The silver question
Boalt, John H. (John Henry), 1837-1901
!0';vc<::<m^<5:- < j-cci. «^^-.ciC:v.^«iK:t/-:<^^ >■ ^n<»^, Vf^r-' <«>%, _ ^^e^^^-cxKjiC'^ ^" c<^ <^r ^t/^^.^i; (SCO <:X3VCt4K ^^r ; tic: 1, vi; V5i«v«^ s wr ?<^X?-f<^*^ t<^<^ V 7 • .> if%» T ^ LI BR AR V OF THE .;', ^ UNIVERSITY OF CALIFORNIA -^0 Received __.,: ^^.^^^^rrrT; i8^... A ccessions No.^_^ ,^/y)^. Shelf No 5%*' •^ ^V m'J^^m^ &i':p,'k.^^.W'i^.'^' it V«/ ».♦1^ ' C3J I THE SILVER QUESTION By JOHN H. BOALT. From The Ovkrlanj) Monthly, November, 18H(). V^ THE SILVER QUESTION By JOHN H. BOALT. [From The Oveki.a.nd Muntiilv, November, ISbG. > •) - rr^ Tlio Overland Moiitlily Puljlisliiii'^ i Ajnipaiiy. THE SILVER QUESTION. V^ There are three different monetary sys- tems used in the world: I. The Monometallic Gold System, in which gold coins constitute the only legal ten- der for the payment of debts to an unlimited extent, as in Great Britain and Ireland. II. The Monometallic Silver System, in which the unlimited legal tender quality is given to silver coins only, as in British India. III. The Bimetallic System, in which the unlimited legal tender quality is given to coins both of gold and silver, as in France and the United States. Which of these three systems is to be pre- ferred ? If the abstract question were asked, whether it were better to use as a measure of values one metal or two metals, it would seem obvious that the answer should be in favor of one metal. For all the commodities whose value is to be measured vary in value according to the law of supply and demand, and the equa- tion differs with each commodity. But the metals are themselves commodities, and they form no exception to the general rule. To use any metal therefore as a measure of the value of other commodities, is to use a varying standaW to measure varying values. To use two metals is to use two such vary- ing standards — standards varying not only as to their own values, but also as to each other's value. If we were compelled to measure lengths with a varying foot, we should undoubtedly consider this a very un- satisfactory method of measurement; but if in addition to the varying foot, we were also compelled to use a varying inch, the diffi- culties would seem to be very greatly in- creased. If, then, we consider metallic money sole- ly with relation to its function as a measurer of values, and seek for it the greatest theo- retical advantage in this respect, it would be natural to conclude that we should find it in the use of one metal only. But this is very far from solving the prob- lem. Indeed, it may be questioned whether the very apparent reasonableness of this argu- ment has not tended to obscure the main question, for many minds have rested upon so simple and easy an answer, without in- quiry into the matter further. A more S3arching examination will, I think, show that this i)lausible solution does not go be- low the surface of the problem. I . In the first place, the argument proves too much. For if it is better to use one varying standard than two, it would be evidently still better to use a standard that did not vary at all. We started with the admission that each of our metals varied in value according to the laws of supply and demand. But our measures of length, of The Silver Question. weight, of cubic contents, do not vary; why, it may be fairly asked, should we use a varying standard of value ? If we follow our premises to their logical conclusion, the end must be that the very best standard of value would be something that itself never varied in value, but always and everywhere remained the same. Now the only things that always remain of the same value are those that never have any value at all. The best possible measurer of values, therefore, must be sought among things that are intrinsically worthless and practically have no value whatever, except perhaps, that which is given them as and for a measurer of values of other things. Since none of the metals possess this pre- requisite, they would all be necessarily excluded. The advocates of an irredeemable paper currency claim to have found this ideal measurer of values in what is called " Fiat money," the fundamental principle of which is that in itself it is good for nothing, and owes its value solely to the government stamp, which makes it money. Without entering into the question of the policy or impolicy of issuing this kind of money, it is sufficient to say here that in this particular theoretical advantage of un- varying value it is certainly far superior to any other form of money known, and if this is the only quality that we are seeking in money, we had better at once discard all the metals and take up this stamped paper. 