The republic. [volume] (Washington [D.C.]) 1849-1853, 1851-01-16
From Hunts Msrehanls' Magazine for January.
California Goldr
WITH REFERENCE TO THE RELATIVE MARKET VALUE
OF SILVER

California G0ldf
WITH REFERENCE TO THE RELATIVE MARKET VALUE
OF GOLD AND SILVER
Two Of the consequences of the immense products
OF California gold mines, which ventured to sug-
gest in the July number of the Merchants Maga-
zine, have already began to manifest themselves
One Is the increase of the currency from the in
creased ability of the banks To enlarge their loans
and DISCOUNTS and the other is alteration in the
relative value of gold and silver or, in other Words
a depreciation of gold.
The first Of these facts ia shown not merely by
the general rise of almost every species of stocks
and in most places of real estate, but by the in
creased dividends of many banks, and in the
increased profits Of all those institutions.
This consequence OF the abundance Of gold is but
temporary. Ii the banks have not already reached
the maximum amount OF their loans, they will
reach IT. Nor can those loans be much increased
without the danger of reaction, and a consequent
dmnution OF their specie, their issues, and their
profits.
The second consequence is manifested by the
growing scarcity OF silver 30 as in some places to
command premium, and the preference shown
by the banks to pay in gold rather than silver.
This consequence, produced by the relative album
dance OF gold, must increase with the increasing
cause. If the accessons of gold continue to be
great as they have been-and they promise to be
much greater-the premium on silver which ia not
more than two or three per cent, will get to
be four or five per cent. and go on increasing,
al the Legislature applies the remedy.
The Inconvenience of this discrepancy between
the relative value of the two metals the mint and
teaches us that wherever such discrepancy exists,
the undervalued metal will be withdrawn from
circulation 1t will be either exported to countries
where 1t Is Justly estimated, be melted up
boarded. This effect, which just theory would
lead us to expect, we have twice experienced in the
United States When the first mint law passed
IN 1881 the proportion it established between gold
and silver was as fifteen to But the proportion
between them in those European countries with
which we principally traded was only about four
teen and half to one-silyer having been thus con-
mr. lnnd nv Mr. uarp iIfnp fore
special reasons assigned by him. The consequences
OF this discrepancy was a comparative scarcity of
silver 30 that those who required it for the Chinese
trade were compelled to give premium of five per
cent. for it, But in the course Of time by gradual
alteration in the supply the demand OF one or
Doth OF these metals, their relative value
changed and gold became worth more than fifteen
times as much as silver. That metal being then
undervalued by law, became scarcer and scarcer,
until finally the eagles, which had been thrown
ofgeneral circulation, became worth 10 GO, six
per cent more than their mint price This evil con-
tlnued until 1t found remedy in the act of 1884,
which raised the price of gold to sixteen for of
silver BY that price gold is now, second time,
valued too high. But it is very desirable to have
both metals in circulation-gold for large pay
ments, and silver for smalland, of the two silver
ID much the most important, not only because it
carries ON the small daily traffic of all classes, but
because bank notes are much better substitute for
gold than for silver. From the present state of
things, then, we are likely to be deprived of that
species of our metallic currency that can be least
ened evil is both certain and easy.
When Congress decided making both gold
and silver standards of value and legal tenders, it
was necessary to determine the relative value of
the two metals to ascertain what the debtor who
had the option of paying in either metal was bound
to pay, and the creditor bound to receive But the
proportion thus fired by lar is always liable, after
"A few years, to vary from the proportion between
the market values of these metals. Thus, in less
than sixty years, we have seen three instances Of
this variance in the United States, silver, and
tuyfr hpph Tod
this Is the case the other metal is comparatively
thrown out of circulation. The of the evil,
then, is in making both metals standards of value,
or in attempting to fix that by law, which is, and
always must be, mutable.
The advocates for double standard admit its in.
conveniences, but insist that must submit to
them if we would have the benefit OF both metals
currency. But this assumption ID contradicted by
the experience of other countries as well as our
own In Great Britain, gold ia the only legal ten
der Tor all sums above forty shilings; yet no one
ever heard OF a creditor refusing to receive ten,
twenty, even fifty crowns in payment of debt.
On this subject, Ricardo, practical banker, and
successful theorist on the subject Of money says
cit appears, then, that while each Of the two
tails was equally a legal tender for debts of any
amount, we were subject to constant change in
the principal standard measure of value. 1t would
sometimes be gold, sometimes silver, depending
entirely on the variations in the relative value of
the two metals and, at such times, the metal that
was not the standard would be melted and with
drawn from circulation, as Its value would be
convenience which it was highly desirable should
be remedicd; but slow is the progress of inn
provement that, though it had been unanswerably
demonstrated by Mr.. Locke, and had been noticed
by all writers on the subject of money since his
day, better system was never adopted till the last
session of parliament, when it enacted that
gold only should be a legal tender for any sum ex-
ceeding forty shillings." (Ricardo's Pol. Econ,
chap. xxy.)
In Russia there is but one standard of value and
legal tender, which is silver. Gold, nevertheless,
readily crculates there, according to her able po
litical economist, Storch, who says: I" Whenever
the engagement to pay is in money and not in
paper the price of every thing is regulated by the
value Of silver but gold is not that account the
less received IN payments, provided IL be valued in sill
per currency according to the rate established by the
course If trade Neither of the contracting parties
being able to gain or to lose in giving receiving
one metal or the other, it is equally indifferent to
both in what money payment is made, and the t,uo
metals circulate currently toihout intring depre
cating one another" (Storch, Econ. Pol. Lib. ",
chap. viii
We have had abundant evidence of the same fact
in the United States. From 1897 to 1906 no for.
egn coin, except Spanish milled dollars and parts
thereof" was here legal tender yet in all that
time the gold coins of England Portugal, Spain,
and France, continued to form part of our metallic
circulation. Again; bank notes which constitute
our principal currency are not legal tender
They, indeed, are exchangeable for the coins
which are a legal tender; but foreign coins at
least equally exchangeable; and they, moreover,
have an intrinsic value which bank notes do not
possess. There is then no ground for the appre
hension that gold coins, with which the
whole people have long been familiar, will cease to
circulate when they shall have ceased to become a
legal tender.
Nor is there any reason to expect, when we have
n single standard and legal tender that one metal
will be generally scarcer than the other. There
will, indeed, be fluctuations in the relative guam
titles but they will be transient and short-hved
every excess having tendency to correct itself,
and to restore that equilibrium between the two
metals which is suited to the wants of trade and
the circumstances of the country. Repeal the
law by which metal is artifcially elevated |
in price and the other depressed, and there would
be no more reason to expect permanent scarcity
OF either metal than of coffee, sugar, iron, any
other commodity. Indeed, it may be remarked
here by the way, that in monetary speculations
we are alwaysin danger oferror five do not regard
gold and silver simply merchandsc-a favor
itc merchandise, indeed, because it is SO readily
exchangeable for every other commodity; but it is