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• Translator's Preface
• Section I.: Preliminary Observations.
• Chapter I.: The Question Stated
• Chapter II.: Preliminary Observations On the Rise of Prices Which Has Characterised the Last Few Years.
• Section II.: An Appeal to Some of the Fundamental Notions Upon the Nature and Characteristics of Money.
• Chapter I.: What We Ought to Understand By Value and Price.—twofold Definition of Money.—the Standard Or Fineness of Money.
• Chapter II.: Of the Meaning of the Word Standard.— the Metal-standard Is That From Which Is Derived the Monetary Unit.—the Two Ideas Standard and Monetary Unit Imply Each the Other.
• Chapter III.: Of the Character of Exchanges As Affected By the Invention of Money —how the Rise and Fall of the Precious Metals Are Manifested In the Course of Trade.—phenomena of the Rise and Fall In Commodities.
• Chapter IV.: On the Possibility of Conferring the Quality of Standard Upon Two Metals At Once.
• Chapter V: Of the Meaning of Certain Words Specially Applicable to Money and the Precious Metals.—price, Value, Premium, Dearness, Cheapness
• Section III.: Of the Present Production of Gold and Its Outlet.
• Chapter I.: Of the Increase In the Present Production of Gold As Compared With the Past —the Extended Coinage of Gold Which Has Followed.
• Chapter II.: Diminished Coinage of Silver In France—gold Is Already At a Discount In Comparison With Silver.
• Chapter III.: Extraordinary Exportation of Silver From the Civilised Countries of the Western World Towards India and China —to What Extent It Is Likely to Continue.
• Chapter IV.: France Serves Temporarily As a Parachute to Retard the Fall of Gold.
• Chapter V.: Whether the Extraordinary Production of Gold Ought to Be Considered As an Ephemeral Accident.—the Crushing of the Quartz Veins —mines In Siberia and Elsewhere.
• Section IV.: On the New Outlet That May Be Expected For the Production of the New Gold Mines, and Whether It Will Be In Proportion to the Extent of This Production.
• Chapter I.: Of the Outlet Afforded By Those Countries Which At Present Have Evidently an Insufficient Proportion of Metal In Their Currencies.
• Chapter II.: Of the Increase of Gold Money Which May Arise From the Development of Business, and the Increase of Population.—of Wear and Tear.—of Hoarding.—of Shipwrecks.
• Chapter III.: On the Employment Which Habits of Luxury May Offer to the Gold of the New Mines.
• Chapter IV.: Conclusion of the Preceding Chapters.—the Fall of Gold Very Probable, If Not Inevitable, In Relation to All Other Commodities.
• Section V.
• Chapters I. to V.: On the Part Assigned to Gold In the Monetary Legislation of France.
• Section VI.: Consequences of the Fall In the Value of Gold.
• Chapter I.: A General Distinction Between Those Private Incomes Which Will, and Those Which Will Not Be Affected. of a Certain Collective Loss Which the People of France Will Suffer.
• Chapter II.: Of the Sufferings and Difficulties Which Will Accompany the Transition.
• Chapter III.: On the Gain Which Would Result to Certain Classes of Persons, and to Society, From the Fall In Gold. the Saving to the State From the Payment of the Dividends On the Public Debt.
• Section VII.: Of the Measures to Be Taken to Avert the Evil Effects of the Fall of Gold.
• Chapter I.: Case of a State Like England, Where Gold Is the Standard, and Where There Is No Other Money But Gold.
• Chapter II.: Case of a State Such As France, Where There Is a Silver Standard, But Also a Gold Currency.
• Chapter III.: The Measure Here Recommended Is a Necessary Complement of the Law of Germinal, Year XI.
• Chapter IV.: On Some Inconveniences Inherent In the Combination, Respecting a Gold Currency, Recommended In This Work.
• Chapter V.: Of a Plan Recommended For Maintaining the Parallel Circulation of Silver and Gold.
• Chapter VI.: Of the Resolutions of a Commission Appointed By the Minister of Finance In Mdccclvii.
• Chapter VII.: Of Various Acts Which the Legislation of the Ancient Regime Upon Money Treated As Crimes, and With Regard to Which Some Persons of Our Day Propose to Establish Penalties. —selecting, and Melting; Trade In Coins; Exportation.
• Chapter VIII.: Of a Different Solution Which Has Been Recommended, and Which Would Consist In the Adoption of a Gold Standard.
• Chapter IX.: Appreciation of the System Which Consists In Adjourning Indefinitely the Legislative Solution.

SECTION II.

an appeal to some of the fundamental notions upon the nature and characteristics of money.

CHAPTER I.

what we ought to understand by value and price.—twofold definition of money.—the standard or fineness of money.

In order to clear the ground as much as possible, it may be well, before entering further upon our task, to call attention to some fundamental notions upon the subject of money, which may be found more or less ably expounded in almost every treatise upon political economy. I repeat them here, however, that I may spare such of my readers as have not these writings fresh in their recollection, the trouble of referring to some special work for information.*

Gold and silver are articles of commerce, that is to say, objects having relations to our wants, and which are bought and sold. Like all other commodities, they have their own peculiar value for which they are in request; and this demand, arising from their utility, combined with the circumstances of their production, and particularly of their quantity, determines their value.

Let it here be observed that value is a word the meaning of which is relative, inasmuch as the attribute to which it relates always implies a comparison. If I say that meat is worth twice as much as bread, I establish, a relation between these two articles; and in thus expressing myself I compare meat with bread.

When we speak of the value of an object, we ought, for the sake of a rigorous precision in expressing our meaning, to point out the other object with which we compare it. It is true, that very often it is understood that we compare it with the generality of other commodities;* or pretty frequently, indeed, it is the price that is meant.

