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Page 13
What then has caused the "great depreciation"? Nothing has caused it.
There has been but a trifling depreciation indeed. It is as clearly proved
as anything unseen can be that if the nations had left silver and gold as
they were in 1870, both would have gained materially in value, that is, in
the power to command commodities, because of the vastly greater relative
increase of the latter; but by demonetization all the increase has been
concentrated in gold, leaving silver almost exactly as it was. At present,
however, I devote myself to the question whether there has been such an
increase in the production as would normally cheapen it. On this point we
have evidence to convince any unbiased mind, for the relative production
of silver and gold has in former ages varied very much more than in the
last twenty-three years, and the variation has extended over much longer
periods, without causing more than the most trifling divergences in value.
And the explanation is simple: the two metals received equal recognition
at the mint and in legal tender laws; the greatly increased use of the
cheaper maintained its value in coinage, while disuse of the dearer tended
equally to check its appreciation. In this sense government can "create
value" by creating a use.
From 1660 to 1700, for instance, the production of silver averaged in
value much more than twice that of gold, and in quantity some thirty-three
times as much; yet all those years, the highest mint ratio was 15.20 to 1
and the lowest 14.81--a variation in money value of but .39 or 2.6 per
cent. From 1701 to 1760 inclusive, the proportion of gold produced
gradually rose from a little over a third to 40 per cent. in values, yet
the money ratio remained remarkably constant, the highest being 15.52 of
silver to 1 of gold and the lowest 14.14. In other words, for sixty years
there were produced on an average about 28 ounces of silver to 1 of gold,
yet the widest variation of their money values in all those years was less
than 9 per cent. In the face of such facts as these, we are asked to
believe that while an average of over 30 ounces to 1 created an average
variation of less than 6 per cent., and a greatest variation of less than
9 per cent., a production of some 20 ounces to 1 since 1882 has created a
variation of 100 per cent. And that the variation began nine years before
the value production of silver exceeded that of gold! It is an affront to
our common sense.
[Illustration: The above diagram shows the relative annual production of
gold and silver from 1493 to 1870, and also average ratio of values of the
two metals.]
I should say, at this point, that my figures are taken from the latest,
and in my opinion the most scholarly work in favor of monometallism, "The
History of Currency," by Prof. W. A. Shaw, Fellow of the Royal Historical
and Royal Statistical Societies. As the ratio between silver and gold
varied considerably in the different marts of Europe, I follow his plan
(which is Soetbeer's) of taking it as it stood at any particular time in
the city which might then be called the greatest commercial centre,
whether Venice, Hamburg, Antwerp, or London. His history comprises the
entire period from 1252 to 1894. It is only fair that I should also give
his explanation of the stability of the metals, which is extremely
interesting.
He begins his second chapter with the statement that the discovery of
America was "the monetary salvation and resurrection of the Old World";
that it was a time of unexampled increase in the precious metals and
equally unexampled rise of prices, but there was also "feverish
instability and want of equilibrium in the monetary systems of Europe." He
shows how the first great import was of gold, which began to affect prices
in 1520; how this was followed by a very much greater increase in silver,
and how, while prices were rising so rapidly as to stimulate trade and
incidentally do damage by causing great fluctuations, yet there must have
been some great regulator preventing the evil which we should _a priori_
have expected. He finds it in the fact that Antwerp had taken the place of
Venice and Florence, and conducted a great trade with the far East. His
language is: "The centre of European exchanges--Antwerp in the sixteenth
century as London to-day--has always performed one supremest function,
that of regulating the flow of metals from the New World by means of
exporting the overplus to the East. The drain of silver to the East,
discernible from the very birth of European commerce, has been the
salvation of Europe, and in providing for it Antwerp acted as the
safety-valve of the sixteenth century system as London has done since. The
importance of the change of the centre of gravity and exchange from Venice
to Antwerp, therefore, lies in this fact. Under the old system of overland
and limited trade, Venice could only provide for such puny exchange and
flow as the medi�val system of Europe demanded; she would have been unable
to cope with such a flood of inflowing metal as the sixteenth century
witnessed, and Europe would have been overwhelmed."
Professor Shaw argues that without the Eastern safety-valve Europe would
have been ruined by an excess of the precious metals, that India furnished
the needed reservoir--did she not take gold as well as silver?--and that
Venice was so far limited to an overland trade that she could not have
performed the function Antwerp did. Later he sets forth the current
monometallist position that the nations are now as one in trade and the
interchange of the precious metals, and therefore even the partial
equilibrium of the sixteenth and seventeenth centuries could not be
maintained. Let us, then, bring the figures down to the present, and it
will be found, I think, that the farther down we come the weaker does the
monometallist contention appear.
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