The herald., 1896-07-18
EFFECTS OF A GOLD PREMIUM

Mr.. Moreton Frewen. the eminent
English bimetallist, in long and lumin-
Gus paper printed in the London Finan-
cial News, addresses himself to the the
sis: What is the argument for single
handed free coinage by the united
States?" One of TWO things will occur,
he says, either of which will rebound
to our advantage as a debtor country,
viz: bimetallism for the whole world,
or, failing this, there will be such
gold premium in New York as today
assists exporters in Russia, in all Asia
and in nine-tenths of South America
Touching the effect of a gold premium,
he says:
This gold premium, unlike protect
i've tariff, stimulates the exports or the
United States. while acting, just as
protective tariff does, to reduce I'M
ports; therefore either free coinage Will
give bimetallism to the whole world, or
failing this it will tend to secure the
excess of American exports over I'M
ports, which is the only possible alter
native to further gold loans. leading up
to ultimate insolvency. These, then.
are the arguments which favor nom
approaching, or even a depreciating
currency in the United States. On the
other hand, l do not see, qua its econ
onic aspects, what possible advantages
can acrue from gold standard and
gold currency. A gold currency. in
America cannot raise-it cannot, In
deed, fail to further depress-the Euro
pean exchanges with S00000,o00 of
Asiatic exporters. 1t cannot, therefore,
fail to still further throw the balance
of trade against the United States, un-
less, indeed, by further contracting the
American currency, 1t forces down prices
there to such point as to contract vio
lently Americas import trades. And
n pretty locke out for England that! In
short, the clamor of our press that
America shall become gold monometal-
lie seems to involve either the insolvency
of our greatest debtor or the decline
of our export trades to America, or both.
There is this further point which you
emphasize-that if America copies our
gold standard confidence will be re-
stored" and we will lend her more
money; thus aggravating in the future
the very disease from which she suf
fers. On the other hand, if she goes
to free coinage we shall, in panic, re-
turn her securities, and thus sell her
back her railways and industrials at
half price, just at that very moment
when, her legislation having sent the
rupee, the tael and the yen to nearly,
or quite, par, the export trades of the
Orient will be cut into, and the eX-
ports of the American farm, mine and
factory will take their place. In other
words, because Of the inane injunc-
tions of a portion of the London press.
our investors there will be so misled as
to sell American stocks to Americans
at that very moment when in America
prosperity is about to set in. You re-
mark that I describe America as the
greatest debtor nation on EARTH, and
you add that one fact is conclusive
against taking any course tending to
lower its national credit" But would
free silver" lower its credit. even
should it involve a gold premium? 1t
certainly would not, if trade and agrl-
culture there improved. and the rail-
ways did a larger business at better
rates The credit of a country 1s not
determined by its currency but by IT'S
prosperity. Thus India's credit, the
rate at which she borrows, has greatly
improved side by side with the deprecia-
ton of her currency. So also has Rus-
sia's. OF the Argentine and Brazil 1t
is not too much to say that inconvert1-
BILE paper issues, and the stimulus thus
afforded their own exports because OF
depreciation, has alone enabled these
countries to continue paying the inter-
est on their foreign loans. And what IS
lacking in the United States is not
really the lenders confidence in the
currency; it is rather the conviction OF
both borrower and lender that money
invested in a farm or a factory Will
earn no profit; that the pains and per-
lis of a fresh resumption" period are
lust ahead: and that while prices over
there are even now depressed below
the point of possible profit, they must
be depressed % per cent further yet be-
fore imports, under any tariff, can be
so checked as to permit gold to remain
at home in the currency. And further
than this, let me ask how, If imports are
to be checked by a high tariff, is the nee
essary revenue TO be secured for the fed
eral government? If, then. as l believe.
the critical position of the United States
results from the present conditions of
exchange between Europe and Asia, and
can only be remedied by some action
which will raise those exchanges, much
may be said for the policy of free silver,
even should that policy involve a gold
premium in New York. 1t is not the eX
porter from America who will be hurt
by that premium it is the exporter to
America-in other words, the English
manufacturer. But let me go further
and ask your reasons for believing that
the United States is unable to main
tain the parity of l to 49, assuming as we
may assume that if the Americantmints
open to free coinage of dollars we shall
open mints again to the free coinage Of
rupees. Are there any scientific grounds
for the conviction so generally held that
such monetary union as this bimetal-
lism in America and silver monometal-
lism in India would fail to maintain the
worlds parity? ] do not venture, of
course, to dogmatize as to ths: but the
problem is so interesting and the exper-
iment by the United States-whether
next year or in 1901-is so extremely
probable that it is worth while for those
who hold that the experiment would be
attended with disaster to offer some
thing for our consideration more con-
vincing than prophecies.
If ever man was nominated for a
high office unDled ped ana mira p,r,a1a5