, its effect would be to enable a debtor to pay his present debts with less than he owed; and to that extent, consequently, to defraud his creditor; and it would, if it [the overvaluation] is considerable, place silver exactly in the condition in which gold now was, and make it an article of trade instead of currency."—"Cong. Debates," vol. x, Part IV, 1833-1834, p. 4665. Ewing "contended that it would impair existing contracts."—Ibid., p. 4669. As to the matter of debasement, Webster gave a characteristic reply: " If it had been imagined that there would have been any evil, it would not have been recommended."—"Cong. Debates," vol. x, Part II, 1833-1834, p. 2121.
50. In discussing the fifth amendment, which forbids taking private property without just compensation or due process of law, the decision reads: "By the act of June 28, 1834, a new regulation of the weight and value of gold coins was adopted, and about 6 per cent taken from the weight of each dollar. The effect of this was that all creditors were subjected to a corresponding loss. The debts then due became solvable with 6 per cent less gold that was required to pay them than before... Was the idea ever advanced that the new regulation of gold coin was against the spirit of the fifth amendment?... It is said, however, now, that the act of 1834 only brought the legal value of gold coin more nearly into correspondence with its actual value in the market, or its relative value to silver. But we do not see that this varies the case, or diminishes its force as an illustration. The creditor who had a thousand dollars due him on the 31st day of July, 1834 (the day before the act took effect), was entitled to a thousand dollars of coined gold of the weight and fineness of the then existing coinage. The day after he was entitled only to a sum 6 per cent less in weight and in market value, or to a smaller number of silver dollars. Yet he would have been a bold man who had asserted that, because of this, the obligation of the contract was impaired, or that private property was taken without compensation or without due process of law."
On the point that the "obligation of a contract to pay money is to pay that which the law shall recognize as money when the payment is to be made," it was laid down: "No one ever doubted that a debt of one thousand dollars, contracted before 1834, could be paid by one hundred eagles coined after that year, though they contained no more gold than ninety-four eagles, such as were coined when the contract was made; and this, not because of the intrinsic value of the coin, but because of its legal value."—"Banker's Magazine," 1871-1872, pp. "765-767 .
Part I, Chapter V
59. "There is, then, a constant stimulant to gather up every silver coin and send it to market as bullion to be exchanged for gold, and the result is the country is almost devoid of small change for the ordinary small business transactions, and what we have is of a depreciated character. This does not injure your Wall Street brokers, who deal by thousands. They are making a profit by it; but it is a serious injury to the laboring millions of the country who deal in small sums."—C. L. Dunham, "Congressional Globe," Appendix, 2d session, 32d Congress, p. 190, February 1, 1853.
60. Ibid., p. 190. Mr. Skelton (New Jersey) remarked: "Gold is the only standard of value by which all property is now measured; it is virtually the only currency of the country."—"Congressional Globe," vol. xxvi, 2d session, 32d Congress, p. 629. "The expense of coining a given value of silver into the smaller coins is much greater than into the large, and when coined the great demand for them gives them a higher currency value than that assigned by law. As a proof of this, the demand for silver for exportation has not operated as yet upon these smaller coins; that is to say, the dime and half-dime (the quarter, too, has been partially exempted), while it has swept the silver dollar and half-dollar from the country."—Hunter, Chairman Fin. Com. of Sen., "Report No. 104," 1st session, 32d Congress, p. 11.
65. "The main object of the bill is to supply small silver change, half-dollars, quarter-dollars, dimes, and half-dimes.... The bill does not propose to change the value of the gold currency; it does not propose to disturb the standard of value now in existence throughout the country. Gold is the only standard of value by which all property is now measured; it is virtually the only currency of the country."—Skelton (New Jersey), "Congressional Globe," vol. xxvi, p. 629.
66. "We propose, so far as these coins are concerned, to make the silver subservient to the gold coin of the country.... We mean to make the gold the standard coin, and to make these new silver coins applicable and convenient, not for large but for small transactions."—Dunliam, ibid., p. 190. The only silver coins in circulation were three-cent pieces and Spanish coins ("fips," 12½-cent pieces, and quarters): 100 cents of the former contained only 83 1/3, cents of intrinsic value; and the latter were so abraded that they contained intrinsically from 6 per cent to 20 per cent of silver below their nominal or face value.
68. "Sec. 5. That no deposits for coinage into the half-dollar [etc.] shall hereafter be received, other than those made by the Treasurer of the Mint, as herein authorized, and upon account of the United States."
69. Strangely enough, this law was evaded in actual practice. "All other governments pay the expense of minting by the difference between the intrinsic value of subsidiary coins and the value at which they circulate, and at which the government redeems them. And such was the law in this country until, by a ruling of Mr. Guthrie when he was Secretary of the Treasury, the Mint was ordered to receive silver from private individuals and coin it."—Mr. Kelley, "Congressional Globe," Part III, 2d session, 41st Congress, p. 2311. In 1870, John Jay Knox, in his Report accompanying the bill which became the act of 1873, said: "The practice at the Mint for many years [written 1870] has been to purchase all silver bullion offered at about $1.22½ per ounce, which is above the market price, paying therefor in silver coin.... The effect of the Mint practice has been to put in circulation silver coins, without regard to the amount required for purposes of 'change,' creating a discount upon silver coin."—"Sen. Misc. Doc., No. 132," 2d session, 41st Congress, p. 10.
72. "Congressional Globe," vol. xxvi, 2d session, 32d Congress, p. 476. He did not believe, moreover, that the great production of gold had lowered its value: "I assume here, and I defy successful refutation of it, that the quantity of gold may be increased upon that of silver without changing the relative commercial value of the metals."—Ibid., p. 490. He also said: "So far as coin is concerned, the changing of our standard of gold and silver has no more effect upon the gold and silver coinage of the United States than a change in the standard of weights and measures would have upon the price of our cotton or wheat."—Ibid., p. 491.