2 . But the measurement of values is not the only function of money. It is a very important function, no doubt, but it is neither the only function nor the only im- portant function. Suppose ten yards of cloth are worth ten dollars in money. We may fairly enough say that the length of the cloth in this case is measured in yards and its value is meas- ured in dollars, and so far both yards and dollars are alike pure abstractions. But if one buys ten yards of cloth for ten dollars in money, the purchaser gives the seller the dollars that measure the value of the cloth and receives in return, not the yards that measured its length, but the cloth itself. It is as if he had taken ten silver yardsticks, and after measuring their com- bined length in cloth, had exchanged the yardsticks for the cloth. A measure of value, then, which can be used as money, differs from all other meas- ures in that it must be capable of transfer; it must be susceptible of manual delivery — or, to use the common amd accepted phrase, it must be a Medium of Exchange. For this purpose there are certain prop- erties that are absolutely necessary, and many others that are highly desirable. Pro- fessor Jevons enumerates the most important of these in a list, placing them according to what he considers the order of their impor- tance. Utility and value. Portability. Indestructibility. Homogeneity. Divisibility. Stability of Value. Cognizability. But in addition to these, it is evident that the substance^ be it metal or anything else, that is to be used as money, must exist in sufficient quantities to supply the amount of money required in the trade, and commerce of the world. Thus it has been said that such rare met- als as palladium, rhodium, iridium, and others of the same group, although more valuable than gold, cannot be used as money, because so far as known they occui in too minute quantities' to supply the amount needed of a metal that is to be used as a medium of exchange. The same objection was made to the use of platinum as money when coined by the Russian government in the early part of this century, and for this reason among others its coinage was discon- tinued. The Silver Question. Now it is positively known, as will here- inafter more fully appear, that there is not enough of either gold or silver, taken sep- arately, in the world to supply the quantity that is needed for use as money — unless in- deed, the value of the single metal so taken should be inordinately raised above its pres- ent value. To this extent, therefore, there is a decided advantage in using both metals as money over the use of either metal. 3. The use of only one metal as a medium of exchange has a tendency to ex- pose the world's stock of money to great and sudden changes in quantity according as there happens to be an over production or underproduction of that particular metal, and these changes in quantity are the direct occasion of great fluctuations in value. While the opposite systeni is not entirely free from this evil, it is a measurable im- provement on the other. Writers on this subject have pointed out the different conditions in wrhich gold and silver occur in nature. Gold is generally found in the native form and usually near the surface of the earth. It is principally obtained by washing and in the form of dust or nuggets. Silver, on the other hand, almost always occurs in veins or deposits. in depth, and in' combination with other metals or elements in the form of mineralized ores, which require metallurgical treatment more or less elaborate before the silver can be utilized aS # metallic product. The conditions of the occurrence of the two metals being so essentially different, it will not surprise us to find in the history of the precious metals that a very large produc- tion of the one metal has been frequently accompanied by a small production of the other, so that the aggregate production of both metals has been subject to very much less fluctuation than the production of either one. For example, the carefully prepared tables of Doctor Sotbeer, probably the leading authority on this subject, show that between the years 1493 and 1850 the estimated pro- duction of gold was 16,368 millions of francs; while .the estimated production of silver during the same period was 33,292 millions of francs, being very nearly tu'ice as much silver as gold. But during the years 1851 to 1879 the estimated produc- tion of gold was 18,778 millions of francs, and of silver 9,101 millions of francs; being a little more than twice as much gold as silver. If only one metal were used as money, and these very large changes in the amount of production and consequent fluctuations in value were confined to that metal alone, it is evident that there must be very much greater disturbance in the value of money than if both metals were used.. Indeed, this is admitted by the leading/ monometallists themselves, and Professor. Jevons — a pronounced gold monometallist — in his well-known work on Money and the Mechanism of Exchange, has illustrated the principle by ingenious diagrams, showing first the lines of fluctuation in value of gold and silver separately, stated in terms of cop- per, and then the line of extreme fluctuations of both metals taken together, and finally the line of the fluctuation in the value of money when both metals are used; and of this he says: " This line undergoes more fre- quent fluctuations than either of the curves of gold or silver, but the fluctuations do not proceed to so great an extent, a point of much greater importance." Going back now to the plausible solution of our problem which at first seemed so satis- factory, we find that we committed the great error of treating the measure of value as if it were a pure abstraction, like the measures of length or weight ; and applying to money the same principle that would have been per- fectly, correct when applied to yards or to pounds, we concluded that it was better to use