“It often happens that other circumstances occur seeming to contradict these principles. Thus in August last (1849), pieces of ten florins were in demand in Holland for foreign remittances, although the price of bar gold was only at 1¾ per cent. agio. Again, the influence of the state of exchange on the importation of gold may recently have been observed; not long ago, gold was exported from England to the United States at the very moment that gold was supposed to be arriving from America in great quantities.” I have repeated at full length these remarkable admissions, to prove that the Dutch government was not arming itself against a pressing or even nearly approaching danger, and that their precautions were not even taken with foresight. To theoretical errors were added practical faults; the Minister of Finance had not measured the importance of the operation with sufficient accuracy; he estimated the amount of gold coin in Holland at [38]96,500,000 florins; it proved to be [39]172,000,000 florins.
The law was voted on September 17th, 1849, and the government received the full power they had demanded. A royal command appeared on June 9th, for the execution of the measure. The following are the principal articles: “1st. The pieces of ten and five florins shall cease to be in circulation as legal payment from Sunday, June 23rd, 1850, but they may continue to be employed in commerce: that is to say, that these coins may be accepted in payment at a conventional value. 2nd. These coins shall be received in payment by government, and by the collectors of the revenues of the kingdom, at their nominal value, till July 31st, 1850, inclusive.”
At the time this notice was published, it appeared that the exchange of gold for bank-notes would take place under the most favourable auspices. Gold was at a tolerably high premium in the market of Amsterdam, bills of exchange on foreign countries were scarce, and consequently the payments of international commerce could very advantageously be made in the precious metals. Moreover, the government treasury was full, and the Netherlands bank declared itself ready to assist efficiently in the operation. But all these chances of success were destroyed by the precipitancy of the government. A complete panic was occasioned by the short period granted to the holders of gold coin: the people hastened to pour their gold into the state treasury, (which could not receive it all) or else to send it abroad. The government had imagined that the sum likely to be exchanged, would no exceed [40]30,000,000 florins: they had miscalculated by two-fifths; for the sum amounted to [41]50,000,000 florins. The 30,000,000 of paper money that they had been authorized to issue, together with the money in the treasury at their disposal, not being sufficient to pay for the amount of gold presented, they were obliged to have recourse to the bank of the Netherlands, and to borrow a sum of [42]6,500,000 florins, at an interest, moderate it must be admitted, of 2½ per cent. per annum.
The exchange being effected, it was necessary for the government to find a means of disposing of the gold withdrawn from circulation. It could be sold only in foreign markets; and there, private industry had forestalled the government, and the price of gold had fallen in consequence of the number of Guillaumes brought for sale. At first the Dutch government suffered only a small loss, owing to a momentary reaction in favour of gold coin; but the first sales having increased the depreciation, they were obliged, for fear of greatly adding to their loss, to stop after having disposed of [43]21,836,000 florins: the loss then amounted to [44]244,446 florins, being about 1¹²⁄₁₀₀ per cent. By the middle of October, gold had fallen in value 2½ per cent. below the legal price, and by the middle of December, 4 per cent. At this period, the pieces of five and ten florins, banished from Holland, were scattered about in the different markets of Europe: London had received them to the amount of £600,000; Paris to the amount of [45]63,000,000 francs; Germany had absorbed the rest: excepting from [46]28,000,000 to [47]29,000,000 florins, still lying unsold in the treasury of the Netherlands.
The Guillaumes have continued to be melted and coined, in Paris, into 20 and 40 franc pieces; for I find in an official record furnished me by the President of the Mint, that Dutch coin was exchanged at Paris in the last six months of 1850, to the amount of [48]40,934,053 francs; and in the first six months of 1851, to the amount of [49]70,901,597 francs,—altogether [50]111,835,650 francs.
The gold coinage of Holland, from 1816 to 1847, was 172,583,955 florins, equal to [51]362,000,000 francs. Supposing that of this only two-thirds was in existence in this shape of coin in 1850, there would be 115,000,000 florins, or [52]236,000,000 francs, all at once withdrawn from circulation, and thrown upon the gold market: is it possible that the price of gold could be otherwise than affected? The gold thus suddenly demonetized equalled at least twice the annual produce of the world, previous to the discovery of California. The Mint of Paris alone, which had not struck above [53]27,000,000 francs in gold during the year 1849, coined [54]85,000,000 in 1850, and [55]269,000,000 in 1851.
Fortunately, the crisis was of short duration; the gold coined in Paris rapidly flowed either towards Piedmont, to pay the first instalment of their loan, or to Milan to pay for silks bought by Lyons and St. Etienne. Credit is at a low ebb in Italy, there is little paper circulation, tending to simplify accounts, and taking the place of specie in the adjustment of debts; gold is therefore always in demand, and the supply was speedily absorbed. Certainly, the apprehensions of the Dutch Government have proved hitherto groundless, and the desired object has been but partially attained: silver, having become the sole standard, has found its way (somewhat in excess) throughout the country, but the loss of gold coin has given rise to a small note paper-circulation: there is now a paper money of 10 and 5 florins (21 francs and 10½), which, although at first but provisionally issued, will probably become permanent circulation. Holland is following the steps of Prussia and Austria. The Dutch Government supposed that, notwithstanding the demonetization of gold, the coinage might remain in circulation, and be voluntarily accepted for its intrinsic value. This was a misconception of the nature of money, which is accepted as a circulating medium only on account of its positive value. As might have been anticipated, gold has ceased to circulate in Holland, and paper has taken its place. It is doubtful whether the nation has gained by the change.
We think we have sufficiently considered the subject of the fall in price of gold in 1850. During the last eighteen months the production of this metal has made immense progress. The crisis, which was then imaginary, may have taken a more serious turn, and may become hereafter a reality. This we will now examine.