The price of a certain thing is its value in relation to a substance specially designated, that is to say, to the material of which money is made. Thus, whilst in ordinary language we often confound these two words, value and price, and use them as synonymous terms, they have in reality a distinct meaning. Both have a relative sense; but value is a more general and indeterminate expression, or to use a better word, more vague; price is more special, and has a meaning perfectly precise.*

Money is a certain commodity out of which we create an instrument that serves, in exchanges, as a common measure of value, because it is with it that, in transactions, all other commodities are compared. But it is not merely & measure; it figures in exchanges in another capacity, that of a material recompense or equivalent. The twenty francs with which a hectolitre of wheat can ordinarily be bought, and which are also at the present moment the price of a hectolitre of common wine in many departments, give me the measure of the value of the wheat and wine, as compared with other commodities of which the price is known; but they do more, they serve, at the moment of the transaction, and in the market where it takes place, as an equivalent for the hectolitre of wheat or the hectolitre of wine. We must, therefore, guard ourselves from viewing money as simply and purely a representative sign of value, although this meaning is sanctioned by usage in nearly every class of society. Money is not a sign; each piece of money is a certain fixed quantity of a definite fineness, very real and very effective, of the metal of which money is made; and it is no more true to say that the twenty francs are the sign of the hectolitre of wheat or the hectolitre of wine, than it would be to pretend that the hectolitre of wheat or wine is the sign of the twenty francs. The definition of the word money which I have given, namely, that it is at once a measure and an equivalent, is that which is acknowledged by all modern authorities. It is remarkable that it should agree exactly with that which Aristotle has given us.

“It was agreed,” says he, “to give and to receive a substance which, useful in itself, was easily transferred from hand to hand in the ordinary transactions of life; it was iron, for instance, or silver, or some other substance of which the size and weight were in the first place determined, and on which, to escape from the inconvenience of continual measurings, a particular stamp was affixed as a sign of its value,”*

From the moment that man forms a society—and how can we conceive it otherwise?—money becomes necessary to him. The division of labour, by which the sociability, as well as the different aptitudes, of mankind is manifested, has existed ever since a few individuals were grouped together, and it has been developed in proportion to the progress of civilisation. It subjects man to the necessity of exchanging, incessantly, the material products of his labour, or the services which he is in a position to render, against the productions and the services of others. If money did not exist, this exchange could only be carried on by barter. The man who had harvested his corn, and was in want of a pair of shoes, would be obliged to seek a shoemaker who had not supplied himself with corn, and was willing to deal with him. and even when he had found one, he would have had to bargain with him as to the proportionate value at which the article of clothing he wanted, and the corn he desired to sell, ought to be exchanged. From the moment when, among all kinds of merchandise, one article has been selected to serve as a standard by which the relative prices of all others may be measured, in other words where money is used, transactions become simplified and facilitated,” In a system of barter,” says M. Eoscher,* “how difficult it would be to find exactly the man in a condition to be able to supply our wants, and at the same time to have occasion for our superfluities! How much more rarely would it happen that the want and the superfluity met each other in equal proportions, that, for example, the manufacturer of nails, who wished to barter his goods for a cow, should find a grazier who had occasion for as many nails as would pay for a cow,” Again, says the same writer:—” Under this system, the strongest party, in an economical sense, would, in every bargain, enjoy an advantage much greater than he possesses at present; the buyer of bread, for instance, might be half-starved before he came to terms with a baker upon the price of the articles he had to offer him in exchange,”

When once the use of money is adopted, the grower of corn exchanges his product for a certain quantity of money which is its price, and with this money he afterwards goes in quest of any other commodity for which he has occasion to those who make it the object of their industry. At first view it might seem that the use of money complicates transactions, inasmuch as it necessitates two exchanges, where otherwise there would be but one; but, in truth, its use is of enormous advantage, and we should take an immense step backwards in civilisation if we were to return to barter. It has been wisely said that there is no machine which economises labour like money, and its adoption has been likened to the discovery of letters.

Gold and silver were not, in the earliest stages of society, invested with the attributes of money. In their primitive communities men resorted for a medium of exchange to those objects which were more immediately at their command, as, for example, cattle. But almost from the very dawn of civilisation it was some kind of metal, and especially copper, which served the purposes of money. In proportion as society advanced, first silver, and then gold, became the instrument of exchange, and it may be said that, from time immemorial, these metals have been chosen as the preferred commodities, the constant intermediaries in transactions. For this purpose, they offer a combination of advantages which no other product possesses to anything like the same extent.

1. In the first place, these commodities are very much prized by mankind. 2. Independently of the facility with which they can be coined, they are more portable than almost any other products, that is to say, within the same weight and volume they comprise a greater relative value. 3. Of all bodies they are the most unalterable. 4. They are completely homogeneous, and being substances simple in their nature, their verification is easy. It is even not difficult to ascertain that which is called the standard, in other words the degree of fineness, or the proportion which each ingot contains of pure metal exempt from all alloy. 5. They are very easily divided, so as, in case of need, to represent small values without thereby impairing any of their advantages; for the detached pieces can be reunited almost without expense; and, on the other hand, they can be separated very cheaply from most of the combinations into which they can enter with other substances, and particularly so from their union with other metals. 6. They are admirably adapted for receiving a delicate impression, which they faithfully preserve, and this, added to their sonorous quality, affords an almost infallible test by which to recognise with readiness their value. Finally, they are less liable than other commodities to the influence of those causes which might tend to lower or to raise their value. Undoubtedly, their value varies in comparison with other goods, but this almost always arises from causes belonging to these, and is not attributable to motives originating with themselves.