one standard of value than two. But money is not, and never can be a 6 77/1? Silver Question. mere abstraction ; it is and always must be a tangible and transferable substance, and the rules that govern the measures of length and of weight have no application to the me- dium of exchange, even although that me- dium, among other functions, performs that of a measure of values. The fallacy of the argument clearly ap- pears when we consider the illustration with which it was accompanied. If we were com- pelled to measure lengths with a varying foot, it would be evidently unwise to use a varying inch or vice versa, because even al- though each of them did vary there would always be plenty of either to satisfy every re- quirement of measurement. But suppose that instead of being abstract ideas, our feet and inches were tangible substances, and could not be used as measurements without transferring them from hand to hand ; then suppose that there positively was not enough of either to satisfy the necessary require- ments of the world ; and finally suppose that we had to dig our feet and inches out of the earth, and sometimes there was plenty of the former and a scarcity of the latter, and some- times the case was reversed and there was a scarcity of the former and a plenty of the lat- ter. In such a case, it is probable that wc should be glad to use both feet and inches even although they did both vary. Putting then our abstract proposition into the concrete form, we see that even consid- ering money solely from the standpoint of a measurer of values, the use of both metals as money possesses certain marked advantages over the use of either of the other two metals. 4. Bimetallism has a further great ad- vantage in that it prevents excessive fluctua- tions in the value of either metal, by means of what is called its compensatory or equi- libratory action. Let us suppose that by reason of new discoveries or improved processes, there suddenly occurs a greatly increased produc- tion of either gold or silver. If all the com- mercial and trading communities in the world were using both metals as money, with a fixed ratio between them, it is clear that this increase in the production of one metal over the other would cause little or no fluctuation in the value of either. A largely augmented supply might, of course, diminish the value of money as money, because the stock on hand would be increased beyond the existing demand for its use; but except to the limited extent presently mentioned, there would be no increase or diminution in the value of either gold or silver as compared with each other. A gold dollar would con- tinue to have the same purchasing power as a silver dollar, and vice versa, no matter how much the supply of either metal might be increased. In the event that this dispro- portionate production should be greatly pro- longed, it is possible that the demand for the metal lagging behind, for use in the arts, might tend to give it a value in excess of the ratio fixed by law, but this is a contingency so remote that it is hardly worth considering. Let us now suppose that instead of all the commercial and trading nations using both metals as money, they are divided into three considerable groups, only one of which uses both metals, while of the other two groups, one uses the single gold stand- ard and the other the single silver standard. This is now, and during the present century at least has been, the actual state of the case. We will next assume an unusually large production of one of the metals, say gold for example. The gold nations soon dis- cover that they have more gold than they need, and as a natural consequence, in their commerce with the bi-metallic nations, they make use of gold as the medium of ex- change. If the increased production con- tinues, they send their surplus gold into the bimetallic countries and exchange it for silver at par, and use the silver so obtained to carry on their trade with the silver group of nations. It is clear that this process could continue The Silvei- Question. until the great bulk of the silver held by the bimetallic nations had been exhausted, and until this limit was reached there would be but a small undervaluation of gold. The great commercial advantage of this Par of Exchange, as it has been termed, and its economic value in preventing sudden and disastrous fluctuations, can hardly be over-estimated. In the great majority of cases its effect must be to preserve the equi- librium until the balance of production is restored, and in any possible contingency it would at least moderate and slacken the dangerous consequences which might other- wise ensue. The operation of this compensatory action has been clearly demonstrated in modern times. The story is so well told by General Francis A. Walker in his admirable treatise on Money, Trade, and Industry, that I quote the passage entire: "The most conspicuous example of the replacement of the dearer by the cheapened money metal under the bimetallic system, is that of France after the Californian and Australian gold discoveries. Prior to 1850 the general circulation of France consisted of silver, gold being too valuable to circu- late at the ratio of 15^ to i. During the seventeen years of Louis Philippe's reign, gold was coined only on an average of 12,500,000 francs