THE RISE OF THE SILVER-PRICE OF GOLD BETWEEN 1770 AND 1830 AND ITS CAUSES.

The gradual elevation in the rating of Gold as compared with Silver has been adverted to from various points of view in the documents heretofore reprinted.

The table of the price of Dutch Ducats in Hamburg, for which science is indebted to the labors of Dr. Soetbeer, and which I have taken the liberty here to reprint at the close of this paper, shows for the period 1770-1780 an average of 14.64 and for the period 1820-1830 of 15.80, a difference of 8 per cent. The table compiled for Mr. Ingham in 1830 (see page 647) of market rates in London gives a percentage of difference equally as great. With all allowances for incorrectness of the latter table (see page 649) and for the lack of information concerning rates in other markets, one may fairly assume a general rise of about 8 per cent. to have occurred. I say rise of Gold not merely because one must say one of two things, either "rise of Gold" or "fall of Silver", and I choose the former, but because, as far as I can ascertain, the change of ratio was really a rise of Gold, not a fall of Silver. I am aware of no evidence that the general value of Money as shown by averages of price was less in 18201830 than it was in 1770-1780. Whatever scanty researches on this subject have come to my knowledge indicate a lower range of prices in the former than in the latter period. Under the circumstances it would be improper to assume a fall in the general value of Money in which Silver, the then principal material of Money, should, of the two, have taken the chief share.

There is, however, another ground for attributing the change of relation of the two metals at that period to a rise in Gold, and a conclusive one, which would not be effective if the question related to such a change

of relation occurring now. There is now in Money value more Gold than Silver in the civilized nations, while during the period in question the amount of Silver used as Money was something like three times as great as the amount of Gold so used. A change of ratio, therefore, is a priori referable to a mobility of the lighter, not of the heavier metal.

How was this rise of Gold, or, if it be preferred, this increase of differ ence between the metals, brought about?

Was it due to any alteration in the relative cost of production? So far as I am informed, history has nothing to say on this subject, and therefore theory cannot assume the existence of facts upon which alone it can be founded.

The amount of the metals brought to the market show no such change of relative quantity as would enable the mere demand for Gold to be used in braid, gilding, and plate to force a rise in its price. As we compare the figures of production and ratios at different dates, remembering that the annual yield was a minute percentage of the stock of the precious metals on hand, it becomes evident that the causes of the rise must be sought, not in alteration of supply, but in alteration of demand for use as Money. There must have been an increased demand for Gold to be used as Money, or a diminished demand for Silver to be used as Money, or the respective demands must have been attached to a higher fixed price.

Was this surplus demand for Gold to be used as Money, or again, this demand at a fixed price a demand created by commerce alone, or a demand created by legislation?

Much may be said of a war demand for Gold as compared with Silver, and this war demand is credited to influences independent of legislation. Undoubtedly there is often a preference for the lighter metal, but the question is the measure of the preference. If the mere existence of a preference for Gold is to be prima facie decisive in the question, what causes a rise in the relative value of gold, there is no need of argument. Gold is the nobler metal; it has certain important advantages over Silver for all purposes, and it comes to us already with many times its weight in Silver. Hence for use as Coin, that is, with a reference to certain prices of things, it is far lighter, and hence more convenient, than Silver. Without discussing the merits of Silver, without entering into questions of habit, the advantage of heaviness, divisibility, the needs of cer

According to Dr. Soetbeer's lately published investigations (Edelmetall-Production, Gotha, 1879) the average annual product of the world was as follows:

tain classes of the population, &c., we may for the sake of the argument admit there was in fact a preference for Gold, of which war demand was a part. But does this account for a rise of 8 per cent. in forty years? Evidently a priori it has no more claim to account for a rise of 8 per cent. than for a rise of 1 or a rise of 20. The question is not the fact of preference, but the amount, the measure of preference. Does any one suppose, for example, that there was such a preference for Gold in England as would have prevented the use of Silver between 1798 and 1820, if the law had permitted it? Of course it would not be strange if many had assumed this to be the fact. Any one who knew that after 1800 Silver stood generally above 15.21, the English ratio, and while aware that there was little or no Silver in England, dated the English Single Gold Standard Law from 1816, must necessarily have assumed the existence of such a preference. (See in this connection page 346.) It is a curious fact that such an impression as this seems to have been instrumental in naturalizing the Gold-Standard theory on German soil.