Originally, in the operations of buying and selling, the quantity of gold or silver delivered by the buyer of a commodity to the seller was weighed by the parties. Afterwards, to simplify and shorten transactions, certain discs of unvarying size were invented, containing quantities of metal fixed by law, which, by being struck or moulded, received an official stamp serving for a public voucher of the weight of fine metal contained in each piece of money. For a long succession of ages, all the nations of the West have adopted this system in the constitution of their currency, whilst, on the contrary, the most populous and the most civilised nation of the East has remained faithful to the old system of weighing,—the same as was practised by the patriarch Abraham, when he paid for his burial ground; by King Priam, when he ransomed the body of his son Hector from Achilles; and by the ancient Egyptians. Nevertheless, in China, of which I was about to speak, to give to the operations of commerce a security which the process of weighing in the time of Abraham did not sufficiently afford, since there was no assurance there that the pieces of metal put into the scales were absolutely pure, or of a known degree of purity, another process has been added. The metal is tested by an assayer, by which means the quality as well as quantity of each ingot or fragment is known. In a word, in every commercial transaction in China, the metal counts both for its quantity and fineness. The various pieces of silver which there pass from hand to hand are ingots of a certified weight and fineness like our own money; but there is this difference, that with the Chinese the certificate of quality and quantity emanates from individuals, whereas in Europe it comes from the government, and, moreover, in China the weight and standard are variable from ingot to ingot, whilst in every country of Europe they are fixed for each description of coin.

Let us insist upon this truth, which may be given for another definition of money—a definition that can hardly be kept too much in mind, for it carries with it the refutation of many sophisms which have borne disastrous fruits in times past, and which some persons would still like to revive from the oblivion in which they appeared to be buried: pieces of money are merely ingots of uniform weight and fineness for each description of coin, and certified as such by government, by means of an impression which it stamps upon them. They are so much and no more. Government places its mark on them in order to attest their uniformity, but there its mission and its duty end. The form which it gives them, the effigies and inscriptions with which they are impressed, are of precisely the same character as the marks stamped upon silver plates or spoons, and which are a guarantee* that the government has verified its fineness.

CHAPTER II.

of the meaning of the word standard.— the metal-standard is that from which is derived the monetary unit.—the two ideas standard and monetary unit imply each the other.

In the preceding chapter the reader may have remarked the expression the matter, or the substance of which money is made. Nevertheless, in most countries, it is not of one material that money is made; hut pieces of gold and silver circulate together indiscriminately. Yet it must not from that be assumed that the two metals, gold and silver, figure in the monetary system with the same prerogatives. We are about to call attention to a word of which it is important to fix the meaning,—I mean the term, standard.

On this Subject it is necessary to guard ourselves against a certain confusion of language. Some persons apply the name of monetary standard to pieces of a metal to indicate that they cannot be refused in payment. That is not the way in which the word standard will be employed in the course of this work, nor is it its legitimate meaning. When it is the privilege of a metal that the coins of which it is made cannot be refused in payment, it is because it is endowed with the attribute of legal tender, which is very different from that of the standard.

When it is said that such or such a metal is the standard, it means that the monetary unit is a certain weight, settled once for all, of this metal, which is, however, quite reconcileable with a state of things where coins of another metal might be equally a legal tender. Thus in France, at the present time, gold is a legal tender, although silver alone is the standard, and constitutes the sole monetary unit.

In a word, standard and monetary unit are terms allied in the closest manner to each other, and they are synonymous the one with the other, as far as the materials of which a thing is made can be confounded with the thing itself. Beyond that the word standard has but a vague meaning, and its indecisiveness may give rise to all sorts of errors and misunderstandings. Let it be added that, in questions of money, mistakes, when sanctioned by government, resolve themselves of necessity into injuries, falling on this or that legitimate interest,—into injustice and iniquity more or less disastrous in its consequences.

The most rigorously exact meaning, perhaps, of the word standard would be to say that it is the monetary unit, the latter itself being defined by the three following conditions: the metal of which it is composed, its weight, and its fineness. It is in this sense that we shall sometimes use it in the course of the following pages; but more frequently it is to the metal itself, constituting the monetary unit, that, for brevity of language, we shall assign the attribute of the standard. The circumstances themselves, under which we shall introduce the expression standard, will render any double meaning impossible.

From the intimate and almost indissoluble connection that exists between the idea of the standard and the monetary unit, spring consequences not unimportant. If, for example, we observe the legislation of a particular State, where, too, the government is fully alive to the conditions essential to a sound system of currency, in other words, is convinced of the necessity of having one standard, and not two;* and if, in the tendency of the laws thus brought under our notice, we find the institution of a monetary unit expressly designed in such terms as these,— such a weight of such a metal, of such a fineness, constitutes this unit, doubt is no longer possible, it is not even permitted; the metal in question is alone invested with the legal attribute of the standard.

This last observation may to some persons seem like a truism, which it is superfluous and almost childish to utter, so completely is it in accordance with proof. Yet it will be seen, by-and-bye, that it is not so needless as it appears, for it has escaped the notice of certain persons in the controversy which is now going on respecting the monetary system of France.

CHAPTER III.

of the character of exchanges as affected by the invention of money —how the rise and fall of the precious metals are manifested in the course of trade.—phenomena of the rise and fall in commodities.

There is another point of view in which exchanges have been to a certain extent modified by the invention of money, and which it may not be unnecessary here to notice; it has permitted the postponement of payments which were almost always made promptly under the system of barter. Thus the door has been opened to all those transactions in which credit performs its part. In return for what may have been received in the form of a variety of goods, or of different services, a party who, indeed, may be a city, a county, or a state, is enabled to bargain to pay, after a certain interval, a number, fixed at the time, of pieces of money, that is to say of metal. In many cases, but particularly where the contracting party was, as has been said, a city, a county, or a state, the engagement to pay has taken the form of a rent or annual interest, consisting of a quantity of metal exactly agreed upon. In such a case, the fluctuations in value which, owing to time and circumstances, the metal of which money is made might undergo, would possibly affect seriously the interests of the debtor or creditor.

