William Arthur Shaw

“ In any system so rough and so non-uniform as that of Europe in the fourteenth century, any variation of one metal served as a vantage-point against [Pg 49] the other, as a lever to press upon and force it out. One metal would have been safe (so long as no partial depreciation was allowed) , two metals served simply as fulcra to each other's oscillations, to the undoing of both. The mediæval legislator could not grasp that there was a double train of principle and event transacting itself under his very eyes—the one, changes of denomination of coins; the other, changes of ratio. ”

“ The complaints of exports of coins, and the evidence of the action of bimetallic law, appears only at three isolated and widely separated periods. The inference can only be—and it is more than an inference—that her reign, besides being a period of currency expansion, was one in which the ratio existing in England facilitated the flow of metals from the Continent, and secured the permanence of that currency expansion. On this increased basis of currency was built that commercial and national, yea even literary, growth and expansion, which have made the Elizabethan age the glory of our history. ”

“ Throughout, there was in existence one class who grasped the fact without any knowledge of the theory, and profited by it—the merchant exchangers. There was constant oscillation—change of ratio, and the least alteration of the condition of one metal made it a lever for operations upon the other. These operations were arbitrage merely. They had no relation to the ebb and flow of commerce as modern arbitrage transactions have. It was a financier's opportunity of private gain, and for private gain the system was worked. ”

“ Such is the structure of the world's commerce that India provides an outlet or drain for any sudden crisis-bringing inflow of precious metal, and preserves the equilibrium of our system. The fact is patent to-day, because the nature of our credit and banking system is understood. ”

“ The part which India has played in the currency history of the world has been characteristic and uniform from the first. India is, and has been, from the birth of international commerce, the receptacle or sink for the precious metals of the civilised Western world. ”

“ Such is the nature of the bimetallic law that any overshooting of the ratio, on no matter which side,—in favour of silver or in favour of gold,—establishes a differentiation, and the differentiation at once gives to the one metal a fulcrum or lever point—a purchasing power—against the other, and the undervalued metal, whichever it is, at once tends to disappear. Four years after this autocratic measure of France, it was found that her currency was in so depreciated a state, through exchange, that the only pieces current were lacking one-third of their full weight. ”

“ Finally, among the numerous states of Italy, with each their little independent Mint, there is no trace of the coinage of gold until the days of the commercial greatness of Florence and Venice. For eight centuries or more those races of Europe, which were to turn the course of the modern world and build its civilisation anew, were ignorant of the commercial use of what has been through all history the most potent factor in civilisation—gold. ”

“ But the process of development which alone made it possible—the development of modern banking, the invention of paper currency media, the breaking down of international trade restrictions, all the mechanical and scientific inventions which have resulted in the binding of the world together in one whole as far as commerce is concerned,—all this would comprise in brief the essential features of the complete commercial development of two centuries or more, and how far they are related as cause or effect it would be hard to say. ”

“ Further than this the monetary system of Europe—unconsciously bimetallic and with an appalling variety of ratio prevalent at the same moment in different places—lay open, helpless and defenceless, and inviting to the bullionist, financier, or arbitragist. In so far as this element of national greed and dishonesty, or private and unprincipled gain, entered into the legislative enactments of the Netherlands, it condemns them as mercenary, and the monetary straits or tightness, not to say crisis and panic which ensued, as unnecessary and therefore in the highest degree lamentable. ”

“ The second practical outcome of the revolution was the development of the modern system of control of the flow of gold balances, viz. by means of the bank rate and the arbitrage transactions depending thereon, and on interest and discount rates generally.
The modern theory of international trade does not say that between two particular countries, or at any one particular point of time there is an equivalence of exchange, but that between a circle of commercially interconnected countries, and over a certain cycle of time or operations, there is an equivalence of exchange of goods and services. ”

“ If the currency system of England had been of silver alone, a single enactment lessening the content of the unit coin, or crying up its denomination, would have stopped any outflow caused by under-valuation as compared with foreign money value. ”

“ The conception of a law of tender is quite modern. And the evolution of the idea of such a law has gone hand in hand with the evolution of a conception of monetary theory on the part of the legislator—that is, with the bitter experience which for want of such a conception Europe endured for centuries. In all systems of jurisprudence money and minting appertains to the kingly office, and the development of the law of tender is to be traced in royal proclamations of the King in Council for long before it became the subject of parliamentary legislation. ”

