The Online Library of Liberty

A project of Liberty Fund, Inc.

• Introduction.
• Taxation and Work.
• Chapter I.: Occupations. Distribution of Products.
• Chapter II.: Taxation Measured By Work.
• Chapter III.: Taxation Measured In Money.
• Chapter IV.: Principal Sources of Revenue.
• Chapter V.: How the Tariff Should Be Reformed.
• Chapter VI.: Taxation Which the Government Does Not Receive.
• Chapter VII.: British Tariff Reform.
• Chapter VIII.: Beggarly Compensation of United States Officials.
• Chapter IX.: What Is Protection?
• Chapter X.: Occupations That Cannot Be Protected By Duties On Imports.
• Chapter XI.: Method of Tariff Reform.
• Chapter XII.: Protection By Exemption From Taxation.
• Chapter XIII.: Free Trade the Objective Point.
• Chapter XIV.: Attempted Definition of the Principle of Protection By Senators Sherman, Hoar, and Aldrich.
• Chapter XV.: Hamilton’s Policy.
• Chapter XVI.: Tariff Protection Does Not Raise Wages.
• Chapter XVII.: Protection Promotes War; Free Trade Promotes Peace.
• Chapter XVIII.: Does Tariff Protection Promote Liberty?
• Chapter XIX.: Progressive Reduction of Duties.
• Chapter XX.: Cost of a High Tariff.
• Chapter XXI.: Development By Free Commerce.
• Chapter XXII.: High Wages and Low Cost.
• Chapter XXIII.: The Use of Machinery By Nations.
• Chapter XXIV.: The Waste of Armies.
• Chapter XXV.: Senator Morrill’s Report On Canada Received. Food and Wages.
• Chapter XXVI.: In the Matter of Silver, Bi-metallism, and Free Coinage.
• Chapter XXVII.: Volume of Trade.
• Chapter XXVIII.: Taxation By Bad Money.
• Chapter XXIX.: How to Maintain Silver Equal to Gold.
• Chapter XXX.: The Issue Joined.
• Chapter XXXI.: Personal Observations—conclusion.

CHAPTER XXVIII.

Taxation by Bad Money.

Since the two foregoing chapters on our monetary system were completed I have received John Henry Norman’s book upon The World’s Exchanges, published by Sampson Low, Marston, & Co., London.

In this work simple rules are given for computing the relative value of all the coins of the world by the relative weight in grains of pure gold or pure silver in each coin. That is manifestly the only true method of determining their value, as the proportion of alloy in each coin varies in different countries.

For instance, the gold dollar of the United States, which is the lawful unit of value, weighs twenty-five and eight-tenths grains (25), but it consists of nine parts of pure gold and one part of alloy; the coin is nine-tenths fine, it therefore contains twenty-three and twenty-two-hundredths grains (23) of pure gold.

The English pound sterling is a name or definition of the weight of one hundred and thirteen grains and a very small fraction (113.0016) of pure gold. The coin named sovereign, which is the equivalent of the pound when of full weight, consists of 916.667 parts of gold and 83.333 parts of alloy, the coin being seven-eighths fine.

The alloy in the coinage of other countries varies in some cases from either standard, therefore in order to ascertain the relative value of any coin the computation of the value for such comparison must be made by the relative weight of pure metal.

The elements of weight and valuation are inseparable; there is no method of comparing value except by weight, and no act of any country can change or alter the value of a coin except by adding to or taking off a part of the pure metal.

This computation I have tabulated from Norman’s work, and the tables below have been carefully corrected by him.

It would be well that the following tables should be officially verified by the officers of the United States Mint, or that corresponding tables should be given if the computations have already been made. I am not aware that any such tables exist.1

Gold coins named in Norman’s work, with weight of pure gold in each stated in troy grains, and relative value as compared to the gold dollar of the United States:

Silver coins named in Norman’s work, with weight of pure silver in each stated in troy grains, and relative value as compared to the silver dollar of the United States of 412½ grains nine-tenths fine, 371.2514 pure; also their relative value in gold at the present price of silver bullion.

“The above silver equivalents are found by dividing the grams of pure silver in each money of current in the large table of the Guide by 24.0567 grams.”—J. H. N.

In making these tables through the aid of Mr. Norman I was not aware that a similar valuation had been made by Mr. Edward O. Leech, Director of the Mint, which is to be found in Johnson’s Encyclopædia, edition of 1888, Vol. II., pages 144-146, under the article “Coinage.” From this table compiled by Mr. Leech, condensed tables have been prepared, which are given below, giving the value, as estimated by him, of the principal coins mentioned by Mr. Norman, in which some slight variations may be found from the previous tables, and some further valuations are added.

