General Sterling Price

“ To begin with, the depreciation of the exchange rate of sterling on the eve of the war had raised by approximately one fifth the sterling price of all imports from the United States. On top of this, the early months of war brought difficulties of supply and transport which raised import prices still further. [23] Meanwhile, the claims of the British war economy upon hard currency were expanding even beyond the requirements of materials and tools that have already been described. ”

“ During the war legal price control had its maximum effect which, while great on a few commodities, probably did not, as statistics can be adduced to show, affect the general price level as much as five per cent. That now in times of peace the effect could be half that much is almost unthinkable.
The job is too big for any man or any government. If our Government tries to fix retail prices to protect the customer it must then go further and fix wholesale prices to protect the retailer and then, likewise, fix the prices of jobber, manufacturer, and producer of raw materials. ”

“ From these positions it seems to result, that whenever it is found that manufacturers enjoy wages more than in proportion to their physical-necessary through the year, reckoned upon the general average of married men and batchelors, the method of reducing them to the proper standard, is either to multiply hands, if you want to reduce prices in your own market, or to augment the price of their physical-necessary, if you incline they should remain the same. ”

“ These two experiences in a single generation have set a larger number of persons thinking on the instability of monetary units than ever before in history.
The cumulative effect is a rapidly spreading consciousness that the price level, on which business is conducted, is now largely at the mercy of monetary and credit conditions. To-day the general public is willing to acknowledge, as before the war it was not, that the tide of prices will rise with a flood of gold or paper money or bank credit. ”

“ How the Price of Exchange, in a prosperous trading Nation, may be prevented from operating upon the whole Mass of reciprocal Payments, in place of affecting the Balance only. We have taken it for granted, that the price of exchange is a hurt to trade in general.
In this chapter, we shall inquire more particularly than we have done, in what that hurt consists. The point of view of every man, whether he be a merchant or not, is first honestly, and as far as law and fair dealing permit, to consult his own private interest ”

“ What proportion of the total of exchange dealt in in the New York market consists of sterling it is impossible to determine, but that it is as great as the volume of all the other kinds of exchange put together can safely be said. Many big dealers, indeed, make a specialty of sterling, and if they handle any other bills at all, do so only on a very small scale. ”

“ Mawes landward to left, and the mining world and the farming world open boundlessly to the rear:—all this made a pleasant outlook and environment. And in all this, as in the other new elements of his position, Sterling, open beyond most men to the worth of things about him, took his frank share. From the first, he had liked the general aspect of the population, and their healthy, lively ways; not to speak of the special friendships he had formed there, which shed a charm over them all. "Men of strong character, clear heads and genuine goodness," writes he, "are by no means wanting." ”

“ Neither in September 1939, nor eight years earlier when sterling had separated itself from gold, was the sterling area a new creation: all that happened on both occasions was that a trading and financial partnership already long established took a shape that was more visible to outsiders. The sterling area had grown naturally from the London-centred international market of the nineteenth century, when overseas producers were always able to sell their products for sterling which they could use either to finance their imports from the United Kingdom or to clear their accounts with third parties. ”

“ It is very hard to control any individual price in the face of the economic forces of supply and demand, but it is very easy to control the general scale of prices; for the general scale of prices depends, among other things, on the weight of the gold dollar and the weight of the gold dollar is whatever we choose to make it. ”

“ The truth is, most explanations of the general rise in prices are mere graspings at the first straw in sight that seems to offer any explanation. People unconsciously pick out some particular cases with which they happen to be familiar and drag them before the public. A middleman or a trust raises prices, a firm announces a rise because of the demands of labor unions, a crop failure raises the price of a cereal,—and immediately some one hails the event as a representative cause of the high cost of living. ”

“ As prices have now been rising 23 years, we may reasonably expect public interest, as soon as the Peace Treaty excitement has subsided, to grow intense and remain so for a few years at least. If, as I expect, prices continue high, the popular idea that the high prices were due to war-scarcity will have no leg to stand on, and the quest for a satisfactory explanation will go on with the greatest eagerness. A member of the Federal Reserve Board says the price level problem is the after-the-war problem. ”

“ In a series of proposals drawn in the autumn of 1697 for submission to the House of Burgesses by leading citizens of Accomac, it was asserted emphatically that money sterling was the most convenient agency in carrying on trade and commerce, and that its absence discouraged men in every walls of life because it compelled them to wait or sell upon credit, which frequently terminated in a total loss. ”

“ Does it not follow from this analysis of the question, that the prices of articles of the first necessity, depend rather upon the occupation and distribution of the classes of inhabitants, than either upon the abundance of those necessaries, or of the money to purchase them; since many examples may be found, where these articles have borne little or no price, even in countries where money was not wanting. The reason therefore of low prices, is not the vast abundance of the things to be sold, but the little occasion any body has to buy them ”

“ He made a million dollars, it is said, by this little piece of cunning. But if all men had thought and acted as Stewart did, we should have had no Union, no country, and there would be left to-day neither honor nor manhood in all the world. The nation was saved by those poor fellows who did not consider the price of cotton goods in the hour of America's crucial agony. Their dust now billows the earth of a hundred battlefields; but their memory will be kept sweet in the hearts of men forever! ”