“ It is inconceivable that such a blunder should have been committed at a time when the production of silver had advanced and was advancing by leaps and bounds beyond that of gold, and when the currency of every European country of commercial note was being accommodated to the depreciation of silver with unerring instinct. ”

“ Properly speaking there has been no subsequent crisis in European history fitly comparable with the latter of these. If at all, there is only one comparison possible, and that is the currency situation in which the monetary world is at this moment, or which has come upon it since 1850—a period of bullion inflation in which silver has, finally as yet, outweighed gold, to the violent disturbance of the ratio. ”

“ This—as yet the last—conference was summoned on the initiative of the United States, but from the commencement a distinct difference of tone and method made itself felt; the Government of the United States recognising that some European countries might not be willing to adopt the remedy which they would prefer, namely, "the establishment of some fixity of value between gold and silver, and the free use of silver as a coin metal, upon a ratio to gold to be fixed by an agreement between the great commercial peoples of the world." ”

“ At a time when the northern nations show signs of an infancy of commerce merely, Italy was advanced in the art and practice of a most highly developed commercial and financial state. It is to her that we owe our system of book-keeping and [Pg 18] the use of bills of exchange, not to speak of the pawnbroking and funding systems; and it is permissible to conjecture that Italy, keeping her finger as she did on the monetary pulsations of Europe, reaped her harvest, and far the largest harvest, from the bimetallic fluctuations of the fourteenth and fifteenth centuries. ”

“ Many of our bankers here have a great trade with your goldsmiths and merchants in London for English gold and heavy English silver. Your Mint will never go until this be discovered, for these men are the sluices that drain all your money. I believe there is at this day forty times more gold and silver in the Low Countries than in England. About twelve years since the French were forced to call in all their money, it being so clipped that their commerce ran into confusion, and you have almost brought yourself to the same point, the coin in Ireland being 20 per cent. ”

“ The simple truth was, that it was much more likely to increase in time of peace and trade activity than in time of war. The point to notice was not at all how much the écu did depreciate, but the relativity of such its depreciation with that of the standard currency of other countries, and the monetary disorder which the inequality of ratio and of rate of depreciation induced. ”

“ It was as the outcome of this resolution that the celebrated Hamburg bank was instituted in 1619, the later life of which was to become of so much importance for the monetary and commercial history of North Germany.
The curious point to observe is the short time—a few months merely—by which the crisis in Germany preceded that in England, and the analogy of some of the manifestations, although there were no such Mint and coinage disorders in England as had aggravated and in the first place partly induced the movement in Germany. ”

“ Though unable to recommend the adoption of what is commonly known as bimetallism, we desire it to be understood that we are quite alive to the imperfections of standards of value, which not only fluctuate but fluctuate independently of each other, and we do not shut our eyes to the possibility of future arrangements between nations which may reduce these fluctuations. One uniform standard of value for all commercial nations would, no doubt, be a great advantage. ”

“ The total omission of the historic, reasoned, and consecutive study of currency history—the most important domain of practical economics—from the curriculum of every university in the land is matter for surprise and regret, and can only be attributed to the lack of an initiative and of a handbook. ”

“ The difficulty of calculating the European Mint ratio at any moment can be judged from the experience and statements of persons so widely apart as Sir Isaac Newton in England, Mirabeau and Calonne in France, and Morris and Hamilton in the United States (see infra, pp. 172-3, 229-30, and 251) .
With regard to the scope of the present work, it is confined entirely to the history of metallic currency and standard. There is no reference to the paper-money experience of any country, not even America or Austria. Such a subject must form matter for a separate treatment. ”

“ For the purpose of external or foreign trade, a debasement of currency is fatuous and pernicious. The coins are estimated at their content of pure metal, and the international exchange is so rated. The consequence is an apparent rise of foreign prices proportioned to the extent of the debasement. ”

“ Four years later the effects of the exchange had made themselves so felt that Henry was obliged to make a treaty with the Emperor, Charles V., "for the reformation of old and new money," 1523. An attempt was made to tie down the chief coins in exchange—the gold real of Flanders, the gold carolus and the double carolus of Spain—and it was further agreed (Article IV.) that no new money of Germany, Italy, Spain, France, or elsewhere, should be given in payment to English merchants, unless it had a fixed value in sterling money by consent of both princes. ”