If the value of the metal declined, the creditor would suffer a loss upon the quantity he had to receive; if, on the contrary, it rose, the debtor would have to pay more than he had calculated upon. In this manner it would seem that the chances between debtor and creditor were about equal. There is, however, a general cause which forbids a perfect equality. Doubtless we are correct in saying that the precious metals, of which money is made, are liable to fluctuations, which as often raise as depress them in value, although in this respect they possess a certain relative stability which we vainly seek in any other products of human industry. But there is a general cause tending to produce a depreciation, which, by its continuous action, prevails finally over the accidental causes which create fluctuations in their value. I speak of the unceasing progress of the arts. The working of the mines is ever an improving industry, and the same law of progress applies to the metallurgic processes for separating the metals from the rude ore which is extracted from the bowels of the earth. If, therefore, the mines continued always of the same richness, and there were no decided disturbance in the relation between supply and demand, the cost price of a given weight of gold or silver would constantly diminish with the lapse of ages;—and since, at least with a great and fluctuating disproportion between the supply and demand, the value of an article varies pretty nearly in conformity with its cost price, the value of gold and silver should, under this influence, experience a constant decline. Thence springs a process of depreciation obviously disadvantageous to the creditor, which operates gradually, or rather in a series of rebounds, but against which there is no safeguard from the time contracts are payable in gold and silver,* a custom now all but universal. Here, at least, is a reason why, in a wise spirit of equity, we should preserve for creditors all the favourable chances which legitimately belong to them.

It is rarely that circumstances occur, proper to the two metals of which money is made, which in a marked degree affect their value; they arise from changes in the conditions of their production, and the consequent supply in the market. It cannot be too often repeated that the very rarity of these occurrences is one of the principal reasons why gold and silver are more suited than any other commodities to perform the part assigned to them in commercial exchanges. Still, circumstances of this kind do recur at certain intervals with much violence. The most memorable example that can be cited is that of the discovery of the mines of gold and silver in America. History, however, records a certain number of similar events, regarding which the reader is referred to the works that specially treat of the matter.†

The effects of a rise or fall in the precious metals are displayed in a manner peculiar to themselves, owing to the attribute of money with which they are invested. When it is said that a commodity falls in value, it means that we must give a larger proportion of it than previously to procure in exchange the same quantity of any other article of commerce. The price of that article, whether it be iron, lead, corn, wine, or any other product, excepting the metal or metals of which money is made, falls accordingly; for the price of a thing is its value, specially compared with those metals, or, to express differently the same idea, it is the number of monetary units which it is necessary to give in exchange for a certain weight or volume of another commodity. A diminution in the value of the metal from which money is essentially coined is shown differently, in this respect that its price remains the same; but then the price of all other commodities, without exception, rises if its value compared with itself has fallen, and falls if it has risen. I say that its price as measured by itself remains the same, since, for this metal, specially and exclusively, the price is its value compared with itself. If, for example, the value of silver falls one half, as the monetary unit, the franc consists, in France, of four grammes and a half of silver,* a kilogramme in weight of fine metal will still be worth 222 francs, 22 cents, because one kilogramme contains four grammes and a half, 222 times and a small fraction; but in this case the price of lead, iron, wheat, wine, and all other commodities will be doubled, because, to obtain the same quantity of these articles, it is necessary to give double the quantity of silver.

CHAPTER IV.

on the possibility of conferring the quality of standard upon two metals at once.

Inasmuch as money is at the same time a measure of value and an equivalent, common sense would seem to tell us how more than difficult it must be to have two monies, equally invariable, and permanently in use together; for how could it be possible for a given quantity of merchandise to have for equivalent indiscriminately a certain quantity of gold and a certain quantity of silver, which should always bear the same relation to each other, seeing that there is not and cannot be a fixed relation between these two metals? The value of gold and that of silver depend, in fact, to a large extent upon circumstances peculiar to each of them, they being identical in this respect with iron or copper, bread or meat. It would, doubtless, be an exaggeration to say that they are absolutely independent of each other; for whenever two substances have a common use, the value of one exercises a certain influence upon that of the other; but between gold and silver this relation is not closer than that between corn and wine, or between bread and meat. Now, who has ever maintained that so close a connection exists between these two products that the price of one being given, that of the other can thereby be determined? It is now a long time since Locke has said,—” Two metals such as gold and silver cannot serve at the same time, in the same country, for the medium of exchange, because this medium ought to be always the same and retain the same proportionate value. To adopt, as a measure of the exchangeable value of commodities, substances which have not a fixed and invariable relation to each other, is as if we were to choose for a measure of length an object which was subject to the process of distending and contracting itself. In each country there should be but one metal to serve for the money of account, the payment of contracts, and the measure of value.

Even before Locke had thus expressed himself the same idea had presented itself to the intelligence of mankind, and been carried out in practice. At the origin of a metallic currency,* it was only one metal that was endowed with the attribute of money. It was not the more vulgar of the two to which was always reserved the particular appellation of the precious metals. It was here iron, and elsewhere copper. We know that for many centuries, copper constituted the money of Rome.† Afterwards, society having become richer, copper money was no longer sufficient; with the increase of wealth, payments became too cumbrous, and a more valuable metal than copper was found better adapted for the bulk of transactions; it was thus that silver money came into use. This was soon after followed at Rome, and for the same reason, by a gold currency, and thenceforth the two metals continued to coexist.‡ The history of the currencies in the monarchies which were reared upon the ruins of the Roman Empire reveals the same process. The first man of genius who then arose, endowed with a commanding spirit of reorganization, Charlemagne, took for his monetary unit the pound weight of silver. A gold currency made its appearance in France under St. Louis, and from that time the two metals have, whether for good or evil, circulated side by side of each other. In England, William the Conqueror established also for his monetary unit the pound of silver, of the Saxon or Tour weight; and it was only under Edward III. that a gold currency was established. In the extreme East, at least in China, silver has from the first continued to be the sole instrument of exchange for all commercial operations on a great scale. In India, silver is the prevailing money; gold formerly filled a secondary place in the currency throughout the vast territories of the East India Company, in the form of coins, bearing the name of mohur, which had been given them by the ancient Moguls; but at present they have been completely demonetised by the Company.