Part I, Chapter VI
75. There had been good authority for the belief that coin would continue to circulate prodded no paper of a corresponding denomination were issued. See J. S. Mill's "Political Economy" (Laughlin's edition), p. 348.
Part I, Chapter VII
92. Cf. Upton, "Money in Politics," p. 207. This matter was quite thoroughly discussed in January, 1878, in the debates in the Senate. See, for example, the "Globe," p. 262, vol. vii, Part I, 2d session, 45th Congress.
94. The following examples, out of many, may be cited: Senator Hereford (West Virginia) charged the fraudulent passage of the act of 1873, on May 27, 1872, on the House, because Mr. Hooper, in charge of the bill, reported a substitute, and moved to suspend the rules and pass the substitute; and because Mr. Hooper said, in answer to an inquiry concerning coins of small denomination: "This bill makes no change in the existing law in that regard. It does not require the recoinage of the small coins." The charge is made that the substitute was not read before it was passed.—"Globe," vol. vii, Part I, 2d session, 45th Congress, p. 205.
Mr. Bright (Tennessee) said in the House: "It was passed by fraud in the House, never having been printed in advance, being a substitute for the printed bill; never having been read at the Clerk's desk, the reading having been dispensed with by an impression that the bill made no material alteration in the coinage laws; it was passed without discussion, debate being cut off by operation of the previous question. It was passed, to my certain information, under such circumstances that the fraud escaped the attention of some of the most watchful as well as the ablest statesmen in Congress at the time. It was passed near the closing days of the session, when, in the bustle and precipitate rush of business, it was most favorable for the concealment of fraud.... Ay, sir, it was a fraud that smells to heaven. It was a fraud that will stink in the nose of posterity, and for which some persons must give account in the day of retribution."—"Globe," vol. vii, Part I, 2d session, 45th Congress, p. 584.
96. It is to be remembered, however, that the bill dealt with many more matters, and those of a technical nature, than the omission of the silver dollar in itself. The originator of the bill, Mr. Knox, thus explains in his report (p. 2) how it was prepared: "The method adopted in the preparation of the bill was first to arrange in as concise a form as possible the laws now in existence upon these subjects [Mint, assay-offices, and coinage], with such additional sections and suggestions as seemed valuable. Having accomplished this, the bill, as thus prepared, was printed upon paper with wide margin, and in this form transmitted to the different mints and assay-offices, to the First Comptroller, the Treasurer, the Solicitor, the First Auditor, and to such other gentlemen as are known to be intelligent upon metallurgical and numismatical subjects, with the request that the printed bill should be returned, with such notes and suggestions as experience and education should dictate. In this way the views of more than thirty gentlemen who are conversant with the manipulation of metals, the manufacture of coinage, the execution of the present laws relative thereto, the method of keeping accounts and of making returns to the department, have been obtained, with but little expense to the department and little inconvenience to correspondents. Having received these suggestions, the present bill has been framed, and is believed to comprise within the compass of eight or ten pages of the Revised Statutes every important provision contained in more than sixty different exactments upon the Mint, assay-offices, and coinage of the United States, which are the result of nearly eighty years of legislation upon these subjects." Mr. Knox's report accompanied the bill to Congress, and gives a clear idea of its full character, with comparative tables of the existing and proposed coinage.—"Letter of the Secretary of the Treasury to the Chairman of the Committee on Finance, communicating a report of John Jay Knox, in relation to a revision of the laws pertaining to the Mint and coinage of the United States," May 2, 1870; "Sen. Misc. Doc. No. 132" 2d session, 41st Congress.
99. "The coinage of the silver dollar piece... is discontinued in the proposed bill. It is by law the dollar unit, and, assuming the value of gold to be fifteen and a half times that of silver, being about the mean ratio for the past six years, is worth in gold a premium of about 3 per cent (its value being $1.0312), and intrinsically more than 7 per cent premium in other silver coins, its value thus being $1.0742. The present laws consequently authorize both a gold-dollar unit and a silver-dollar unit, differing from each other in intrinsic value. The present gold dollar piece is made the dollar unit in the proposed bill, and the silver dollar piece is discontinued. If, however, such a coin is authorized, it should be issued only as a commercial dollar, not as a standard unit of account, and of the exact value of the Mexican dollar, which is the favorite for circulation in China and Japan and other Oriental countries"—"Sen. Mis. Doc. No. 132," 2d session, 41st Congress, p. 11.
100. E. B. Elliott (now Government Actuary), "Letter of the Secretary of the Treasury to the Speaker of the House of Representatives, communicating a report of John Jay Knox, Deputy Comptroller of the Currency, giving the correspondence of the department relative to the revision of the Mint and coinage laws of the United States, H. R. Exec. Doc. No. 307," 2d session, 41st Congress, June 29, 1870, p. 70.
108. "This bill provides for the making of changes in the legal-tender coin of the country, and for substituting as legal tender coin of only one metal instead, as heretofore, of two. I think myself this would be a wise provision, and that legal-tender coins, except subsidiary coin, should be of gold alone; but why should we legislate on this now, when we are not using either of those metals as a circulating medium? "—Mr. Potter, ibid., p. 2310.
114. "I don't know what we should do with the bulk of silver if it was not disposed of in some such way. I am very well aware that before the coinage of the trade-dollar the rate of exchange with China, owing to the scarcity of Mexican dollars, had caused them to change 7 per cent here within a week.
