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1829: GALLATIN TO MARTIN VAN BUREN. - Albert Gallatin, The Writings of Albert Gallatin, vol. 2 [1879]

Edition used:

The Writings of Albert Gallatin, ed. Henry Adams (Philadelphia: J.B. Lippincott, 1879). 3 vols.

Part of: The Writings of Albert Gallatin, 3 vols.

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GALLATIN TO MARTIN VAN BUREN.

New York, March 4, 1829.

Dear Sir,—

I would accept the mission to France, which the state of my private affairs at the time compelled me to relinquish, and which, as Mr. Brown has informed me, is now vacant; the duties require no more labor than I can easily perform, and the office would be acceptable, partly on account of my health, principally from my earnest wish to place my eldest son James, and the hope that, if appointed, I might be permitted to take him for secretary of legation. But I would not have thought of it had I not believed that, considering my familiar knowledge of the relations of the two countries, that of the language, the proximity to the Netherlands, perhaps that to England, and my standing with the French government, the appointment might in certain respects be attended with some public advantage. I say this without any prejudice to the equal or higher claims of others, and would not even have mentioned the subject had I not found that an opinion prevailed at Washington, correct only in relation to England, that I would not on any consideration accept again a foreign mission.

GALLATIN TO C. P. VAN NESS.

New York, 22d March, 1829.

Sir,—

Your letter of 3d January reached Washington after I had left it, and was after a while forwarded to me. An accident to my right hand prevented an immediate answer, which has since been delayed longer than was necessary or proper. I pray you to excuse this, and to ascribe it to anything but the respect justly due to you.

When at Ghent it was not known to me, and I believe my colleagues to have been also unacquainted with the fact, that the boundary-line between the then provinces of New York and Quebec had been officially surveyed, with the sanction of the Crown and by the competent provincial authorities. The treaty accordingly assumes and declares as a fact what was not really true, that no part of the line from the source of the river St. Croix to the river St. Lawrence had been surveyed. I perceive no other circumstance on which to ground our claim to the old line; and the argument, founded rather on equitable considerations, is far from being conclusive. I need hardly add that the pretension drawn from the geocentric latitude is altogether untenable, and that it is a matter of regret that it ever was advanced.

I did not perceive any trace of the embarrassment to which you allude in your decision respecting the north-westernmost head of the Connecticut River. And although it is true that our abandoning the claim to the old line along the 45th parallel of north latitude would remove one of the main objections to Hall’s Stream being considered as the branch of Connecticut River, designated by the treaty, I still incline to the opinion that, independent of that, it will be safer to insist on Indian Stream. I have, however, on the map agreed on at London, laid down Hall’s Stream as the boundary claimed by the United States; and whether this or Indian Stream should in our statement be ultimately insisted on is a question not yet settled between Mr. Preble and myself.

You have certainly taken true ground in your decision of the most important question, that of the boundary of Maine, which depends on the situation and not on the elevation of the highlands. The only portion of the proceedings on the part of the United States which I regret is so much of the surveys as seems to admit that that elevation was one of the considerations on which the decision ought to depend. More from respect to the opinion of others and to the expectations of the State of Maine than from any belief that our argument would be much strengthened by new matter, I had a provision inserted in the new convention allowing both parties to adduce fresh evidence. We are now in possession of that of the British as well as our own. Neither party will be essentially benefited by this addition. We must still resort to the treaty of 1783, and to the intentions of the parties as derived from its expressions and from Mitchell’s map, now admitted to have governed the proceedings of the negotiators. It appears to me that it is most clearly established that the line claimed by the United States is the only one that is consistent with those expressions and those intentions; and the whole of our argument must be made to bear on that point. I apprehend no difficulty in repelling the captious objections of the British, and I have in that respect been able to bring some additional evidence and authorities which may not be altogether useless, and of which, not having been laid before you, you could not avail yourself; but they are not really of any great importance.

Whilst in London I took several opportunities, in my correspondence with our government, to do that justice to which you were so fully entitled, not only for the soundness of your decision and of the arguments on which it was founded, but for the impartiality which you evinced throughout the whole of the proceedings under the commission. I think it highly honorable to the country that the commissioner appointed on the part of the United States should have sustained the character of a judge, bound on his oath to decide as such, and according to evidence and the general principles of law, and should in no instance have permitted himself to act as a partisan.

