Monsieur de Humboldt remarks, that during the ten years, from 1817 to 1827, there was coined in Great Britain, above [3]1,294,000 marcs of gold; that is nearly one milliard of francs, and more than [4]100,000,000 francs per annum, without any influence having been produced by such extensive purchases on the relation of gold to silver: the proportion, which was as 1 to 14·97, never exceeded 1 to 15·60; or shewing a rise of not more than 4²⁄₁₀ per cent. Such was the case when England, which for above twenty years had had only a paper circulation, re-established a metallic currency, and attracted the coin and the bars of gold dispersed throughout Europe. During these ten years she absorbed, or nearly absorbed, an amount of gold which perhaps equalled the production of the whole world, and certainly exceeded the import of gold, during that period, into all the great commercial depots in the civilized world. It would not enter into our subject to examine at what sacrifices England made this monetary revival; but the equilibrium once restored, and the empire of Britain having placed herself in harmony with the rest of Europe, it does appear wonderful that it did not cost more than a premium of 4 per cent. to have attracted a quantity of gold, probably equal to the half or one-third of that possessed by the whole of Europe. And the wonder increases when we remember, that the Mint of London, which in 1814, 1815, and 1816, had not coined a single sovereign, issued at once, in 1825, £9,520,758 sterling (about 240,000,000 of francs), which must have been consequently abstracted from trade in the course of a few months. Political commotions brought about other variations in the price of the precious metals. It is well known, that on the news of the landing of Napoleon in 1815, gold rose 10 per cent. in London.
To explain how this sudden collection of gold, effected by Great Britain with as much perseverance as vigour, did not bring about a general crisis; it has been said, and not without reason, that the quantity of the precious metals now existing in the shape of money, rendered the oscillations in its production and supply as money, less sensibly felt. It should be recollected, that if the metallic values were so greatly depreciated by the discoveries of America, this state referred to the existing condition of Europe, exhausted both of silver and gold. The difference thus exhibited between the two periods is very evident; but it does not appear to be sufficient to account for the facility with which the circulation may increase in the present day, without affecting the price of silver or gold. It may be as well to add, that this movement, which appears to convey life throughout every artery of commerce, is not fed now solely, as in olden times, and during the middle ages, by the precious metals. Metallic money now forms but a small portion of the total circulation, if we take into account the mass of bank notes, bills of exchange, drafts and bankers’ cheques, which complete the amount of a circulating medium of exchange; this, at the present day, taken as a whole, is something almost indefinite: it appears to defy all calculation; and we might almost say that the excess in the production of gold and silver now need not necessarily produce more influence than the waves of the sea on the permanent level of the ocean.
At the same time that the depreciation of gold and silver under any general form becomes less probable, the increasing facility of communication, and the greater mutual dependence of nations in matters of credit, renders any great local difference in the value of money more improbable. Whenever the precious metals become in excess in one country, the surplus quickly reaches its neighbour. Let a sudden scarcity of food, or any other cause, create a drain of specie, the consequently increased value of money will soon draw back that which has been exported. The cost of transport, and the premium of insurance of gold, are the limits of the variations in the rates of exchange; and the charges are being diminished every day, thanks to railroads and steam communications. Before the wonderful progress in the development of industry from the commencement of the nineteenth century, we have seen the changes occurring at different periods, in the relative production of the precious metals, without any corresponding alteration in their relative values. At the close of the fifteenth century, it is true, that America, furnishing nothing but gold, and this metal having accumulated in Spain, Queen Isabella of Castile was forced to alter the relative standard of gold and silver. After the first half of the 16th century, the production of gold having ceased to preponderate, and silver being imported in great abundance, the value of the inferior metal underwent such a depreciation, that the governments of Europe, yielding to the force of circumstances, changed its relative legal value; but with these two exceptions in the monetary laws, one purely local, and the other European, we observe the production of each metal extend and diminish alternately, without any relative alteration in value of sufficient importance to attract public attention.
“From the year 1645 to the commencement of the 18th century,” says M. Michel Chevalier, “silver took the lead in a most remarkable manner. Then occurred the bright days of the mines in Potosi, and the production of silver exceeded that of gold, weight for weight, in the proportion of 60 to 1; after that, and without any diminution in the produce of silver, came the glorious time for the Brazilian gold mines. Simultaneously appeared the auriferous regions of Chico, Antioguia, and Pepayou. The commercial world received from America 1 kilogramme [5]of gold for every 30 kilogrammes of silver. Thus passed the middle of the 17th century. Then the silver mines of Mexico put forth all their splendour, and the proportion increased to 40 to 1. The Brazilian mines began to diminish, whilst those of Mexico continued to increase in production; and, at the beginning of the next century, silver exceeded gold in the proportion of 57 to 1. In 1846 the production of silver still continued to predominate, and we are now at the proportion again of about 40 to 1.”
Humboldt’s calculations differ but little from those of M. Michel Chevalier. This great authority considers that the import of gold until the first years in the 18th century, bore the proportion to silver of 1 to 65. Let either of these suppositions be true, there can be little doubt, that the relative weight of supply of the two metals varied by one half, without any serious alteration in their relative price; which surely proves that gold was essentially required, and that the increase of production did but fill up the gap, which, as far as the 18th century, the progress of civilization and of luxury had created, without an adequate means of supply.
In ancient times, the relative value of the two metals appears to have been almost entirely governed by the quantities produced and brought to market. A pound of gold was worth eight or ten pounds of silver, according as the quantity brought to market varied in the like proportion. The simplicity of commercial interests, in a state of society when neither luxurious arts or industry were thought of, offered no inducements for the collection of gold or silver for their use as money, excepting on account of their relative scarcity; but when fighting ceased to be the principal occupation of mankind, and labour began to be held in some estimation, an end was put to this patriarchal state: if the people lost their primitive simplicity, the relation of supply and demand no longer depended exclusively on the proportionate production of the two metals; other causes affecting a rise and fall began to operate on prices.
When the precious metals were nearly absorbed in the supply of money, their commercial value had no other element to influence an alteration than the requirements of circulation; the monetary value governed the commercial price. But, at the present time the contrary is the case: the greater the degree of civilization, and the greater the increase of a taste for luxuries, the more does the demand for the precious metals for other objects exceed the want of them for coin. Mr. Jacob, whose work on the precious metals appeared in 1831, places a value of [6]149,000,000 francs on the gold and silver annually used for articles of jewellery and plate in Europe and America.
During the last twenty years the progress of luxury amongst the industrious and commercial nations of the world has been enormous. The moveable wealth of France and England has made prodigious accumulations. What family is there so poor as not to have some article of plate? Gilding is no longer confined to the decorations of temples and palaces; it is found in the most humble cottage. To what a length may it not reach if the taste should increase for gilding the dresses of ladies, and for covering the uniforms of our men with gold or silver lace?
On the whole, then, it appears that the demand for gold and silver, as articles of commerce, is likely to exceed the demand for the precious metals solely for use as money. This is a new point; and we must not lose sight of it in endeavouring to appreciate the effect which an increase or diminution in the production of the precious metals may have, both on their price and on their relative value.