annually. Though the California production began in 1848, the influence of the new mines was not felt until 1850. Immediately thereafter the bimet- allic system of France was subjected to a severe trial. "In 1846 the total production of the world was estimated at $30,000,000 of gold, and $32,500,000 of silver. In 1852 the annual production of gold had risen to $150,000,000, while that of silver had risen to only $42,500,000. When the California discoveries took place, the stock of silver in existence was at least one-half greater than that of gold. Within twenty years these proportions were to be reversed. "The effect was of course to cheapen I gold relatively to silver; and hence under ■ the French law, the coinage of gold began ' actively. In 1850 it was coined to the | value of 85,000,000 francs; in 1851, 270,- ' 000,000; in 1852, 27,000,000; in 1853, 313,000,000; in 1854, 526,000,000; in 1 1855, 447,000,000; in 1856, 508,000,000; ' in 1857, 572,000,000; in all, within eight ] years, 2,721,000,000 francs. " Coincidently with this movement, the , coinage of silver was checked. For the ! period of 1800 to 1848 the average annual ' coinage of silver had been about 81,000,000 1 francs. In 1853 the silver coinage had ; sunk to 20,000,000 francs; in 1854 to I 2,000,000; in 1855 it rose to 25,000,000; j in 1856 to 54,000,000 (these were the years j of the war in the Crimea); in 1857 it sank ' to 4,000,000 francs. , " The effect of the issue of the cheapened ' metal was naturally to displace a portion of - the dearer metal existing in the form of coin, and to cause its shipment to coun- tries not having the bimetallic system. ' "In 1852 the excess of exports over im- ■ ports of silver amounted to 3,000,000 francs; ; in 1853 it rose to 117,000,000; in 1854 to 164,000,000; in 1855 to 197,000,000; in I 1856 to 284,000,000; in 1857 to 362,000,- 000. In all, from 1852 to 1859 inclusive, , 1,127,000,000 francs, computed to be about two-fifths of the French stock of sil- ver money. All this vast exjjortation had taken place through a premium on silver, , which ranged generally between one and | three per cent ' ' The effect produced was twofold. Cold and silver were held together at nearly the , ratio of the French law, 15'/^ to i. The 1 production of gold in the period following | 1850 was sufficiently large to have caused a I very great fall in its silver value. Such a fall was apprehended by those who did not ' understand or ai)preciate the working of the j bimetallic system. It was feared that gold | would sink to two-thirds or one-half its 8 The Silver Qi!cstio?i. former value. A veritable gold panic set in. ' Frightened,' says Professor Levi, ' and not without reason, at the possible consequences, some countries heretofore anxious to attract and retain gold in circulation, even at great sacrifices, showed a feverish anxiety to banish it altogether. In July, 1850, Hol- land demonetized the gold ten-florin piece and the Guillaume. Portugal prohibited any gold from having a current value, except English sovereigns. Belgium demonetized its gold circulation. Russia prohibited the export of silver; and France, alarmed, but less hasty, issued a commission to inquire into the matter." "All these apprehensions were vain, so long as France kept open her mints to both metals, and silver remained to be exported. As M. Chevalier remarked:.... 'It was impossible so long as this state of things ex- isted that gold should fall anywhere, whether at London, at St. Petersburg, or at New York, much below fifteen and one-half times its weight in silver.' The maximum ef- fect produced by the flood of new gold was to change the silver price of that metal 43_; per cent, and even this effect in any such de- gree was momentary ; gold nearly recovered its price again, the whole permanent effect of the California and Australian discoveries being placed by Professor Jevons at not above i^ per cent. " The second result of the operation of the bimetallic system during this critical period, was that gold and silver thus held closely to- gether by the operation of the French law, both declined in value. Without the bi- metallic system, gold would have sustained a great fall while silver would have held its own, or perhaps have risen ; as it was, gold and silver sank together, ' the depth of the fall being diminished' says Professor Caires, ' as the surface over which it has taken place has been enlarged.' " The gold monometallists have fully ad- mitted the facts here stated and have ac- knowledged that the eiiuilibrium between the metals was preserved by the bimetallic system. Mr. Bagehot, of the London Ecotiomist, speaking of the bimetallic countries says: "Whenever the values of the two metals altered, these countries acted as equalizing machines. They took the metal which fell ; they sold the metal which rose, and thus the relative value af the two was kept at its old point." Professor Jevons in discussing the same question says that the bimetallic system ' ' cannot prevent both metals from falling or rising in value compared with other commo- dities, but it can throw variations of supply and demand over a large area, instead of leaving each metal to be affected merely by its own accidents."' "Imagine," he continues, "two reser- voirs of water, each subject to independent variations of supply and