In itself, the desire to make gold and silver circulate together in the currency of a State is justifiable upon good reasons, an equal value of the one being much more portable than the other; but, on the other hand, being little suited for small sums, owing to the risk of the coins slipping out of sight, a division of their employment seems to be indicated,—for silver the smaller, and for gold the larger payments, especially when they pass from hand to hand. Each metal thus having its special use, the idea of employing both, which has been found to prevail in almost all countries, has really a reasonable origin.

But the question of a simultaneous circulation of the two currencies being decided in the affirmative, others presented themselves:—On what conditions and in what form should this process be carried out? Should the two metals be treated alike, and invested with the same dignity? In a word, should each of them be the standard, or, what comes to the same thing, the monetary unit? The preceding statement shows that this duality of the monetary unit would be opposed to the very nature of things. It might absolutely be possible to have for unity of length simultaneously the metre and the foot, because the relation of one to the other is fixed and invariable. It would be very different, however, with two weights, one of gold and the other of silver, which should have been determined, once for all, as the measures of value. The relation of one metal to the other is variable, and has never ceased to vary, more or less, from the commencement of the world.

Unfortunately, however impracticable it may be to treat money as though each of the two metals constituted equally the monetary unit, that is no reason why it should not have been resolved upon in times of ignorance, or under governments disposed to believe, in their greediness, that this combination would be more favorable to the frauds which it suited them to perpetrate on the currency.

If people had not, wilfully or otherwise, forgotten whence money is derived, and if submitting to the nature of things, which, in such matters, cannot be thwarted with impunity, they had laid down the principle that one of the two metals was the standard, that is to say, the substance constituting the monetary unit, the other would then have been quite obviously a subordinate metal, and this subordination itself would have permitted it to have been devoted in various forms, to uses not necessarily the same for gold as silver, as we shall have occasion to show in the course of this essay. The confusion, real or simulated, which has so long and so often prevailed on the subject of the currency, in official quarters, is the reason why we have departed from that simplicity which would have averted much embarrassment, but which would also have subjected governments to the laws of honesty, a burden which they have found it difficult to bear. In fact, however, governments have incessantly undertaken the task of fixing the relative value of gold and silver, according to the effective value of the two metals compared one with the other. Hence have sprung many changes in the currency. Unfortunately, as these changes have been, in the majority of cases, effected without regard to recognised principles, or rather in contempt of all principle, they have occasioned much disorder and led to many evils.

The plan of a double standard, or the system of placing gold and silver absolutely on the same footing in the currency of a State, would be an injustice as regards all creditors, who would always be paid in that metal which should happen to be at the lowest value at the moment when the payment fell due. As we have already said, the adverse risk to the creditor is from the fall of the material from which money is made, whilst the debtor has, on the other hand, to encounter the chance of a rise. Where there is but one standard, and provision is made that the legal value of the coins of the other metal shall be in conformity with the quotations of its value in the metal market (I here argue upon the assumption, which is true in most countries, that the two metals are used for money), the debtor and creditor have equal chances,* and, whatever happens, neither of them has the right to complain of being the victim of an injustice. But, if, instead of establishing one standard, the law assigns this attribute to two metals, or if, which amounts to the same thing, neither of the metals is invested with the attribute, the equality of chances ceases between the debtor and creditor. The latter has in effect against him all the chances of a fall which one or the other metal may undergo. If it be the national creditor, for example, he will lose, in the first place, by the fall in the value of silver, and he will encounter a second loss when the same process takes place in gold. In order that the debtor should, on the contrary, sustain a loss, it would be necessary that the two metals experienced at the same moment a rise, which is a tolerably improbable occurrence.

However striking may be the inequality established between the situation of the debtor and creditor, by the system of the double standard, which might, I repeat, be more properly described as no standard,—that is not the sole or even the strongest objection to which it is exposed. If the two metals are equal before the law, that is to say, if it be not declared that one is the standard, and the other for subservient uses, the government, having the power, will yield to the temptation, of manæuvring with the one and the other; for, governments being proverbially always more or less needy, they will find the way of relieving themselves of a portion of their engagements, by discharging their debts with whichever of the two metals shall have had the greatest relative fall in value. It will only be necessary, for example, to compare, alternately, the value of gold with that of silver, and the value of silver with that of gold, to diminish successively the burden of the national debt, thereby injuring the public creditor, outraging public morals, and causing great derangements to private interests. Thus, when gold shall have risen in value in comparison with silver, the State will only pay in the latter metal, and private debtors will not fail to follow the example: the law will have authorized them to do so. Fortune changes; rich mines of gold are discovered; gold instead of being worth fifteen-and-a-half times its weight in silver, is worth only fourteen times, afterwards thirteen, and then falls to twelve, and even to ten. Things are left to take their course, and some fine day, under pretext of confirming an established state of things, a law decides that the relation between the two metals, instead of being expressed by the number 15½, shall be expressed by 14 or 13. Some time afterwards this proportion is altered to that of 10. By virtue of these successive combinations, the silver coins, the value of which had remained stable, are melted again and again, and each time greatly diminished. The debtor henceforth acquits himself with one kilogramme of gold, or with ten of silver, whereas the creditor had thought he was to receive fifteen-and-a-half of the latter metal, or an equivalent quantity of gold.

