People's Pilot, Volume 3, Number 31, Rensselaer, Jasper County, 19 January 1894 — BIMETALLISM. [ARTICLE]

BIMETALLISM.

Some Facta In Begird to Money That Will Be found of Interest. Chicago Coin has compiled some interesting points on bimetallism, from an interview with Archbishop Walsh, of Dublin. In this interview is a statement of a few elementary facts and principles of political economy that must underlie every explanation of the currency question. The points set out in it are purely elementary matters They are these: 1. Money forms our common medium of exchange. At first, commerce, such as it was, had to be carried on by a system of pure barter—the system in which, for instance, so many sheep were given in exchange for so many cows, so much corn for so much wool, and so on. Then, as civilization progressed, this system of pure barter was displaced by the employmedt of a common medium of exchange, available in all cases of selling and buying. Great diversity existed among various tribes and peoples in the choice of the particular medium employed. In some places, skins were used; in some leather; in some, corn; in some, cattle. Then came a higher stage of development, when metals, such as iron. tin. lead and copper, were employed. But now, with practical universality, all other materials for standard money have given place to gold and silver. 3. Money, as regards its primary function, is simply a commodity, selected first by custom, and (often but not always) confirmed by law, as an intermediary in transactions —a something for which, in a civilized community, any other thing can be sold, and with which any other thing can be brought In other words, a particular commodity is selected to perform the function of a common measure of value; but it is, and remains, a commodity. Gold remains gold, silver remains silver, while they perform this function of money: and they remain subject to exactly the same laws of exchange as before. A new use is imposed upon the substance; that is all; the substance itself is unchanged. 3. By the “value” of money, we are to understand its “exchange value,” or, in other words, its purchasing power—that is to say, the poiyer which the possession of money gives to those who possess it to go into an open market and obtain, in exchange for their money, the things that are on sale there. 4. The metals, gold and silver, like all other marketable commodities, are liable to fluctuations in value; their value being controlled, like that of all other commodities, by the law of supply and demand. This means that if gold and silver are to be had in abundance, a smaller quantity of other commodities —as, for instance, less corn, less hay, less butter—will have to be given in exchange for a definite quantity of gold and silver. On the other hand, if gold and silver are not so easily to be had, then, a larger quantity of other commodities—more corn, for instance, more hay, more butter—will have to be parted with, to obtain in exchange for them the same quantity of those metals. 5. “It is now universally admitted in works of political economy that any such thing as a commodity with absolute stability of value is unattainable.” 6. "The most important characteristic of a good monetary standard is, that it should preserve comparative stability of value. The principal reason why, of the multitude of commodities that have been used for the material of money at different times, gold and silhave survived as the fittest, is because their great durability renders the total stock extremely large compared with the annual supply, and thus eliminates one element of instability of value.” 7. Another special advantage of gold and silver for monetary purposes is that both the weight and the purity of coins made from them may easily be ascertained. At first, after gold and silver were generally adopted, the risk of being defrauded by inferior quality or adulteration was left entirely to the receivers of the metals; in fact, gold and silver circulated between the inhabitants of the county simply as merchandise. Very early, however, it began to be recognized that there would be great convenience if pieces of the metal were certified by authority to be of certain weights and fineness; and, accordingly, coinage has always been one of the first industrial functions that governments have undertaken.

8. Coinage is only a process of branding or stamping, and nothing else. The process of minting certifies two things; first, that the coin is of a certain weight of gold or silver, as the case may be; and.secotfdly, that the gold or silver of which the coin is composed is of a certain specified degree of purity. But minting—the minting, for instance, of gold into a sovereign—adds nothing to the value of the piece of metal that is coined. 9. It is not, however, to be supposed that the commodity, gold, or the commodity. silver, does not derive a special value from the fact of its being constituted a standard monetary metaL “Law singles out gold or silver,or both, to be used as money, and gives them special functions which it confeis on no other commodity. In virtue of this selection, the demand for these metals is greatly increased, and, as they are only of limited production, their value is increased accordingly.” 10. A sovereign is a minted coin consisting of a certain specified weight of gold, of a certain specified fineness. 1L A fluctuation in the value of gold involves a fluctuation in the Value of the sovereign. This, of course, does not mean that the sovereign can ever become worth more or less than twenty shillings. That would be a contradiction in terms. For “a shilling” means merely the twentieth part of the value of a sovereign. When we say, then, that the value of a sovereign may fluctuate, what we mean is that, as a medium of exchange, the sovereign will sometimes have a greater, sometimes a lesser, “exchange value” or purchasing power. The reason of the liability to fluctuation in the purchasing power of the sovereign is plain. When gold rises in value, a larger

