The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1897-08-10
A MATTER OF SUPPLY AND DEMAND

A correspondent in Columbus has been
reading the speech of Senator Chandler.
which, instead of affording information,
seems to have caused doubts which have
led him to ask several questions. The first
is as follows
From 1887 to 1874 the ratio between gold
and silver was approximately 155. During
this period the percentage of the prOduc-
ton of the precious metals varied from %
per cent. of gold to rs per cent of silver, to
20 per cent. of gold to p per cent. of sill
yer; and yet the ratio remained COMPARE
lively stable. Now ! had always supposed
that the cost and production of the metals
determined their relative value. How do
you explain the permanence of this ratio;
and what caused it to change after 1873?
The commercial ratio to which the writer
alludes varied from year to year during
the period named. In 1902 it was 1852 to L.;
in 1772 it was 1442 to /; in 1915, 1892 to 1.
The percentage of silver and gold making
up the precious metals has had little to do
with the respective values for the reason
that the quantities of both were so small
that there was a demand for all of both
that could be produced. To illustrate: The
price of corn would not be materially af-
fected by the quantity of wheat raised the
same year. 1t is when the quantity of
corn raised is much larger than used as
was that of last year. that the price falls.
1t falls because the crop is in excess of
the demand. The silver casuists have
fooled US long time about the ratio be-
tween the production of gold and silver
from year to year when it has nothing to
do with the case. Note the figures: Be-
.
the worlds silver mines was 20, 313 237
ounces; during the five years, 1876, it
was 35, 4O1 972 ounces. During the five years
closing with 1870 the output averaged 49,
05l, 5S3 ounces, but during the five years
which followed the output rose to an annual
average of $751;, O14-three times as much
as the annual output in any year prior to
1880 and six times as much as any year
prior to 1900 1t was during this period that
the price of silver began to WAIVER. The
output of silver leaped from year to year
thereafter. 1t was SO, 1897, 290 ounces in 1886;
1GS, S27606 ounces in 1888; 1877, ,919 in 1892;
1877, 1922 SCI in 1894. The output would have been
much greater if the price could have been
sustained. The price has not been sus-
CdlIlStr DeCduS0 the output mas OutStrlpped
the demand. Even in 1873, when the output
but one-fourth of that of 1894 the
price began to fall because of the supply.
If the annual yield of corn should be
quadrupled without any wider market what
would become of the price? The cost of
production will affect the supply, but the
demand in connection with the supply
makes the price. The second question is:
If value cannot be created by law then
how is 1t possible for one nation or any
rumber of nations to maintain the free
coinage of gold and silver at any fixed
ratio when the quantity of these metals is
constantly changing in the relative
amounts, thereby influencing the market?
In other words, how is bimetallism at
tempted by any number of nations pos
sble?
Speaking for itself the Journal is of
opinion that the free coinage of both
metals cannot be attained unless the mint
ratio conforms very nearly to the market
ratio of the two bullions. Bimetallism, on
the contrary, is the largest possible use
of both metals as money. In this coun-
try we have bimetallism
The correspondent further asks if the
use of the metals as money adds to their
value. Coinage, as one of the demands
upon the supply, would affect the price of
silver. For years the coinage value of gold
the world over has been equivalent to
about 500 an ounce, and that is its in
trinsic value.