It is my intention, if Mr. Preble agrees to it, and with the approbation of government, to annex to our statement the whole of your report, so much only excepted as relates to the incidental question about the surveys, with which we need not trouble our arbitrator. Mr. Barclay’s report is swelled to more than three hundred pages; but the greater part consists of quotations from the arguments of the agents; and I have extracted so much as consists of his own arguments and constitutes his decision. Thus reduced, it will not exceed in bulk your own report, and I intend to annex also that extract to our statement. The contrast will be entirely in our favor, and it will also be advantageous to tie the British, as far as practicable, to their old ground, and to preserve some precious admissions of Mr. Barclay.

I have written this letter with so little reserve, that it may also perhaps contain some admissions not intended for the eye of our opponents. I pray, therefore, that, with the exception of what is personal to yourself, you will be pleased to consider it as confidential until the decision of the arbiter shall have been obtained. It is of course understood that on this subject I write nothing which may not be communicated to the President and to the Secretary of State.

I have the honor, &c.

GALLATIN TO W. P. PREBLE.

Private.

New York, 22d March, 1829.

Dear Sir,—

I had the honor to receive your letter of the 16th instant. Considering the new evidence, all that is to be done, both as to details and to prepare in the best manner we can our statement, and also that I can use my pen but moderately, I have concluded that it was best not to run the risk to be pressed by time, and to proceed as soon as I can to Washington, probably quite early in April. I will, of course, be very desirous to see you arrive as soon as you can make it convenient. There are, indeed, other considerations connected with the subject of our labors which make me anxious that you should be even now at Washington. It seems to me that there is an inclination there to make an immediate appointment of a minister to the Netherlands. And I found that Mr. Van Buren, who passed through this city yesterday, was not aware either of the just expectation of your State or of your own claims in that respect. I gave the proper explanations, for which he thanked me. But, generally speaking, “les absens ont tort.”

I have the honor, &c.

GALLATIN TO WILLIAM C. BRADLEY.

New York, 22d March, 1829.

Sir,—

Your letter of the 31st of October reached me at Washington at the moment when we were most busily engaged in collating maps and surveys, and in selecting and preparing the evidence intended to be laid before the arbitrator, and which we were bound to communicate to the British minister at Washington on or before the 1st of January. An accident also deprived me at that time of the use of my right hand, which I have not yet altogether recovered. I owe you, nevertheless, an apology for not having caused your letter to be sooner acknowledged, and particularly for not having informed you that I found in one of the atlases of the surveys executed under the commission a copy of that of the 45th parallel of north latitude, duly certified by the secretary, and stated, as you had informed me, to have been filed with your argument. Though omitted in the other copies and in that of the British government, we have a right to give it in evidence.

The assistance of Mr. Hales would certainly have been useful; but we are not authorized to employ a secretary.

I embrace with pleasure this opportunity of acknowledging the great benefit I have derived from your able arguments, in which you maintained an evident and constant superiority over the British agent, and amongst which there is but one—that relating to geocentric latitude—which I cannot use. We will have the advantage of condensation, of some additional authorities calculated to repel in a more direct way the captious objections of the British, of the admission of Mitchell’s map as evidence of the intentions of the negotiators of the treaty of 1783. But as to the leading and conclusive arguments on the main questions, I do not believe there is any of importance which had not been stated at large or suggested by yourself.

As you very correctly made the question respecting the highlands to rest on their situation, and not on their elevation, I wish that, unless a complete survey of both the conflicting lines had been ordered by the commissioners, no partial one had been attempted or admitted on our part. As the case will now be presented to the arbitrator, I fear that he may not be satisfied, and that, attaching more importance to that point than it deserves, he may order new and more complete surveys, and thereby occasion much more delay than is desirable.

I have the honor, &c.

GALLATIN TO S. D. INGHAM, Secretary of the Treasury.

New York, August 4, 1829.