A little later, the silver mines are more productive, the production of that metal begins to increase, and its value to fall; now follows another deviation: from the relation of 1 to 10 there is a rise successively to that of 1 to 12, 13,14, 15, 15½, or even beyond if the comparison between the market value of the two metals warrant it. Then the State and other debtors discharge their debts only in silver; or, if they pay in gold, it is a quantity diminished, compared with what they would have paid during the preceding period, in proportion to the fall in silver. Another oscillation reduces the value of gold; this depreciated metal then becomes the preferable type, and it is made the standard of comparison for silver, the coins of which lose another portion of their weight. These double-dealings are perpetrated by virtue of a law, against which, whatever may be thought by those who regard it from an impartial and equitable point of view, there is really nothing to be said from the moment that we recognise the fallacious principle of a double standard. At each change the creditor is deprived of something, until with sufficient time it ends in his losing nearly everything.

Supposing this scene to be enacted in a country where the franc is in use, this coin, which originally contained five grammes of silver of nine-tenths fineness, is successively reduced till it contains but four, then three, and always less and less. This alternate adjustment, by virtue of which, under the false theory of a double standard, the depreciated metal is always practically the type, would be a new mode of arriving at precisely the same result as was sought and obtained by the ancient princes when, stealthily or boldly, they mixed copper with their silver, or altered, by proclamation, the pound in their established coinage. In this manner, with the principle of a double standard, the franc might be reduced to the seventy-second part of a franc, just as the royal clippers and coiners of olden times degraded the pound to the seventy-second part of a pound by the continual admixture of the baser metals.

We will explain more clearly this result by a hypothetical case. The franc being 5 grammes of silver of the standard of nine-tenths fineness, the equivalent in gold consists actually of 32½- centigrammes of the same fineness. If in consequence of gold falling to ten times its weight in silver, it be decided that the franc shall still remain equal to this quantity of gold, then the silver must be recoined so that the franc shall comprise only 3¼ grammes, of the same fineness of nine-tenths. Suppose that silver in its turn falls; if the fall be such that the relative value rises to 15½ and if in the system of the double standard, 3¼ grammes of silver for the franc is to be preserved, then the gold ought to be recoined, so that there shall not be more in one franc than 21 centigrammes. A fresh fall in gold following, if it be such that to restore the relation of 1 to 10 between the two metals, a similar operation is necessary, the franc will then only contain 2 grammes and one-tenth of silver. Thus it will be seen by how rapid a process the currency of a country may be swallowed up.

Nothing more need be said to induce us in our day to resist all the efforts which, under various pretexts and forms, are made to restore the double standard to favour, or to revive it in practice.

For the very reason that the plan of a double standard leads, by the deduction of an irresistible logic, to consequences so manifestly contrary to an equitable security of contracts, it is right in studying the monetary system of a country to require the clearest and best proofs before deciding that it is avowedly founded on the principle of a double standard. For it is in fact to declare that the legislators of such a country are, in monetary affairs, guilty of ignorance or of injustice and bad faith, and such an imputation ought not to be made excepting on sufficient grounds.

CHAPTER V

of the meaning of certain words specially applicable to money and the precious metals.—price, value, premium, dearness, cheapness

Before bringing these preliminary generalities to a close, and entering upon the core of the subject, I beg to be allowed to define the true meaning of some expressions which are frequently used in our day in discussing the question of the currency. On this point we find persons who are not without influence on public opinion, deluding themselves with phrases of dubious meaning, and it is against this danger that I would wish to warn the reader, and those persons themselves.

The expressions which I have here more particularly in view are those of value and price, applied not as has already been done to commodities in general,* but especially' to the currency, and the precious metals of which it is made. I allude also to the expressions, premium, clearness, and cheapness, taken in relation to the same objects,—the currency and the precious metals.

In ordinary language, the words value and price are often used as synonymes. They are different, however, in their meaning, as has been already shown in reference to commodities in general. It is well here to define this difference in regard to the currency, and the precious metals of which it is made. It is such that one could indicate instances where, if the value of one of the precious metals fell, its price would rise. This is not a scholastic subtlety, imagined for the amusement of triflers; it is a fact presented to us in even vast proportions, in history. Thus, from the time of the discovery of America to our day, the value of gold in ingots or in coins has certainly diminished, since at the present time a given quantity of gold in coins or ingots is exchanged for a smaller quantity of corn, or of other ordinary products, or for fewer days' labour. However, the price of gold, in silver money, has increased; and in thus expressing myself, I do not allude to the circumstance of the coins having been altered, to such an extent that the weight of metal which was denominated a silver pound, under Saint Louis, would have made twenty pounds under Louis XVI. A rise in price of this kind is only nominal. That which is meant, and which is incontestable, is that, supposing that the currency in France had never been altered, and that its coins had continued of the same weight and fineness as in 1492, the year of the first voyage of the great Genoese navigator, the gold coin which would then have exchanged for ten or eleven silver coins of the same weight would in the nineteenth century have regularly exchanged for fifteen or sixteen. In a word, the price of gold has positively and effectively risen, from 1492 to our day, in the ratio of 10½ to 15½, whilst its value has declined.

