Remarks on the production of the precious metals / and on the demonetization of gold in several countries in Europe

by Léon Faucher

The extraordinary abundance of gold, then, does not appear to be of permanent duration. It is a sudden outbreak which we, accordingly, have to meet. It does not appear to be, as far as we can now form any opinion, a reign of one metal, which is likely to take the place of some other; nevertheless, there will most infallibly be a very marked fall of gold in comparison with silver, unless met by a most extraordinary activity in working the silver mines; other causes, however, although secondary in themselves, appear, concurrently, likely to neutralize part of the effect of this superabundance.

It is of little importance to ascertain the amount of the annual production of the precious metals, unless we investigate the proportions in which they are distributed between the two hemispheres. Silver gives rise to a regular trade, and, coming from sources long open, it is sent almost exclusively to Europe, as an article of exchange, against the produce of her soil, or of her industry. Gold in California, on the contrary, a source of unexpected wealth, starting up in a new country, is first absorbed by the wants of a local circulation. A new society, formed in the midst of a desert country, necessarily requires some medium of exchange: some money. Next to the immediate necessities of California come the wants of the United States. These States have, for some years past, been endeavouring to introduce a greater amount of the precious metals into their monetary circulation. The gold of California has powerfully contributed to effect this object. Silver coin now circulates, but in small amounts, throughout the Union. They have coined gold pieces of 20, 10, 5, and even of one dollar. Out of [189]400,000,000 to 500,000,000 francs, brought in during the three first years, not more than [190]70,000,000 or 75,000,000 have found their way to Europe. The import of 1851 has been more sensibly felt. According to the returns of the American newspapers, the quantity of gold shipped to Europe from New York and New Orleans, was, during last year, [191]200,000,000 francs.

The like result is obtained from other channels of information. The Mint of London, which ordinarily coins gold at the rate of about £2,000,000 sterling per annum; and which, in 1850, had not coined more than £1,492,000 sterling; in 1851, increased their operations to the extent of a coinage of £4,200,000 sterling (above 105,000,000 of francs). The moiety of this gold must have come from California. In the same year, the mint of Paris coined in gold [192]269,709,570 francs, of which about half was supplied by the conversion of 100,000,000 of Dutch Guillaumes into French money. In the accounts of the German Mints, we find about [193]200,000,000 of Californian gold. If we are to judge from the operations of our own mint, the import of 1852 will be smaller than that of 1851; for we have coined but 14,000,000 pieces in gold during the first three months of this year.

Australia sends regularly large amounts of her gold to England; but a part of the export of gold dust, or “nuggets,” is returned in gold coin. Many vessels have lately cleared from London with £200,000 sterling; and this at a time when England had barely received £800,000 sterling, from Sydney and Melbourne. Considerable amounts will likewise be imported in plate and jewellery. The more wealth increases in the colony, the more gold will be employed both for circulation and for luxuries. The producing country will be most certainly, par excellence, the country of consumption. Europe contains 200,000,000 inhabitants, of whom not one-half are adequately supplied with metallic money. It would require, certainly, an addition of many milliards of francs to the quantity of the present metallic circulation, to put many of these countries in an equally favourable position in this respect with France, Belgium, Switzerland, Holland, and Great Britain. We know, that only nations of industrious habits are in want of a larger supply of gold and silver because they alone carry on trade to any extent. Abundance of production precedes and gives rise to a demand for money. Wealth must exist in a country before the sign of that wealth is required; but, at the same time, it cannot be denied that the circulation of the precious metals stimulates, to a great degree, the creation of richness; it acts like roads, canals, or other modes of transport, which, by opening the means of reaching markets, extend the radius of operations, and give additional value to commodities. One half of Europe has a trade of inconsiderable importance, and derives but a small part of the benefit of the produce of its own soil. It has neither industry nor credit. In many countries now, gold and silver are replaced by the use of paper-money, often discredited in its own, and in all cases valueless out of its own country.

Austria has just made, partly in London, and partly in Frankfort, a loan of £3,500,000, intended principally to restore the credit of her paper money. This will be the first step towards the restoration of metallic money, which had disappeared to such an extent, that the smaller notes were often divided into four, to use for change. Prussia, Poland, Russia, and Turkey, have experienced, in different degrees, the like embarrassment. Before these various markets are all superabundantly supplied with gold and silver, the treasures of Siberia, Australia, and the two Americas, may be diffused for many years over the continent of Europe.