Q. Always commanding at that time a premium? A. Yes, sir. There was an extra duty on them from Mexico which gave them a premium at once; and an additional premium was created by the demand for them for shipment to China. I have paid 22 per cent premium for Mexican coin for shipment to China, and for many years the range was from 11 to 16 per cent."—Testimony of General La Grange before the United States Treasury Commission, "Report of Director of Mint," 1877, p. 52.
Q. Which do you like best to ship, trade-dollars or Mexican dollars? A. At present trade-dollars are better, because we get about 2 per cent more premium on them in China."—Fung Chung, ibid., p. 53.
115. "Trade-dollars are current by count at Singapore, Penang, Bangkok, and Saigon; they are current by weight at Swatow, Amoy, Foochow, and Canton. In Hong-Kong they are not a legal tender, and the banks will only take them from each other by special arrangement; but the Chinese take them freely in Hong-Kong when they want coin of any description, which is very seldom, as they prefer bank-notes, and only take coin from the banks when they require to export it from the colony. In the south of China, the Straits, and Cochin China the trade-dollar is well known and passes without comment along with the clean Mexican dollars, but in Shanghai and the northern ports it is unknown, and it is not likely to be current for a length of time."—"Report of the Hong-Kong and Shanghai Banking Corporation, and the Oriental Bank," January 30 and 31, 1871, in "Report of Director of Mint," 1878, p. 10.
Part II, Chapter VIII
1. Levasseur, "La Question d'Or"; Jevons, "A Serious Fall in the Value of Gold Ascertained"; Chevalier, "On the Probable Fall in the Value of Gold"; Stirling, "Gold Discoveries and their Probable Consequences"; McCulloch, "Precious Metals" in the "Encyclopedia Britannica"; and, above all, Cairnes, "Essays in Political Economy," the first four chapters.
3. Cf. Mill's chapters on Money, and Jevons's "Money and Mechanism of Exchange," chap. iii, for an explanation of the functions of money and the proper qualities possessed by a metal used as a medium of exchange.
Part II, Chapter IX
15. Ibid., Q. 1,050. Mr. Cairnes also quotes Mr. Alexander Forbes: "It has often been said that the natives (of India) hoard silver; now my experience is that they do not hoard silver; they hoard gold; and that the silver is actually required for the commerce of the country."—"Essays in Political Economy," p. 94, note.
20. Between 1850 and 1873 India, borrowed 164½ millions sterling, which must be repaid in gold. The interest also must be paid in gold. This is the chief difficulty of India,, arising from the fall of silver, since more silver is required to pay the same amount as before in gold.
28. Writing in 1860, Mr. Cairnes said: "We are aware it has been maintained that the value of silver, so far from having fallen, has really risen during the last few years, in proof of which we are referred to the increased demand for it for Oriental remittance. That silver has risen in its gold-price owing to this circumstance we admit, but we deny that this is a proof of a rise in its value, any more than a rise in the gold-price of any other commodity would prove a rise in its value at a time when the supply of gold was rapidly increasing. During the last two years (1858 and 1859) the demand for silver in the East has been affected a good deal by requirements connected with the Indian Mutiny; but, if we investigate the causes of the extraordinary demand which has characterized the last four or five years, we shall find that they are in a principal degree traceable to the increased production of gold, operating through the expenditure of enlarged money incomes in England and the United States on Oriental productions; and that thus the increased demand for silver, which is alleged as a proof that silver has risen in value, is in reality a consequence of the large amount of gold available, for its purchase."—"Essays," pp. 142, 143. Mr. Cairnes was thus of the opinion that the imports of silver after 1850 were abnormal, and, by inference, would decline gradually with the absorption of the new gold.
See speech of Sir Louis Mallet, "French Report of Conf. of 1881," i, p. 173.
Part II, Chapter X
38. 1,080,486,138 marks of silver coins were withdrawn; 382,648,841 marks were used in the recoinage; the remainder, 697,797,069 marks, divided by 90 (the number of marks to a pound under the old system), give 7,474,644 pounds. It will be noticed, however, that these figures, taken from the "French Report of Mon. Conf. of 1881," i, p. 16, do not exactly prove. The figures in this "Report," already referred to, are unfortunately marred by many errors.
41. Mr. G. Pietsch, manager of the sales of silver for Germany in London. See "H. C. Report of 1876," Questions 739-760. The estimate of one third for disappearance on the amount of the original coinage was found in fact to be, on an average, only 21 per cent for three kinds of coin.
44. From 1871 to 1876 gold to the amount of $119,930,000 was purchased by the German Government in London ("H. C. Report of 1876," Q. 325}; $50,000,000 of gold came from France in the War Indemnity; and other amounts came from France, Belgium, and Russia.
Part II, Chapter XI
46. After 1850 "the five-franc silver began first to disappear; and soon the fractional coins were displaced in their turn; so that the necessary quantity of subsidiary coin was thus diminished to the great injury of small transactions."—"Message of the Federal Council of Switzerland," February 2, 1866.
47. By the law of May 25, 1864, the coinage of fifty and twenty centimes at a fineness of 835/1000 was authorized to the amount of thirty millions of francs; which was only about one franc per capita of subsidiary coinage. See "Report of 1878," pp. 782, 783.
53. "When the value of gold relatively to silver increased, the state decreased the weight of gold forming the monetary unit; when it was the value of silver which increased, the state decreased the weight of silver. Thus, in the course of centuries, the weight of the coin was constantly diminished and reduced; it is true, the name remained the same; the monetary unit was always called the livre until the time when its name was changed by law in the year XI to that of franc; but the livre was no longer a pound; it decreased and decreased until it was reduced to a very small part of the original pound. This was profitable to the government who coined the money; it was profitable to debtors who were freed from their debts by a weight of gold or silver less than that which had been agreed upon; but all these profits were made at the expense of the whole people."—M. Burkhardt-Bischoff, "French Report Mon. Conf. of 1881," i, p. 132. For the text of the law of 1803, see Appendix III.
