There is not, therefore, a fact or deduction about the law of 1873, or the history of the market since, which the silver men have put forward, which will stand examination.
A CONCURRENT CIRCULATION OF GOLD AND SILVER
[1878]
It seems as if the United States were destined to be the arena for testing experimentally every fallacy in regard to money which has ever been propounded. A few years ago only a very few people here had ever heard of the “double standard” or knew what it meant. In 1873 we became simply and distinctly a “gold country” in law, as we had been for forty years in fact. Immediately after that date silver began to fall in value relatively to gold, so that, if we had been on the “double standard,” and had not been deterred by considerations of honor, morality, and public credit, which considerations kept the double-standard countries from taking that course, we could have paid our debts in silver at an advantage. Forthwith all those persons who had before been racking their brains to devise some scheme for resumption without pain or sacrifice, turned their attention to silver, and began to devise plans for getting back to the position which, as they thought, we had unwisely abandoned. The consequence has been that, for the last year, the country has produced numberless editorials, essays, lectures, and speeches, full of the most crude sophistry, and the most astonishing errors as to all the elementary doctrines of coinage and money. The favorite object of all these schemes is to find some means of increasing the amount of money at the disposal of the world, or of this nation, so as to raise prices and make it easier to pay debts. These schemes have taken their point of departure in the speculations of some European economists. In Europe the propositions of the economists in question have never passed beyond the realm of speculation and theoretical discussion amongst professional economists. They have been regarded by some as probably sound, and capable of being made the basis of advantageous legislation. By others, superior in number and authority, they have been regarded as unsound. Inasmuch as they involve an international coinage union between all civilized countries and could be put to the experiment only on a scale involving immeasurable risks, the overwhelming judgment has been that they were out of the question. Here, however, our amateurs and empirics are in hot haste to make the experiments, without any coinage convention, or with the coöperation of only a few and the less important nations, that is to say under circumstances which even the most extreme bimetallists condemn as ruinous.
It must be observed then that there lies back of all this popular discussion a scientific and technical question of great delicacy. I might even say that it is a speculative question, or a question in speculative economics, for we have no experience of an international coinage union, or of a concurrent circulation, of the metals. We have to imagine the state of things proposed and reason a priori as to what must be the result. There is a postulate to all these schemes which has never been expressed and never been discussed, but which is assumed to be true. It has two different forms: (1) A concurrent circulation of gold and silver may be established in any country: (2) A concurrent circulation of gold and silver may be established by a coinage union of all civilized nations. These postulates, or we may say this postulate, for the latter includes the former, I have now to bring in question. If the science of money teaches that there cannot be a concurrent circulation of the metals, then the schemes which I have referred to are all condemned. The question, moreover, has won such an immediate and practical significance in the country that it is no longer a subject for academical discussion amongst economists, about whom opinions may differ without importance.
The Senate of the United States has just passed a bill containing the following provision:
“Sec. 2. That immediately after the passage of this act the President shall invite the governments of the countries composing the Latin Union, so called, and of such other European nations as he may deem advisable, to join the United States in a conference to adopt a common ratio between gold and silver for the purpose of establishing internationally the use of bimetallic money and securing a fixity of the relative value between those metals; such conference to be held at such a place in Europe or in the United States at such a time within six months as may be mutually agreed upon by the executives of the governments joining in the same. Whenever the governments so invited, or any three of them, shall have signified their willingness to unite in the same, the President shall, by and with the advice and consent of the Senate, appoint three commissioners who shall attend such conference on behalf of the United States, and shall report the doings thereof to the President, who shall transmit the same to Congress.”
The conception which governed this legislation is plain enough. It proposes to secure a concurrent circulation of the two metals at a fixed ratio by an international agreement. The proposition is to put the experiment at work when only three nations besides ourselves consent and in the meantime to remonetize silver here at sixteen to one when the market ratio is seventeen and one-half to one. This adds to the absurdity of the bill, but has no bearing on my present controversy. I challenge the postulate which is assumed, which has never been discussed, much less proved, that a concurrent circulation is possible if an international union can be made. Anybody who concedes this concedes, as I view it, the fundamental and controlling error in the silver craze. If this premise is conceded, there can be no further controversy on the arena of science. It remains only to try to overcome practical difficulties. Such is the issue I raise with those who, under any reservations whatsoever, concede that a concurrent circulation is possible. In a body of scientific gentlemen I need only refer to the mischief done in science by assuming the truth of postulates without examination, and I need make no apology for bringing forward with all possible force and vigor a controversy on a point so essential. It is my duty to say that I may be in error, and I have the misfortune to differ here with gentlemen from whom I dissent seldom and unwillingly, but it will not be denied that, while there is controversy on a point so essential, and at a moment when practical measures of high importance to every person in this country are proposed, based on certain views of the matter, I am right in promoting discussion. I wish to be understood as paying full respect to everybody, but I address myself, without compliments, to the question in hand. I shall be satisfied if I make it appear that I have some strong grounds for the position I take in a long, careful, and mature study of this question in all its bearings.
It will economize time and space, if, before entering on my subject, I try to clear up two points: (1) what is an economic force or an economic law, and how ought we to go about the study of economic phenomena? (2) What is a legal tender?
(1) What should be our conception of an economic force or an economic law, and how ought we to study economic phenomena? Some people seem to think that economic phenomena constitute a domain of arbitrary and artificial action. They think that social phenomena of every kind are subject to chance or to control. They see no sequence between incidents of this kind. They have no conception of social forces. They think economic laws are only formulae established by grouping a certain number of facts together, like a rule in grammar, and they are prepared for a list of exceptions to follow. This conception, in its grosser forms, is now banished from the science, but it still has strong hold on popular opinion. It also still colors a great many scientific discussions, those, namely, who seek to carry forward the science by following out the complicated cases produced by the combined action of economic forces in our modern industrial life, and describing them in detail. In my opinion such efforts are all mistaken.