Dear Sir,—

Owing to my family having removed to another house whilst I was at Washington, my papers were so much deranged that I could not, till last week, lay my hands on those respecting the relative value of gold and silver. On inspection I find some information still wanting, which I expect to obtain in a few days, after which I will communicate the facts and submit my conclusions to you. There is no doubt as to the fact of our mint regulations having rated gold too low, nor as to the propriety of raising it to its market value, unless we intend to exclude gold coins altogether. As the defect of our currency consists in our wretched paper system, the contemplated regulation relating to gold may not be very important; but its effect, though not great, cannot be but beneficial. It will not in any degree affect either property or contracts; theorists may object for a reason which will be hereafter explained; and some of the dealers in exchange and precious metals may prefer the present state of things, which is unintelligible to the many and, on that account, favorable to a few. But the true difficulty consists in ascertaining the average relative value of the two metals within such narrow limits as that, selecting any convenient ratio between them, no practical inconvenience can arise. At present I can only say that the true ratio is between 15.54 and 15.69 to 1. Those limits, which correspond to about 260.60 and 258.13 grains standard gold (instead of 270) in the eagle, are too far apart (near 1 per cent.); and I am in hopes to come to a nearer result. But I am in search of truth, and I will not assert as certain what, after a thorough investigation, may to me still appear doubtful.

The lists of the rates of our exchanges and price of gold will be useful, but require corrections, and are subject to several objections and exceptions. The price of doubloons is artificial and must be excluded, as it would lead to much too high a valuation of gold. The rates of exchange with England prior to the resumption of specie payments there (about 1819-20) must be thrown out. For the subsequent years the first operation is to calculate, from the quotations, the average nominal premium for each month; and the next, to obtain the true amount paid in dollars per pound sterling for each month. Thus, as the premium is quoted (at least in New York) on the supposition that the pound sterling is worth only $4.44, if the premium is quoted at 10 per cent. it means that bills at sixty days sell at the rate of $4.88 per pound sterling. The premium on British current gold coin is calculated on the same principle; that is to say, that a sovereign, or twenty-shilling gold coin, though worth, even at our low valuation of gold, $4.56.6, is rated as if worth at par only $4.44. And as the quotations of the price of American gold are founded on its mint value, this makes an apparent difference of 3 per cent. between the premiums on both kinds. All those discrepancies must be corrected, and a new table prepared from the quotations, in which every exchange and price shall be brought to one common standard, before any comparison can be made or true inference be drawn. As I had prepared such one from the New York quotations for three years, and the details are familiar to me, I think I can, when at Washington in October, assist in pointing out how a complete one may be made from the materials you will have collected. But this, after all, can only assist, the price of gold here, as it is now only an article of merchandise, being entirely governed by its price abroad, combined with the current rate of exchange and the charges of transportation. On this last point, which it is essential to ascertain with precision, as well as the result of actual sales abroad, I have also collected and hope to obtain more information.

I have written so much by anticipation that you may be satisfied that I have not forgotten my promise, and that the delay must be ascribed to the desire of obtaining the greatest degree of correctness within my reach.

I have the honor, &c.

GALLATIN TO S. D. INGHAM.

New York, 27th September, 1829.

Dear Sir,—

Expecting to be in Washington in the course of next month, and wanting still some materials, I had postponed putting them in proper order and digesting them till I should be there. I am at this moment so exclusively and deeply engaged in preparing our reply to the British statement (on the North-East boundary), which reached me near one month later than expected, that I could not for the present, without much inconvenience, relinquish that object for another. I have always found that intense and undivided thinking on the same subject was necessary for a complete analysis; and the importance and complexness of the question at issue with Great Britain must for some time require my whole attention. I will have gone through all but the mechanical part of the work when I reach Washington, and will be at leisure to attend to the other subject. The result of my researches on this I am also desirous to give to you as complete and in as proper shape as I am able; and this will require but two or three days, which I really cannot spare now. All the materials which I could expect are obtained, save only a sufficient number of actual sales of American gold in London and Paris, the difficulty of obtaining which is owing to the small amount actually exported.

The relative value which I have ascertained is that of France, the great European mart of precious metals, and where alone can be found a sure and easy way to ascertain that value, by the rate of the premium on the gold coins of the country. The English prices are of much less certainty, the transactions in metals being far less extensive, and, on account of the exclusion of silver coin for any purpose but to have change, the relative value they give being that of bullion to coins, and not of coins to coins. Yet I have not neglected them, and they do not differ materially from those of France. Indeed, the Paris prices may with great safety be taken as the average prices of Europe, though the fluctuations in London, Amsterdam, and Hamburg may not and do not, in point of time, agree with them. What we want is the general average and the limits of ordinary fluctuations; and both will be found in those of France.