58. Chevalier says that under Louis Philippe there was coined of gold 216,000,000 francs, of silver 1,757,000,000 francs; but under the Second Empire 6,152,000,000 francs of gold, and only 625,000,000 of silver.
Italy was also allotted an extra 20,000,000 fr., and certain deposits at the Mint, for which coin warrants had been issued, were also excepted.
64. Wolowski held that the slight fall in silver at this time was a "passing circumstance"; and that when the various countries then laboring under heavy issues of paper money began to resume payments in specie, the danger would be that there would not be enough, rather than that there would be too much, of silver.—"Journ. des Écon.," December, 1873, p. 506.
Cf. "Journ. des Écon.," March, 1876, p. 443.
69. "La fabrication de pièces des 5 francs en argent pourra être limiteé ou suspendue par décrets," was the phrase of the act. A decree in consonance with the law was issued the next day (August 6th) after its passage. For the animus of the law, see the statement of Léon Say, "H. C. Report of 1876," Appendix, p. 92.
The following statement is given by Ottomar Haupt:
Dr. A. Soetbeer. "Währungsfrage," p. 32.
Part II, Chapter XII
74. See Appendix II, D, for London prices since 1833. Monthly quotations in each year since 1833 to 1880, by Pixley and Abell, can be found in the "French Report of the Mon. Conf. of 1881," i, p. 197. The average monthly ratio from 1845 to 1880 is given in Appendix II, F.
82. Mulhall's "Dictionary of Statistics" states that since 1840 the banking of the world has increased eleven-fold, or three times faster than the increase of commerce, and thirty times faster than population. That in 1863-1870 the precious metals required for the interchange of the sea-borne commerce of the world was 12 per cent of the transactions, and in 1871-1880 only 8 per cent.
83. "It used to be said until a few years ago that England and Portugal were the only countries where gold was the standard of value; and there were certain countries which had a double standard, but those were not very many; and all the rest used silver. Silver is the normal currency of the world, and from a natural cause, because silver is a much cheaper metal, and is suited to those small transactions which constitute the bulk of the dealings of mankind."—W. Bagehot, Q. 1389, Report to H. C. of 1876, on "Depreciation of Silver."
84. "In the Low Countries they struck gold ducats which circulated preferably abroad as merchandise without official value. Because of their fineness and the worth of their stamp they were highly regarded in the Orient, and especially in the Balkan peninsula; but these ducats had no circulation in the Low Countries, although their coinage was free. The only standard of the Kingdom of the Netherlands was really a silver standard. Russia, Germany, Austria, likewise struck gold ducats, friedrich d'or, and pistoles for exportation; but, like the Low Countries, they employed at home only silver money. France had, it is true, bimetallic legislation; but its circulation consisted entirely of silver. From 1789 to 1848 she had struck about four thousand millions of francs of silver money, while the amount of gold coined during the same period was only one thousand millions. Generally, in Europe, gold bore a premium; generally, the circulation, both domestic and foreign, was made up of silver."—Dr. O. J. Broch, "French Report of Mon. Conf. of 1881," i, p. 39.
86. Although the metallic drain to the East is composed principally of silver, the efflux—at least in its present proportions—is not the less certainly the consequence of the increased production of gold, for the silver of which it consists has been displaced from the currencies of Europe and America by the gold of Australia and California, and the drain to the East is only not a golden one, because silver alone is in that region the recognized standard."—Cairnes, "Essays in Political Economy," p. 99.
87. "M. Chevalier appears to assume that, when the process now  going on in France is completed, all further substitution of one metal for another will be at an end, and that the action of future supplies, concentrated on gold alone, will tell in the depreciation of this metal with proportionate effect. But we question the correctness of this assumption. We are inclined to think that the substitution of gold for silver in France is only a very striking example of a process which has been in unobserved operation over a much wider area, and which will continue after the French movement has ceased. In India, where there is an immense silver currency the process has already begun, and signs are not wanting that it will soon assume more important dimensions."—Cairnes, "Essays in Political Economy," p. 144.
88. The sales of silver by Germany, taken by themselves, can not be said to be the chief cause of the depreciation in silver, because other events must have had greater importance. Between 1871 and 1879 the production of silver amounted to $750,000,000; the sale of India Council Bills to $500,000,000; while the sales by Germany in all only rose to $ 141,000,000.
90. The amount of $125,000,000 claimed by Mr. Horton as constituting a new demand I do not admit as such; but I insert it in brackets in the table as a matter which has been considered as a new demand. Likewise, in the case of Germany, I insert the whole possible supply of silver in brackets. I need scarcely add that this table does not attempt to do more than approximate to the actual state of things about 1876; but yet I believe it gives the general situation with sufficient exactness to serve our purpose.
Part II, Chapter XIII
91. The gold in the Netherlands Bank having seriously declined in amount, in April, 1384, the Government gave the bank permission to sell twenty-five millions of silver gulden at the market price. The power to sell accomplished the purpose, and actual sale has not taken place, the gold reserve of about $25,000,000 remaining intact.
"Annuario Statistico Italiano," 1878, Parte Prima, pp. 144-147.
94. "A forced circulation was given to the notes of the National Bank of the Kingdom of Italy, and to the notes of the Bank of Sicily and of the Bank of Naples, in Sicily and in the Neapolitan provinces respectively. At the same time the National Bank advanced to the Government a loan of 250 million lire for the purpose of carrying on the war. Later in the month the forced circulation was further extended to the notes of the National Bank of Tuscany, and of the Tuscan Bank of Credit within the Tuscan provinces."—A. B. Houghton, "Italian Finances from 1860-1884," Quar. Journ. of Econ., 1889, pp. 245, 246.