demand. In the absence of any connecting pipe the level of the water in each reservoir will be subject to its own fluctuations only. But if we open a connection, the water in both will assume a certain mean level, and the effects of any ex- cessive supply or demand will be distributed over the whole area of both reservoirs." It only remains to add that France, while performing the great function of equalizing the money metals, herself sustained no in- jury. Her prosperity continued unabated during the whole of the critical period, and she emerged from it in certainly as good if not better financial condition than when it began. It would seem indeed that there are cer- tain features in the bimetallic system which under present conditions naturally attract trade and commerce to the country employ- ing it. For it tends to make that country a clearing house for monometallic countries, some of which use the gold and some the silver standard. If a merchant were dealing with persons of whom one set conducted business on a gold basis, and another on a silver basis, he would naturally- — other things The Silver Question. being equal — prefer to bank where he could obtain either gold or silver as his necessities might require. The same principle would seem applicable to the business carried Ofi by and between the merchants and tradesmen of the different nations of the globe. It has always been one of the leading arguments against bimetallism, that it would in practice result not in the use of both metals, but of the cheaper metal — that it would be in fact only alternative monome- tallism. There is certainly much truth in the charge. But is it certain that this is a disadvantage ? Did not the whole world find safety in it during the critical period of the great influx of gold from California and Australia ? Before that period the principal currency of France was silver; during it, a large proportion of her silver was supplanted by gold. Afterwards the silver current re- turned and the currency became as before. If this is alternative monometallism, is it not preferable to unaltering monometallism ? 5. There is another advantage in the bi- metallic system, which is especially appli- cable to the American people and the States of our Union. The unit of our money — the dollar — while admirably adapted to our wants, is nevertheless too small to permit of the cir- culation of gold coins representing its value. Accordingly the coinage of gold dollars has been practically abandoned, and the few- specimens in the hands of th» people are mostly preserved as curiosities. The next highest gold coin — the two-and-a-half dollar piece — -is not favored and there are relative- ly very few of them in circulation. It may be fairly said that the lowest gold coin which is practically available for our circula- tion, is the half-eagle or five dollar piece. If, then, we should adopt the monometal- lic gold system, the absolute necessities of our business would retiuiro the coinage and circulation of a very large amount of silver token money, to be a legal tLiider U[f to a moderate sum — say up to ten dollars, which is about the I^nulish limit. Now it would not answer to coin any of this token money in the proportion to gold at which our present silver dollars are coined —nearly 16 to i — because if we did, and silver ever regained its former value, this token money would at once leave the country, its proportion of silver being higher than that of the silver of the bimetallic countries. We lost the greater portion of the silver that we coined prior to 1853 ^o^ this identical reason. : It would be necessary, therefore, to coin ' our token money with a less amount of silver in proportion to gold than the legal j tender silver of the bimetallic countries — in other words, it must be less than 153/^ to I — say about the proportion of our present 1 token money. I Nor would it be practicable to vary the silver content of this silver money according to the gold value of silver, for that would expose it to the hazard of constant specula- j tion; it would be offering a premium to money brokers, and the amount of this kind | of money in circulation would become such ' a varying quantity that its fluctuations could never be anticipated or provided against, j Whatever the proportion, it should be a | constant one. ' Of course we should meet with the diffi- culty just mentioned at the very start, for the gold value of our new token dollar would be 1 less than that of our present standard dollar, | but this could probably be remedied by i offering a slight premium on the present ' issue, so as to bring ihem in for re-coinage. \ But let us suppose that the new system ' has been fairly inaugurated, and that we j have a composite currency like the present English system, with gold coins that are a | legal tender for an unlimited amount, and silver coins that are not legal tender for any \ sum in excess of ten dollars. It could then be charged with some jus- | ticc that we had one money for the rich and ' one for the [)oor; that the [joor man's money I was a debased coin, current onlv within the 10 The Silver Questiofi, boundaries of his own country, no matter what the ratio of silver to gold elsewhere might be, and even at home was a legal tender for only a small amount; while the rich man's money was of