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Page 10
And in all the world there was not one observer who dreamed that this
hunger would soon be far more than satiated, and the philosopher who
should have predicted half of what was soon to come would have been jeered
at as a crazy optimist. In 1848 gold was discovered in California, and
three years later in Australia. The supply from Africa and the sands of
the Ural Mountains had previously increased, so that in 1847-8 it was
equal to that of silver. But how trifling was this increase to what
followed. In 1849 there was still a slight excess of silver production,
and in 1850 the proportion was but $44,450,000 of gold to $39,000,000 in
silver. Then gold production went forward by great leaps and bounds. How
much was produced?
Well, the estimates vary greatly. Soetbeer places the amount at
$1,407,000,000 by the close of 1860; but Tooke and Newmarche have put it
about $100,000,000 less. In the same era the production of silver varied
but a trifle from $40,000,000 a year. A committee of the United States
Senate, appointed for investigating the facts, reported that in the twelve
years ending with 1860 the gold produced was $1,339,400,000; and in the
next thirteen years, ending with 1873, it was $1,411,825,000. Thus, in the
thirteen years following the California discovery the stock of gold in the
world was doubled, and in the twenty-five years ending with 1873 it was
more than tripled. Several economic writers have made the statement very
much stronger than this, and M. Chevalier, in his famous argument for the
demonetization of gold, written in 1857, declares that the production of
gold as compared with silver had increased fivefold in six years and
fifteenfold in forty years, and that, owing to the export of silver to
Asia and its use in the arts, there would, in a very little while, be no
possible method of maintaining the parity of the two metals in money at
any ratio which would be honest and profitable.
And what was the real fact? The ratio, which in 1849 was 15-78/100 of
silver to 1 of gold in the London market, and the same in 1850, never sank
below 15-19/100 to 1, and never rose above the ratio of 1849 till after
silver was demonetized. Why this wonderful steadiness? The answer is easy.
In the eight years of 1853-60 France imported gold to the value of
3,082,000,000 f., or $616,000,000, and exported silver to the value of
$293,000,000; in short, her bullion operations amounted to $909,000,000.
She stood it without a quiver; she grew and prospered as never before. She
resolutely refused to change her ratio. Her mints stood open to all the
gold and silver of the world, and thus did she save the world from a great
calamity.
Scarcely, however, had the golden flood begun when the moneyed classes and
those with fixed incomes raised a loud cry. From the laboring producers no
complaint was heard. They never complain of increased coinage. In the
United States we knew nothing of this clamor, for we then had no large
creditor class, no great amount of bonds, and very few people interested
more in the value of money than in the rewards of labor. In Europe,
however, all the leading writers on finance and industries took part. In
1852 M. Leon Faucher wrote: "Every one was frightened ten years ago at the
prospect of the depreciation of silver; during the last eighteen months it
is the diminution in the price of gold that has been alarming the public."
In England, the philosopher DeQuincey wrote that California and Australia
might be relied upon to furnish the world $350,000,000 in gold per year
for many years, thus rendering the metal practically worthless for
monetary purposes, and another Englishman, as if resolved to go one
better, declared that gold would soon be fit only for the dust pan. M.
Chevalier took up the task of convincing the nations that gold should be
demonetized as too cheap for a currency, and of course the interested
classes soon organized for action.
Holland had already begun the process in 1847, but had managed it so
awkwardly that her condition is not easily understood or described as it
was in 1857. The estimated amount to be thrown out of use was only half
the real amount, and in the attempt to avoid a small evil they produced a
very great one.
Austria was at that time involved in trouble with her paper money system,
and thought the cheapening of gold offered a fair opportunity to come to a
metallic basis. The reasoning of her statesmen was singularly like that of
General Grant in 1874, when he pointed to the great silver discoveries in
Nevada as a providential aid to the restoration of specie payments, being
at the time in sublime ignorance that he had long before signed an act
demonetizing silver, and thereby depriving this country of the benefit of
such providential aid. But the strength of the creditor classes was
entirely too much for Austria and Prussia, and the German States allied
with them almost unanimously declared for throwing gold out of
circulation. A convention had been held at Dresden in 1838, with the view
to unifying the coinage, but little had been accomplished, and now a
convention was called at Vienna, which was attended by authorized
representatives of Prussia, Austria, and the South German States. It was
there stated that, besides various minor coins, there were three great
competing systems in Germany, namely, those of Austria, Prussia, and
Bavaria. It is needless to go into details of this once famous convention,
but suffice it to say that the following points were agreed upon: (1) The
Prussian thaler was to be the standard for Prussia and the South German
States, and was to be a silver standard exclusively. (2) The Austrian
silver standard was to prevail throughout that empire. (3) The contracting
powers could coin trade coins in gold, but none others, except Austria,
which retained the right of coining ducats, and these gold coins were to
have their value fixed entirely by the relation of the supply to the
demand. "They were not therefore to be considered as mediums of payments
in the same nature as the legal silver currency, and nobody was legally
bound to receive them as such;" in short, none of the gold coins permitted
by the convention were to be legal tender, but all were to be mere trade
coins precisely for the same purpose as the trade dollar once so famous in
the United States. The result, of course, was to make silver the standard
and gold the fluctuating money or token money. The effects of this
convention remained with but little change till 1871.
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