I have been unable to avoid drawing this inference from the writings. of the progenitor of the Gold movement in Germany. I refer to J. G. Hoffmann, a name justly honored in Germany, where his activity as First Professor of Political Economy in the University of Berlin; first Director of the Statistical Bureau, as a co-worker of Von Stein and Hardenberg as well as of a second generation of Prussian statesmen, gave anthority to views which a later generation has sought to put into prac. tice.*

Fully aware that after 1800 Gold, for the first time for a century, stood higher than the English ratio, Hoffmann does not seem to have been aware that the flow of Silver into England had been cut off; that although the Coinage of Silver was gratuitous and free by one law, another law had prohibited all Coinage of Silver. The conclusion was natural that the mere free will of "commerce," the mere preference of Englishmen for Gold as against Silver, and not their law-guided preference for the only Money the law allowed them, had led them to maintain Gold as their only standard metal.

But it is apparent to those who read the law of 1798-9 (see page 346) that a law was required to prevent Silver from being coined into debtpaying coin.t

*In a paper on "The Prussian Anti-Silver Theory and its Origin in an Error of Fact," extracts from which are printed in an Appendix to an Address on the "Monetary Situation" (Cincinnati, 1878), I have given citations from Hoffmann's Doctrine of Money and Signs of the Times (1838-1840), on which I base the inference above set forth.

+ It is suggestive to note in this connection that Mr. Feer-Herzog, in his Report on the Conference to the Swiss Federal Council (see page 347), states that this law, to the existence of which I called his attention (see page 86), was an act of "mere form." It is but just, however, to add that in saying this the learned Delegate must have neglected the fact that the Statute for Free and Gratuitous Coinage of Silver as well as of Gold was in force in 1798; and also, perhaps, that the law of 1798 expressly stated that "there was reason to think that more Silver would come to the mint to be coined, and that therefore it was necessary to suspend the Coinage of Silver."

Indeed, even if one assume that the matter be regarded not with reference to the

This English preference for Gold required the re-enforcement of a law; but for that law the preference would have been overcome entirely, while, in spite of the law, millions of Spanish dollars were in use for a time. (See page 357.) Under the circumstances it does not appear that the preference was very strong. And yet England had been accustomed to Gold for three generations, and Englishmen are the most conservative of creatures of habit. Is it not, therefore, more than doubtful whether England's mere preference for Gold, unaided by legislation, could have raised its value one per cent.? And yet England's preference for Gold represents the then maximum force of "commerce" in this matter.

The forces of legislation on the other hand are forces that deal directly with great masses of metal, and fix rates of exchange for them on a grand scale. They do this not because they set in motion in the heart of the citizen a merely boyish predilection for the white or the yellow metal as a metal, or as being light or heavy, but because they act upon the entire current of that self-interest which is the great motive of the world's production and of the world's exchanges. In fixing what metal shall be legal tender, or in fixing the price at which two metals, or either of them, as the payer prefers, shall be legal tender, the legislator marshals the entire force of the self-interest of his nation and others dealing with it to increase the demand for the metal selected, or to hold the metal to the fixed price he would establish.

What, then, were the chief forces of legislation which were at work in this matter in the fifty years that center about 1800?

Let us review in order those which will naturally be regarded as specially active.

A.-The Coinage policy of Spain, making the ratio of 16 more or less effective.

B. The recoinage of the louis in France in 1785 at 154.

C.-The raising of the rating of Gold under the "Parallel Standard" in some of the German States. (Two Rhine Districts 1786, Austria 1793.)

D.-The various issues of paper Money in different countries.

E. The withdrawal from Silver in 1798 of the privilege of becoming Money in England at 15.21, and its entire exclusion from Coinage.

F.-The establishment in France in 1803 of free Coinage of the two metals as full legal tender at a mint price of 15.69.

facts, but with reference to a supposed set purpose to establish the Gold Standard and exclude Silver; that is to say, if we assume that Mr. Feer-Herzog meant that the law of 1798 was, not an act of "pure form," but a foregone conclusion, an error still remains. The complaints of Lord Liverpool and of Mr. Magens of the lack of Silver Coin in 1804 and '5 (see page 357), and the fact that the law of 1816, which Mr. Feer-Herzog (in common with the majority of monetary writers) originally assumed as the starting point of the anti-Silver legislation of England, was compelled to repeal this law of 179in order to supply England with a fair share of Silver Tokens, show that the prohibition of Silver Coinage can hardly be accurately described even as a "foregone conclusion."