“ But now that the war is over, the high prices seem, to many, inexcusable. If, as I anticipate, prices remain at high levels and the public fails to see why, they will wish to wreak vengeance, some on one luckless object of their wrath, some on others—profiteers, landlords, employers, speculators, middlemen, retailers, trusts, railways, labor unions, etc. If the price level stays high, profiteering will increase—as an effect not a cause. ”

“ How are poor mortals whirled hither and thither in the tumultuous chaos of our era; and, under the thick smoke-canopy which has eclipsed all stars, how do they fly now after this poor meteor, now after that!—Sterling abandoned his clerical office in February, 1835; having held it, and ardently followed it, so long as we say,—eight calendar months in all.
It was on this his February expedition to London that I first saw Sterling,—at the India House incidentally, one afternoon, where I found him in company with John Mill, whom I happened like himself to be visiting for a few minutes. ”

“ A. T. Stewart began life as a teacher in New York at $300 a year. He soon resigned and began that career as a merchant in which he achieved a success almost with out precedent. Honesty, one price, cash on delivery, and business on business principles were his invariable rules. Absolute regularity and system reigned in every department. In fifty years he made a fortune of from thirty to forty million dollars. He was nominated as Secretary of the Treasury in 1869, but it was found that the law forbids a merchant to occupy that position. ”

“ It is of consequence to distinguish exactly between these two constituent parts of price, the cost and the profit: the first is invariable after the first determination, but the second is constantly increasing, either from delay in selling off, or by the multiplicity of alienations; and the more exactly every circumstance with regard to the whole analysis of manufactures is examined, the easier it is for a statesman to correct every vice or abuse which tends to carry prices beyond the proper standard. ”

“ If the time of adoption of the plan should happen to come after a long steep rise of prices, such as in 1919, 1873, 1865, or 1814, it is clear that the price level then existing would be too high to afford a just and proper starting point and that a somewhat lower level ought to be selected to which we should deliberately descend. Otherwise most outstanding debts would have to be paid in terms of a dollar of less value than the dollar contemplated when the debts were contracted, before prices were so high. ”

“ If there is force in this contention, and unless the Government of India have definitely made up their minds that their sterling reserves are to be used in no circumstances except for the support of exchange and of the sterling value of their currency, it is important to understand that immediate action is essential, and that to delay action for a few weeks may be fatal. ”

“ On the other hand, if once we deliberately choose a price level after reference to an expert and impartial commission and then keep that level unchanged we shall give it a right to exist. The verdict will soon be generally accepted. Any unadjusted factors will gradually make the needed changes. Business will be rid of the handicap of uncertainty as to what the dollar is. In particular, wages will rise to recover the purchasing power lost in the losing race with the high cost of living. ”

“ So we go right ahead, and nothing is to be said to any one, not even to William Rockefeller. I have always argued that it is fool business to go to a lawyer with a scheme that depends entirely on how it is carried through as to whether it is perilous or not. I could have told Sterling there is apt to be more danger in a deal in which one makes thirty-five to forty million dollars without turning a hair, than in furnishing staid advice from an office-chair for a fixed sum per diem. ”

“ It is well known that certain prices are sensitive and others insensitive to the various market influences. For instance, the wholesale price of silver is so responsive to every market wind which blows that rarely are the quotations on two successive days alike; while, on the other hand, street railway fares have only begun to budge from the traditional five cents after having stood stock still through more than two decades of upheaval of prices of most other goods and services. ”

“ Several of the inconveniences we have here enumerated, may appear trifling, and so they are found to be in countries where commerce is little known; but the operations of trade surpass in nicety the conceptions of any man but a merchant; and as a proof of this, it may be affirmed with truth, that one shilling can hardly lose a 542grain of its weight, either by fraud or circulation, without contributing by that circumstance, towards the diminution of the standard value of the money-unit, or pound sterling, over all England, as I hope to be able to shew both by reason and facts. ”

“ Evidently such a limitation would effectually stop any embarrassing speculation. Thus suppose the fee to be 1% on the Government's deposit — or buying — price, which to-day is, say, $18.00. Then the pair of Government prices, to-day, will be:
Suppose that to-morrow both prices are to be raised 17 cents, almost to the limit of 1%, or so as to be:
Clearly a speculator who tried to profit on the rising market would fail; for he would have to give to-day $18.18 and would get to-morrow only $18.17, actually losing 1 cent an ounce. ”

“ No one who considers the plain facts of our situation believes that commodity prices, especially agricultural prices, are high enough yet.
Some people are putting the cart before the horse. They want a permanent revaluation of the dollar first. It is the Government's policy to restore the price level first. I would not know, and no one else could tell, just what the permanent valuation of the dollar will be. ”

“ This is what confines the fluctuation of prices within limits which are compatible with the reasonable profits of both buyers and sellers; for, as has been said, in treating of trade, we must constantly suppose the whole operation of buying and selling to be performed by merchants; the buyer cannot be supposed to give so high a price as that which he expects to receive, when he distributes to the consumers, nor can the seller be supposed to accept of a lower than that which he paid to the manufacturer. ”

“ But there is much more danger that they will succeed in the last, and, by increasing the quantity of gold in a pound sterling in proportion to the fall in its value, succeed in keeping prices at their present low level, notwithstanding all the addition which California and Australia have made to the circulating medium of the globe. ”