Crawford avalanche. (Grayling, Mich.) 1879-19??, 1896-07-30
Exchange

LII VIII De- seen tnat the rates realized
in the two standards differed but slight
iy until 1876, when the fall of exchange
began. Before 1875 they differed on the
average by . per cent on the principal,
while the average difference beginning
in 1875 was z per cent. From 1888
the exchange fell more rapidly, and the
difference in the two interest rates rose
further, amounting in one year to IL
per cent. The two bonds are issued by
the same government, possess the same
degree OF security, and are quoted side
by side on the London market. The diff
ference in the two rates means that In
vestors will pay higher relative prices
FOR gold bonds than for silver bonds,
whose principal shows tendency to
depreciate. If we in America should
adopt the silver standard our bonds
held in London would be treated in pre-
clsely tho same way.
In our own country special emphasis
may bo given to the period 1S1J-79, dur
ing which time resumption of specie
payments was being accomplished and
prices were falling with great rapidity.
The rate of interest in New York was
then lower, not only than before 1875,
but even than after 1879 In spite Of the
steady inflow OF foreign and growth Of
native capital.
In short all the facts go to show that
the rate of interest tends to adjust it.
: self to the appreciation or depreciation
OF the monetary standard in such n
manner as to correct in large measure
those gains or losses to the contra citing
parties, which would otherwise arise
from variations in the purchasing pow
er of money.
TO see the influence of changes in the
purchasing power of money we suppose
one-year debt contracted and paid
within the period of 1851. For every
81 200 the borrower repaid at the end
OF the year 81 ,052, but owing to the fall
Of prices during the year, il the 81, ZOO
at the beginning would buy 1000 units
OF (wholesale) commodities. the S1,052
1T the end would buy 1,073 units. In
1S49-57, for $1,000 he returned year
later 81 ,0S2, which, owing to the rise in
prices, was as IL for 1000 units Of COM
.modities he had paid back 1,041 units.
This would look as IL the borrowers
lot were harder during recent years
than before the war, in spite Of the re-
iuccd interest. This would be the case
II the cost Of producing commodities
had not changed. The borrower in the
period 1851, for loan worth 1000
days labor, had to pay back year later
the equivalent Of 1,04S days labor,
while q borrower in the period 1857,
for 1000 days labor paid back 1,O70
days labor; that is, the debtor during
the period '75-91 repaid his loan with
less OF human effort than in the earlier
period.
The main point, however, is yet to be
mentioned. The full benefit Of the gold
standard In reducing interest is not en-
joyed by the American debtor for the
simple reason that he allows that stand
ard TO be in debate. The silver agita-
ton has become most powerful agent
, in raising the rate Of interest against
linn. No one need be reminded that our
government was recently offered loan
OF 81 odd millions at 3 per cent, II gold
were texpressly stipulated, but at 3%
ger cent. II the repayment were prom
ised sin coin" Congress refused to
make the bonds pm yable in gold, and by
so doing added 1G millions In interest to
our national debt. This Is but sample
OF the manner in which the would-be
champions OF the oppressed debtor are
doing everything in their power to add
To his burdens. The city OF Cincinnati
more recently furnished a similar ex-
ample in funding loan. In fact, II. was
well known that municipal bonds not
specifically payable in gold can be dis
POSED OF only on terms disadvantageous
TO the city. The. very existence OF the
gold clause Is proof positive that invest
ors are'wiliing to pay something for II.
1f Congress- should pass law commit
ting this nation to a gold standard they
would at one stroke cut down the inter-
est on new contracts of all kinds. No
means Of helping the debtor class could
be. surer or more speedy than this.
Gold Clause Bccomiuv Popular.
There were two interviews printed
In the News yesterday which ought to
,set people thinking. 1t was shown In
one OF these interviews that the banks
bare already beginning to call In their
papcr even papcr which Mt other times