My tables of the price of American gold coin in silver American dollars are only for New York, and from 1st January, 1825, to 30th June, 1829, during which period the price was never less than 2 per cent. premium. About 3¾ per cent. premium (our eagle being taken at 10 silver dollars) is about par according to the average relative value of gold to silver in Europe. The effect of raising our gold coins to the same value will be to prevent their exportation when the premium is not above that rate, 3¾ as now quoted, but in reality par at the lowest estimate that can be made of the relative value of gold. In Mexico, Havana, and South America it is indubitably higher. With us the quantity of precious metals is, on account of our paper system, so extremely small, and the transactions in exchange so enormous, that the exportation of gold and silver cannot and never does (as in France and other European countries, that have less commerce and a much greater quantity of metallic currency than we have) prevent the rise of exchange. It is, on the contrary, the rate of exchange which always, though not with mathematical uniformity, governs the market price of our gold in our own country, as is obvious from a view of the comparative tables of our rates of exchange and prices of gold. A regulation, therefore, raising our gold coins to their true value cannot prevent their exportation when the exchange will rise 1 per cent. above that, or, in other words, when the exchange on London will rise to more than 1 per cent. above true par; that is to say, to more than 1 per cent. above what is called 6½ per cent. premium, calculating the dollar at 4 shillings 6 pence sterling.

What has been the origin of that erroneous valuation I never could ascertain. Since the year 1772 the legal weight of Spanish dollars has been (from the most correct comparison of weights existing) hardly above 417 troy grains, and the legal standard, which is still impressed on the new Mexican dollars (10 D. 20 G.), parts fine and alloy. The only older and better dollars, of which any are yet found in circulation, are those (prior to 1772) with two shields and without effigies. They are of the same weight, but of a better standard, being taken by the French mint at the rate of 906, and probably being actually of the standard of fine. The variations of coinage, with respect to all, have consisted in making them of less and not of higher value. The highest legal rate above stated falls far short of 4 shillings 6 pence sterling. But there may have been still more ancient and more valuable dollars, no longer to be seen, of which I have no knowledge, and on which the original valuation of 4 shillings 6 pence was perhaps founded. It is only in some ancient works on the subject that the information can be had. I have seen quoted a publication of Sir Isaac Newton, being a statement of his assays of foreign coins whilst at the head of the mint of England; but it is not printed in any of the collections of his works, and I have never met with it.

I have the honor, &c.

GALLATIN TO S. D. INGHAM.

Washington, December 31, 1829.

Sir,—

The information which it is in my power to give you respecting the relative value of gold and silver, applies principally to France. It, however, happens that it is that which affords the best and most easy means to ascertain the fact, as it is by far the most wealthy country in which both gold and silver coins circulate simultaneously.

There has been no scientific comparison of the new French and British weights. The most correct is that made in the year 1824, by Dr. Kelly, the result of which is 15,434.1 grains troy weight for the kilogramme. But, as it cannot be relied on within 3 or 4 grains, I have assumed 15,435 grains, which makes the par of exchange between the United States and France 5 francs 34½ centimes for our dollar.

The standard for both the gold and silver coins is fine and alloy, and the legal relative value of the two species of coin is, since about the year 1790, 15.5 to 1; the kilogramme of standard gold being coined into gold coins of the nominal value of 3100 francs, and the kilogramme of standard silver into silver coins of the nominal value of 200 francs.

It is believed that, notwithstanding the great attention which was at that time paid to the subject, gold was even then rated too low in proportion to silver; it is certain that the fact is so now. During the thirteen last years there has never been a premium on silver coins, and there has almost always been one on gold coins. This has never during that period reached 1 per cent., which may be considered as the greatest fluctuation in the relative value of gold and silver coins in France. But it is very rarely and only for very short periods that this premium on gold coins has ever fallen below ⅕ or exceeded ⅘ per cent.; and the average is about ½, rather below than above it. If, therefore, the legal relative value was enhanced ½ per cent., or be about 1 : 15.58, instead of 1 : 15.5, the ordinary fluctuations would not exceed per cent. above or below that legal value.

