People's Pilot, Volume 4, Number 12, Rensselaer, Jasper County, 7 September 1894 — WORDS OF WISDOM. [ARTICLE]

WORDS OF WISDOM.

An Englishman's Able Defense of the White Metal. Rt Hon. Henry Chaplin, who was a member of the royal gold and silver commission, a member of the Salisbury cabinet, and also a member of parliament, recently made an able speech before the Scotch chamber of commerce at Edinburgh upon the subject of “Bimetallism in Relation to Agricultural Depression.” The speech was quite lengthy, but his defense of silver remonetization and bimetallism-we reproduce. Mr. Chaplain said: “Now, what are the usual objections that are urged to our views? I have been asked by some correspondents to reply to one or two of them, and I will do so. The first, the old stock argument, is this: You cannot maintain a fixed ratio between gold and silver any more than you can between any two other commodities. You cannot interfere with the laws of supply and demand. The thing is impracticable; it is, in fact, a bimetallic dream. Now, our opponents appear to be still in blissful ignorance of what is, perhaps, the most elementary fact of our contention, viz. that the bimetallic theory affords, perhaps, the most perfect and most striking instance of the operation of those laws in a specially instructive case, and I believe I am right in saying that that is the opinion of every teacher of political economy in -England at the present time. Mind you, this is very ancient history, but so many of the critics have so little learned their lesson that I will-repeat one argument on the subject, and I think it will suffice. What we say is this, that the law can exact that either, or both, of the metals-, shall be legal tender for debt’. That we know, because it has been done effectually already. And therebj r the law creates what is and what has been the chief demand for the precious metals —namely, for the purposes of money. The law can also enact that they shall be legal tender at a given ratio between the two, for this also has been done, and done effectively -in the past. Now comes the question: How is the ratio maintained? The answer to this question is that debtors will always try to pay their debts in the cheapest way they can, that is to say, in whichever metal is the cheapest. What do those debts amount to? The indebtedness of the world is estimated at something between twenty and thirty thousand millions sterling. Consequently, if either metal falls, for any reason, below the legal ratio, there will be an immediate increase in demand upon it for the purpose of the payment of debts. The increased demand produces its natural effect. The metal which has shown the smallest tendency to fall returns to the n<»-mal. or rather, I should say, the legal level. Formerly it was gold—at the time of the great gold discoveries forty years ago. More recently it has been silver, the production of which of late has much in-

creased, although in nothing like the same proportion as the production of gold increased in former days. And in this way an automatic action is set up, which not only keeps the relative value of the metals steady, but makes it impossible, as we contend, for them to vary, except within the smallest limits. If a great increase in either metal should occur, and begin to have the least effect, the parity is immediately restored by the operation of natural law. And this explains at once the practical stability of the ratio during the long periods antecedent to 1873, when variation of the production of the metals was infinitely greater than it has been ever since then. I feel that I ought to apologize for repeating 'this fundamental argument in replying to the antiquated objections with which we are assailed, but if I had not done so I wasrafraid that I would be attacked, like your distinguished countryman Mr. Arthur Balfour in the city not very long ago. for not answering the objections which were advanced against bimetallism. The next objection that I hear is this: ‘Even if you could maintain a ratio you never could agree as to what the ratio should be.’ My answer, gentlemen, is this:. Bimetallists would accept any ratio rather than go on as we are at the present time. But what the final decision as to a ratio should be is, obviously, a matter of agreement among the different people who are concerned. My own opinion upon that point is, and always has been this, it is not so important as people think, and for this reason: So sensitive is silver that the moment a bimetallic settlement was really on the tapis the market price of silver would conform to any ratio that was fixed long before it was enacted by any positive legislation. “But then I hear it said that even if you could agree upon the ratio the enormous quantities of silver that can be produced even at the present price, must inevitable break it. Well, to begin with, I have my doubts as to this illimitable production. lam aware of no facts and no information to confirm the statement. Certainly there are none to be found in the whole evidence before the conference at Brussels. But the answer to that argument is this: ‘What is of importance is not the annual output of the metals,but the total amount of the mass of each of them which is already in existence.’ This is an idea I want you to carry away in your minds. The annual output now is, what shall I say? probably 30,000,000 sterling a year of each. Perhaps it is even more than that of silver, but what is the existing mass? I turn to the report of the gold and silver commission? There I find that the estimate of the mass of gold in existence in the world five years ago is 1,550.000,000, or, in round numbers, say 1,000,000,000 sterling. Silver, on the other hand, is estimated at a little under 2,000,000,000 sterling. Now, supposing that the present annual production of silver was doubled, what does it matter whether you add 30,000,000 a year or 60.000.000 a year to the existing mass? You have 2.050,000.000 of silver, instead of 5.050.000,000 ns the mass of silver in the world. Why, the difference is fractional—barely per

cent. That is also the reply to the question I have been asked to answer by a gentleman well known to you (Mr. Lindsay), who was the president of your chamber. Mr. Lindsay asked me this question: “If the effect of monetizing silver be to enhance the value of that metal, will this not lead to a still further increase in its production. and consequent augmentation of the difficulty? The Broken Hill Proprietary Co. produces about 20 per cent- of the total supply in the world, and it is paying now, even at the present price, an enormous dividend. To that question I answer, no Ido not think it will affect it in the least. Twenty per cent, of the total annual output of silver is only an infinitesimal addition to the mass already in existence. You'- must remember that the metals differ from almost all other commodities in this respect—that they do not perish, and they are not annually consumed. A crop of wheat, for instance, or the greatest part of it is consumed every year. A great increase or decrease in the annual crop of wheat makes all the difference in the world. But the mass of gold and silver is the accumulation of centuries. Some of the gold we are using now, however often it has been recoined, existed probably in the days of Salomon or the Pharaohs—and the annual additions to this enormous mass are comparatively unimportant. That is likewise the answer to another very common question, namely, that our present difficulties; will be augmented by the increasing output of gold in South Africa; No doubt they are increasing every year. I hope they will continue to increase, but unless they do so in proportions of which I do not see any prospect, they will be absolutely insufficient to redress the mischief which is going on at present. Again, I hear it said that if you did this you would be making the fortunes of the owners of silver mines in Mexico, in America and in other places of the world.! Well, perhaps you would, but would any one of you refuse to receive gold for any reason such as that? I know a gentleman now in London who is said to have made a fortune of many millions within the last few years from the gold mines of South Africa. Well, you welcome all that he can send you. , “Why should you refuse the silver? Do we starve or freeze ourselves in wintefr to prevent, the owners of coal mines from becoming rich? It is really quite the weakest and the silliest of all the arguments I know. There is another, I admit, which is deserving of much more serious attention. We are the greatest creditor nation in the world. Why should we take payment for our debts in what is the least valuable metal? My reply is this: If bimetallists are right, there can be no such, thing as a cheaper or dearer metal. Their relative value will remain stable and each of them will perform all the function* of the other. What may happen, quite possibly, is this. There may be some increase in prices, and as we receive payment for our fpreign-4ebt in produce from other countries we" may get something less of produce than we got before. But look at the other side of the picture for a nfcoment. Is it just, is it wise, for the creditor to push his debtor into such a corner as we are doing now by monetary changes which have enormously increased the burden of his debt?j Ido not care whether it is an individual, or whether it is a nation. I ask them both the same question.”