Discovery of gold fields in California, 1848.

15.60 to 1-Transition period. .15.34 to 1

1849 to 1852 (4 years). 1853 to 1858 (6 years). 1859 to 1862 (4 years) 1863 to 1864 (2 years). 1865 to 1866 (2 years). Simplest, and probably most convenient, mint ratio of gold to silver, 15 to 1: present United States mint ratio of gold to fractional silver, 14.88 to 1; United States mint ratio of gold to silver dollar, (circulation limited because overvalued,) 16 to 1: British mint ratio of gold to silver, 14.28 to 1: French mint ratio, gold to silver 5-franc piece, (circulation limited because undervalued,) 15.5 to 1; French mint ratio, gold to debased smaller silver coinage, 14.38 to 1.

.15. 34 to 1Since the opening of California and Australian gold .15. 37 to 1 fields, average 15.38 to 1. .... 15. 46 to 1 j

The ratios since 1859 were deduced from the semi-monthly quotations of the price per ounce of silver bars in London, published from time to time in the journal of the Statistical Society of London. From 1841 to 1848 the values adopted were computed from data furnished by Mr. Wm. Newmarch in a valuable paper read by him before the London Statistical Society and published in the journal of that society. From 1760 to 1829, inclusive, the values were taken from the Funding System of Mr. Jonathan Elliott, which forms part of the Executive Documents of the second session of the 28th Congress. For the 11 years, 1830 to 1840, inclusive, there is a lapse in the information furnished; but it is deemed safe to assume the ratio for this period as 15.8, the ratio of the periods just prior and subsequent to the interval.

It will be observed that with the discovery and working of the California and Australian gold fields the relative value of gold to silver fell from an average of 15 for the eight years 1841-'8, just prior to this event, to an average of 153. for the 14 years 1853-'66, which followed the transition period of four years 1849-'52.

The ratios adopted for the purposes of coinage by the mints of the United States, Great Britain, and France, respectively, are herewith given. Comparison of the data indicates that the simplest ratio which could safely be adopted for the purposes of coinage at the mint is 15 to 1, a rate sensibly lower than the market ratio for at least 60 years, and destined, it would seem from the present upward tendency of the value of gold as compared with the market value of silver, to remain so for years to come. The silver coins are thus, by the adoption of this simple ratio, overvalued, which is now the settled policy of the civilized world, and if made legal tender only in payment of small sums, as is at present the case in the United States, in England, in France, or in many other countries, would circulate freely with our present standard gold coin-the latter, of course, being made legal tender in all amounts.

The importation of silver from the silver-producing countries into Great Britain, and the price per ounce for bar silver in London at various times since 1848, are shown in the following table:

It was expected about 1853, when the permanence of the Californian and Australian gold mines was no longer a matter of doubt, that the relative value of gold would soon fall as much as it had risen in the sixteenth century, but this expectation has not been realized. It is impossible now to foresee or to form any confident opinion whether gold will fall in value, as compared with silver, if the present relative production is maintained. Chevalier contended, in 1857, that if it were not for the fact that France, since 1850, had been changing her currency from silver to gold, the latter metal would have fallen greatly in value; and he called France the parachute of gold.* From 1850 to 1857 the French mint coined $540,000,000 in gold, or an annual average of nearly $80,000,000, while for 45 years previous to 1848 the annual coinage of gold had been only $4,450,000. His argument would seem to be that so soon as a gold currency had been substituted in France, gold would fall, but since 1857 enough of that metal has been poured into Europe to supply nearly all the nations with gold, and still there is no noteworthy change in relative value.

There is such an immense demand for ornaments and table-ware made of the precious metals, that a long time must elapse before it can be supplied. We must expect, too, that at no distant time Asia will use gold extensively for currency, and in fact it has already commenced to do so. We consider it entirely useless to endeavor to predict the relative value of gold and silver in the future. The financial and commercial history of the world during the last ten years does not establish Chevalier's idea that gold as related to silver will soon commence to fall in proportion to the excess of its production. According to his theory the fall should have commenced already. In 10 years that have elapsed since he wrote $1,200,000,000 have been added to the possessions of Christendom, more than enough, if his estimates were correct, to overstock the market. But the market is not overstocked, as we know from the fact that the price is not materially changed. It is undeniable, however, that the market would soon be overstocked in Christendom if there were no outlet. Gold, except for purposes of small change, in sums less than two dollars and a half, is far more convenient than silver, and is preferred for most of the purposes of coin; and that preference will extend to Hindostan and China so soon as we have no more silver to spare. We have now an excess of silver or we would not ship so much away, and so soon as we have no longer an excess, the European and American merchants in Asia will tell their customers that they must take gold in payment. The more intelligent Chinese see the great advantages of a currency of gold coin over a bartering for silver bars, so the more precious metal has already come into considerable use, and those Asiatics who have done business in California and Anstralia will help to make the change. If it could be proved that all the gold must be confined to Europe and America while Asia should continue her demand for silver, then a great fall in the relative price of gold within a brief period would have to be admitted; but that proof cannot be furnished. Some fluctuations have taken place in the relative value of the two precious metals within the last ten years, but they are too slight to furnish a basis for conclusions of any importance.

The coinage of all the nations fixes the comparative prices in such a manner that no change can occur without overcoming obstacles which did not exist 200 years ago. Throughout Christendom the governments and the merchants say that one ounce of gold shall be worth 15 of silver; and to prevent any question about the precise relation, coins of both metals are in universal use with a conventional value. The value is conventional to a great degree; we know that it does not bear any precise proportion to the supply. If the value is now conventional why should not the conventionality stand? A change in such a matter necessarily implies loss and inconvenience. The present relative prices of

*Chevalier, pp. 59, 73.