The scarcity of gold had restricted its use; in France, for example, the smallest gold coin was [194]20 francs. Since it has become more common, the Mint have coined pieces of [195]10 francs, which are much liked, and are convenient for use. These smaller coins appear likely to take the place of a portion of our silver, which is needlessly cumbersome. It is supposed that the use of Bank-notes of [196]200 and 100 francs has economised the use of several hundreds of millions of the precious metals. The 10-franc pieces, when more generally used in circulation, will take the place of, and drive out a portion of silver coin. The demand for silver then will diminish, whilst that for gold is increasing. Silver will be used as change for gold—as gold is for bank-notes. This is the case to such an extent in England, where the silver circulation is small, that the Mint in London, which coined £1,492,000 sterling in gold, in 1850, only coined £130,000 sterling in silver in the same year, whilst, in the same year, [197]86,000,000 francs in silver were coined at the Mint in Paris. It must not be forgotten that the use of the precious metals is not confined to the limits of Christian civilization. The Chinese import Peruvian and Mexican dollars in exchange for their silks and teas; they attract by their trade the gold produced in the neighbouring Islands, and in the Straits of Sunda. This industrious nation has sent its contingent of labourers and traders both to California and Australia. A portion of Californian gold has already gone to China, but Australia appears better situated for the purpose of supplying the eastern regions and the southern portions of Asia with the precious metals. The Australian gold, however, sent there will be as so much lost treasure; for whilst the precious metals which are thrown into circulation in Europe continue in use as coin for a long time, that which is sent to China, or India, or Africa, altogether disappears; it is not required for circulation, but seems to be consumed.

Nothing appears more likely to restore the confidence of those who have taken alarm at the abundance of gold than the consideration of the almost unlimited extent of its market. What people, civilized or uncivilized, agricultural or manufacturing, do not enter into competition for a supply! What are the millions of francs extracted from the Cordilleras when compared with the capital created by the labour of the inhabitants of the whole globe?

The combined washings of the Altai, California, and Australia, during a quarter of a century, would be required to produce a sum equal to the annual revenue of England alone. This unexpected harvest of the precious metals is but an addition to a common fund of wealth; it cannot produce a deep or a durable impression on the almost incalculable mass of wealth already existing in the world.

After all, Europe herself does not preserve gold and silver as relics. Money is used by wear and tear to such an extent that it must from time to time be recoined, and the consequent loss falls on the community at large. The use of silver and gold plate, of gold work and jewellery, is increasing every day, as a distinguishing mark of the rise of the middle classes; the manufacturers of France, England, and Switzerland are at work for all the world. English statisticians have estimated the loss, from use, disasters at sea, and export without return of the precious metals, in the United States and Europe, at more than [198]125,000,000 francs a-year. A more moderate estimate reduces this sum to [199]75,000,000 francs. As to articles of luxury, the sums of gold and silver employed therein annually, have been estimated by Mr. Jacob, at [200]148,000,000 francs, without including the consumption of the United States of America. Mr. M’Culloch, who embraces the United States in his calculations, puts the amount at [201]150,000,000. France, herself employing upwards of [202]30,000,000 francs, it may be admitted, without fear of exaggeration, that the sum of [203]125,000,000 of gold is used for domestic purposes. Here, then, we have an annual consumption of [204]200,000,000 francs; the proportion borne by gold in this absorption of the precious metals is every day becoming more important. What remains, at the present time, of the enormous masses of the precious metals which Mexico and Peru have poured forth during the last three centuries? The amount of gold and silver now in the form of circulation would scarcely equal the produce of the mines during the last fifty years. The 30 milliards which America sent to Europe, from the Spanish Conquest to the beginning of the 19th century, has almost entirely disappeared. It would appear as if industry, in its contact with gold and silver, must have volatilized it. France converted into coin a large amount of the precious metals; but when coined, it did not remain there. Exportation appears constantly to produce the effect of banishing it from the country. Thus, in twelve years, from 1840 to 1852, we have imported [205]123,012 kilogrammes of gold, and we have exported [206]71,217 kilogrammes; the difference in favour of the import being [207]51,795 kilogrammes, equal to [208]181,138,000 francs, showing an average of [209]15,000,000 francs per annum. Jewellery, goldsmith’s work and gilding, employ, annually, in France, quantities of gold exceeding that sum in amount. The excess, then, is taken from the coinage, which accounts for the ordinary premium on gold in our market. The average would be considerably reduced if we except the year 1851, during which the import has exceeded the export by [210]34,503 kilogrammes; but the results of 1851 may be considered as exceptional. Already, the greater part has disappeared; gold finds its way from France to London. The Bank of France, whose metallic reserve in 1851 included an amount of [211]100,000,000 francs of gold, now does not hold above [212]15,000,000 to 20,000,000. French gold coin, common enough in Paris, is scarcely seen in the provinces.