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• The Works and Life of Walter Bagehot Volume Vi
• Lombard Street.
• Lombard Street In 1910.
• Prefatory Note to Twelfth Edition.
• Advertisement.
• Chapter I.: Introductory.
• Chapter II.: A General View of Lombard Street.
• Chapter III.: How Lombard Street Came to Exist, and Why It Assumed Its Present Form.
• Chapter IV.: The Position of the Chancellor of the Exchequer In the Money Market.
• Chapter V.: The Mode In Which the Value of Money Is Settled In Lombard Street.
• Chapter VI.: Why Lombard Street Is Often Very Dull, and Sometimes Extremely Excited.
• Chapter VII.: A More Exact Account of the Mode In Which the Bank of England Has Discharged Its Duty of Retaining a Good Bank Reserve, and of Administering It Effectually.
• Chapter VIII.: The Government of the Bank of England.
• Chapter IX.: The Joint Stock Banks.
• Chapter X.: The Private Banks.
• Chapter XI.: The Bill Brokers.
• Chapter XII.: The Principles Which Should Regulate the Amount of the Banking Reserve to Be Kept By the Bank of England.
• Chapter XIII.: Conclusion.
• Appendix.
• Note A.: Liabilities and Cash Reserve of the Chief Banking Systems.
• Note B.: Extract From Evidence Given By Mr. Alderman Salomons Before House of Commons Select Committee In 1858.
• Note D.: Meeting of the Proprietors of the Bank of England. 13th September, 1866.
• The Metaphysical Basis of Toleration. (1874.)
• Monsieur Guizot (1874.)
• Professor Cairnes. (1875.)
• The Public Worship Regulation Bill. 1 (1874.)
• The Depreciation of Silver.
• Preface.
• I.: The Low Value of Silver, and Its Effect On India.
• II.: The Remedies For the Fall In Silver.
• III.: Further Suggestions On the Fall In Silver.
• IV.: The Effects of the Resumption of Specie Payments In France On the Price of Silver.
• V.: The Effect of a Depreciation of Silver On Our Foreign, and Especially On Our Eastern Trade.
• VI.: The Extreme Fall In Silver, and the Hasty Remedies Proposed.
• VII.: The Report of the Committee On the Depreciation of Silver.
• VIII.: The Proposal of the Bengal Chamber of Commerce to Suspend the Coinage of Silver In India.
• IX.: The Debate On the Indian Budget.
• X.: The Different Effect On Trade of a Cheapening of the Precious Metals, and of a Depreciation of Inconvertible Paper.
• XI.: The American Commission On the Currency.
• XII.: The Permanent Effect of an Increase of “council Bills” On the Flow of Silver to India and Upon the Indian Exchanges.
• XIII.: The Effect of the “council Bills” On the Indian Exchanges.
• XIV.: The Minute of the Indian Government On the Depreciation of Silver.
• XV.: A Proposed Remedy For the Depreciation of the Silver Coinage of India.
• XVI.: The Transition State of the Silver Market.
• XVII.: Bi-metallism.
• Appendix. Evidence Before the Select Committee On Depreciation of Silver. Monday, 8th May, 1876.

XVII.

BI-METALLISM.

We have written much this year on the subject of silver, and on the evils of its depreciation, but we have hardly, we think, referred to the scheme which some persons think would set right everything—the scheme of universal “bi-metallism”. But the truth is, that we regard that scheme as so entirely beyond the boundaries of practical finance that we did not think it worth discussing, and we only discuss it now because we continue to receive ingenious pamphlets, some of them written by men of business, which maintain that it is both practicable and advisable. We shall, therefore, state as shortly as possible our reasons for thinking that it is neither.

The plan is, that by means of an “international conference,” or otherwise, all nations should agree to use both gold and silver as legal tender for all amounts, and to use them in the same proportions; which, it is said, would cure any evils which now arise from changes in the relative value of gold and silver, and in the cost of production of both or either of them.

But first, any such attempt would be such an alteration in the monetary system of most countries, that it would be difficult to get most of them to take it into consideration, and impossible to induce many of them to agree to it. Take our own case,—England has a currency now resting solely on the gold standard, which exactly suits her wants, which is known throughout the civilised world as hers, and which is most closely united to all her mercantile and banking habits. What motive, that an English Parliament could ever be got to understand, is there that would induce them to alter it? You cannot even begin an argument which would seem to have a sufficiently striking sound. Some time ago it was indeed said that the finances of our Indian Empire were thrown into confusion by the fall in the price of silver, and that, therefore, the English and the Indian currency should be assimilated, and both be on the “double standard” principle. But even in that case the English people would, rightly or wrongly, never have consented to change their currency; they would have told the Indian financiers to adjust their system of raising a revenue to the new circumstances. They would not have altered the sovereign for anything which might happen to the rupee.

And still less would the English people think of doing so when silver has risen in price, and when our Indian finance is no longer inconvenienced. They would say, with their usual untheoretical common-sense, “This event shows how dangerous it is to make great changes upon fine arguments in important matters. You—the advocates of bi-metallism—wanted us to make a most troublesome and difficult change to cure our evil, which has now for a time entirely, and perhaps for ever, cured itself. We certainly shall be cautious how we listen to you again.”

Then it is said that under our present system the fall in silver throws exchanges into confusion, which, no doubt, alters the course of trade. But practical commerce soon adapts itself to such changes, and a nation which at present has a good currency, and one which suits it, would be very foolish to make a change merely to keep the exchanges from possible fluctuation. And as we have often shown before, the fluctuations in the Indian exchange, which have hampered our export trade to India, are not by any means wholly due to the change in the price of silver; they are partly owing to the increase in remittances from the East for interest of debt, and on other accounts; the effect of which was long suspended, but now is fully felt. And, as we have also often shown, though the trade to India is impeded by a fall of silver, our trade from India—our imports from thence—are stimulated. The same cause which tends to impair the one, tends equally and necessarily to add to the other. A change in the monetary system of any one country can rarely be effected, except to prevent some great evil; a change of the system of a very large number of countries could only be made to meet some superlative evil, and in this case neither exists.

Most advocates of “bi-metallism” now admit that unless all countries adopt it, and unless all countries keep to it, it is a very faulty system. It is not a currency of two metals, but an alternative currency, sometimes of one and sometimes of another. Countries with such an alternative currency always use the cheaper metal and sell the dearer metal. Creditors in it are always injured by being paid in the cheaper metal; debtors are always benefited by being enabled to pay in it. The currency of France was thus a few years ago changed from gold to silver, and would now have been changed back again to gold, if it had not refused to take the silver, and had not, in so doing, practically abandoned the bi-metallic system. And a system which requires that every one should agree to make it good, is certainly a system which is difficult to make good, and which is always liable to become bad.

And even if this system was at once, say, by “miracle,” imposed on all the human race, it would be very imperfect. It forces an arbitrary equation, in which there is no naturalness, between gold and silver. But their natural relative price has varied exceedingly. The table, on page 337 published by Mr. Goschen’s Committee, shows this clearly.

And the effect of the bi-metallic system, if universal, would be to fill the world with the cheaper metal only. That which could be brought to market most easily would come to market; that which could least easily be brought to market would not come. And there would, in consequence, be an incessant tendency to change of prices. No doubt that tendency would be impeded by the magnitude of the stock of the precious metals which now exists, and of which it would have to change the value. But still it would exist, and would be a constant evil.

But this and other characteristics, whether for good or evil, which may belong to universal bi-metallism are, in our judgment, scarcely worth considering; they seem to us fit only for theoretical books, because the plan is only a theory on paper, and will never be in practice tried.