If Not Silver, What?

by John W. Bookwalter

The above diagram shows the relative annual production of gold and silver from 1493 to 1870, and also average ratio of values of the two metals.

I should say, at this point, that my figures are taken from the latest, and in my opinion the most scholarly work in favor of monometallism, “The History of Currency,” by Prof. W. A. Shaw, Fellow of the Royal Historical and Royal Statistical Societies. As the ratio between silver and gold varied considerably in the different marts of Europe, I follow his plan (which is Soetbeer’s) of taking it as it stood at any particular time in the city which might then be called the greatest commercial centre, whether Venice, Hamburg, Antwerp, or London. His history comprises the entire period from 1252 to 1894. It is only fair that I should also give his explanation of the stability of the metals, which is extremely interesting.

He begins his second chapter with the statement that the discovery of America was “the monetary salvation and resurrection of the Old World”; that it was a time of unexampled increase in the precious metals and equally unexampled rise of prices, but there was also “feverish instability and want of equilibrium in the monetary systems of Europe.” He shows how the first great import was of gold, which began to affect prices in 1520; how this was followed by a very much greater increase in silver, and how, while prices were rising so rapidly as to stimulate trade and incidentally do damage by causing great fluctuations, yet there must have been some great regulator preventing the evil which we should a priori have expected. He finds it in the fact that Antwerp had taken the place of Venice and Florence, and conducted a great trade with the far East. His language is: “The centre of European exchanges—Antwerp in the sixteenth century as London to-day—has always performed one supremest function, that of regulating the flow of metals from the New World by means of exporting the overplus to the East. The drain of silver to the East, discernible from the very birth of European commerce, has been the salvation of Europe, and in providing for it Antwerp acted as the safety-valve of the sixteenth century system as London has done since. The importance of the change of the centre of gravity and exchange from Venice to Antwerp, therefore, lies in this fact. Under the old system of overland and limited trade, Venice could only provide for such puny exchange and flow as the mediæval system of Europe demanded; she would have been unable to cope with such a flood of inflowing metal as the sixteenth century witnessed, and Europe would have been overwhelmed.”

Professor Shaw argues that without the Eastern safety-valve Europe would have been ruined by an excess of the precious metals, that India furnished the needed reservoir—did she not take gold as well as silver?—and that Venice was so far limited to an overland trade that she could not have performed the function Antwerp did. Later he sets forth the current monometallist position that the nations are now as one in trade and the interchange of the precious metals, and therefore even the partial equilibrium of the sixteenth and seventeenth centuries could not be maintained. Let us, then, bring the figures down to the present, and it will be found, I think, that the farther down we come the weaker does the monometallist contention appear.

The improved, more extended, and more intimate intercourse of the nations brought about by the introduction of steam, electricity, and other agencies tends to minimize the fluctuations of the two metals, and indicates that the divergences of the metals in mediæval times was due rather to the want of speedy, easy, and certain intercourse and communication of the nations than to an innate commercial tendency of the two metals to diverge. Had the same intimate and speedy commercial relation existed between the nations of the world in those times as now exists, the equalizing tendencies of trade would evidently have prevented not only the ratio of divergence to which the metals attained at different periods, but would have prevented a difference of ratio existing between the different nations at the same period of time.

From 1761 to 1800, inclusive, the relative production of gold decreased steadily, until it was but 23.4 per cent. of the total value, to 76.6 per cent. of silver. In other words, there were for many of the later years over 50 ounces of silver produced to 1 of gold, and yet the ratio stood long at 15.68 to 1. This is almost exactly the ratio fixed by Hamilton and Jefferson, fixed because of its long-continued maintenance in European markets. During these forty years the production of silver in proportion to gold was never for even one year as low as the highest proportion of any year since 1873, and yet the money value only varied from 14.42 to 15.72, or a fraction over 8 per cent. In the face of such figures as these, the change in relative production since 1873 seems too trifling to be taken into account, especially since in that year and some time after the value production of gold at 16 to 1 was much the greater, nor was it till 1883 that the world’s silver product exceeded that of gold.

In 1800-10 the annual production of gold was $12,069,000 and of silver almost exactly $39,000,000, or some 50 ounces to 1; yet the highest ratio was 16.08, and the lowest 15.26. This relative production changed very slowly, and in 1831-40 of the total in values produced 34.5 per cent. was gold and 65.5 per cent. silver.

That is, there were, for ten years, about thirty times as many ounces of silver mined as of gold, and during these years the change in the ratio was so minute that it can only be calculated in small fractions of 1 per cent. In 1841-50, for the first time since the middle of the sixteenth century, we find the production of gold the greater, that metal being 52.1 per cent. of the total product, and silver but 47.9 per cent. During the decade the lowest value ratio of silver to gold was 15.70, and the highest 15.93, a variation of only 1.4 per cent. Then California and Australia poured out their wonderful golden flood, and all the world was changed. In 1851-55 the gold yield was 77.6 per cent, of the total, and the silver yield 22.4, and for the next five years the change was but .2 of 1 per cent. In other words, during those ten years the average annual yield of silver was less than 5 ounces to 1 of gold; so if the “overproduction theory” laid down by the Times were correct, gold should have lost—well, at least 70 per cent. of its value in silver. The actual variation was from a ratio of 15.98 to one of 15.46, or a relative depreciation of gold of considerably less than 3 per cent. Now, it is alleged by many who have made a study of prices during that period, that in actual value gold depreciated 25 per cent.; so it is plain that it carried down silver with it, and the only logical explanation is that the mints were equally open to both.

We have seen that in all the century and a half when the mines were pouring forth silver at the rate of from 20 ounces to 1 of gold up to 55 ounces to 1, the greatest variation in their value was less than 9 per cent., and in the twenty years when the silver production was to that of gold as less than 5 ounces to 1, the value of gold produced being more than three times that of silver, their money value varied less than 3 per cent., and yet we are coolly asked to believe that since 1873 silver is to be rated among variable commodities like potatoes, the size of the crop each year determining the value. Monometallists have had much to say about the relative cheapness of gold during those years, and have laid much stress upon the fact that it was an era of great prosperity and rapid development, with rise of wages and the prices of farm produce. In this argument they admit three things: that we have a moral and constitutional right to use the cheaper metal at any time; that we did use gold for all those years simply because it was easier to pay debts with it, that is, it was cheaper, and that the use of the cheaper metal aided greatly in making prosperity. That is all that any bimetallist claims. As the entire burden was not then thrown upon silver, we claim that it should not now be thrown upon gold, doubling or trebling the rate of its advancing value; and as the privilege to use the cheaper metal then checked the advance of the dearer and enhanced prosperity, we insist that the system of that time shall be restored.