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4-5 indicates the increased demand for and consumption of all sorts of commodities incident to the gold hunting fever which prevailed throughout the world. The great rise from 1860 to 1867 was largely the effect of the general progress of civilization and the general increase in the scale of expenditure in social life. But of the special events which increased the demand for and values of commodities, the four great wars mentioned were the most potent. These were the causes which operated to increase the values of commodities. independent of the increase or decrease of the stock of precious metals. These created a demand for new articles, viz. munitions of war, and diverted labor from its usual employments to supply them; the result being an increased demand for labor, and consequently an increased cost. The demand for labor continued temporarily after the wars to supply the waste incident to them. But this being done there was no longer so much employment, the supply of commodities became excessive, resulting in a decline of prices and of the wages of labor. (The "rise of prices" indicated at this period refers, of course, to prices in gold-the rise in currency prices was much greater.)

But now taking the two lower lines, the continuous one representing the value of gold as compared with the values of commodities, and the dotted one representing the value of silver as compared to gold and also to the values of commodities, we see a great descent in the lines of both from 1850 to 1855-6. Silver declined because its value was "tied to the value of gold" by the laws then in force in the United States, France, and practically in the greater part of Europe, making one ounce of gold legally equal to from fourteen

to sixteen of silver.* Silver being the money of nearly all Europe, its value sustained the value of gold, and prevented a much greater decline.

The whole difference between these values of the precious metals and the values of commodities was called "the rise of prices."

* The following table shows the relative legal values of gold and silver in the coinage systems of various countries:

RELATIVE VALUES OF GOLD AND SILVER IN THE COINAGE SYSTEMS OF COUNTRIES OF THE GOLD STANDARD.

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RELATIVE VALUES OF GOLD AND SILVER IN THE COINAGE SYSTEMS OF COUNTRIES

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* These countries issue a gold coin for commercial or trade purposes.

RELATIVE VALUES OF GOLD AND SILVER IN THE COINAGE SYSTEMS OF COUNTRIES OF THE DOUBLE STANDARD.

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5 francs. 5 francs. 22.4012 347.22

1 to 15%

The Latin Monetary Union," mentioned in the foregoing table, was a convention ratified at Paris, December 23, 1865, between the governments named,

But the value of gold began to rise with the increase of traffic and debts. The change in the money standard of Great Britain to one of gold alone in 1816 had as yet produced but little effect on the world at large. But as great debts increased, and as immense sums began to be negotiated in London, this law of 1816 began to operate to increase the demand for gold to pay interest in the only metal that England recognized as the standard of values. The evidence of this advance in the value of gold is in the fact that it soon rose above that of 1 to 15% of silver. The lines of the two metals, as shown in the diagram, had crossed each other about 1850, and now again they crossed about 1862, indicating that the "golden era" had ended, and that the "era of golden debt" had begun. The success of Germany in the war with France gave the former the means of attempting to follow in the footsteps of England. Germany demonetized silver, and depended upon the

this convention constituting the governments into a union for the purpose of establishing a uniform system of weights, measures and valuations and forms of currency.

The governments (Art. 2) contracted not to coin any gold moneys in any other denominations of coins than 1,000 francs, 50 francs, 20 francs, 10 francs and 5 francs, at the ratio of 1.612.90 grammes of standard gold (9-10 fine) to each 5 francs.

Silver coins of the denomination of 2 francs (or less) were made a legal tender between individuals in the state that coined the silver for sums of 50 francs; but in payments from individuals to the state which issued the silver the coins were made legal tender in any sum. It was provided that the national treasuries of the several countries should accept silver coined by any of the other states in the union to the extent of 100 francs. The convention, however, fixed the limit of total coinage of silver during the continuation of the union to its expiration in 1880. The amount allowed to be coined by each country for 1876 has been stated as follows, viz.:

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$1,000,000,000 she was to get from France as a war penalty, for the means of substituting gold for about $300,000,000 to $400,000,000 of her silver currency. France was not only obliged to borrow gold of all the surrounding nations, but to hoard all she could to avoid being obliged to accept a metallic currency of silver which had become depreciated by the operation of the laws of England and Germany. Thus the appreciation of gold went on, but even yet was to a considerable extent held down by the use of silver in the larger part of Europe; but with the beginning of 1876, when the new laws in Germany went into full operation, and Germany began to sell off about $250,000,000 of silver, the two metals parted company. Silver declined until in July, 1876, it was nominally quoted as low as 46 pence per ounce, and gold was left as the only measure of values in the leading commercial countries of Europe, Great Britain, France and Germany. Debts and the interest on them are payable in those countries only in gold. In the United States they have been made payable (by the coinage law of February, 1873,) in promises to pay gold, viz.: in United States treasury notes. Thus this increased demand for gold, present and prospective, (made prospective in the United States by the specie resumption act of January, 1875,) has increased its value. Debts are paid with commodities, but not until the commodities have been exchanged for money-gold. The decline of prices since 1872-3 is explained by the increased value of gold. The first effect was to cause a collapse in "speculative securities," viz.: bonds of railroads, etc., which were based on the expectation of a continuance of high prices for commodities, or in other words, a low value for gold. The losses which followed

caused panic and a decrease in manufacturing industry and improvement enterprises. This diminished employment for labor and necessarily decreased the consumptive demand for all commodities. This again caused still further cessation of industry and a further decrease of demand for commodities. Theorists have been jangling for three years about the cause of the reaction which began in 1872-3, and the decline of prices which has continued almost without interruption since. These causes are, however, not obscure. The progress of the physical sciences and of labor-saving inventions has undoubtedly had an important tendency to reduce the prices of nearly all manufactured articles and, to a small extent also, the values of raw materials. But the increased burden of debt, the increase of traffic (thus requiring a larger volume of the circulating medium), and the demonetization of silver, have all contributed to increase the value of gold beyond its equitable value as a measure for values of commodities.

The era of golden debt, like the era of gold, has had its culmination, and the causes at work now are preparing the way for some new era in financial affairs which will, in all probability, be as unique as either of the two which have preceded it. No man can yet foresee what it is to be. It is, however, not difficult to distinguish a few tendencies that must continue to operate toward the new development. The first of these is the decline in the rates of interest for money in order to reduce the burden of funded and mortgage debt everywhere. This will be accomplished partly by the repudiation and complete loss of a very large portion of the existing volume of funded debts, and partly by the concentration of capital (seeking safety rather than

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