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Page 17
IS BIMETALLISM PRACTICABLE?
Can this great nation coin silver and gold on the same terms, at the ratio
of 16 to 1, and maintain a substantial parity?
This question, like all others in political economy, may he argued
theoretically or on the basis of actual experience. The monometallists say
that one metal or the other always has been and always will be the cheaper
at any ratio; that if both be freely coined, the dearer will be more
valuable as bullion than as money, and will therefore go out of use. They
say that, in spite of all devices to the contrary, we must have
monometallism any how, and always on the basis of the cheaper metal.
The bimetallist replies that such is, in truth, the natural tendency; but
when the dearer metal is thrown out of use as money it thereby becomes
cheaper, and as the cheaper metal must take its place, a vastly greater
demand for it is created, and so it becomes dearer; thus an alternating
action keeps the two near a parity, provided that the ratio corresponds
nearly with the relative amounts of the two metals in the world's stock.
They claim that the world has thus a far less fluctuating standard of
value than it ever can have with one metal alone.
The monometallist rejoins that this is "all theory." This brings both
parties to the test of experience, and by common consent the experience of
France in the seventy years from 1803 to 1873 is taken as the best
practical test. At first view, it would seem as if the matter could easily
be settled, as the time is so recent that there could be no great
obscuration of the history; but on inquiry a determination of the real
facts is found to be no such simple matter, and as the disturbance of
natural law by war and other causes was almost constant, both sides find
enough in the facts to make a basis for their respective contentions. Let
us then consider this history.
Napoleon Bonaparte became First Consul and practically ruler of France in
1799, and at once addressed himself, with his usual energy, to the task of
establishing a stable monetary system. He found that in 1785 Calonne had
established the ratio of 15-1/2 of silver to 1 of gold, and that it had
worked reasonably well. He accepted it, therefore, as justified by
experience, and his Finance Minister carried through the Council of State
an act for the free coinage of both metals at that ratio. For seventy
years this law stood practically unchanged, and it is speaking with great
moderation to say that in those seventy years there occurred more
disturbance of every kind unfavorable to the maintenance of a ratio than
in any other seventy years in monetary history. France was twice
conquered, her soil overrun, and her capital held by the enemy. She four
times changed her form of government. Once she was subjected to the
payment of enormous war expenditures, and again not only to the payment of
still greater expenditures but to a fine exceeding in amount the largest
sum of gold ever held in the United States. During a large part of this
time the world's production of silver was in excess of that of gold to an
extent very much greater than it has been in recent years, and then, after
a very brief interval of something like equal production, there was a
sudden and tremendous increase in the production of gold until it exceeded
that of silver more than 3 to 1 in value. During these years, also,
several of the neighboring nations, including seventy million people,
demonetized gold and threw the whole burden of sustaining its equality on
the continent of Europe upon France, and during another portion of the
time there were monetary disturbances so far-reaching that they shook the
foundations of credit in every civilized country in the world. And yet,
through all these convulsions, France for seventy years maintained a
substantial parity, by welding the two metals together for monetary
purposes.
The contrasted figures are simply amazing. In the decade of 1811-20 there
were produced 47 ounces of silver to 1 of gold, and yet the market ratio
outside of France never stood higher than 16.25 to 1. In the decade of
1821-30 the production was 32 ounces to 1 and the average ratio 15-80/100
to 1. In 1831-40 the production was 29 ounces to 1 and the average ratio
15-75/100 to 1. In 1841-50 the production was 14-9/10 ounces to 1 and the
average ratio 15-83/100 to 1. The demonstration is as complete as that of
any proposition in Euclid. In spite of the enormous overproduction of
silver, the maintenance of the mint ratio in France held the two so nearly
together that in three years out of four the difference in other countries
only amounted to the cost of transporting the silver to the French Mint
and of coinage.
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