The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1895-04-15
HOW THE GRESHAM LAW OPER-
ATEs.

ATEs.
The bright, but as the Journal thinks
on the silver question mistaken, Frank
fort News surrenders the editorial page
in it's last issue to a communication
from ]. B. Cheadle, who is more mis-
taken than he is bright on the same
question. The communication has the
heading, 'sStill After the Journal and
the writer gets after the Journal by de-
claring in his first sentence that coin
money is not currency in the general
meaning of that term 1t seems a
waste of time to expose the mistakes
and fallacies of writer on the money
question who says that coin money,
that is. gold and silver. are not cur
rency. Every person who understands
the meaning of the word currency
knows they are Currency in money
sense means that which is current, and
includes all kinds of money in circula-
ton. The Century Dictionary defines it
as that which is current as a medium
of exchange; that which is in general
use as money or a representative of
value" Whether money consists of gold
and silver or of paper. If it circulates it
is all currency If Mr.. Cheadle is still
in doubt on this point let him write to
the treasurer of the United States or
the Director Of the Mint and ask If gold
and silver coin Is currency. If they
think the question worth answering they
will write him that it is.
The assertion is made the basis of an
Argument that the well-established
Gresham law that cheap currency will
always drive out and supplant a SUI
perior one does not apply to gold and
silver because they are not currency.
On the strength of this assumption Mr..
Cheadle asks. How could silver drive
out gold?" We answer just as ire
deemable or inconvertible paper money
drives out both gold and silver. Free
coinage of gold and silver by the United
States alone at the present ratio would
result in the expulsion of gold by silver
as surely as water seeks its level. When
men discovered that with a twenty-doI-
lar gold piece they could buy enough
silver bullion to make thirty or forty
legal-tender silver dollars, and that the
government would coin and stamp them,
all the gold coin would be turned into
silver. and gold would disappear from
circulation. Another effect would be
that all foreign exchanges and remit
tances would have to be made in gold,
thus causing a continual drain of that
form of currency and eventually driving
it out entirely. Something like this has
happened once before in this country.
When the ratio of / to Is between gold
and silver was established in 1892 gold
was slightly undervalued. The result
was that during the next twenty-five
or thirty years silver quietly displaced
and supDlanted gold. In 1921 Congress
appointed committee to inquire into
the expediency of increasing the rela-
tive value of the gold thereafter to be
coined. The report was submitted to
the House Feb 2, 1921 The committee
said:
They are of opinion the value Of Ameri-
can gold, compared with silver. ought to be
somewhat higher than by law at present es-
tablished. On inquiry they find that gold
coins, both foreign and of the United States.
from the best calculation that can be made
there Is reason to apprehend that they will
ought not to be a matter of surprise, under
our present regulations, that this should be
the case. There remains no longer any
doubt that the gold coins of the United
States are. by our laws, rated at a value
lower than in almost any other country in
comparison with that of silver. This occa-
sons the gold to be constantly selected,
when 1t can be obtained. in preference to
from this to foreign Countries, and, at the
same time. prevents those who have occa-
sion to remit to the United States from
doing 1t in gold. Hence, there is a continual
and steady drain of that metal from this
country. without any corresponding return,
any of it among us. There have been
coined at the mints of the United States
nsas anS Il ga poron Is q Y
at this time be found within the United
States. y 1t now becomes question
ton, whether a gold currency be at all de-
sirable, or whether it should wholly give
place to silver.
The processes here described continued
until gold was virtually driven out of
circulation. and remedy was sought
In a change of the ratio.
In that case a very slight fractional
Generalization Of silver had the effect
under free coinage of driving gold out
of circulation and out of the country.
That the free coinage of silver by the
United States alone at ratio of / to
16 at this time. when the market ratio
is / to so. would have the same effect
there is not particle of doubt. If it is
desirable to get rid of gold and place
the country on an exclusively silver
basis unquestionably that is the way to
do it, but if we want to maintain BIZ
metallic currency and have free gold as
well as free silver coinage there must
be readjustment of the ratio by inter-
snational agreement. The Journal be-
lieves that intelligent public opinion in
Europe as wen as in this country is
rapidly moving in that direction.