Chapter III (4)

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Hamilton's scheme, as contained in his most remarkable paper, was for a silver unit or dollar of 371-1/4 grs. of pure silver and a ratio of 15, and instead of the allowance of 2 per cent. for waste and coinage the principle was adopted of free coinage--of delivering at the Mint the same weight of pure metal coined as should be brought to it in bullion or foreign coin. Hamilton justifies his ratio thus: "The difference established by custom in the United States between coined gold and coined silver has been stated to be nearly 1:15.6. This, if truly the case, would imply that gold was extremely overvalued in the United States, for the _highest actual_ proportion in any part of Europe very little, if at all, exceeds 1:15, and the average proportion throughout Europe is probably not more than 1:14.8." He also deduces his ratio of 15 as a mean between the two lately preceding issues of dollars. "Taking the rate of the late dollar of 374 grs., the proportion would be as 1:15.11. Taking the rate of the newest dollar of 374 grs., the proportion would be as 1:14.87. The mean of the two would give the proportion of 1:15 very nearly, less than the legal proportion in the coins of Great Britain, which is as 1:15.2, but somewhat more than the actual or market proportion, which is not quite 1:15." As to the express selection of one or other metal for the unit, Hamilton makes a departure which marks clearly that he was creating and not continuing a system, and that if bimetallism is a feature of modern conception that conception is due to American rather than French statesmanship:[18]--"Contrary to the ideas which have heretofore prevailed in the suggestions concerning a coinage for the United States, though not without much hesitation arising from a deference for those ideas, the secretary is, upon the whole, strongly inclined to the opinion that a preference ought to be given to neither of the metals for the monetary unit ... because this cannot be done effectually without destroying the office and character of one of them as money and reducing it to the situation of mere merchandise, which, accordingly, at different times, has been proposed from different and very reputable quarters, but which would probably be a greater evil than occasional variations in the unit, from the fluctuations in the relative value of the metals, especially if care be taken to regulate the proportion between them, with an eye to their average commercial value. To annul the use of either of the metals as money is to abridge the quantity of circulating medium."

[Sidenote: UNITED STATES: SCHEME OF 1792]

This scheme was accepted in its entirety by the Act of 2nd April 1792, with the slight change that the standard of silver was changed from 11/12 to 1485/1664 fine. The silver dollar, therefore, weighed 416 grs. gross (371-1/4 grs. pure silver); on this basis, at a ratio of 15, the equivalent gold piece would contain 24.75 grs. (371-1/4/25 = 27-3/4). This was accordingly established as the basis of the gold _eagle_ or ten-dollar piece, which was to contain 270 grs. gross (247.5 grs. pure gold).[19] The Act was followed by another on the 9th February 1793, for regulating the rate of foreign coins. The gold coins of Great Britain and Portugal of their then standard were made a legal tender for the payment of all debts and demands, at the rate of 100 cents for every 27 grs. of their actual weight, those of France and Spain at the rate of 100 cents for every 27-2/5 grains.

For a period the system established in 1792 went on, although the ratio established was prejudicial to gold. But, twenty years after, the natural result arrived in America, as in England, and the circulation of gold was completely extinguished in the States by the unseen withdrawal of the metal.

In obedience to a resolution of the Senate of 3rd March 1817, John Quincy Adams, Secretary of State, produced a report on weights and measures, in which he impugned the correctness of the data on which Hamilton had based his reckoning in 1791.

Two years later, 26th January 1819, a committee of the House reported an ill-considered scheme, recommending a change in the ratio in favour of gold, and the imposition of a heavy seigniorage on silver. On the 1st of March following, the House of Representatives directed the secretary to report such measures as might be expedient to procure and retain a sufficient quantity of gold and silver coin in the United States.

In this report, in referring to one feature in the previous crisis, namely, the necessity in 1814 for the suspension of specie payments, Secretary Crawford stated that, from the commencement of the war until that event of 1814, a large amount of specie was taken out of the United States by the sale of English Government bills, at a discount frequently of 15 to 20 per cent.

He concluded by suggesting a raising of the value of gold in relation to silver, 5 per cent., implying a ratio of 15.75.

In the report to the House of Representatives, dated 17th March 1832, quite a different statement was made, namely, that there was no export of gold from the United States from 1792 to 1821, and that "there were certainly no indications that gold was rated too low in our standard of 1:15 earlier than 1821, when the English demand commenced."

[Sidenote: UNITED STATES: GOLD EXPORT OF 1820]

The terms of the report of the committee on the currency, which was communicated to the House of Representatives on the 2nd February 1821, must be contrasted with this statement. "The committee are of opinion that the value of American gold compared with silver ought to be somewhat higher than by law at present established. On inquiry they find that gold coins, both foreign and of the United States, have in a great measure disappeared, and from the best calculation that can be made there is reason to apprehend they will be wholly banished from circulation, and it ought not to be a matter of surprise, under our present regulations, that this should be the case.... There have been coined at the Mint of the United States 6 millions of dollars in gold. It is doubtful whether any considerable portion of it can at this time be found within the United States.... It is ascertained that the gold coin, in an office of discount and deposit of the Bank of the United States in November 1819, amounted to 165,000 dollars and the silver coin to 118,000; that since that time the silver coin has increased to 700,000 dollars, while the gold coin has diminished to 1200 dollars, 100 only of which is American."[20]

The committee proposed a bill in the sense of their report, but for seven years--years of acute commercial crises and distress--no actual step was taken. In November of the following year the subject of the disappearance of gold from the currency was brought before the lower house of Congress by Mr. Lowndes. In December 1828, however, the Senate required the Secretary of the Treasury to ascertain the ratio and to state such alterations in the gold coins as might be necessary to conform those coins to the silver coins in their true relative value.

