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Page 11
Of course, gold at once became "dishonest money." It was worth less than
silver, and a regular gold panic set in. Holland had already demonetized
most of her gold coinage, that is, had deprived it of the legal tender
quality, and Portugal now practically prohibited any gold from having
current value, except English sovereigns. Belgium demonetized all its gold
at one sweep, and Russia prohibited the export of silver. Thus, in an
alarmingly short space of time five nations had practically demonetized
gold, and others were threatening to do so, and the world was rapidly
being taught that gold was the discredited metal, while silver was the
stable and sound money.
Some curious and a few amusing results followed. Among a certain class in
England a regular panic broke out, and in Holland and Belgium even the
masses of the people became suspicious of gold and disliked to take it in
payment. In the latter country a few traders hung out signs to attract
customers, to this effect, "L'or est recu sans perte," meaning that gold
money would be taken there without a discount. It is probably not known to
one American in a thousand that the practice of inserting a silver clause
in contracts became at that time so common in Europe that it was actually
transferred to the United States, and in England life insurance companies
were established on a silver basis. Several American corporations
stipulated for payment in silver, especially of rents, and to this day a
New England establishment is receiving a certain number of ounces of fine
silver yearly under leases then drawn up.
It is equally interesting to note in the literature of that period
arguments against gold almost word for word like those now used against
silver. The financial managers threw gold out of use and then urged its
non-use as a reason for its demonetization. "None in circulation,"
"variation shows impossibility of bimetallism"--such were the phrases then
applied to gold, as we now find them applied to silver. An artificial
disturbance was created, and then pleaded as a reason for further
disturbance.
All this while the financiers of England were bombarded with arguments and
prophecies of evil, but her geologists pointed out clearly that Australian
and Californian products were almost entirely from the washing of alluvial
sands and consequently must be very temporary. Her statesmen believed the
geologists rather than the panic-stricken financiers, and so she held for
gold monometallism.
But it is to France that the world is indebted for maintaining the parity
through those years of alarm and panic. M. Chevalier urged upon French
statesmen the importance of returning to the system which had been in
force previous to 1785, when silver was the standard and gold was rated to
it by a law or proclamation. The proposition was actually brought forward
in Council and urged upon the Emperor that silver should be made the
standard and gold re-rated in proportion to it every six months. The net
result was, by France taking in gold and letting out silver, that in 1865
that country had a larger stock of gold than any other in Europe. Suffice
it to repeat that several nations, including seventy million people,
actually demonetized gold, deprived it of its legal tender, and treated it
as a ratable commodity; while France, single-handed and alone upon the
continent of Europe, was able to absorb the enormous surplus of gold and
maintain the parity by the simple process of keeping her mints open to
both at the ancient ratio.
Thus ended the scheme to drive gold out of circulation and base the
business of the world upon one metal, and that the dearer metal, silver.
But suppose the scheme had succeeded; suppose France had been less firm;
what a wonderful flood of wisdom on the virtues of silver we should have
had from the monometallists! How arrogantly they would have denounced
us--who should, I trust, in that case have been laboring to restore gold
to free coinage--how arrogantly they would have denounced us as the
advocates of cheap money, dishonest tricksters, repudiators! How they
would have rung the changes on "dishonest money," "fifty-cent gold
dollars!" What long, long columns of figures should we have had to prove
the stability of silver, the fluctuating nature of gold! What
denunciations, what sneers, what gibes, what slurs would have filled the
New York city papers in regard to those Western fellows who want to
degrade the standard! How glib would have been the tongues of their
orators in denouncing all who advocated the remonetization of gold as
cranks, socialists, populists, anarchists, ne'er-do-wells, and
Adullamites, kickers, visionaries, and frauds! Is there any practical
doubt that we should have witnessed all this? None whatever; in fact,
something of the same sort was heard in Europe at the time of the
demonetization of gold. It all goes to show that self-interest blinds the
intellects of the best of men so that they readily believe that which is
to their interest is honest, but that the farmer who seeks to raise the
price of what he has to sell thereby throws himself down as dishonest. Of
course, the successful demonetization of gold would have brought about an
enormous appreciation of the value of silver, since it would have thrown
the whole burden of maintaining the business of the world upon one metal,
and equally, of course, we should have had the same attacks upon the
owners of gold mines that we now have upon the owners of silver mines. As
the withdrawal of silver from its place as primary money and its reduction
to the level of token money has thrown the burden of sustaining prices
upon gold, so unquestionably would the reverse process have occurred had
gold been reduced to token money in place of silver. All this we know
would have taken place from what actually did take place, and this makes
important the history of the demonetization of gold.
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