People's Pilot, Volume 3, Number 48, Rensselaer, Jasper County, 18 May 1894 — BIMETALLISM. [ARTICLE]

BIMETALLISM.

The Demonetising of Sllner and the Appreciation of the Purchasing Power of Gold. In a recent lecture on the silver question at Manchester, England, Proi Fox well, who holds the chair of political economy in the University College of London, said it was impossi ble for him to explain in a single lecture the whole, or even an outline of the whole, subject He, therefore, proposed to lay before his hearers the broad outline of the question, and he would remind them at the outset that they were met to consider a monetary disturbance which he might briefly describe as an appreciation or a rise in the value of the monetary metal of the country brought about by the demonetization of silver. As a consequence of that appreciation of gold and the demonetization of silver, there was a disturbance of the silver exchanges about which business men were perhaps most deeply concerned. It was the average movement of prices which was most important to them. In England all valuations of commodities were expressed in fixed terms of gold. In India the same opinion was formed about rbpee as was formed in England about the sovereign, and it was. therefore, important to business men that they should know which was the right view to take of the two metals By common consent and established tradition the test was obtained by discovering the purchasing power of money, whether it be silver or gold. Even Mr. Giffen agreed that commodities must be the measure of monetary value, and they would notice by the charts on the walls of that room the gradual rise and fall of those prices since 1818. The year 1819, said Prof. Fox well, was an epoch-making year in the history of English currency, and up to the year 1850 they would see that there was a marked rise in prices and a marked fall in gold. At a later period right down to the year 1893 there was an unmistakable fall in prices, brought about, as bimetallists believed, by the appreciations of gold and its relative scarcity, which in its turn was caused by the demonetization of silver. In other words, since 1873 gold had had to do the work it did formerly in conjunction with silver. Prior to 1873 gold and silver were linked together by the metallic system of Europe, a system which had prevailed from time immemorial, but in that year the link was broken, an experiment was tried, and each metal took its separate course in regard to the matter of appreciation and depreciation. % There was a general impression, which was fortunately not entertained in Manchester, that since 1873 silver had gone on depreciating, but he thought it was as clear as anything could be that down to 1892 the purchasing power of silver was as great—in fact it was a little greater in 1892 than it was in 1873. Gold in the meantime had risen in its purchasing power by 33 per cent., and he begged those who might meet others in this controversy to accept from him the fact that up to 1892 it was not silver but gold that had altered in value. But in 1893 silver distinctly lost its purchasing power, and that depreciation was due to the ill-judged action of the British government at the Brussels conference. Silver had, in fact, fallen 30 per cent, in one year, and there was no period to his knowledge when silver had similarly fallen. The impression had been left in Europe that henceforth silver was not to take its place as a precious metal, and the consequence had been that in 1893 there was a panic fall and not a statistical fall in the price of silver. It was a fall which was not due to changes in the production of the metal nor in the demand for it, because curiously enough, although the Indian mints were closed to it, India had still taken as large a quantity of silver as ever, with the exception of one brief period. They could come to no other conclusion than that the fall of 30 per cent was due simply to panic. The monet try metals, like all other commodities, were subject to all the ordinary laws of supply and demand. If the demand for a monetai’y metal increased its price necessarily rose. When silver was demonetized, it followed that gold had to do a great deal more of the work of the world than it had previously to that event. The monetary demand for gold was increased, Mr. Goschen estimated, by £200,000,000, but meanwhile the supply of gold was not increasing. For many years after that the supply of gold positively fell off. Baron Rothchild predicted that the demonetization of silver meant ruin, that it would bring down values, and cause a crisis. They saw that values had been brought down, and that it had landed them in that persistent depreciation in prices which was the difficulty under which each trade and agriculture at that time were suffering. There were some who said that the disturbance in the ratio in 1873 was due to the increased production of silver; but that was not borne out by the facts. It had been almost universally admitted by business men that produce was the one thing that regulated value. It had been conclusively shown that the power of the state to maintain a ratio was a perfectly rational principle, and was based on the ordinary doctrine of demand and supply. Prof. Foxwell could not admit the argument which maintained that one metal was cheaper than the other. The mints of Europe were open for centuries to take silver at the ratio of 15>£ to l,and consequently silver did not fall below that ratio. He did not wish to exaggerate the disadvantages of these currency changes. The appreciation of gold affected the whole country and the whole civilized world, * whilst the disturbance of exchange affected very materially those dealing with silver-using countries About 70 per cent of the world’s commercial transactions was based upon some system of deferred payment or credit; consequently almost all persons actively engaged in business had to bear the strain of fixed charges, while the value of money was constantly changing. Those fixed charges were estimated at £30,000,000,000, and they would, therefore, see bow long-date contracts would

be disturbed by the appreciation of geld. The real and vital injury caused by the appreciation of gold was that the world’s production was contracted, and when that was so the prosperity of all classes in the long run must be diminished. It was beyond doubt that the whole of our commercial history showed that where there was a rise in the value oi money aDd a fall in prices there was depression in trade. Of the general uncertainty of all exchange business they had rather telling examples during the past two or three months. They had had silver falling to the lowest point on record, then they had had a sudden rise again, and now once more they were having an equally sudden falL He need hardly point out that these uncertainties made trade partake more or less of the nature of gambling. He admitted that trade must put up with uncertainties of fashion, and so on, but why add to those uncertainties? The continued fall in the value of the rupee or in the value of the silver currency of any silver-using country diminished the power of that country to pay a gold price. That being the case, one of two things must happen. Either the silver price must rise, and in that event the demand from the silver countries must fall off almost in proportion, and sometimes in more than proportion, or the gold price must fall to the full extent of the fall in silver prices. That was what had been taking place during the last seven years. The producer in gold countries had had to cut down his prices until they had met the reduced price of the rupee. One of the chief trades of England was the development of the more backward countries of the world, and those were either silver-using countries or countries which used unconvertible paper. Unconvertible paper was almost sure to be depreciated to the same extent as silver was by the appreciation of gold. The proposals of the bimetallists for remedying the existing mischief were nothing very formidable, nothing very new, and nothing sensational. They were simply to go back upon the blunder which was made in 1873 and return to the European system. The professor could say he thought most positively that the change would not be perceptible in their ordinary dealings. The great mass of the community would be unaware that a change had taken place except by finding easier conditions prevailing in trade. They would not have a double standard as was sometimes said, any more than his watch was double because it was made of two metals. It would be a more stable standard. In England they would go on measuring gold, but silver would be rated at a fixed rate to gold, and the consequence would be that gold would be more steady. They couid still reckon by the ounce of gold, but the value of it would be steadier than it has been in the last twenty years. It would be as if they had one water supply, and had a reservoir fed from two independent sources, one of which was not likely to be dry when the other was. There need be no disturbance of prices. In his opinion the restoration of the ancient monetary use of silver was perfectly easible. In Manchester and also in London considerable attention, he was glad to say, had been given to this important subject, but taking the country it had not been brought fully before the public mind. It was to further that object that he was present that day.