In his report Secretary Ingham insisted on the advantage of a single standard, but, in case of a determination to maintain both gold and silver, he proposed to approximate as near as could be to the French system by establishing a ratio of 15.625. In case of no change of the ratio he proposed to discontinue the gold coinage, whenever the premium for gold should exceed 2 per cent.

No action was taken on these reports, nor on the similar proceedings in the two following years, nor very little more on the report which in June 1832 the select committee on coins produced. Part of the instructions given to this committee were "to inquire into the expediency of making silver the only legal tender, and of coining and issuing gold coins of a fixed weight and fineness, which shall be received in payment of all debts to the United States, at such ratio as may be fixed from time to time but shall not otherwise be a legal tender."

In the House of Representatives the converse proposition of a gold standard with a restricted legal tender had been made by M. Wilde, 26th March 1832, but when the report appeared it advocated a silver standard.

[Sidenote: UNITED STATES: THE ACT OF 1834]

While Congress was thus delaying over a vital question the New York bankers, May 1834, pressed for the regulation of the gold coins, so as to retain them in the country.

Two months later, 31st July 1834, the long-sought measure passed, but in an extraordinary form. At a blow the ratio was changed from 1:15 to 1:16 (15.988), by the reduction of the weight of the fine gold in the gold coins to 23.20 Troy grains, soon afterwards, by an Act of 18th July 1837, changed to 23.22 grains, the standard being changed at the same time from 11/12 to 9/10 fine.

The motives and amount of wisdom which underlay this sudden close of a long period of agitation can be measured from Benton's own words, in his _Thirty Years' View_:--

"A measure of relief was now at hand, before which the machinery of distress was to balk and cease its long and cruel labours--it was the passage of the bill for equalising the value of gold and silver and legalising the tender of foreign coins of both metals. The bills were brought forward in the House by Mr. Campbell H. White of New York, and passed after an animated contest in which the chief question was as to the true relative value of the two metals, varied by some into a preference for National Bank paper; 15-5/8 was the ratio of nearly all who seemed best calculated from their pursuits to understand the subject. The thick array of speakers was on that side, and the eighteen banks of the city of New York, with Mr. Gallatin at their head, favoured that proportion. The difficulty of adjusting this value, so that neither metal should expel the other had been the stumblingblock for a great many years, and now this seemed to be as formidable as ever. Refined calculations were gone into, scientific light was sought, history was rummaged back to the times of the Roman Empire; and there seemed to be no way of getting to a concord of opinion either from the light of science, the voice of history, or the result of calculations. The author of this _View_ had, in his speeches on the subject, taken up the question in a practical point of view, regardless of history and calculations and the opinions of bank officers; and looking to the actual and equal circulation of the two metals in different countries he saw that this equality and actuality of circulation had existed for above three hundred years in the Spanish dominions of Mexico and South America, where the proportion was 16:1. Taking his stand upon this single fact, as the practical test which solved the question, all the real friends of the gold currency soon rallied to it. Mr. White gave up the bill which he had first introduced, and adopted the Spanish ratio. Mr. Clowney of South Carolina, Mr. Gillet, and Mr. Cambreleng of New York, Mr. Ewing of Indiana, Mr. McKim of Maryland, and other speakers gave it a warm support. Mr. John Quincy Adams would vote for it, though he thought the gold was overvalued, but if found to be so the difference could be corrected hereafter. The principal speakers against it and in favour of a lower rate were Messrs. Gorham of Massachusetts, Selden of New York, Binney of Pennsylvania, and Wilde of Georgia, and eventually the bill was passed by a large majority, 145 to 35. In the Senate it had an easy passage. Messrs. Calhoun and Webster supported it, Mr. Clay opposed it; and on the final vote there were but seven negatives--Messrs. Chambers of Maryland, Clay, Knight of Rhode Island, Alexander Porter of Louisiana, Silsbee of Massachusetts, Southard of New Jersey, Sprague of Maine. The good effects of the bill were immediately seen. Gold began to flow into the country through all the channels of commerce, old chests gave up their hordes, the Mint was busy; and in a few months, as if by magic, a currency banished from the country for thirty years overspread the land and gave joy and confidence to all the pursuits of industry."

The panacea thus magnificently lauded soon proved itself worse than inefficient. The ratio was too high, and the silver dollars could not be maintained. They were unduly exported, especially between the years 1848 and 1851. And in order to retain within the country a sufficient amount of small coin the amount of silver in the small coins, from the half-dollar downwards, was reduced by an Act of 24th February 1853. It was at the same time provided that they should be coined only on Government account, and they were made legal tender only up to the sum of five-dollars.

The direction of this step will be seen at a glance--it was in the direction of the gold valuation. This is as plainly the case as it was in the Latin Union, already exemplified (p. 190). Further, it was so conceived and explicitly stated by Dunham, who piloted the bill through the House. "We have had," he said, "but a single standard for the last three or four years. That has been and now is gold. We propose to let it remain so, and to adapt silver to it, to regulate it by it." Legally, the old silver dollar was left untouched, and the gold and silver valuation was not expressly abolished. No reference whatever was made to the silver dollar in the Act, for the simple reason that for years nothing had been seen of them. They did not and could not circulate. There was plenty of gold, and the absence of silver with the change in standard therein practically implied was either unnoticed, or regarded, if at all, only with indifference.

The final step in the simplification and unification of this system was commenced in 1870, when a bill was prepared for a revised coinage law with a pure gold standard, silver being demonetised as a legal tender money. The bill did not become law till 12th April 1873. And no opposition was expressed in either the House of Representatives or the Senate to the abolition of the double standard. The silver dollars previously coined (of which, however, but few were in existence) maintained their quality as legal tender; but the coining of new dollars, whether on Government or private account, was forbidden.