The price of a thing, as has already been said, is its value in relation to money. When the precious metals are in question, it is convenient to distinguish between ingots and coined money, and also to particularise the species of money in which the price is measured. If, for example, I speak of gold, I am bound for clearness not only to indicate whether I refer to the ingot or the twenty-franc piece, but also whether I reckon the price in silver or gold coins. Assuming the coinage to be accurately struck, a fair assumption in these days when the operations of the Mint are brought to such perfection, and that every piece of gold is of full and equal value, then the price in gold currency, of a thousand francs in gold coin, or say fifty pieces of twenty francs, can only be a thousand francs. But the price of an ingot, containing weight for weight, and fineness for fineness, the same quantity of gold as the fifty pieces, may according to circumstances exceed them in value. It would be worth more if, under circumstances of real or supposed exigency, there were a great demand for ingots for coining at the same time that there were very few on offer in the market. It is a case which occurs but seldom, but which has happened in our day. Thus, between the 1st July, 1855, and the 1st January, 1858, the Bank of France purchased at a premium gold to the amount of 1,363 million francs (£54,520,000), the premium on which in some instances amounted to 15 per 1,000. The sum total paid by the Bank for premiums, in this interval of two years and a half, exceeded fourteen million francs (£560,000).*

On the contrary, the ingot will be worth more than coins of the same metal, always assuming them to be of full weight and fineness, when bullion flows to the Mint to be coined. Its destination being the coinage, it is natural that it should be at a disadvantage in comparison with coined money to the extent of the expense of the operation, including the loss of interest during the time that the bullion is retained at the Mint. The case now indicated, in which the ingot sells for less than an equal weight of coined metal, is that which usually presents itself to our view in European countries.

Another case, in which the ingot may be worth more than coins, is that of a country, for example, where a gold currency abounds, and from which this metal may be exported to other conntries in which the coins of the exporting State are not current. It might be more advantageous in such a case to export ingots than coins, or, to express the same thing in other words, it might be necessary to convert the coins into ingots before forwarding them to their destination; then the ingot would necessarily be worth more than the coins, weight for weight, and fineness for fineness.

A directly opposite case to the preceding is that where the money of the exporting country enjoys, through prejudice or otherwise, great favour in other regions. Commerce then finds it advantageous to withdraw coined money rather than ingots from this country, to transport it to those regions. Hence a sufficient reason why the money should be at a greater or less premium over the raw metal. It is thus that Spanish dollars, especially those called pillars, were, and still are, in great request in China, and pass in some localities at a value quite disproportioned to the quantity of metal they contain. There needs no other motive why they should be sought for, not only in the country of their production, but all over the world, and paid for in ingots at a premium.

It would be a very different hypothesis from the foregoing, to suppose that the coins have become worn by the process of circulation, so. as to have lost an appreciable part of their weight, as always occurs after the currency has remained a long time without being renewed. It is quite clear that, in such a case, an ingot of gold, containing weight for weight, and fineness for fineness, the quantity of metal contained in fifty perfect twenty-franc pieces, would be worth more than fifty of the same pieces when rendered light from excessive usage. Consequently, the price of an ingot in the current coins would be at a great premium. But then the fifty twenty-franc pieces, withdrawn from the circulation, would not really and substantially be pieces of twenty-francs. They would be simply pieces of nineteen francs, or eighteen francs, to which, by an abuse of language, or by the neglect of the authorities to resort to a recoinage, they had preserved the name and the currency of twenty-franc pieces.

It is needless to add that what has been said of coins and ingots of gold, applies equally to silver coins in relation to ingots of silver, and vice versa.

Examples of differences of this kind between the price of ingots and that of coins of the same metal abound in history. To observe the phenomenon in all its simplicity, and, if I may so speak, in all its purity, it is better to consult the history of England than that of other states, because out of England, the facts relating to the currency have been almost everywhere complicated with the incidents of a falsification of the standard. In England, then, the reduction in the intrinsic value of the currency by the passage from hand to hand, a loss to which the sweaters of coins have not failed to contribute their proportion when once they have ceased to possess their full legal weight, has sometimes been so great that the ingot corresponding legally with a certain number of coins, contained a quarter, a third, or even a half more of metal than these did, taken from the average of the current circulation. It followed that the ingot bore an enormous premium, a premium moreover which was quite apparent. This is what befel the silver currency in the reign of William III., before the recoinage of 1695. The ingot of silver was at a great premium in the current coins of the same metal; indeed, the English gold coin so well known under the name of the guinea, and which was at that time of good weight, passed for much more than its value in shillings. From the moment that the silver money had been recoined, and was thus perfect, the premium which the ingot had gained disappeared; that of the guineas, in relation to the silver money, fell to the insignificant amount which corresponded to the slight difference in the market quotations for these two metals, and the current value conferred by law or usage upon these' gold coins as compared with good silver money.*

It is not an uncommon thing in France to hear it affirmed that gold has lost none of its value since the discovery of the Australian and Galifornian mines, and as a proof the fact is cited that, in the market of Paris, ingots of gold are at par, or at least that they are only at a small premium. Persons who reason thus fall into a confusion, which, however, it becomes necessary to treat with some care, for men of very distinguished talent have fallen into it; I will soon quote an example. To know with certainty whether gold is dearer or cheaper, whether it be at a premium or not, the method is not to compare ingots of this metal with gold coins. Between the ingot and coins of full weight and fineness there can only be by accident a sensible difference. It is limited, in fact, by the charge at the Mint, including the interest of capital during the interval of time absorbed in the process of coining. A better, and the only good measure of the rise or fall occurring in the value of gold is that which takes place in its price in silver money, or, which amounts to the same thing, in the price of silver ingots in gold coins; and then it must be premised that no disturbance shall have arisen to cause a sudden change in the value of silver.

Thus, at the present time, the very decided premium which silver is acquiring, represents exactly the divergence that has occurred between gold and silver, for this premium indicates the excess of the price of silver as compared with the legal par in gold coins. Now, for how much does the fall in gold enter into this divergence? and for how much the rise in silver, if any rise have really taken place? This is not the question at present under discussion, and if it were, I doubt the possibility of solving it with any precision in figures. I have merely wished to point out the error into which some persons fall who try to estimate the exact rise or fall of gold by comparing the market price of ingots of this metal with the coins into which they are or may be converted.