quantity of any other commodity—say of corn, of hay, of butter, or of cloth—will have to be given in exchange for any given quantity of gold, such, for example, as the quantity contained in a sovereign. On the other hand, when gold falls in value, a smaller quantity of any other com-modity-say of corn, of hay, of butter, or of cloth—will suffice to obtain in exchange for it any given quantity of gold, such as that contained in a sovereign. 12. It is an obvious inference, that our gold coinage, however useful as a medium of exchange, does not furnish us with a standard of value,, fixed and unalterable. It does not furnish us, for example, with such a standard as the yard is of length, or as the pound troy is of weight. 18. The popular notion, then, of the sovereign, cr pound sterling, constituting a fixed standard of value, is merely a popular delusion. The sole foundation of that delusion manifestly is, that, in these countries, the values of all commodities are commonly stated in terms of the pound sterling; in other words, in pounds, shillings and pence —“a shilling” meaning the twentieth part of a pound, and “a penny” the twelfth part of that again. The natural result of this method of expressing the values of commodities other than gold is that to the superficial observer the impression conveyed by a rise or fall in prices is that it is the value of all other things that changes, the value of the sovereign remaining fixed.

14. In Great Britain —and the same is true of Ireland and of many other countries —gold being the one standard metal, all prices are stated in terms of the sovereign, or parts of the sovereign. 15. The price of things estimated in gold—their gold price—may change, whilst their price estimated in silver—their silver price—remains unaltered. This will occur if the value or purchasing power of gold goes up or down, while the value or purchasing power of silver remains unaltered. Suppose, for instance, that gold is in any way carce in relation to the demand upon it. Then in any country where gold is the standard metal of the currency, those who wish to obtain a certain quantity of gold, whether in coin or bullion, will have to give a larger quantity of other commodities in exchange for it, or—to put the matter in another light—those who have ohly a definite quantity of commodities to part with will receive less gold in return for them. In other words, there is a fall in gold prices. Suppose, on the contrary, that gold is abundant in relation to the demand upon it. Then those who wish to obtain a certain quantity of gold, whether in coin or in bullion, will not have to give so large a quantity of other commodities to obtain the quantity of gold they require, or—to put the matter, as before, in another light—those who have a definite quantity of other commodities to dispose of will obtain more gold in return for them. In other words, there is a rise in gold prices. If, in either case, there is no change in the value of silver, then the prices of commodities, stated in silver — their silver prices, as the technical phrase is—will remain unchanged. Similarly, of course, the silver price of things may change, while their gold price remains unaltered. Bimetallism, as some writers express it, is the monetary system in which the two precious metals, gold and silver, are taken as standards of currency. That, however, is a misleading way of putting the case. The word bimetallism, indeed, is an unfortunate one to have been chosen. It gives prominence to the idea of duality, and so leads many half-informed people to think that bimetallism, as distinct from monometallism, aims at having two standards of value instead of one. Now this is not at all the case. In the bimetallist system there are not two standards of value; there is but one. One of the essential requirements of a standard, whether of value, or of length, or of weight, or of anything else, is that it should be one. The word bimetallism, then, is, in one respect, an unfortunate one to have been chosen. It gives rise to an unhappy notion that the bimetallists favor some sort of shifting or alternative system of standards. But this is not so. The very opposite is the fact. Unity of standard and stability of standard—in so far as stability in this matter of a standard of value is within the reach of attainment—these are the very fundamental points of bimetallism.