[Sidenote: UNITED STATES: THE LEGISLATION OF 1873-74]

This Act was therefore simply the complement of the preceding legislation of 1853.

The completion of this system thus established was provided in section 3586 of the Revised Statutes of 1874, by which the silver coins of the United States were declared legal tender only up to five dollars, thus completing, from December 1873 onwards, the demonetisation of silver, and the establishment of gold monometallism on the English plan. As an effective scheme it meant little because of the prevalence of paper.

Within a very short time of the passing of this bill, however, began the great change in the relative value of the precious metals which has continued since. The silver-producing interest, at that moment on the eve of receiving an enormous accession of strength by the Nevada finds, made itself heard. At the same time the prospect of the resumption of cash payments brought an additional incentive and interest. A commission to investigate the question of standard was therefore appointed, 14th August 1875, and a majority of this commission recommended the establishment of the double standard. Thereupon Bland, one of the members of the commission, proposed in the House of Representatives the re-establishment of the double standard, at the old ratio of 1:15.988, with free coinage of silver.

The question of resumption was pressing near. On the 1st January 1879 the States were to return to cash payments. On what basis should that return be effected? Should the Act of 1873 be maintained, or should a return be made to the bimetallic system which had prevailed before then? The Government was of the former opinion; the majority of Congress of the latter.

The silver party, finding the measure could not be carried over the veto of the president, agreed to a compromise, under which the free coinage clause was dropped, and it was as a compromise that the Bland Act so-called, the "Act to authorise the coinage of the standard silver dollar, and to restore its legal tender character," passed on the 28th February 1878.

To the favourers of a gold system it was conceded that in the maintenance of the previous legal ratio of 15.988, the silver dollar should be reserved for Treasury reckonings, and a maximum minting limit of 4 million dollars monthly should be fixed. The bimetallists gained the fixing of a minimum limit of 2 million dollars monthly of silver coinage, and the clause enjoining the President of the United States to take steps for the meeting of an international conference.

[Sidenote: UNITED STATES: BLAND AND SHERMAN ACTS]

This scheme became law immediately, and on the 1st January 1879 the United States resumed specie payment. As far as the actual circulation of the country is concerned this return is only nominally effective. The habit of employing redeemable paper had grown too strong and continuous, and even the rule of the New York banking-houses, to employ only gold in clearing-house settlements, has been formally, though not absolutely, abolished by the Act of Congress of 12th July 1882, which provided that no national bank should be a member of a clearing-house at which gold and silver certificates were not accepted in payment of balances. The Bland Bill deceived the hope of both parties, as such a compromise might be expected to do. It remained in force, notwithstanding, till August 1890, and during the twelve years, 1878-1890, the United States coined a matter of 370 million silver dollars, employing therein 9 million kilogrammes of silver--a third of the total contemporary production.

Almost yearly, up to 1887, the repeal of the silver purchase clauses of the Bland Bill and the suspension of the silver coinage was recommended to Congress by presidential message, and in the reports of the Secretary of the Treasury.

In December 1889 President Harrison and Secretary Windam definitely proposed to cease the coining of silver, and to limit the issues of silver certificates to the value of the silver bullion as deposited, reckoning that value at its then market price. From these proposals sprang, by the same peculiar process of committee gestation which had produced the Bland Act, the compromise which passed on the 14th July 1890, under the title of the Sherman Act.

This act represents a compromise not of principles but of self-seeking interests. The main regulations of the law, which came into force on the 13th August 1890, were:--

1. The Secretary of the Treasury is to purchase silver to not more than the monthly amount of 4,500,000 oz. at the market price, so long as that price is below 129.29 cents per oz.

2, 3. To issue Treasury notes against the purchases, the said notes to be full legal tender, and capable of forming part of bank reserves.

5. Up to 1st July 1891, 2 million oz. monthly of this silver to be coined into dollars. That coinage to cease after the date specified, except so far as necessary to secure the Treasury notes. At the same time the Act declares the intention of the American Government to preserve the parity of gold and silver.

The fillip given by this legislation to the price of silver was over in a moment, and almost immediately the question recurred for pressing consideration, on the strong demand of the silver party for free coinage in place of these as yet ineffectual purchase schemes. The impotent close of the international monetary conference at Brussels, in February 1893, was followed by the Act of the Governor-General of India in Council of June 26th closing the Indian Mint to the free coinage of silver. Left practically alone in her stand in defence of silver, America, in the simple interest of her gold reserve, was obliged to abandon the field, and after a bitter fight the repeal of the clauses of the Sherman Act, which had enacted the compulsory purchase of silver, was carried in November 1893.

[Sidenote: UNITED STATES: COINAGE 1793-1893]

We are too near the event to estimate these later developments of the situation, but as yet two remarkable facts have hinged upon this report--(1) the immediate depreciation of the value of silver and the effect on the export of silver to India were not such as might _a priori_ have been conjectured; (2) the ceasing of the silver purchase deprived the currency of the United States of its only remaining element capable of expansion, and of all the countries of the world the United States stands most in need of an expanding and expansible currency.