There are 480 grains in a troy ounce. There are 371.2514 grains of silver in a silver dollar. Therefore, in order that a silver dollar may be worth as much after it is melted as it purports to be worth in the coined dollar, the price of bullion in New York must be a fraction over $1.29 per ounce. Fine silver bars are now worth 88 to 90 cents per ounce. In other words, they are at a discount of thirty per cent., and the true value of the silver dollar at the present standard is substantially seventy cents; it has recently been worth less.

The prices of all our principal products are now on a gold basis. We get one hundred cents’ worth of gold or its equivalent for each dollar’s worth of cotton, corn, wheat, pork, butter, or other goods that we export; our whole internal traffic is on the same basis and is measured at the same standard.

The rates of wages and the incomes of all our people are now on a gold basis, liquidated in money worth one hundred cents on each dollar.

The only effect of debasing our standard to silver worth seventy cents on a dollar will be to lower wages by destroying credit.

The advocates of the free coinage of silver dollars of full legal tender have the audacity to say that an act for the free coinage of silver will bring the silver bullion and the silver coin of the world up to par in gold. They undertake to say that the United States can raise the value of silver from seventy cents, where it now is, to one hundred cents in gold, an advance of a fraction less than forty-three per cent. This claim only needs to be stated in order that its absurdity may be made conspicuous. The power of the United States to promote the circulation of silver certificates convertible into gold is already exhausted. Silver bullion is now uselessly piling up in the Treasury at the cost of the tax-payers of this country.

The people of this country are now paying a tax in gold of $4,000,000 per month, or $48,000,000 a year, for the purchase of silver bullion that nobody wants to use as money either in coin or in certificates.

When the legal-tender notes of the United States first depreciated, the depreciation being shown by what was called the premium on gold, gold vanished from circulation and was hoarded or exported on the very day the premium reached even one per cent. When the so-called premium on gold reached a little higher rate, so that our subsidiary silver coin became worth more than the paper currency, the whole of our silver coin vanished and was seen no more for many years. As we moved on in 1878 toward resumption on a gold basis, January 1, 1879, the silver coin first re-appeared and the gold next came back into the vaults of the Treasury and of the banks. No one could trace the silver and only a part of the gold in the statistics of the export and import of the precious metals.

A difference of a fraction of one per cent. turns the tide of gold from one country to another. What would be the effect on silver when we offer to coin it at forty per cent. profit?

Our gold coin can be converted into sovereigns at the rate of $4.8666 to one sovereign. The sovereign is the coin which corresponds to the pound sterling, the pound sterling is the standard of international commerce. If the free coinage of silver dollars of full legal tender were granted, any foreign banker could now purchase silver enough to make $4.86 for less than three dollars and a half in gold. This conversion would be at work at once. These dollars would then be paid out in this country as a full legal tender on all contracts for cotton, wheat, provisions, and other goods. Gold would be drawn out from the Treasury and from our banks to be shipped to England. The shock to credit would stop trade, except for daily necessities of life. The bankers who deal in exchange would make immense profits on the import and conversion of silver into dollars, and the stupid people would suffer the cost. People are slow, but not so stupid as they seem. This nefarious act cannot be done.

The advocates of the free coinage of silver dollars of full legal tender at the present time are trying to induce the people of this country to offer one hundred cents’ worth of gold, or of our cotton, grain, meats, provisions, oil, and other products now worth one hundred cents in gold at present prices, for the whole volume of silver coin or bullion in the world which is now worth but seventy cents in gold. This would give forty per cent. profit to the dealers in silver bullion.

The figures which I have given prove this, and no man capable of reasoning can deny it. It is beyond the power of the silver Senators and Representatives to disprove this statement.

The Republican Senators and Representatives of the silver-mining States now demand that the West and the South shall take seventy cents’ worth of silver instead of one hundred cents’ worth of gold for their cotton and their grain in order to enable the silver miners to sell their little petty product of silver for more than it is worth. The Democratic Senators of the South and West with few exceptions have nibbled at this bait, but the trap has not yet been sprung.

The trick is exposed, and the masses of the people who would pay the terrible cost of this nefarious measure have warned their representatives that this fraud must not be put upon them.

No coined money is true money and no coined standard can be a true standard or unit of value of which the bullion is not worth as much after it is melted as it purports to be worth in the coin.

The silver dollar of the present standard is bad money; it is a false standard because it does not meet these conditions. Its coinage must cease and the purchase of silver bullion must be stopped. This verdict has been rendered, and either this or the next Congress will enforce the decision by suitable legislation.

The Bland act and the McKinley act have been alike condemned,—neither has any intellectual standing nor any intelligent support. Both are marked alike by a perversion of the power of taxation to purposes of private gain in total disregard of the public welfare.

[1 ] See tables compiled by Mr. E. O. Leech, Director of the Mint, on pages 236 and 237, which have been recently added.