The relative value of gold and silver bullion differs from that of gold and silver coins, and is liable to greater fluctuations. Independent of these, there are two reasons which make gold bullion more valuable in relation to silver bullion than gold in relation to silver coins. It is more expensive to coin ten silver dollars than one gold eagle, which, if the charge for coining is the same for both, makes in proportion the silver coin more valuable. And the unavoidable difference between the legal and the actual standard of the most faithful coins, as well as the similar original difference of weight and the diminution arising from wear, are more sensible and greater in value in gold than in silver coins, so that the loss in melting the current gold coins of any country may be fairly estimated at ½ per cent.

Of this the French government was aware; and accordingly the mint, which coins all the bullion and foreign coins that are brought to it, paying for it as it is brought, deducts a much greater seigneurage on silver than on gold; that is to say, 3 francs (or 1½ per cent.) on each kilogramme of standard silver, and 9 francs (or less than per cent.) on each kilogramme of standard gold. In other words, the mint price of standard gold and silver per kilogramme, in France, is 3091 francs for the first and 197 francs for the last. The relative value of gold to silver bullion is, therefore, fixed at the rate of 3091 : 197, nearly equal to 15.69 : 1. Each metal is brought to the mint in greater or less quantities respectively, according to the fluctuations in their relative market value. But what proves that this ratio does not essentially differ from the true average market relative value is, that the mint has been abundantly supplied with both for the last twenty-five years, the coinage of France being far greater than that of any other country. I hardly need observe that it is due to the almost total expulsion of paper as currency. The Bank of France alone issues paper, and none of a denomination less than 500 francs; so that it is used almost exclusively for commercial remittances and transactions, and makes no part of the currency, properly so called, of the country. Paper, as all know, necessarily drives away the precious metals, which will naturally flow to the places where paper is not used. They are a dearer but the only safe circulating medium; and no country that will resort to other means can expect to have a sound and uniform currency. There is, indeed, no permanent standard of value in nature; but, as applied to periods of twenty or thirty years, within which time all ordinary contracts are executed, gold and silver are, for that purpose, far preferable to any other commodity; and paper, having no intrinsic value, must, however used as currency, be always estimated in reference to those precious metals.

Although it cannot be expected that an alteration in the erroneous relative legal value of the gold and silver coins of the United States will, whilst paper chiefly of a local circulation continues to be their general currency, be productive of any great advantage, still, the change will do some good, and can be attended with no injury. The present rate was the result of information, clearly incorrect, respecting the then relative value of gold and silver in Europe, which was represented as being at the rate of less than 15 : 1, when it was in fact from 15.5 to 15.6 : 1. It would be better, at all events, to discontinue altogether the coining of gold than to continue the present system.

Although the ratio of about 1 : 15.58, as from coin to coin, which is deduced from the average premium on gold coins in France, is most to be relied upon, yet there may be an advantage and no danger in fixing the value of gold at a somewhat higher rate. For it appears certain that the average ratio is higher both in England and in the United States.

I have not sufficient data to estimate that ratio in the first country; but I am inclined to the opinion that for the last two years the price of American (United States) silver has not exceeded there the average of 57½ pence sterling per ounce, which gives the ratio of 15.82 : 1. But it must be observed that this is not merely the ratio of bullion to bullion (which in France is 15.69 : 1), but of silver bullion to gold coin. This ratio is in France, according to the mint price and current value of gold coins (that is to say, with ½ per cent. premium), as 3115.5 : 197, or about 15.81 : 1.