COINAGE OF THE MINTS OF THE UNITED STATES.[21]

+--------+---------------+--------------++--------+---------------+---------------+
| Years. | Gold | Silver || Years. | Gold | Silver |
| | (Dollars). | (Dollars). || | (Dollars). | (Dollars). |
|--------+---------------+--------------++--------+---------------+---------------+
| 1831 | 714,270.00 | 3,175,600.00 || 1863 | 22,445,482.00 | 809,267.80 |
| 1832 | 798,435.00 | 2,579,000.00 || 1864 | 20,081,415.00 | 609,917.10 |
| 1833 | 978,550.00 | 2,759,000.00 || 1865 | 28,295,107.50 | 691,005.00 |
| 1834 | 3,954,270.00 | 3,415,002.00 || 1866 | 31,435,945.00 | 982,409.25 |
| 1835 | 2,186,175.00 | 3,443,003.00 || 1867 | 23,828,625.00 | 908,876.25 |
| 1836 | 4,135,700.00 | 3,606,100.00 || 1868 | 19,371,387.50 | 1,074,343.00 |
| 1837 | 1,148,305.00 | 2,096,010.00 || 1869 | 17,582,987.50 | 1,266,143.00 |
| 1838 | 1,809,765.00 | 2,333,243.40 || 1870 | 23,198,787.50 | 1,378,255.50 |
| 1839 | 1,376,847.50 | 2,209,778.00 || 1871 | 21,032,685.00 | 3,104,038.30 |
| 1840 | 1,675,482.50 | 1,726,703.00 || 1872 | 21,812,645.00 | 2,504,488.50 |
| 1841 | 1,091,857.50 | 1,132,750.00 || 1873 | 57,022,747.50 | 4,024,747.60 |
| 1842 | 1,829,407.50 | 2,332,750.00 || 1874 | 35,254,630.00 | 6,851,776.70 |
| 1843 | 8,108,797.50 | 3,834,750.00 || 1875 | 32,951,940.00 | 15,347,893.00 |
| 1844 | 5,427,670.00 | 2,235,550.00 || 1876 | 46,579,452.50 | 24,503,307.50 |
| 1845 | 3,756,447.50 | 1,873,200.00 || 1877 | 43,999,864.00 | 28,393,045.50 |
| 1846 | 4,034,177.50 | 2,558,580.00 || 1878 | 49,786,052.00 | 28,518,850.00 |
| 1847 | 20,202,325.00 | 2,374,450.00 || 1879 | 39,080,080.00 | 27,569,776.00 |
| 1848 | 3,775,512.00 | 2,040,050.00 || 1880 | 62,308,279.00 | 27,411,693.75 |
| 1849 | 9,007,761.50 | 2,114,950.00 || 1881 | 96,850,890.00 | 27,940,163.75 |
| 1850 | 31,981,738.50 | 1,866,100.00 || 1882 | 65,887,685.00 | 27,973,132.00 |
| 1851 | 62,614,492.50 | 774,397.00 || 1883 | 29,241,990.00 | 29,246,968.45 |
| 1852 | 56,846,187.50 | 999,410.00 || 1884 | 23,991,756.50 | 28,534,866.15 |
| 1853 | 39,377,909.00 | 9,077,571.00 || 1885 | 27,773,012.50 | 28,962,176.20 |
| 1854 | 25,915,962.50 | 8,619,270.00 || 1886 | 28,945,542.00 | 32,086,709.90 |
| 1855 | 29,387,968.00 | 3,501,245.00 || 1887 | 23,972,383.00 | 35,191,081.40 |
| 1856 | 36,857,768.50 | 5,142,240.00 || 1888 | 31,380,808.00 | 33,025,606.45 |
| 1857 | 32,214,540.00 | 5,478,760.00 || 1889 | 21,413,931.00 | 35,496,683.15 |
| 1858 | 22,938,413.50 | 8,495,370.00 || 1890 | 20,467,182.50 | 39,202,908.20 |
| 1859 | 14,780,570.00 | 3,284,450.00 || 1891 | 29,222,005.00 | 27,518,856.00 |
| 1860 | 23,473,654.00 | 2,259,390.00 || 1892 | 34,787,222.50 | 12,641,078.00 |
| 1861 | 83,395,530.00 | 3,783,740.00 || 1893 | 56,997,020.00 | 8,802,797.30 |
| 1862 | 20,875,997.50 | 1,252,516.50 || | | |
+--------+---------------+--------------++--------+---------------+---------------+

[Sidenote: UNITED STATES: MOVEMENTS OF METALS, 1851-1893]

IMPORT AND EXPORT OF THE PRECIOUS METALS INTO AND FROM THE UNITED
STATES.

+------------------------------------------------------------------+
| Gold and Silver. |
+--------------------------+-------------------+-------------------+
| | Import (Dollars). | Export (Dollars). |
+--------------------------+-------------------+-------------------+
| Yearly average, 1851-55 | 5,151,817 | 39,432,522 |
| " 1856-60 | 10,385,770 | 59,589,841 |
| " 1861-63 | 24,112,923 | 43,611,777 |
+--------------------------+-------------------+-------------------+

