In two former articles I have discussed some points which are presented by the advocates of the free coinage of silver, on the assumption that their project was feasible and their conception of its operation correct. They have laid out a program; free coinage, silver standard, great demand for silver, rise of prices, rise in the value of silver, cancellation of debts, prosperity. They now admit that this program would involve a panic, but it would come out, they say, at the desired result in two or three years. They denounce the gold standard as having caused hard times, but they plan a program with a panic as an incident on the way to a silver standard as if it was a trifle.
There is not a step in this program which could or would be carried out as planned.
Free Silver Means Fiat Paper Money.
The amount of circulating cash of all kinds in the hands of the people at the present time is about nine hundred millions. If the dollar was reduced to half its present value, and if allowance was made for reserves, two thousand million silver dollars would be the specie requirement of the country. We already have nearly five hundred millions of such dollars. Hence the country could not use at the utmost, if the new silver dollar was worth not more than half the present gold dollar, and if the total circulation consisted of silver without any paper, but three times as many more silver dollars as we have now. But every one knows that such a state of the currency never would exist. We should have paper “based on silver”; that is to say, the silver inflation never will be carried out. It will turn to paper inflation at the first step. Who can believe that, if the silver standard was adopted, silver would be bought and piled up dollar for dollar against the paper, and that the paper would be issued only as fast as the silver could be coined? In fact, silver would no doubt be dropped and forgotten, and we should have plain and straightforward fiat money of paper. Such ought to be faced as the only real sense and probable outcome of the present agitation for the free coinage of silver.
Limit of the Amount of Silver which could be Absorbed.
Let us, however, proceed upon the assumption that the plan proposed is sincere, and that the attempt would be made to carry it out in good faith. The circulation in the hands of the people would be paper, for they would become sick of silver and revolt against it. There would then be two thousand million dollars in paper afloat, each “dollar” being of silver and worth half a present gold one. We have now five hundred million silver dollars. At the utmost not more than another five hundred millions of silver could be absorbed into the system. That would give reserves of fifty per cent of the total currency, and that is the maximum of the demand for silver which could be created if the United States went over to the silver standard. The supply would come from all over the earth. Mr. St. John is sure that none would come from Europe, because legal tender silver there is at a higher ratio than sixteen to one. Not a nation in Europe which is now under the yoke of silver would hesitate a moment to demonetize it and send it here if we opened our mints to it at sixteen to one. He also assures us that none would come here from the East because the course of silver has always been from West to East. The course of silver has turned from East to West more than once when there was a profit on bringing it back, and that is the only condition necessary to bring it back again. Japan would adopt a gold currency the moment that the United States adopted a silver one.
It is Impossible Indefinitely to Increase the Circulation.
The power of our currency to absorb silver is not unlimited. People seem to believe that they can go on and increase the monetary circulation indefinitely. This is possible with paper, which has no commodity value and cannot be exported, always understanding that the paper will depreciate as issued, but it is not possible with any money which has commodity value. When silver has been put into circulation here to such an amount that all the fictitious value given to it by the coinage law has been eliminated—that is to say, when so many silver dollars, or paper bearing the obligation of silver dollars, have been issued as will equal in value the present circulation—then there will be no profit in sending silver here from elsewhere, and no more profit in minting silver here than in sending it elsewhere. As we have seen, there is no reason to estimate the amount of silver which would be absorbed in this operation at more than five hundred millions. The miners are making all this agitation for the sake of that share which they could get in furnishing this sum. That share would really not exceed the silver they had on hand when the law was put in force.
Antagonistic Interests of Miners and Populists.
What share, then, would the silver-miners get in the results of the enterprise? They could get none unless the new silver was bought only of them, and only bought gradually as they produced it, and bought at a rising price as the demand of debtors acted upon it. Not one of these conditions would be fulfilled. The debtors and the silver-miners really have antagonistic interests at every point. It has been proposed that only American silver should be accepted at the mint. That plan is impracticable in any case, but, when the Populists had their victory in hand, does anybody suppose that they would wait eight or ten years for the realization of their hopes while the mines were producing new silver, being certain that that delay would cause all they hoped for to slip through their fingers? I repeat: The interests of the two factions are all antagonistic to each other, and one of them is destined inevitably to be the dupe of the other. That destiny is reserved for the miners who, besides, are paying all the expenses.