standard value, current everywhere, and a legal tender to an unlimited extent. The poor tenant could not use the money with which his daily labor was paid to pay the rent his wealthy land- lord demanded, unless, indeed, his tene- ment was of so small value as to bring its rent within the legal limit. Doubtless this evil might be to some extent mitigated by a statute similar to our present law, under which subsidiary coins may be redeemed at any sub-treasury of the government in sums of twenty dollars or multiples thereof, but in any event it would work an injustice and create a dangerous irritation. The government that coined this debased money would of course reap a large profit, but unless absolutely unavoidable in carry- ing out measures for the benefit of the whole people', such a profit would be both unjust and unwise. It may be suggested here that the government of this country is now making a similar profit out of the coinage of standard dollars under the present depreci- ated price of silver. But the present profit is unavoidably made in attempting to" preserve the- former ratio between silver and gold, a measure which the statesmen who procured the passage of the law under which this coinage is contiuued^ believed to be for the advantage' of the whole people. The object and aim of the law is to prevent the making of this profit. In the case we are now considering — the adoption of gold monometallism by this country and the consequent issuance of a debased silver token money — the effect would be to perpetuate this profit. Again, in the case of the standard silver dollars, the government's profit, although an undesirable one, is at least gathered at the expense of rich and poor alike. For standard silver dollars, by reason of their unlimited legal tender quality either as coin or certificates, are equally valuable to both classes. But in the case of a debased silver token money the profit would be derived almost exclusively from the laboring classes, whose peculiar currency it is. This proposi- tion may be doubted. Let us turn it around. Suppose that the government is- sued a debased gold currency and compelled its acceptance as a legal tender for sums above ten dollars. On whom would the burden fall then } Without discussing this branch of the question further, it is sufficient to say that there is little likelihood that gold mono- metallism, with its necessary accompani- ment of silver token money, could ever be enduringly successful among our people, for the reason that it would create constant friction between the richer and poorer classes, and would inevitably become a political question with periodically recurring chances of success or defeat, the very possi- bility of which would make it undesirable. The recent and divergent action of party conventions in the different States on this question certainly makes this much clear. . 6. The most important objection to the adoption of gold monometallism remains yet to. be considered. The amount of gold in circulation as money in the world was estimated in the re- port of the Director of the United States Mint for 1884 at $3,293,606,836. The amount of silver in circulation as money was placed at. $2, 7 54, 6 11,080.' By means of this money the business of the world is transacted. Without it we should be in helpless confusion. It is of course well known that an im- mense'amount of business can be transacted and actually is transacted without the move- ment of coin at all, but simply on the faith of its existence. For example : A draws a check on his bank and with it pays his debt iThe probable amounts of the j-reeious metals in circu- lation as money in China and some of the other Asiatic countries are not included in these estimates. Th'^. Silvtr Question. 11 to B who endorses it over to C and thus can- cels another obligation. C! in his turn trans- fers it to D who deposits it in the bank on which it was drawn. But on the same day D pays A $5,000 by a check which A sends to bank with his other deposits. It is found in the bank that x\'s check in the hands of I) exactly balances D's check in the hands of A and thus we have the result that $20,- 000 of debt has been paid, while not a dollar in coin has changed hands. Of course this use of paper representatives of money may be extended almost without limit and may be further ramified and complicated in a multitude of ways unnecessary to explain here. But the important fact must not be lost sight of that such use of paper representa- tives of money is absolutely impossible unless the actual coin is ready somewhere to liqui- date each piece of paper on presentation Unless this is so, then that use of a paper representative of money means either fraud or insolvency. In all these transactions with paper there is no new money created. It is simply a very convenient method of handling money that already exists — a method so convenient that by means of it a small amount of money may be made to do an im- mense amount of business. If A had gone to the bank and got his $5,000 and carried it to B, and B had then carried it to C, and C had carried it to D, and D had carried it to the bank, the transaction would have been exactly the same ; but by this use of paper representatives all this carriage was avoided and the money remained all the time securely in the vaults of