+-----------------------------------------------------------------+
| Gold. |
+-------------------------+---------------------------------------+
| | Import (Dollars). | Export (Dollars). |
+-------------------------+-------------------+-------------------+
| Yearly average, 1864-70 | 11,117,584 | 58,757,484 |
| " 1871 | 6,883,561 | 66,686,208 |
| " 1872 | 8,717,458 | 49,548,760 |
| " 1873 | 8,682,447 | 44,856,715 |
| " 1874 | 19,503,137 | 34,042,420 |
| " 1875 | 13,696,793 | 66,980,977 |
| " 1876 | 7,992,709 | 31,177,050 |
| " 1877 | 26,246,234 | 26,590,374 |
| " 1878 | 13,330,215 | 9,204,455 |
| " 1879 | 5,624,948 | 4,587,614 |
| " 1880 | 80,758,396 | 3,639,025 |
| " 1881 | 100,031,259 | 2,565,132 |
| " 1882 | 34,377,054 | 32,587,880 |
| " 1883 | 17,734,149 | 11,600,888 |
| " 1884 | 22,831,317 | 41,081,957 |
| " 1885 | 26,691,696 | 8,477,892 |
| " 1886 | 20,743,349 | 42,952,191 |
| " 1887 | 42,910,601 | 9,701,187 |
| " 1888 | 43,934,317 | 18,376,234 |
| " 1889 | 10,284,858 | 59,951,685 |
| " 1890 | 12,943,342 | 17,274,491 |
| " 1891 | 45,298,928 | 79,187,499 |
| " 1892 | 18,165,056 | 76,735,592 |
| " 1893 | 73,280,575 | 80,010,633 |
+-------------------------+-------------------+-------------------+
| Silver. |
+-------------------------+-------------------+-------------------+
| Yearly average, 1864-70 | 5,469,798 | 16,818,279 |
| " 1871 | 14,382,463 | 31,755,780 |
| " 1872 | 5,026,231 | 30,328,774 |
| " 1873 | 12,798,490 | 39,751,859 |
| " 1874 | 8,951,769 | 32,587,985 |
| " 1875 | 7,203,924 | 25,151,165 |
| " 1876 | 7,943,972 | 25,329,252 |
| " 1877 | 14,528,180 | 29,571,863 |
| " 1878 | 16,491,099 | 24,535,670 |
| " 1879 | 14,671,052 | 20,409,827 |
| " 1880 | 12,275,914 | 13,503,894 |
| " 1881 | 10,544,238 | 16,841,715 |
| " 1882 | 8,095,336 | 16,829,599 |
| " 1883 | 10,755,242 | 20,219,445 |
| " 1884 | 14,594,945 | 26,051,326 |
| " 1885 | 16,550,627 | 33,753,633 |
| " 1886 | 17,850,307 | 2,954,219 |
| " 1887 | 17,260,191 | 26,296,504 |
| " 1888 | 15,403,189 | 28,027,949 |
| " 1889 | 18,678,215 | 36,689,248 |
| " 1890 | 21,032,984 | 34,873,929 |
| " 1891 | 27,910,193 | 28,783,393 |
| " 1892 | 31,450,968 | 37,541,301 |
| " 1893 | 27,765,696 | 47,463,399 |
+-------------------------+-------------------+-------------------+

In 1878 the currency total of America was thus composed:--

+-------------------------------+---------------+---------------+
| | 1878. | 1879. |
+-------------------------------+---------------+---------------+
| Gold (dollars), | 82,500,000 | 123,700,000 |
| Silver (dollars), | ... | 11,100,000 |
| Silver (small coin), | 53,600,000 | 54,100,000 |
| Gold Certificates, | 44,400,000 | 14,800,000 |
| Silver Certificates, | ... | 12,000,000 |
| State Notes, | 311,400,000 | 327,700,000 |
| Notes of the National Banks, | 313,900,000 | 330,000,000 |
| +---------------+---------------+
| Totals, | 805,800,000 | 862,600,000 |
+-------------------------------+---------------+---------------+

In 1893--

Metallic.

1893. Dollars.
Gold bullion, 84,631,966
Silver bullion, 128,479,587
Gold coin, 582,366,998
Silver dollars, 419,332,777
Subsidiary silver coins, 76,267,586
-------------
1,291,078,914
=============

Paper.

Legal tender notes (old issue), 346,681,016
Legal Tender Notes Act, 14th July 1890, 153,160,151
Gold certificates, 77,487,769
Silver certificates, 334,584,504
National Bank notes, 208,538,844
Currency certificates, 39,085,000
-------------
1,159,537,284
=============

Of the total of silver dollars in the above, only a matter of 57,869,589 are in circulation. The balance, 361,463,188, are in the Treasury vaults.

[Sidenote: THE NETHERLANDS IN 1816]

Netherlands.

During the eighteenth century the monetary history of the Netherlands loses its central and determining importance. The details of the Mint laws, which precede the later developments of the nineteenth century, are therefore relegated to the Appendix (No. IV. Holland).

When the United Provinces of the Netherlands and Belgium were united under a single sceptre, both countries had an immense variety of coins, for formerly nearly every province claimed a right of coining money. To meet the desire for a simple and single system, a monetary law was passed in 1816 under King William I. Its object was to arrive at a currency having the old florin, called the florin of 200_as_, as the unit. But at the same time a gold piece of 10 florins was allowed. The florin contained 9.63 grms. of silver and the 10-florin piece 6.056 grms. of gold. The ratio was therefore 15.873, whilst in France it was 15-1/2.

Moreover, to respond to the desire of the inhabitants of Belgium, the franc was accepted in the public treasuries, but at too high a rate, viz. at 47-1/2 cents, whereas it was worth only 46.8 cents. The result was that the new 3-florin pieces on leaving the Brussels Mint went to the Lille Mint, to come back in the shape of 5-franc pieces.

The law was languidly carried out. Gold pieces were principally coined, and in proportion as gold was coined it became more and more difficult to coin silver.

In 1830 Belgium was separated from Holland, and it was not till 1844 that the recoining of the old money was seriously undertaken. The monetary law had been already altered in 1839. Side by side with the worn silver coins there were issued 5 or 10-florin gold pieces, which had been coined to the amount of 172-1/2 millions of florins. The worn and clipped silver coins not being available for international transactions, gold formed the basis of exchange. This was regulated not by the florin but by 1/10 of the 10-florin gold piece. All difficulties it was thought could be obviated by adopting a florin of exactly 10 grms. weight, corresponding to the decimal metric system, and .945 fine. As long as the gold coins remained in circulation, and they were of great use while the recoinage was going on, there was thus a bimetallism with a ratio of 1:15.504. From 1842-49 more than 85-1/4 millions of florins in nominal value were called in and were recoined in new silver pieces. The operation cost the State 8 millions of florins, 7 millions being the loss on the old coins.