With respect to the United States, the average premium on the American gold coins for the last four and one-half years has been about 5⅙ on the nominal value. This, being according to our ratio of 15 : 1, gives for the average market price the apparent ratio of 15.775 : 1 for that of gold bullion to silver coin; since, being so underrated, the American gold coins can be considered only as bullion. But as they are probably ½ per cent. defective in weight and standard together, the true ratio may rather be estimated at 15.82 : 1, or about the same as that deduced, from the price in England of 57½ pence per ounce of dollars, for the ratio of silver bullion to gold coin. But less reliance can be placed on the ratio deduced from the price of American gold in the United States than from either of the other two modes. A single glance at the table of prices current will show that that price is entirely regulated by that of the exchange with London. It will be found, accordingly, that in the summer of 1825, when the nominal exchange on London was 5 per cent. premium, or in reality near 2 per cent. below par, the nominal price of American gold was 2½ per cent. premium, or in reality 1½ per cent. below its average market value in Europe or in the United States. This anomaly was clearly due to the legal value being underrated. Generally speaking, the difference between the true rate of exchange on London and the true market price of American gold in the United States is about 1½ per cent., as will be seen by the table B, where the true premium on both is calculated according to the ratio of 15.6 to 1.1 This general result, deduced from the New York prices current for the last four and one-half years, agrees with the general result of actual sales of our gold in London. The freight, insurance, and all charges are near 1½ per cent., and the average loss in weight and standard about ½ per cent. But from this loss of 2 per cent. must be deducted, when compared with exchange at sixty days, near ¾ per cent. gained in interest, the sales of gold being realized within fifteen days after arrival. It follows that if gold coins are raised by law to their true value they will not be exported so long as the exchange on London is not above 1½ per cent. above the true par, or about 8½ per cent. nominal, as now calculated. Whenever the exchange is above that rate there is no means to prevent the exportation; and, as the general tendency of our exchanges with Europe is against us, this affords a reason why, in fixing the relative value of the two metals, gold may be a little overrated beyond the ratio deduced from the average premium on French gold coins in France. But this should be done cautiously, as there is always danger in going beyond what the well-ascertained facts will warrant.

No notice has been taken, in what precedes, of the market price of Spanish dollars and doubloons. The first vary in standard, and it is much more simple to draw conclusions from the price of our silver coin abroad than from the fluctuations in the price of Spanish dollars in the United States. The marc of Castile, of standard Spanish silver, should, according to law, be coined into 8½ dollars, making the legal weight of the dollar 416½ to 417 grains troy weight. The legal standard, at least since the year 1772, is pure and alloy, and the Spanish dollar faithfully coined should therefore contain about 376 grains pure silver. The calculation is founded on what has been stated as an accurate comparison of the Spanish with the modern French weights, by which it appears that the marc of Castile is equal to 229.8 grammes. In fact, the Mexican dollars, which (with the Bolivar) are the best, contain but about 374½ grains, and are worth from ¾ to 1 per cent. above ours. The Spanish proper vary, and the most modern are sometimes ½ per cent. less. The price of the Mexican is in London ⅜ of a penny sterling more per ounce than ours, and in France 7 centimes per dollar.

It may be proper, as connected with the exportation of our silver coin, to state that the price of American dollars in France, deduced from twenty different shipments, is 5.26065 francs per dollar. Deducting 1½ per cent., according to the mint price, from the par value of the dollar, or 5.345, would give 5.26482 francs. The small difference arises partly from that in weight, principally from a small charge at the mint for refining on bullion below the French standard. The freight, insurance, commissions, &c., amount, as on gold, to about 1½ per cent., and the total loss to 3.28 per cent. If from this ¾ per cent. is deducted for the gain in interest, the difference is 2½ per cent. Whenever, therefore, the premium on exchange exceeds 2½ per cent. true premium (equal to 9½ nominal on London), the American silver coins will be exported.

Means have been found very lately in France to extract with profit the very small quantity of gold which is always found in silver. The effect has been within a few months to raise common silver bullion ⅕ per cent. above the mint price. Dollars and other bullion are purchased at that rate by the melters, who, after having extracted the gold, sell the bullion to the mint at its ordinary price. This circumstance will not ultimately affect the relative value, as the process will be gradually applied to all the silver bullion before it is coined; but it is in the mean while a reason against overrating gold.

The doubloon ought to be of the same weight and standard as the dollar. But it has been more adulterated, and, taking the ratio of 15.6 : 1, is not believed to be, on an average, intrinsically worth more than 15.16 dollars. The premium, calculated on that basis, varies in the United States from 2½ : 8, and averages 4½ per cent. This affords no criterion whatever of the relative value of the two metals, as it is exclusively due to the varying demand for the Havana and South American market, where, by internal regulations, the doubloon is rated never less than 16 and generally at 17 dollars. This arbitrary order drives of course silver from the market, and, without raising actually gold to that rate, has nevertheless a considerable effect on the price of that particular coin. The average premium on Patriot doubloons, which are as good, is but about 2 per cent.

Reverting to the valuations founded on correct data, it has been shown that:

1. The relative value of gold to silver coins, deduced from the average premium of ½ per cent. on gold coins, is below 15.6 : 1.