98. The "consorzio" was made up of the five former banks of issue and the Roman Bank—viz., Banca Nazionale del Regno d'Italia, Banca Nazionale Toscana, Banca Romana, Banca Toscana di Credito, Banca di Napoli, and Banca di Sicilia. Instead of the old state note issues, the "consorzio" would furnish the state one billion lire, of ½, 1, 2, 5, 10, and 20 lire notes, printed on white paper, inconvertible, and having a forced circulation. The banks were jointly responsible for the notes; but the state deposited with them an equivalent value in rentes.
The banks continued to issue notes on their own account, on colored paper, in denominations of 50, 100, 200, 500, and 1,000 lire, redeemable in "consorzio" notes or specie, but limited in amount. See Say, ibid., p. 1305; Kaufmann, ibid., p. 144; Houghton, ibid., p. 375, 376.
Wages had increased from 100 in 1862 to 136.99 in 1814, and to 144.08 in 1878, while prices were much lower in 1878 than in 1865.
102. The exposé, or report, accompanying this plan is one of the most valuable documents in monetary literature relating to the experiences of a country with a depreciated paper. See "Bulletin de Statistique et de Législation comparée," 1881, pp. 162-167, 251-258, 341-347, and 429-434.
103. The ½, 1, 2, and 5 lire notes were to be withdrawn and canceled, making altogether about 315 million lire. After they were retired, notes of other denominations were to be withdrawn in like manner until the amount of 600 was reached. It will be observed that this plan prepared the way for a metallic subsidiary money, while redeemable paper was to form the rest of the circulation.
112. For this and other points, see the "Report of the Special Commission of the Upper House on the Bills for regulating the Standard of Value and Conversion Parts of the Public Debt," translated in Quar. Journ. of Econ., January, 1893, p. 225.
113. Since 1866, unsecured treasury notes (1, 5, and 50 gulden) exist to the sum of 312,000,000 gulden. An additional amount may be issued provided that this additional issue, together with the "Saltworks Notes "(interest-bearing treasury notes, for short periods), do not exceed 100,000,000 gulden, thus raising the limit to 412,000,000 gulden.
117. The Austrian silver guldens already coined, however, retained their full legal-tender character (like the German silver thalers not withdrawn), and passed current, just as subsidiary coins, irrespective of the lessened market value of the silver metal in them.
124. The Austro-Hungarian Bank is required to give to the public for a kilogramme of gold 3276 krone in notes, reserving 4 krone as seigniorage, 3280 being the full equivalent of a kilogramme in coin.
129. "The later development of the monetary question brought an unbroken chain of events, all indicating the deposition of silver from the position of standard money—the continual sinking of the ratio, the complete cessation of silver coinage in the Latin Union in 1878, the suspension of silver coinage on private account in Austria-Hungary (in 1879), the repeal of the obligation previously incumbent on the Austro-Hungarian Bank to redeem silver, the establishment of the gold standard in the Balkan countries, the policy of Holland in regard to silver. Even India could no longer be counted on as an unfailing purchaser of the superfluous silver of Europe; and Japan, shrewdly perceiving the characteristics of modern commerce, established in 1870 the gold yen as a necessary part of its new civilization.
"The efforts of the silver statesmen of America to counteract this natural course of events, notwithstanding the enormous scale on which they were undertaken, proved on the whole unsuccessful. Gold rules even the trade of America. It has long played a dominant part in the countries of the Latin Union, and even in Austria-Hungary. Gold, even though indirectly, is now the basis of our standard of value."—Report of the Special Commission of the Upper House, etc., p. 227.
130. Cf. Elstaetter's "Indian Silver Currency," translated by the writer (University of Chicago Press, 1895). This gives the best account I know of, in compact form, of the currency situation in India.
"The quantity of silver imported in the years 1890-1891 far exceeded the needs of trade, and this silver brought into India for the purposes of speculation is not therefore to be found in circulation, but rests in the bank like capital waiting for investment."—Report of German Consul-General at Calcutta, "Deutsches Handelsarchiv," 1891, vol. ii, p. 619, quoted by Ellstaetter, ibid. p., 7.
131. Or perhaps $18,030,000, at present value of the rupee. Rx. is 10 rupees. The traditional use of 1 Rx. = £1, or 1 rupee = 2s., although still appearing, is inexact. At 1s. 4d. the rupee is worth about 32 cents, but its market value is still less than that.
132. The gold mohur contained 180 grains troy, gross weight, and 165 grains fine gold. The East India Company silver rupee of 1835, following the type of the Madras rupee of 1818, contained 180 grains troy, gross weight, and 165 grains of fine silver. At this weight the rupee at par is worth 44 cents of the United States silver dollar of 371.25 grains. April 1, 1895 its gold value was 21 cents.
136. In the face of such efficient testimony, it is difficult to understand why some extreme advocates of bimetallism keep on asserting that in silver-using countries silver still keeps its value relatively to goods, or that prices have not risen. Cf. Andrews, "An Honest Dollar," p. 801: "Silver prices have not risen. The rupee has not lost in general purchasing power."
Part III, Chapter XIV
1. "There is no reason why we should move now, except that given by the man, when met with the question of an irate wife as to why he came home so late at night, who answered, 'Because all other places are shut up.' "—Senator Morrill, "Globe," vol. vii, Part I, 2d session, 45th Congress, p. 616. Hereafter, in speaking of this volume of the "Globe," I shall refer to it as vol. cxxxvi.
5. "Globe," vol. v, Part I, 2d session, 44th Congress, p. 149. It will be noticed that there is a great similarity in the main provision of Mr. Bland's original bill with that which at the present time (fall of 1885) is put forth as the so-called "Warner bill." Both are plans for the issue of bullion certificates.