Before actually commencing the recoinage, the question of standard had been carefully considered. Silver was resolved on. For more than a century and a half the florin had been the unit of all transactions. As the recoinage advanced, further attention was devoted to the necessity of instituting the single standard. By the law of 26th September 1847, the system of single silver standard was adopted. In June 1850 the gold coins were called in. A total of 50 millions, not one-third of what had been coined, was offered by the public. It was sold in 1850-51 by the Government, which thereby lost rather more than 1 million.

[Sidenote: HOLLAND IN 1872]

There is a very noticeable point connected with this reform. The law of September 1847 admitted trade coins in gold by the side of the legal silver coins and fractional money. Besides the ducats, which are still in demand from time to time, there were _Guillaumes d'or_, _double-_ and _half-Guillaumes_. These pieces were inscribed only with the weight and fineness.

This system failed completely. Though the gold Guillaume was coined of the same weight and fineness as the old 10-florin piece, which was much in request, people would not have it. The uncertainty of its value made it unpopular. Between the years 1851 and 1853 only 10,000 Guillaumes, 10,000 half-Guillaumes, and 2636 double-Guillaumes were coined, and since 1853 not a single one has been coined.

All through the Californian and Australian gold finds and until 1872, the price of silver remained stationary for large transactions. Only in small transactions did it exhibit from time to time some slight fluctuations.

From 1847-72 everybody was invariably
able to sell his silver
to the Netherlands Bank at 104 fl. 65 cents.
Bank retained for recoinage, etc 1 fl. 17 cents.
-------------------
105 fl. 82 cents.

which, equal to value of 1 kilogramme of silver, .945, was as by the Netherlands standard.

At Amsterdam also the price of silver did not change.

With the change in 1871 this repose was disturbed. A commission was thereupon appointed, in October 1872, to consider the situation, which reported in the following December. It proposed to prohibit the free minting of silver, and this was enacted by the law of 21st May 1873. As long as there was still a hope of Germany continuing her old system, the commission merely proposed to coin a gold piece side by side with the silver money. When, however, Germany adopted the gold standard, the commission, in its additional report of 26th June 1873, proposed to do the same by the introduction of a legal tender currency of 10- and 5-florin pieces in gold, and the withdrawal of the silver standard coins issued under the law of 1847. This measure did not meet the approval of the States-General. For the moment Holland had therefore no standard of value, the Mint being closed to silver, and gold being unrecognised. The consequent heavy fall in the exchange led to an agitation which resulted in the enactment of the law of 6th June 1875, which opened the Mint to the public for the coining of golden 10-guilder pieces of .9 fine, to be legal tender concurrently with the silver florins at the ratio of 1 to 15.625 (calculated on a quotation of 60.35 price per oz. of silver). The law was only enacted for a year, and in the following May 1876 an attempt was made to pass a bill for the introduction of an exclusive gold standard, and for the demonetisation of silver. The bill was rejected by the First Chamber, and the law of 1875 renewed for another year, and then (by the law of 9th December 1877) renewed "until otherwise determined upon by law."

The result was the permanence of the limping standard--a gold piece with free minting, side by side with silver pieces whose minting is restricted, but gold and silver pieces being alike of unlimited legal tender.

On the 28th March 1877 the States-General passed a law establishing, in the Dutch East Indies, the double standard on the same basis as in Holland, i.e. with the formal suspension of the further coinage of silver. This law was promulgated in Java on the 7th June 1877.

[Sidenote: PORTUGAL IN 1868]

Portugal.

The first law respecting gold in Portugal is dated 4th August 1688.

By that law the price to be paid in the Lisbon and Oporto Mints for a mark of gold (22 carats) was 96,000 reis (533 fr. 33 cents). This same gold was valued at 102,400 reis (568 fr. 88 cents). For a mark of silver of 11 dinheiros (i.e. 11/12 fine) the value was fixed at 6000 reis (33 fr. 33 cents), producing, when minted, 6300 reis (35 francs). The legal ratio at that date (1688) was 1:16 (for purchase price of the metal), 1:16.25 (for the Mint issue rate).

In 1747 the value of a mark of coined silver was changed, and rose from 35 francs to 41 francs 66 cents (7500 reis), an enactment which changed the ratio at a blow to 13.6.

This ratio remained until the beginning of the present century, and led in short to the expulsion of gold from the monetary circulation.

The law of the 6th March 1822 gave to a mark of coined gold a fixed value of 120 milreis (666 francs 666 cents), and the gold piece, whose value was 6400 reis (35 francs 55 cents), had a value of 41 francs 66 cents (7500 reis). This law was repealed shortly afterwards, together with those passed in the Cortes of 1820, but was restored and ratified by another law of the 24th November 1823, and by a special charter of 5th June 1824.

The preamble of the law of 1822 had declared that the equivalence of 13.5 between gold and silver was very far from expressing the proportion of their mercantile value, and that gold did not practically come into circulation on account of the legal value of such money being below its corresponding value in bullion, the legal ratio was therefore raised to 16 in 1825.

In 1835 a new law, of the 24th April, gave the coined silver mark the value of 7500 reis (41 francs 66 cents), which brought the equivalence to about 15.5, a figure which was considered the average rate of exchange of money, whether national or foreign.

On the 3rd March 1847 a new law was passed raising the value of the gold mark to 128,000 reis (711 francs 11 cents), and the gold piece, whose value had been fixed in 1822 at 41 francs 66 cents (7500 reis), rose to 44 francs 44 cents (8000 reis). After this law other legal measures were taken which established the legal ratio of 16.5.

It was these incessant alterations of ratio which led Portugal to abandon bimetallism. The preamble of the law of 1854, which instituted the gold single standard, expresses this, attesting that the circulation felt the lack of harmony and the disorder produced by alterations in the ratios, that the legal ratio being higher than the commercial ratio hampered the transmission of money and burdened all transactions.