the bank. Let us now go back to our sum total of money. For the purjjoses of this argument wc will assume the grand aggregate to be $6,000,000,000, one half being gold coin and the other half silver coin. Let us now assume that silver coins are everywhere de- monetized and rendered unavailable for use as money. Of course this would reduce our stock of money by just one-half and, as we have seen, it would reduce our ability to do business with paper representatives of money in exactly the same proportion. It is evident that the result of such a change would be to put the whole work of our grand aggregate of $6,000,000,000 upon the $3,000,000,000 of gold remaining avail- able for use as money. Each gold dollar would become twice as useful as it was be- fore and twice as valuable. One dollar after the demonetization of silver would be equal to two dollars before the demoneti- zation. Suppose this did happen, what harm would result } The man who received only one dollar when he received two dollars be- fore, would soon find that he could purchase with his one dollar what before had cost him two dollars, so that the gains and losses created by the change would offset each other. To those who survived the painful process of a readjustment of our complicated price-lists this would doubtless be the result as to all future expenditures. But how about antecedent debts? One dollar after demonetization will not pay two dollars of in- debtedness incurred prior to the change. The practical result of the change, there- fore, would be to double the amount of all debts. When we consider the enormous bonded indebtedness of the different nations of the earth, and add to that the additional in- debtedness of the multitude of States, provinces, and municipalities constituting those nations, and pile upon this aggregate the almost countless private debts of the individuals living in these States, provinces, and municipalities — a grand total which has been estimated to amount to not less than $70,000,000,000 — it is within bounds to say that such a change as we are now con- sidering would, unless prolonged for a cen- tury or more of time, inevitably bankrupt every civilized nation of the globe. The burden is sufficiently grievous as it exists, but to double it- -to make every 12 Tlie Silver Question. nation, every State, every province, every municipality, every individual owe two dol- lars when he owed but one dollar before — would be simply to bring about universal ruin. If the policy of the universal demonetiza- tion of silver were resolved upon, or if such an event were surely impending, could it be prolonged during a sufficient time to prevent or ameliorate the enormously disturbing in- fluence of such a measure upon the business of the world ? We have seen in the past that the market has sustained with astonishing equanimity the immense influx of gold and silver from new discoveries of these metals in the mines of America. But in those times no one could predict how soon the current might slacken or the stream run dry. The pro- duction of mines has always been precarious, and in no single instance has it been con- tinuous. Again, economists have long since pointed out that money, unlike all other things that can be bought and sold, is but slightly affected by a merely prospective increase of the metals composing it. Not until the metals have been actually extracted and coined into money, and this money is circu- lating from hand to hand, does the effect of an increased supply become apparent. In the case of every other commodity^ — in wheat, corn, hay, cotton, and the like — the bare prospect of an augmentation of the supply is immediately felt in the market price. The effect of a great increase in production of either metal in the past was therefore but slowly felt. But in the case which we are now consid- ering, these modifying influences could hardly operate. The demonetization of silver means the annihilation of the value of an existing supply. The amount in circulation is easily estimated; the effect of the change is readily foreseen. In the present condition of wealth and intelligence, with all the facilities of railroads, steamships, telegraphs, public journals, and daily, and even hourly, market reports, the catastrophe could probably not be long delayed. Keen-eyed merchants and brokers all over the world would be swift to take advantage of the coming change, and the event would be discounted in every market long before it actually occurred. And perhaps if it is coming at all, it would be as well for the people of the world that it should come rather in the form of a cataclysm than of a gradual and prolonged depreciation. For in that case, after the overwhelming effects of the first disaster, all would have an equal chance in the future. We should know at least just what to ex- pect. But if the value of money is to steadily and surely advance during the com- ing years until it finally reaches the ratio which belongs to universal gold monometallism, then vv'henever a man borrows money paya- ble at some date a number of years ahead, it must happen that when he comes to pay it, the money will be worth considerably more than it was when he borrowed it. In other words, although the number of dollars will remain the same as when he borrowed them, the value of the dollars will be appreciably enhanced, and it will cost him more labor, or goods, or land to get them. Thus the hill which the debtor has to climb will be made steeper as he ascends it, and the in- evitable result must be a tendency to make the rich richer and the poor poorer. While such a gradual rise in the value of money and consequent depreciation in the wages of labor and the prices of commodities would operate thus disastrously upon the debtor class it would not be without great disadvantages to the creditor class who represent the wealth of the country. For it would bring about a stagnation of capital. Nobody would care to embark in new enter- prises or to engage in the development of new lines of industry or trade, when the re- sult must be that the money value of the Hie Silver Question. 