6. "I confess that I am in favor of the bill as originally introduced. I agree that the certificates authorized to be issued for bullion deposited in the Treasury would take the place of your national bank-notes."—Bland, "Globe," vol. v, Part I, 2d session, 44th Congress, p. 172.
7. "I suppose that the officer of the United States Army who had charge of the excavations at Hell Gate, an hour before the explosion, could have given you the lay of the ground on every square foot of Hell Gate ledge;... but if he had pretended to tell any one, just after the explosion occurred, how the ledge lay, how deep the water was, and what the situation of the channel was in regard to navigation, he would have proved himself a charlatan and a cheat.... But there has been an explosion under the silver question as it stands related to gold—an explosion as much greater than the explosion under Hell Gate ledge as the continents of Europe, Asia, and America are greater than Hell Gate itself.... Now... it is proposed, in the hot haste of a two hours' debate, under the tyranny of the previous question—the two hours being parceled out into fragments of five or ten minutes apiece—it is proposed in this chamber that we settle this world-wide question and determine it to-day."—Garfield, ibid., p. 167. For the names of the voters, see ibid., p. 172.
8. Among those who voted Yea were: Bland, Buckner, Carlisle, Conger, J. D. Cox, S. S. Cox, Crittenden, Ewing, Foster, Goode, Hubbell, Hunton, Keifer, Kelley, Knott, McKinley, McMahon, Morrison, Reagan, Spriner, Vance. Nay: Chittenden, Claflin, Frye, Gibson, A. S. Hewitt, Morse. See "Globe," vol. vi, 1st session, 45th Congress, p. 241.
10. This was passed by a vote of 40-30. An amendment that the coinage of silver dollars should not interfere with the coinage of gold and subsidiary coins was lost, 23-46; to fix the number of standard grains in the dollar at 425, instead of 412½, which was proposed by Mr. Blaine, was lost, 23-46; to make it 440 grains, lost, 18-49; to make it 420 grains, lost, 25-44; to limit the legal-tender power of silver dollars of 412½ grains to $20, lost, 20-46; to exclude payment of duties and interest on the public debt in silver dollars, lost, 18-45. See "Globe," vol. vii, Part II, 2d session, 45th Congress, pp. 1076-1110. Hereafter, in speaking of this volume, I shall refer to it as vol. cxxxvii.
14. Among the nays were Blackburn, Bland, Buckner, Burchard, Candler, Carlisle, Conger, J. D. Cox, S. S. Cox, Ewing, Foster, Hanna, Hiscock, Hubbell, Hunter, Keifer, Kelley, Mills, Knott, McKinley, Morrison, Reagan, Springer, Tucker, Vance.
16. As it now stands, the act of 1878 ought to be called the Allison bill, because his amendments changed its whole character. As it originated in the House and was first introduced by Mr. Kelley, it might properly be known as the Kelley-Allison bill; but as it was under the charge of Mr. Bland in the House, it may be well to accept the common usage, and speak of it as the "Bland bill."
23. The "Cincinnati Gazette," in June, 1877, said: "This notion got a start and great momentum from the apparent showing that it was cheaper than the greenback dollar. The promise of a specie dollar for payment of the bondholder and of all the 'creditor class,' cheaper than payment in legal-tender notes, was too captivating not to be received with great favor in this country, where every man is a financier and thinks that the way to pay debts is by fabricating currency."
24. "By it [act of 1873] one half of our money-metal is virtually abolished, silver money is abrogated, the Government, the several States, territories, cities, all corporations, and the people, are deprived of their right to pay their debts in silver coin."—Senator Merrimon, "Globe," vol. cxxxvi, p. 977.
25. "But we are told that policy forbids restoring silver to our coinage independent of our legal right; that the quantity of metal which we propose to coin into a dollar is worth but ninety cents in gold, and a depreciation of 10 per cent in all values would follow. This is a queer argument to urge in the face of the fact that worthless paper, bearing the impress of Government authority, with no intrinsic value whatever, by being invested with the functions of money is worth nearly its face value in gold."—Senator Jones (Nevada), "Globe," vol. cxxxvi, p. 440.
26. "If I could sink low enough in my own estimation to be willing to take advantage of my creditor, and insist that it was right for me to pay him but ten cents for the dollar which I honestly owed him; much more, if, in a legislative body, in making the law, when the question is not what the law is but what it ought to be, I should claim that it would be right or proper for me to aid in passing such a law to enable me and all other dishonest debtors to justify our dishonesty under the legal power conferred by such an act, and thus to encourage dishonesty, I should feel that all men would have the right to say of me that, but for the restraint of the law, I could be a knave and criminal."—Senator Christiancy, "Globe," vol. cxxxvi, p. 668.
27. "But it is urged that if we remonetize silver, it, being the cheaper, will drive gold out of the country. Suppose it does; if, as is predicted by the enemies of the bill, silver will flood the country, and we pay all our debts with silver, both public and private, if this bill should become a law, where is the injury to the nation or the citizens thereof? But it is not true that gold would be driven out. Why does it not have that effect in France? Why did it not have that effect from the foundation of the Government down to the date of its demonetization?"—Senator Hereford, "Globe," vol. cxxxvi, p. 206.
29. "These rights depend on the law; the law is their definition and measure; and whatever dealings with them on our part are lawful must be right, and therefore honorable."—Senator Morgan, "Globe," vol. cxxxvi, p. 140.