The law was adopted unanimously by the Portuguese Chambers.

The International Conferences.

The chief feature of the modern monetary agitation--the international conferences and the attempt at international system--is due to the rapid development of bimetallic theory in France, and to the initiative of the United States, as well as to the universal or world-embracing needs of the situation, and the extension of the domain of international law or morality.

It is a mistake to suppose that this new era dates from 1871, from the change in the German monetary system and the commencement of the wide divergence between the two metals. The formation of the Latin Union was the initial step in the process, although, in a smaller sphere, German monetary history for centuries had been acquainted with Mint conventions between very divergent systems, and had shortly before furnished another illustration in the Conference of Vienna in 1857. The first widely-embracing international conference proper, however, was the outcome of an expression of opinion in the conclave of the Latin Union. It was called at the invitation of France, and met at Paris on the 17th June 1867. The States represented were Austria, Baden, Bavaria, Belgium, Denmark, Spain, the United States, France, Great Britain, Greece, Italy, the Netherlands, Portugal, Prussia, Russia, Sweden and Norway, Switzerland, Turkey, and Wuertemberg. The eight sessions of the conference occupied till the 6th July 1867. All the states except Holland declared in favour of a gold standard. It closed without arriving at any actual or practical conclusions, but the president, De Parieu, in his concluding oration, considered himself justified in asserting that the sense of the conference was in favour of a gold monometallic standard, approximating, as near as the occasions of future Mint change in the various states would permit, to a unit based on the 5-franc piece (620 tale to a kilogramme of gold).

[Sidenote: THE CONFERENCE OF 1868]

Though without immediate practical result, the conference initiated a wide movement. In England it was followed by the appointment of a commission, 18th February 1868, "to consider and report upon the proceeding of the said international monetary conference, ... and to examine and report upon the recommendations of the conference, and their adaptability to the circumstances of the United Kingdom, and whether it would be desirable to make any and what changes in the coinage of the United Kingdom, in order to establish, either wholly or partially, such uniformity as the conference had held in contemplation."

The commission sat from the 13th March to the 8th July 1868, but closed without practical decision, in regard of the difficulties lying in the way of an international coinage. In particular, the proposition of a reduction of the pound sterling to the 25-franc piece was rejected.

In France the whole course of public opinion, both before and after the conference of 1876, and in the concluding examination of the _Enquete_ of 1865-69, ran strongly in favour of gold monometallism, and the opinion has been unflinchingly held and expressed that only the breaking out of the Franco-German War prevented the adoption of that system in France and in the states of the Latin Union. It is hardly too much to say that the conclusion of the war, with the heavy war indemnity which she thereby suffered, took the initiative in monetary legislation out of the hands of France.

Along with the latest reconstruction of her hoary imperial scheme, Germany effected her great and greatly-needed monetary unification and reform. She accomplished it on the basis of the old or French ratio of 15:5, and for two years after the reception of the scheme the price of silver maintained itself moderately. On the 9th July 1873, however, she completed the system by the Legal Tender Law, which demonetised the silver currency, and gradually more than two-thirds of the total old German silver money was called in, melted into bullion, and flung on the market. Concurrently, other changes were at work on the Continent. In 1872 the Scandinavian States followed the example of Germany and adopted a gold in place of a former silver standard. By the treaty of 18th December 1872 a common system was established between Sweden, Norway, and Denmark. For Sweden the conversion of the silver currency was based on a ratio of 15.57, for Denmark 15.43, and for Norway 15.44. Three years later the Netherlands followed suit. By their law of 6th June 1875 and 10th May 1876 they adopted a gold in place of their previous silver standard at a basis ratio of 15.625.

Before the completion of these widespread changes, the great fall in the gold price of silver had begun, and the United States in her silver-producing interests, Great Britain in the interests of her Indian dependency and in those of her trade with silver-using countries, and the whole commercial world generally in the dislocation of international exchange, found themselves menaced by gravest danger.

[Sidenote: THE DEPRECIATION OF SILVER]

Before the inrush of silver to the Mint, caused by such a fall, the Latin Union first limited and then abandoned its coining of the 5-franc piece.

The fall of silver became thereby only the more acute and confirmed. By July 1876 it had sunk to 46-3/4 per oz. Apprehension was universally felt, and in both England and the United States fresh commissions were appointed to consider the question. The English commission on the depreciation of silver was appointed in March 1876, and sat from the 20th March to the 8th May, under the presidency of Mr. Goschen. The investigation turned upon the causes of the prevailing situation, without any attempt at the suggestion of a remedial positive system.

Later, in the same year (15th August), the American Congress voted the appointment of a like commission, to inquire into the causes of the depreciation of silver and into the feasibility of a reconstruction of a bimetallic system, as well as to devise a ratio and measures for the facilitation of a return to cash payments in the United States. This commission resulted in a double report, the 'majority' and the 'minority' report. The majority, comprising Messrs. Jones, Bogy, Willard, Groesbeck, and Bland, recommended the remonetisation of silver and the recourse to a fresh international conference. This latter proposition was expressed in the compromise known as the Bland Bill, the "Act to authorise the coinage of the standard silver dollar, and to restore its legal tender character, 28th February 1878." Section 2 of this law imposed it upon the President of the United States to invite the members of the Latin Union and the other interested nations to an international conference. On the invitation of France this conference met in Paris on 10th August 1878. The American delegates proposed the free coinage of silver in an international agreement and its unrestricted employ on a full equality of tender with gold. The delegates of Belgium, Switzerland, and Norway combated the proposals, and, on the part of England, Mr. Goschen declared that while the complete demonetisation of silver portended a commercial crisis to which no parallel could be found, England could consent to no serious modification of her currency system. Germany was not represented, and in her absence France adopted a waiting policy, and the conference closed with an impotent expression of opinion that, in view of the difference of opinion, it was useless to discuss an international ratio, and that, while it was necessary for the world to maintain the currency of silver, the choice and treatment of each or either metal must be left to the particular monetary situation and needs of each separate state.

