Metallic currency

“ But there are these two signal points of distinction between a paper and a metallic currency: first, that paper money may be increased or diminished much more easily than metallic money; and, second, that any excess or deficiency of the former is not so easily corrected by the natural operations of trade. The sudden or large increase of the metals is prevented by their scarcity and the laborious processes necessary to produce them, and a sudden or large decrease of them could be brought about only by some great public calamity which should destroy them or cause them to be hoarded. ”

“ The actual provision of metallic currency has from the earliest times been almost entirely under the control of the government which took into its own hands, as an essential part of the police protection which it gives to the people, the coining of currency, stamping the coin in such a way that anybody who took one might know that he was getting a certain weight of a precious metal. ”

“ But the extension of the metallic currency of the globe, though it cannot altogether remove, materially lessens this dreadful danger. It inspires confidence among moneyed men. It diminishes the terror of the withdrawal of the precious metals, which, when it once seizes them, is productive of such unbounded calamities ”

“ The desire for adornment is not a keen one with most civilized persons; and, so far as it exists, is gratified in other ways than by using silver or gold. For purposes of manufacture their use is large and increasing. The second head is that with which we are principally concerned. It is evidently connected with the need for metallic currency; and this again depends on the level of prices and the monetary organization, including in the latter the banking system. Currency requirements still form the largest part of the demand for the precious metals. ”

“ The expense of a metallic currency is, however, combined with its weight, a strong reason for the great developments of representative money and credit in modern times, with the result that gold and silver are hardly ever used in large domestic transactions, all such payments being made by cheques, which are cleared off against one another. ”

“ Since a coin consists chiefly of raw metal, we may therefore count on having before us a régime of falling prices, whatever metallic currency we adopt. The rate of the fall and the degree of steadiness in it will be greater with some metals than with others. The variations in the value of gold are, on the whole, comparatively steady. This metal fluctuates in amount and in cost, but the changes are less sudden than in the case of most others. ”

“ One of the chief defects of a purely metallic currency consists in the very circumstance that it does not contract and expand with the decrease and increase of marketable commodities requiring to be exchanged for each other, but that, on the contrary, through the operation of an influx or efflux of gold, it not unfrequently contracts or expands in a far greater proportion than the state of the markets would justify, thereby producing an excessive depreciation or appreciation in general prices ”

“ But its supporters argue that such a system of convertible paper as this country has so long had is radically wrong; that all our evils are to be traced to the banks; and that the sooner they are put down, and a currency exclusively metallic is established, the better. They further argue, that such a metallic currency will reduce inflated prices, lower the wages of labor, enable us to manufacture cheaper, and thereby admit our manufacturers to maintain a successful competition with foreigners. ”

“ That subsidiary currency consists of metal tokens, such as silver, copper, etc., is mainly due to the fact that in most countries the less valuable metals such as silver in England, copper in ancient Rome, Sweden, Scotland, etc., had circulated as money before they were degraded by the process of circulation to the rank of small change and replaced by a more precious metal. Besides, it is natural that the money symbol which grows directly out of metallic circulation, should itself be a metal. ”

“ In other words, the fluctuations in the value of silver are confined to it in its bullion shape, and cannot enter into its form as money. The idea that paper currency must be redeemed in gold, as money, or silver, as money, is erroneous. It is redeemed in those metals because they have value as merchandise. In domestic transactions this fact is often lost sight of, but it becomes manifest in international exchanges when the metallic money passes strictly on its merits as bullion, and without regard to the stamp it bears. ”

“ He said: "'Our population, notably the agricultural population, finds that it has not at its disposition sufficient resources in currency, in metallic money. On the other hand, if the Government in the actual state of affairs reopens the mints to the free coinage of silver, we would be flooded by the abundance of this metal coming from all other countries of the world, and we could not resist the even greater evil of the inevitable depreciation of one of our precious metals, that is to say, of the effective destruction of the legal ratio upon which our monetary system is based. ”

“ The man who possesses sheep exchanges them for oxen with the man who possesses oxen, the owner of corn exchanges his commodity for some implement or ornament of metal with the owner of the latter. The metals are only regarded as merchandise, not yet being in any degree set apart to serve as a medium of exchange in the terms of which all other commodities are valued. This is the practice which prevails in so civilized a country as China down to our own days. The only coinage which the Chinese possess is copper cash. ”

“ To afford a hope that a monetary union will succeed in establishing stability in the relative value of gold and silver, it is essential that the nations adhering to it should be of such number and importance that the metallic currency of the whole body shall be of sufficient extent to allow of the exercise of adequate influence on the value of the two metals. ”

“ And they offer their gold for sale to their neighbours likewise at a cheap rate, giving thrice as much gold as they get copper in exchange and twice as much gold as they get silver in exchange, for they have not the skill to work the gold, and the metals which they receive in exchange are rare in their country and more necessary for life [112] . ”