2. The relative value of gold to silver bullion, deduced from the mint price in France, is below 15.7 : 1.

3. The relative value of gold coins to silver bullion, deduced from the mint price in France, combined with the average premium of ½ per cent. on gold coins, and also from the presumed average of 57½ pence per ounce of American dollars in England, is above 15.8 : 1.

4. The premium in the United States on American gold, though much less to be relied on, since it is regulated by the exchange, corroborates the last-mentioned ratio.

It is clear that it is the relative value of coins to coins which is the proper foundation. That of bullion to bullion and that of gold coins to silver bullion are in fact the same, allowing for the superior value of coins over bullion; and although, for the object in view, less correct than that of coin to coin, shows nearly how far the gold coins may be rated without danger above the last-mentioned ratio. The conclusion is that the ratio should not be below 15.58 and not above 15.69 : 1; and that we will be safe between those limits.

The ratio is only a basis on which to proceed, and it is quite immaterial whether it gives an apparently inconvenient fraction, since, once adopted, it is never recurred to either at the mint or for any calculation of exchange, rate of duties, &c. In selecting, therefore, a ratio between the limits aforesaid, the first object is to take one which will correspond with a convenient number of grains standard and pure contained in the ten-dollar gold piece. The next, if practicable, is that this should also give a convenient number for the reduction of pounds sterling into dollars and cents, which must be perpetually recurred to in the calculations of duties and exchange.

The most convenient ratio, in both respects, is that of 2700 : 173, equal to about 15.6069 : 1, and answers nearly to a premium of ⅔ per cent. on French gold coins; which is above the average. This ratio will give 259½ grains for the weight of the ten-dollar gold piece, 237⅞ grains pure gold in it, $4.7505 for the value of the pound sterling, and make the present eagle worth $10.40½. The table C shows the result of several other ratios. I think that that which gives 258 grains for the weight of the ten-dollar gold coin rates gold too high. The calculations in relation to the pound sterling are of course all founded on the fact that the 20-shilling sterling gold piece contains 113 grains of pure gold and the American dollar 371¼ grains of pure silver.

As there is not in nature any permanent standard of value, it has been objected to the simultaneous circulation of the two metals as a legal tender that, in addition to the fluctuations in the price of either gold or silver if only one of the two was made the sole circulating medium, the fluctuations in their relative value increased the uncertainty of the standard.

Great Britain has, since the year 1819, acted on the plan of adopting gold as the sole legal tender for all payments above 40 shillings sterling. But in order to have money for small payments she resorts to an adulterated silver currency, which is by law rated at about nine per cent. above its intrinsic value. The object appears to be to prevent the exportation of that silver currency which is, in fact, assimilated to the copper coinage. It has been a part of the same system to prohibit the issuing of bank-notes of £2 and under, the place of which is supplied by the overrated silver new currency.

Great Britain till the year 1797, when the suspension of cash payments took place, and all other nations to this day, have used the two metals simultaneously, without any practical injury, and to the great advantage of the community, though in many instances sufficient care had not been taken to assimilate the legal to the average market value of the two metals. A fact so notorious, so universal, and so constant is sufficient to prove that the objection, though the abstract reasoning on which it is founded is correct, can have no weight in practice. It might not therefore be necessary to discover in what respect the principle is misapplied; but the reasons appear sufficiently obvious.

The whole amount of the inconvenience arising from the simultaneous use of the two metals consists in this. Their relative value being fixed by law, if this changes at market, the debtor will pay with the cheapest of the two metals, and therefore at a rate less than the standard agreed on at the time of making the contract, if the change in the market price is due to a fall in that of the metal with which he pays his debt. And it is obvious, in the first place, that if the change is due to the rise in value of one of the two metals, and that had been the only legal tender, the choice given to the debtor to pay with either enables him to do it according to the standard first agreed on.

But the true answer is, that the fluctuations in the relative value of the gold and silver coins, arising from the demand exceeding or falling short of the supply of either, are less in amount than the fluctuations, either in the value of the precious metals as compared with that of all other commodities, or in the relative value of bullion to coin, and even than the differences between coins, particularly gold coins, issued from the same mint; and therefore that those fluctuations in the relative value of the two species of coin are a quantity which may be neglected and is in fact never taken into consideration at the time of making the contract.