It was not to be expected that so lame a conclusion could stand before the needs of the situation. On the 19th May 1879 the landed interest in Germany succeeded in driving the Chancellor of the Empire to suspend the further sale of silver. The circumstance gave fresh hope to the bimetallists, and a busy propaganda was carried on throughout Europe and the States. The renewed international conference of 1881 is to be regarded as an outcome of this movement.

[Sidenote: THE CONFERENCE OF 1881]

On the invitation of the United States and France the third international conference met in Paris on the 19th April 1881. All the European States, Canada, India, and the United States were represented.

France, through her delegates, Magnin, the president of the conference, and Henri Cernuschi, at once and boldly declared for bimetallism. The United States, Italy, Austria, the Netherlands, and British India followed suit. On behalf of their states the British and German delegates declared that no change in the currency systems of their countries could be entertained, but in case of an agreement among the chief nations certain regulations to increase the monetary employment of silver might be devised. Belgium, Switzerland, Greece, and the Scandinavian kingdoms declared against bimetallism. After a recess from the 30th June to the 19th May the conference closed on the 8th July 1881 with a nominal adjournment to the 12th April 1882, so as to give room for possible currency legislation in the meantime. On the day fixed, however, the conference, as need hardly be said, did not reassemble.

Practically, in the interval between the second and third of these international delegations, the monetary situation had not perceptibly altered. The price of silver in 1878 had been 52-9/16, in 1881 it was 51-11/16: the general level of prices had, if anything, slightly improved, while the production of silver had not materially increased (from 2,551,000 kilogrammes in 1878 to 2,593,000 kilogrammes in 1881), though that of gold had certainly decreased. The close of the conference was, however, followed by a strong bimetallic agitation in England and Germany, which found united expression in the Bimetallic Congress at Cologne in October 1882.

This congress unanimously adopted the following resolutions:--

"That in order to the establishment of a firm ratio between gold and silver, it is desirable for England and Germany--

"1. To increase the employment of silver by minting full tender silver by the side of the divisional restricted tender silver.

"2. That Germany should withdraw all gold and paper below the value of 10 marks [and replace it by silver].

"3. That Germany should sell no more silver.

"4. That the Bank of England should put in practice the clause of her charter which allowed her to employ silver as part of the bank reserve."

The conclusions of this congress had, however, no practical influence on the course of policy of either nation.

In the United States a parallel though more interested agitation was conducted, centring round the yearly proposed repeal of the compulsory minting clauses of the Bland Bill.

[Sidenote: THE ENGLISH GOLD AND SILVER COMMISSION]

In England the commercial depression, consequent upon falling prices and the dislocation of exchanges with India and the East, ran its full course, and gave fresh ground for activity to the then recently formed Bimetallic League.

In the course of 1886 silver had sunk to 42d. per oz., and when the royal commission on the depression of trade and industry closed its investigations, with the expression of a desire for an inquiry into the state of the precious metals, the British Government only too gladly acceded. On the 20th September 1886 the royal commission "to inquire into the present changes in the relative values of the precious metals" was appointed. Its final report was made in October 1888, and, as is well remembered, was of a divided nature. All the members of the commission agreed that the action of the Latin Union in 1873 broke the link between gold and silver, which had kept the price of silver, as measured by gold, constant at about the legal ratio, and thereby left silver exposed to the influence of all the factors which go to determine the price of a commodity. On the question of bimetallism, in reference to the actual and to any possible currency system, the commissioners disagreed, and made separate reports. Lord Herschell, Sir C.W. Fremantle, Sir John Lubbock, Sir Thomas Henry Farrer, J.W. Birch, and Leonard H. Courtney expressed themselves adversely.

"Though unable to recommend the adoption of what is commonly known as bimetallism, we desire it to be understood that we are quite alive to the imperfections of standards of value, which not only fluctuate but fluctuate independently of each other, and we do not shut our eyes to the possibility of future arrangements between nations which may reduce these fluctuations. One uniform standard of value for all commercial nations would, no doubt, be a great advantage. But we think that any premature and doubtful step might, in addition to its other dangers and inconveniences, prejudice and retard progress to this end.

"We think also that many of the evils and dangers which arise from the present condition of the currencies of different nations have been exaggerated, and that some of the expectations of benefit to be derived from the changes which have been proposed would, if such changes were adopted, be doomed to disappointment.

"Under these circumstances we have felt that the wiser course is to abstain from recommending any fundamental change in the system of currency under which the commerce of Great Britain has attained its present development."

From these opinions dissent was directly expressed in Part III. of the report by the remaining members--Sir Louis Malet, A.J. Balfour, Henry Chaplin, Sir D. Barbour, Sir W.H. Houldsworth, and Sir Samuel Montague.

[Sidenote: DISSENT FROM REPORT OF COMMISSION]

"We cannot doubt that if the system which prevailed before 1873 were replaced in its integrity most of the evils which we have above described would be removed; and the remedy which we have to suggest is simply the reversion to a system which existed before the changes above referred to were brought about--a system, namely, under which both metals were freely coined into legal tender money at a fixed ratio over a sufficiently large area.

"The remedy which we suggest is essentially international in its character, and its details must be settled in concert with the other powers concerned.

"It will be sufficient for us to indicate the essential features of the agreement to be arrived at, viz.:--

"1. Free coinage of both metals into legal tender money.

"2. The fixing of a ratio at which the coins of either metal shall be available for the payment of all debts at the option of the debtor.

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The History of Currency, 1252 to 1896Chapter III (4)

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