30. "It seems to me, however, that these gentlemen overlook the fact that the object in remonetizing the silver dollar is not alone to furnish money for the payment of the public debt. The main purpose is to arrest the movements inaugurated in Europe, and blindly followed in this country, to destroy a great part of the wealth of mankind.... The remonetization of silver aims at the restoration of commerce, manufactures, agriculture, and all our industries to their former prosperous state."—Senator Bailey, "Globe," vol. cxxxvi, p. 306. State aid was also appealed to by Senator Merrimon (North Carolina), ibid., p. 978. "This silver mania,... seems to me to be a very peculiar disease.... Its intensity seems to be manifested very nearly in proportion to the proximity of the victims to the great bonanza mines.... It seems to have passed to the people, attacking with most severity those most deeply in debt."—Senator Christiancy, "Globe," vol. cxxxvi, p. 667. "It is needed to utilize our vast silver mines, to employ our mining labor, and to turn the silver streams into the channels of trade. It is needed for the encouragement of our languishing industries and the employment of our starving laborers."—Bright, "Globe," vol. cxxxvi, p. 585.
33. Senator Withers held that contraction had led to the panic of 1873. "Following upon this was the additional contraction caused by the act of 1873 demonetizing silver, thus reducing at once by about one half the capacity of the country to pay the bonds, depreciating largely the value of silver, and, as a natural consequence, enhancing the value of gold—all of which inured directly to the interest of the bondholder, and added from 8 to 10 per cent to the value of the bonds."—"Globe," vol. cxxxvi, pp. 849, 850. Cf. also Willard (Michigan), "Globe," vol. cxxx, p. 165.
36. "I do not hesitate to affirm that an examination of all the facts bearing upon the case... will demonstrate that gold again began to rise about ten years ago, and especially about five years ago, as measured by commodities, land, and labor, and that its rise is still unchecked; and that this last rise of gold, as so measured, has been so greatly in excess of its rise as compared with silver as to show that silver has not fallen in value; or, in other words, that the average fall in the gold price of commodities has been so much greater than the fall in the gold price of silver as to make the conclusion irresistible that silver, instead of having depreciated in value during the last few years, has actually appreciated, though not to the same extent as gold."—"Globe," vol. cxxxvii, p. 1019. The inconsistency of this position with that of most advocates of remonetization was distinctly pointed out by another Senator: "But, notwithstanding it is so evident and so generally admitted that the demonetization of silver, by checking a demand for it, reduced its price and increased the demand for, and the price of, gold, the argument is now started that the whole effect of the demonetization of silver was to leave silver exactly where it was, and to elevate the price and value of gold."—Senator Christiancy, "Globe," vol. cxxxvi, p. 794.
38. Senator Wallace said: "If we coin annually one half of the world's supply of silver, its rise in value is inevitable."—"Globe," vol. cxxxvi, p. 641. Similarly Hill (Georgia), ibid., p. 850. Allison thought that the United States with the Latin Union might restore silver to its former value. "If we restore silver, shall we not practically place in circulation and in use an equivalent of the amount of silver demonetized by the action of the German Government?"—"Globe," vol. cxxxvi, p. 175.
41. "It is said that an inferior currency always drives away the superior, which is true in a measure; but, in my opinion, the argument will not hold good in this instance, because, first, as a currency of general use in the current transactions of trade and barter among the masses, silver is not now, and never has been, inferior to gold; second, supposing it to be the cheaper of the two, it can not drive out the superior until it becomes equal in volume to it, sufficient in quantity to fill up the channels of trade, which is not likely to occur."—Finley, "Globe," vol. cxxxvii, p. 1264.
42. This is one example of many: "Enact this law and confidence will be restored in the public mind.... The people of this country, and especially the people of the west, have an abiding confidence that the enactment of a law of this kind will give them not only immediate but permanent relief.... They understand that every dollar of silver that is coined in this land adds one dollar to the material wealth of the people[!]."—Tipton (Illinois), "Globe," vol. cxxxvi, p. 601. See, also, Senator Jones, vol. cxxxvii, p. 1024. As amusing as any of the bits of rhetoric was that by which Senator Allison, without considering where the value was to come from to be exchanged for the coin, argued that very large sums of silver might be coined because the negroes of the South would take such very large quantities. "Who does not believe that if it is made a legal tender, or rather if silver dollars are coined, these colored people, like the people of China and the East Indies, will hoard this money in considerable sums, so that we shall be able to go on coining at the rate of $30,000,000 per annum for many years to come without disturbing the relative value between gold and silver?"—"Globe," vol. cxxxvi, p. 175.
46. "Globe," vol. cxxxvi, p. 822. Mr. Blaine believed that the double standard was established by the Constitution! "No power was conferred on Congress to declare that either metal should not be money. Congress has, therefore, in my judgment, no power to demonetize silver any more than to demonetize gold; no power to demonetize either anymore than to demonetize both.... If, therefore, silver has been demonetized, I am in favor of remonetizing it." But he urged a dollar of 425 grains standard silver, instead of 412½ grains, worth in 1878 only 93 cents in gold. "I think now very clearly, with the light before me, that it [the act of 1873] was a great blunder."—"Globe," vol. cxxxvii, p. 1063.
50. Introduced December 6, 1877 ("Globe," vol. cxxxvi, p. 47). Passed the Senate January 25, 1878, by a vote of 43 to 22. Passed House, without debate, January 28th, by a vote of 189 to 79. It was not a party question. It was supported by 116 Democrats and 73 Republicans, and opposed by 23 Democrats and 56 Republicans.
Part III, Chapter XV
55. Act of July 12, 1882, § 12.... "Such (gold) certificates, as also silver certificates, when held by any national banking association, shall be counted as part of its lawful reserve; and no national banking association shall be a member of any clearing-house in which such certificates shall not be receivable in the settlement of clearing-house balances." It is worth noticing, however, whether "such certificates" does not refer solely to gold certificates, described at length in the previous section, and already mentioned as "such certificates."
