The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1895-04-13
THE RATIO BETWEEN SILVER AND
GOLD.

THE RATIO BETWEEN SILVER AND
GOLD.
The fact that the economic world is
as much subject to fixed laws as is the
moral or the natural world is shown by
the constant use of the word ratio in
the discussion concerning bimetallism
and its vital significance in practice.
The selection Of this word to express
the parity relation between gold and
silver is itself significant. Primarily it
is mathematical term and is used by
mathematicians as synonymous with
quotient, or the number of times one
quantity is contained in another. Some
writer's on political economy expand the
word into the phrase ratio of ex-
change, as expressing the proportion
in which a given quantity of one COM
modify may be exchanged for given
quantity of another. In its correct use
it signifies a relation automatically
exact.
When the founders of the government
got ready to begin the coinage of money
the first thing they did was to endeavor
to ascertain as nearly as possible the
ratio of value between gold and silver
that would maintain the parity and cir
culation of the coins of both. For sew
eral years after the revolutionary war
there was no gold or silver coin in the
country except of European coinage and
of different values. Thomas Jefferson in
his notes on the establishment of a.
money unit, laid before Congress in
1882, said:
The proportion between the values of
gold and silver is a mercantile problem
altogether. 1t would be inaccurate to fix
it by the popular exchanges of a half joe
crowns, or five Louis for twenty-three dol
lars. The first of these would be to adopt
silver; the second the French, the third
mere popular barter, wherein convenience
is consulted more than accuracy. The legal
i51s for /; in France IS for l. The Span
iards and English are found in experience
and to lose their silver The French have
a greater proportion OF silver. The differ
epce' at market has been on the decrease.
The financief states it at present at 141a
for l. Just principles will lead us to disre-
gard legal proportion altogether; to inquire
countries with which we shall principally
be connected in commerce, and to take an
average from them Perhaps we might
above par for gold, considering neigh
borhood and the commerce with the sources
high price of gold in Spain has to draw
thither all that of their mines, leaving sill
1t is not impossible that Is for / may be
found an eligible proportion.
In this one notes, first, Jefferson's ex-
IRENE solicitude to ascertain the true
and exact ratio of value between the
two metals; second, the entire absence
of sentiment. the disposition to treat
the question as one of cold business,
and third, the distinct recognition Of
the fact that our prospective CONNER
cial relations with other countries
should be taken into account, although
at that time it took more weeks to cross
the ocean than it now does days.
They did not decide things hastily in
those days. Nine years later, in May,
1871, the coinage of money not having
yet begun, Alexander Hamilton, then
Secretary of the Treasury, made a re-
port to Congress relative to the estab-
lishment of mint, in which, among
other topics, he discussed the ratio
which ought to subsist between gold and
silver. He said:
One consequence of overratng either
metal in respect to the other, is. the ban
III.
Qamilton understood Gresham's law
If two countries supposed, in of
Whch 1se II oba goa 70 go SILVER en
worth more silver less, in one than in the
other, it is manifest that in their reciprocal
payments each will select that species
which it values least to pay to the other
where it is valued most. Besides this the
dealers in money will, from the same
exchange of the metals between the two
mas 20 nfh ar in yara NAL hat ff,o
greatest part of the gold would be collected
in one and the greatest part of the silver
in the other.
Hamilton discussed the question of
ratio at considerable length on the line
above indicated. He analysed the ratios
then prevailing in different countries of
Europe and gave full weight to our
commercial relations with them. He
gave encoura cement to the now
prevalent idea that the relative COM
mercial value of the metals can be over
ruled by law. There can hardly be
better rule in any country for the legal
proportion" he said, than the market
proportion if this can be supposed to
have been produced by the free and
steady course of commercial principles.
The presumption in such case is that
ing to it's intrinsic utility, in the general
system of money operations" Hamilton
finally decided upon and recommended
to Congress the ratio of 1 to Is, and it
was adopted. This represented as near
ly as possible the actual commercial
ratio of gold and silver throughout the
world at that time. When jefferson
and Hamilton wrote one pound of pure
gold would exchange in the markets of
the world for fifteen pounds of pure
silver, hence they recommended the
ratio of l to Is. To-day one pound of
pure gold will exchange in the markets
of the world for thirty pounds of pure
silver. Yet there are people in the
United States clamoring for the free
coinage of silver at / to Is. What would
jefferson and Hamilton have thought of
a proposition for the free coinage of sill
yer by the United States alone at l to
~? Yet that in their day would have
been no more preposterous than an at
tempt now by the United States alone
to maintain bimctallism at l to is. and,
considering the vastly greater CONNER
cial interests of the present day, not
n icaS