St. Paul daily globe. [volume] (Saint Paul, Minn.) 1884-1896, 1894-02-06
THOUGHTS ON CURRENCY.
Written for the Globe.1
CHAPTER vi.
TuE pKIcE oF sILyEp.

TIE PRICE OF SILVER.
Why is il that twenty years ago an
ounce of silver was worth 81 20 in gold,
while now the same ounce is worth only
little over 60 cents?
Many people have been answering the
question by saying, ''fhe demonetiza-
ton of silver did it," Is this true? Let
us see. What determines the price of
silver or of anything else during series
of years? Those who don't stop to think
much will reply. 'Wby. supply and de-
mand, or course."S OF course, supply
and demand do no such thing. Think it
out for yourself. Suppose great in
crease in the demand for silver
Will that permanently increase the
price? No. 1t may cause the price
to rise, it is true; but that very
rise will greatly stimulate produc-
ton. More silver will be taken out of
the earth in order to get the extra profit
which the high price gives. This new
silver coming into the market will bring
the price down until there is no excessive
profit in producing silver more than in
producing other things; in other words,
until the price of silver is not much. if
any, above the cost of production. Here
supply and demand will meet at price
that will fairly cover every item of cost
no more.
Suppose, in their desire to secure the
large profits due to high prices, men
should rush into silver mining and
overdo the whole business? Suppose
the supply of silver should thus become
enough greater than the demand to
glut the market and bring the price
down far below the cost of production,
what then? Why, production gould be
checked. The excessive supply would
be worked off-used up. Supply and
demand would meet again at the cost of
production, and things would move on
regularly until some other disturbing
element should come in to considerably
increase or diminish price.
Indeed, any excessive permanent de-
mand for any product is more likely to
bring about permanent reduction than
permanent increase in price. The
reason is plain. the increased demand
makes production possible OH a larger
scale, stimulates inve ntion, economies
time and space, and thus finally reduces
cost, and consequently brings down the
price.
Here, then, we see the natural law
that governs the price of silver Or of
anything else that can be readily pro-
duced. The price is determined by the
total cost of putting the product into
the hands of the consumer-the total
cost to those producers who are working
under the hardest conditions, but whose
product must be had to meet the de-
mand.
The price of anything can never long
remain much below nor much above
cost. Changes III supply and demand
never affect price very much nor for
very long time. Such changes can only
cause prices to fluctuate up or down,
but such fluctuations always tend to
disappear and bring price and cost of
production together.
We are now prepared to answer our
first question: why is it that twenty
years ago an ounce of silver was worth
S1.29 in gold, while now the same ounce
is worth only little more than 65
cents" The cost of producing silver
has diminished as compared with the
cost of producing gold. 1t takes less
effort to get an ounce of silver out of the
earth than formerly. New mines of
great richness have been opened, i'm
proved machinery bias been introduced.
As a natural consequence the price,
measured in gold, has fallen.
Ii the price is now below the cost of
production, as many claim. don't get
excited about it; possess your souls in
patience. Production will fall off until
the price comes up to the cost. and there
1t will stop. You can't keep it very
much above, for production will then
be stimulated. the supply will become
excessive, and the price will fall.
You can't keep 1t very long much
below cost, for production will fall Off
and the price will rise; or else improve
ments will be made that will bring the
cost down to the lower price.
If the price of silver, or of anything
else. for that matter, regularly falls for
series OF years, that is pretty good
evidence that the cost of production has
fallen.
Cost of production determines general
prices.
Changes in supply or demand, or
both. simply cause temporary tiuctua-
tions in price.
These facts constantly borne III mind
will save us from many wrong con-
clusiors in discussing the silver ques-
ton.
The next paper will deal with the So
called characterization of silver.
G. ]. BUELL..