“ One of the most obvious differences between a metallic and a paper circulation is, that the coin can never, by any panic or national danger, be reduced below the value of bullion in other civilized countries; whilst a paper currency may, from the action of such causes, totally lose its value. Both metallic and paper money, it is true, may be depreciated, but with very different effects.
1. Depreciation of coin. The state may issue coin of the same nominal value, but containing only half the original quantity of gold, mixed with some cheap alloy ”

“ If the volume of business were to increase at the rate of two per cent a year, while other influences affecting prices were to remain unchanged, the currency would not expand as rapidly as the demand for it, and prices would not only fall, but would fall at the same rate as if only one metal had been used. Use ten metals instead of two,—make coins of tin, platinum, copper, nickel, etc.,—and if the grand composite still insures the one per cent rate of general increase of metallic money, prices will vary as they would have varied with a currency of gold alone. ”

“ Gold was now a waste product in the release of atomic energy, and it was plain that no metal could be the basis of the monetary system again. Henceforth all coins must be token coins. Yet the whole world was accustomed to metallic money, and a vast proportion of existing human relationships had grown up upon a cash basis, and were almost inconceivable without that convenient liquidating factor. It seemed absolutely necessary to the life of the social organisation to have some sort of currency, and the council had therefore to discover some real value upon which to rest it. ”

“ In adapting the new silver coinage to the ordinary uses of currency in the everyday transactions of life and prescribing the quality of legal tender to be assigned to it, a consideration of the first importance should be so to adjust the ratio between the silver and the gold coinage, which now constitutes our specie currency, as to accomplish the desired end of maintaining the circulation of the two metallic currencies and keeping up the volume of the two precious metals as our intrinsic money. ”

“ Were there infinitely stronger reasons than can be adduced for hoping that such action would secure for us a bimetallic currency moving on lines of parity, an experiment so novel and hazardous as that proposed might well stagger those who believe that stability is an imperative condition of sound money.
No government, no human contrivance or act of legislation, has ever been able to hold the two metals together in free coinage at a ratio appreciably different from that which is established in the markets of the world. ”

“ Thus the largest possible enjoyment of both metals is gained with a value universally accepted throughout the world, which constitutes the only practical bimetallic currency, assuring the most stable standard, and especially the best and safest money for all who earn their livelihood by labor or the produce of husbandry. ”

“ 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. ”

“ If all countries had their irredeemable paper money, and had no money acceptable elsewhere, there could be no international adjustment of monetary matters. Price levels in different countries would have no intimate connection. Indeed, to some extent the connection is actually broken between existing countries which have different metallic standards,—for example, between a gold-basis and a silver-basis country,—although through their nonmonetary uses the two metals are still somewhat bound together. ”

“ When bimetallism has broken down at one ratio, it can always be set in operation again at another, but the transition requires a depreciation of the currency. The only way of reintroducing the metal which has passed out of the currency reservoir is by lowering the amount of it in the monetary unit,—unless the still more drastic measure is adopted of raising the coinage weight of money already in circulation. ”

“ Such indestructibility, and facility of being tested, are united in gold; its intrinsic value is great, and its imaginary value greater; so that, partly through indolence, partly through necessity and want of organization, most nations have agreed to take gold for the only basis of their currencies;—with this grave disadvantage, that its portability enabling the metal to become an active part of the medium of exchange, the stream of the currency itself becomes opaque with gold—half currency and half commodity, in unison of functions which partly neutralize, partly enhance, each other's force. ”

“ It is obvious from this that the par of exchange between any two countries will be stable if they employ the same metal functioning as their standard money freely convertible into and exportable as bullion, for in that case they would have as a measure of value a common medium, the value of which could not differ, given freedom of commerce, in the two countries by more than the cost of its transhipment, i.e. within specie points. On the other hand, there can be no fixed par of exchange between two countries having different metals as their currency standards of value. ”

“ There is not indeed the self-acting check which convertibility brings with it. But there is a clear and unequivocal indication by which to judge whether the currency is depreciated, and to what extent. That indication is, the price of the precious metals. When holders of paper cannot demand coin to be converted into bullion, and when there is none left in circulation, bullion rises and falls in price like other things; and if it is above the Mint price, if an ounce of gold, which would be coined into the equivalent of 3l. ”

“ Thus, the United States required one hundred millions; Germany, eighty-four millions; and Italy, sixteen millions. This meant an average extra demand on the ten years of twenty millions annually.
We must bear these figures in mind in endeavouring to see how gold has become scarce, and, as it is termed, ‘appreciated in value.’ Besides the coinage for these and the other states which have to put a certain quantity of gold through the mints every year in order to keep up their normal currency, there is the large demand for the metal for employment in the arts and manufactures. ”

“ The insufficiency of silver and the want of credit currency caused such an embarrassment to trade that there grew up a change in the attitude towards the Currency Act of 1835, and people, for once, began to ask whether, although it was well to have changed from bimetallism to monometallism, it would not have been better to have preferred gold monometallism to silver monometallism. ”