13 property invohed in them would gradually but surely fall, and the profit on future pro- ducts would be offset by a depreciation in their price. Therefore the only investment which could commend itself to capital would be bonds or money futures, in which the fixed amount of money to be paid would render depreciation impossible. In other words, capital would prefer rising bonds to falling property. Thus we have seen in the last fifteen years a very extraordinary and unprecedented rise in the market prices of Government bonds (bearing low interest) while the market prices of everything else have been constantly falling. Senator Jones of Nevada has elaborately and fully explained this in a speech delivered in the United vStates Senate in July, 1886. With these considerations fresh in our minds, it will not surprise us to find the gold monometallists of the present day practically unanimous in opposing universal gold monometallism. The author of the article on " Money " in the last edition of the Encyclopedia Brittanica, himself an evident adherent of the gold standard, sums up the matter by saying " The immediate introduction of an universal gold currency is by the admission of all parties eminently undesirable, and this is the only settled point in the controversy." ' It seems to have been rather a sudden conversion, for at the International Monetary Conference of 1867 it was almost unanimously resolved to recommend the general adoption of gold monometallism; and shortly afterwards the Chancellor of the Exchequer of Eng- land, the leading gold standard nation, in Parliament congratulated the country that Europe was about to adopt this course. But at the Conference of 1878 the Right Honorable G.J. Goschcn, the chief of the English delegation, stated that while the delegates from Great Britain were not free to vote for any proposition compromising the gold standard, he would personally willingly subscribe to the princii)le that " it is not desirable that silver cease to be one of the money metals." He added that all of the states ought to work as far as practicable toward the aim to maintain silver as the ally of gold in all parts of the world where this could be done; that a campaign against silver would be extremely dangerous even for countries with a gold standard; "if all states should resolve on the adoption of a gold standard, the question arose, would there be sufficient gold for the purpose with- out a tremendous crisis.?" All the advocates of gold monometallism in this Conference subscribed to a declara- tion that "it is necessary to maintain in the world the monetary functions of silver as well as those of gold." In 1867 they were clear that an universal gold standard was desirable. In 1878 they were clear that an universal gold standard was undesirable. It would seem that what these distin- guished gold monometallists really want is to regulate the monetary system of their own countries in one way and the monetary sys- tems of other countries in quite a different way, and it must be confessed that it is rather a humiliating confession to make that the success of the monometallic gold system in England must depend on its non-adoption by other countries. The attitude of the adherents of the gold standard on this point seems to be suscepti- ble of only two explanations. The first is that since 1S67 they have be-, come conscious, more or less dimly perhaps, that gold monometallism is a mistake but they think that if this mistake is not too widely committed, no dangerous consequen- ces need ensue.' The second ex[)lanation is that they believe that if the three monetary systems are divided among the nations of the earth in a certain suitable and fixed [)roportion, then the • Since the Conference of 1878, Mr. Gibbs, one of tlie Kiiglisli delegates to the Conference has formally receded from the views expressed by him in favor of tiie mono- metallic gold system at that Conference, and has an- nounced his adhesion to the bimetallic system. 14 The Silver Question. nations using the gold standard would gain a profit at the expense of the other nations. If this be the true reason, then no gold monometallist has yet either admitted it or explained where the profit was to come from. It will be observed that even this second explanation involves the admission of a blunder. For at the Conference of 1867 nothing was said about a fixed proportion be- tween the different monetary systems; on the contrary, the proposition put forth then was that gold monometallism was universally desirable. 