It has been shown that the fluctuations in that relative value may, by affixing a correct legal value to each metal, be reduced to or, at most, ½ per cent. The relative value of gold bullion to gold coin has within the last five years varied 1 per cent. in England, the price of standard bullion having been in 1824 as low as 76 shillings 9 pence; and the average value of the bullion was for four years (1822-1825) 77 shillings 7⅓ pence, or ⅓ per cent. less than that of the coin. It has already been stated that the remedy and wear together make a difference of ½ per cent. between old and fresh American gold coins; but the differences are sometimes much greater, since even the guinea, of the legal weight of 129 grains, could pass when weighing only 128 grains, or 1 per cent. less than the legal weight. And the simultaneous rise and fall of the two metals in relation to all other commodities, though not susceptible of being precisely valued, does often take place to a greater amount than any of the other fluctuations. It is evident that whenever such rise takes place, whether generally or only on the spot, it is an advantage to be able to resort to both instead of one of the metals; and that if the rise is only on one of the metals for which there happens to be a greater demand, and that should be the sole legal tender, it will be exported, and diminish in a most inconvenient way the whole amount of specie, a diminution which in that case cannot be remedied by resorting to the other metal which is not a legal tender. That inconvenience is still greater when gold is the metal selected for currency, to the exclusion of silver, the annual supply of this last metal being much larger in value than that of gold. That annual supply was estimated with considerable correctness by Humboldt at 36 millions of dollars in silver and 12 millions in gold, prior to the year 1809. Since that time, on account of the revolutions and internal disturbances in what was formerly Spanish America, the annual supply may be estimated at 18 millions in silver and 9 millions in gold. As order is restored, the usual supplies will again take place. In the mean while, the annual exportation of silver to India and China from Europe and America has been lessened from 12 to about 6 millions of dollars, and this has prevented sensible alteration in the relative value of the two metals. What proves the great amount of both previously existing is, that the diminution in the general supply has not even affected sensibly the value of the precious metals in relation to other commodities.

But not only has England by that experiment, in the face of the universal experience of mankind, gratuitously subjected herself to actual inconvenience for the sake of adhering to an abstract principle, but, in so doing, she has departed much more widely from her own principles and from those which regulate a sound metallic currency. Whilst pretending to exclude silver, she admits it, and makes it a legal tender for all that multitude of daily purchases and contracts under 40 shillings, at an overrated value. This is, in fact, an issue of an adulterated money, which does not regulate itself; which, on account of the profit in the coinage, there is a strong temptation to issue beyond what is actually wanted for the object intended; which, being irredeemable, is therefore liable to fluctuation between its nominal and intrinsic value; and which, by its connection with the 20-shilling and 40-shilling gold coins, deranges, or may derange, the whole system of British currency.

Even if the precedent was good, it could not be conveniently adopted in the United States. If silver was adopted instead of gold as the legal tender, which is, in fact, our present system, gold will be excluded altogether, and the partial advantage gained by the English issue of silver must be given up. To the exclusion of silver there are, on the other hand, great objections. The American dollar, or 371¼ grains of pure silver, is the unit of money and standard of value on which all public and private contracts are founded; the supplies of silver are greater, and it requires a greater premium on the exchanges before it can be exported; payments in silver, suppressing small notes, is as yet the only practical remedy against over-issues of the worst species of paper currency.

There is another and very distinct reason in favor of affixing to our gold coins a value corresponding with their market price. By their conventions with France and several other countries the United States are bound (the condition being reciprocal) not to lay higher duties on their produce and merchandise than on those of same nature and value imported from other countries. In estimating that value, foreign currencies have generally been rated by law at their true value; whilst the pound sterling of England has been rated at $4.444, or 7 per cent. below what it is actually worth. It ought, at all events, to have been rated at least at $4.5657, so as to correspond with the legal value of our own coins. But it cannot with propriety be rated higher than that value; and it is necessary to raise this to its true relative value as compared with silver, in the manner proposed, in order that Great Britain may have no reason to complain that the pound sterling should be estimated at its worth, which is at least $4.75. And, on the other hand, if this is not done, France and other countries will, as they now have, a just right to complain that they pay duties 2 per cent. at least higher than what is imposed on goods of the same description imported from Great Britain. It is only to be regretted that this will produce an increase of revenue of several hundred thousand dollars; but this is an unavoidable evil, unless there should be a general though small reduction of duties to an equal amount.

I have the honor, &c.

[1 ]For the tables, see Report of the Secretary of the Treasury dated May 4, 1830.