This error, however, occurs, without any qualifying circumstances, in Lord Liverpool's treatise.* After demonstrating that silver has a less stable value than gold, that statesman, gifted nevertheless with a rare intelligence, estimates the variations which gold and silver commodities had undergone, by a reference to their price in current money, at a time when the currency consisted exclusively of gold or of bank notes convertible on demand into gold. One could hardly succeed in finding a device better calculated to persuade the mystified reader that silver alone undergoes any variations, and that gold by some inexplicable privilege escapes all appreciable alterations. Such a mistake, on the part of an authority of so high an order, whose good faith, moreover, is above all suspicion, shows how much attention must be brought to the study of the currency, and to the qualification of monetary facts, if we would avoid vulgar errors, and not become the dupes of false appearances.

[*]We know that France is of all the countries of Europe, or of Christendom, that in which political economy is the least taught. There are but two professorships: the one public, that of the College of France, and the other restricted to a special class of functionaries attached to the school of the Board of Works. Everywhere else, whether in Europe or America, each university has at least one chair of political economy; this will be found equally in Russia and in England, in Prussia and in Spain. The little kingdom of Portugal supports three professors of political economy. In France, instead of extending, we seem to be curtailing this useful branch of instruction. The chair of industrial economy, which was filled with such success by M. Blanqui, at the Conservatoire des Arts et Métiers, and which, as its title indicates, was devoted to but one branch of political economy, has been suppressed since the death of that brilliant professor. Another chair has been founded in its place, but it has been, by an accident no doubt, filled by a person whose chief claim to public attention consists in the propensity he has shown to throw insults on political economy and those who study it.

[*]It is this meaning which must be nearly always accepted in the course of the following arguments.

[*]On the subject of the true meaning to be attached to the word value, I entreat the reader to consult a work of the highest order, for which we are indebted to one whose premature loss the student of political economy will long deplore,—I allude to the “Harmonies Economiques" of Frederic Bas-tiat.

[*]Aristotle, Politics, Book I., Chap. III —This definition of the word money is that which Lord Liverpool has given in his treatise “On the Coins of the Realm,” He probably derived it from a work by Mr. Harris, Assayer General of the Mint, which appeared in two parts in 1757 and 1758. This valuable pamphlet, entitled “Essay upon Money and Coins,” has just been reprinted under the auspices of the London “Political Economy Club,” in a volume of old tracts upon money, with a preface by Mr. McCulloch, whose eminent qualifications are known to all political economists. (For the definition of money, by Mr. Harris, see p. 370 of the above volume.)

[*]Principles of Political Economy; translated, with notes, by M. Wolowski, Book II., Chapter III.

[*]It has been the custom for governments to levy a tax on plate and jewellery, in addition to the cost of affixing these stamps; but for the convenience of commerce it is necessary that nothing of the kind should take place in the case of money, and all the civilised states of our day recognise this principle and act upon it

[*]This point will be established in Chap. IV. of the present Section.

[*]To meet this, a plan has been recommended, and sometimes put in force, of paying in specified measures of corn instead of gold or silver, where the contract extends over a long period, or where it involves the payment of perpetual rents or annuities. These stipulations have, in some instances, endured for centuries in England, and the annuitants interested have derived great advantage therefrom.

On this subject, Lord Liverpool's treatise may be consulted with advantage. He cites, in particular, some examples of rents payable to colleges at Oxford and Cambridge.—(Page 117, edition of 1805.)

[†]See among others, the Principles of Political Economy, by M. Koscher, translated by M. Wolowski, Vol. I., Book II., Chap. IV., p. 338.

[*]When in the course of this work we speak of a fixed weight of gold or silver, without indicating its degree of fineness, the reader will be pleased to bear in mind that we mean those metals when absolutely pure and free from alloy. It is this which is ordinarily meant by the standard of 1,000 milliemes. We know that the standard of fineness of French coins is 900 milliemes, or nine-tenths, that is to say that they contain one-tenth of alloy.

[*]In a great many countries, metals were preceded as instruments of exchange by other objects. Thus, in Rome, we are warranted by the very word pecunia in believing that different articles of merchandise were valued and paid for in heads of cattle.

[†]The foundation of Rome dates from the year 753 b. c. Silver money was not introduced till five centuries later (269 b. c)

[‡]Copper thenceforth performed but a subsidiary part; it did not, properly speaking, constitute money, that is to say, both an equivalent and a measure. With the Romans, as with us, copper coins were thenceforth merely tokens, inasmuch as they had a value in exchange greater than their intrinsic value; but then, as now, they were merely used for the smallest payments.

[*]Excepting, however, the inequality before alluded to, as consequent on the progress of the arts.

[*]See Section II., Chapter I.

[*]On this subject some persons are of opinion that the Bank submitted to terms which might have been avoided. Without noticing in detail all that has been urged in this sense, I may call to mind the information afforded by Lord Liverpool (p. 150, edition of 1805, of his treatise on the English currency), that when the Bank of England in 1797 struggled with all its might to avoid a suspension of specie payments, she purchased no gold above the money standard, that is to say at more than £3. 17s. 10½d. an ounce, of metal of the legal fineness. For the twenty years that preceded the suspension of specie payments, the average of the price paid by her for gold was 2¾d. an ounce under the standard or Mint price.

[*]See Lord Liverpool's treatise, p. 69. There is also a very interesting exposé of the monetary situation of Great Britain at this time, in the brilliant History of England, by Lord Macaulay, Chap XXI.

[*]Page 149; edition, 1805.