56. At that time the banks, in view of the great uncertainty of the future, accumulated a gold reserve greatly in excess of the legal requirements. In the statement for December 20, 1884, it appeared that the New York banks held $70,816,147 in gold or its representatives, and but $2,022,803 in silver and silver certificates. For the Clearing-House rules, see "Finance Report," 1878, p. 169. Taussig ("Silver Situation," pp. 12, 29) points out that only New York, Boston, and Philadelphia banks refuse to use silver currency, while Chicago, St. Louis, Kansas City, and Denver banks treat silver exactly as other forms of money.
57. Any one who moves about in country districts will see enough silver-dollar pieces to make it impossible to agree with Professor Taussig's statement ("Silver Situation," p. 45): "Though permanently out of the Treasury, the fifty or sixty millions of silver dollars are probably not at all in actual monetary use."
61. In August, 1884, it was again believed that the condition of the United States Treasury required payments in silver, but the emergency was tided over. February 10, 1885, the Treasury did actually pay out silver to a certain amount to the Clearing-House, but it has not repeated the act since.
62. "It is obvious that the Treasury could pursue with success the course just described only because its income exceeded its expenditure. In the eighteen months between the beginning of 1885 and the middle of 1886 the Government received over twenty-six millions in silver certificates which it did not reissue, paid out, in addition, some thirty-six millions of silver bullion, which was coined into silver dollars, and in that form stowed away in the Treasury vaults, and materially increased its net holdings of gold. These enormous sums, of course, represent an excess of income over outgo. Notwithstanding the decline in its receipts as compared with earlier years, the Government still had a surplus so large as to enable it to hoard sixty millions of silver currency, and to add twenty-five millions to its holdings of gold, before it resumed, in the beginning of 1886, the repayment of the public debt. In the financial history of any other country such a surplus would be considered a rare piece of good luck. We had it for so many years that we did not fairly realize what risks it enabled us to run without coming to grief."—Taussig, "Silver Situation," p. 32.
66. Professor Taussig ("Silver Situation," pp. 8, 9) intimates that economic writing, following absolute teaching, had at that date predicted the disappearance of all gold. Of course this would not take place so long as the new silver was kept at par. If all our money were equally good, and then became redundant, some of it might go abroad; but that is an entirely different thing from dropping to a lower standard of silver. Free coinage of silver (as proposed by the Bland bill), by introducing an unlimited amount of money of a lower value than gold, would at once drive all gold from circulation; and the Bland bill was what most persons had in mind. The Act of 1878, however, was a radically different measure from the Bland bill.
67. "I am willing to compromise... on this subject, and make silver more than a subsidiary coin, but I would limit its legal-tender power. Why? For the very reason of the example you have before you. The Senator from Missouri has thrown it in our faces that two of the present half-dollars are of less weight than 412½ grains, and yet they pass at par. Why? Is it because the value of the silver in them is equal to 25.8 grains of gold? No, sir; but because of the limit in legal-tender power, and because there is no other currency with which it comes in competition. For the very same reason your minor coins pass at par."—Senator Hill, "Globe," vol. cxxxvi, p. 846.
68. In a letter to James P. Helm, Louisville, Ky., in September, 1896, Secretary Carlisle said: "With a knowledge of these assurances, the people have received these coins and have relied confidently upon the good faith of their Government, and the confidence thus inspired has been a most potent factor in the maintenance of the parity. The public has been satisfied that, so long as our present monetary system is preserved, the Government will do whatever its moral obligations and express declarations require it to do, and, very largely in consequence of this confidence in the good faith of the executive authorities, the silver coins have not depreciated in value. It is not doubted that whatever can be lawfully done to maintain equality in the exchangeable value of the two metals will be done whenever it becomes necessary, and although silver dollars and silver certificates have not, up to the present time, been received in exchange for gold, yet, if the time shall ever come when the parity can not be otherwise maintained, such exchanges will be made. It is the duty of the Secretary of the Treasury, and of all other public officials, to execute in good faith the policy declared by Congress; and whenever he shall be satisfied that the silver dollar can not be kept equal in purchasing power with the gold dollar, except by receiving it in exchange for the gold dollar, when such exchange is demanded, it will be his duty to adopt that course. But if our present policy is adhered to, and the coinage is kept within reasonable limits, the means heretofore employed for the maintenance of the parity will doubtless be found sufficient in the future, and our silver dollars and silver certificates will continue to circulate at par with gold...."
Part III, Chapter XVI
Part III, Chapter XVII
77. General Francis A. Walker says money performs the function of a measure of value "in respect to a vast bulk of commodities where it is not called on to become a medium of exchange.... It requires the actual use of money, for a longer or shorter space of time, to effect those double exchanges which we call buying and selling; but the prices resulting from such exchanges may be applied to far greater bodies of wealth without the use of money. For example, a farmer sells a cow to be sent to the city for beef. It is only in the actual sale that money is used: but he takes the price—the money-value—thus determined, as the means of estimating the value of his herd; and so does the Government in taxing him.... The farmer compares his cow with the one he has just sold for money, and, knowing it to be as good a cow, or better, or poorer, fixes her price, in denominations of money, for the purposes of the contemplated exchange."—"Money," p. 64.
[Note: Footnotes to the many tables in the Appendices are available within the scanned gifs of those tables. Footnotes to the text sections in the Appendices are recorded below, numbered in order of appearance in the Appendices.—Econlib Editor]
4. This article refers to an issue of obligations made during and after the war of 1866. These were at first assignments or mortgages of the yield of the salt works, but were later made convertible into state notes, and remained there after alternatively interest-bearing or non-interest-bearing, at the discretion of the minister of finance. The maximum issue was 100 million florins. They constitute a separate debt for Austria, over and above the 312 millions of paper which are a debt common to Austria and Hungary. In 1891 this extra issue of paper money, payable by Austria alone, stood at 66.8 million florins.