We can pay

the two metals are very well suited to the wants of commerce. large sums in gold without overloading a man; we can pay small sums in silver with coin not too small to be handled or carried in the pocket. It would be very inconvenient to have all our coin of equal value per pound, for then large sums would be burdens, or small coin would be too small for our fingers. In fact two metals are hardly enough and so copper and brass have been used for coinage by most civilized nations, in addition to the precious metals. Chevalier* says, "Nobody can say that some day silver may not also undergo a great fall, brought about by a production which should be distinguished by the two following characteristics: Of being much greater in comparison with the employments to which it had hitherto been applied, and of being produced under more favorable circumstances, that is at less cost per kilogramme for the metal obtained. There are strong reasons for thinking that if the United States annexed Mexico and penetrated further into the regions of Central America, this event would not be of tardy accomplishment under the auspices of a race so industrious and so enterprising as the Anglo-Saxons."

HOW INDIVIDUALS ARE ENRICHED BY MINING.-The first effect of the production of the precious metals in rich mines is that it enriches the individual engaged in mining, or at least gives him an opportunity to enrich himself. A large proportion of mankind are so stupid, so imprudent, so wasteful, or so indifferent to the value of money, that they cannot make money when they have the best of chances, or keep it after they get it. The wages of miners are higher than those of other laborers, and when the mines are very rich the proprietors become possessed of immense sums. In the mining districts nearly every man when he goes out walking over the hills keeps a lookout for "indications," in hope of finding some vein that may make him a millionaire.

The poorest white laborer in California working by the month gets a dollar a day besides board, and as the French or German laborer in Europe receives less than 50 cents a day, the Californian can, with his earnings, hire two Europeans to work for him, or he can purchase as much as two can produce, or he can afford to consume as much as two European laborers do. He wants their merchandise and they want his gold; so he exchanges one of his days' work for two of theirs. In this way he may live rich, even if on account of his extravagant habits he does not die rich. But the disproportion between wages in California and Europe is still greater in other occupations. The average pay of laborers and the average profits of business men in California are from three to five as great as in continental Europe for labor or business of the same kind, and the difference represents a ten-fold profit. If it costs 75 cents per day to live, the man who gets one dollar per day can lay by capital twice as fast as the man who makes only 873 cents. If the laborer of California had lived during the last 17 years with as little unnecessary expenditure as the laborer of Germany, there would scarcely be a man among the old residents without his thousands.

HOW NATIONS ARE ENRICHED BY MINING.-The second effect of the production of the precious metals is to enrich the nation which possesses the mines, or to give it an opportunity to enrich itself. Nearly all mining districts are poor, although they consume luxuries which can elsewhere be afforded only by the wealthiest. The finest silks and the most costly wines went to Virginia City during the great bonanza in 1862, and similar extravagance had been witnessed before at Potosi, Cerro Pasco, Guanajuato, and Zacatecas. The owner of a rich mine cannot dig out the pure, precious metal with a shovel unassisted; he must employ a great number of laborers, and his money runs all through the community and stimulates every branch of industry. The whole nation feels rich, and it purchases for one day's work the productions on which other nations

* Page 142. See also Chevalier's Political Economy, section III, chapter I and II.

have spent two day's. The gold and silver are sent abroad to purchase those things which can be made cheaper abroad where labor has not felt the stimulus. HOW THE PRECIOUS METALS FALL IN VALUE.-The third effect of the production of the precious metals in large quantities is that the prices of other articles generally are effected. We want gold and silver for coin and for use in the arts, and the smaller the supply relatively to the demand the higher the value. The experience of ancient as well as of modern times has proved this principle. After Alexander conquered Persia, and enriched Greece with the spoils of Asia, three times as much silver was required to pay for a day's work as before; and now it requires in average years six ounces of silver to purchase as much wheat in Europe as could be bought in 1490 for one ounce.* The cause of the change is the great relative increase in the supply of silver while there is no relative increase in the supply of wheat. The result of the great yield of the silver mines of Peru and Mexico in the 16th century was that between 1550 and 1600 wheat trebled in price. The production of the 16th century was about $690,000,000, whereas, the production of $4,000,000,000 in the 18th century added only 50 per cent. to the price which wheat bore in 1600, but more than 200 per cent. of the price which it bore in 1500.

When we compare ancient with modern times we see that the rise in prices was very much greater relatively in Rome after she became mistress of the world than it has been in modern Europe since the mines of America, Australia and Russia have yielded their treasures. The difference is owing partly to the fact that a large portion of the laborers in the Roman Empire were slaves, and the number of those who used money and could possess plate was comparatively small, and civilization was confined within narrow limits.

The decrease of prices was less in proportion to the production of the precious metals in the 17th than in the 16th, and less in the 18th than in the 17th century, because business has increased with much greater rapidity in late times than before. Commerce, manufactures, and intelligent agriculture have grown wonderfully. Many branches of trade conducted mainly by barter several centuries ago are now managed exclusively with money. The laborers are all free, and each needs a stock of coin with which to make purchases in case of necessity. The use of silver table ware and of gold ornaments is very extensive, and large quantities of both gold and silver are used in various kinds of manufacture. The introduction of steam in mills, boats and cars has doubled the productive capacity of mankind, and far more than doubled the demand for money. The speed and cheap communication between all countries has added vastly to the general wealth, and has increased the demand for the representatives of wealth. The remotest parts of the world are now brought to our doors, and China and Hindostan open their laps to receive our gold and silver and prevent it from falling in value by becoming too abundant in our hands. One of the best indications of the increase of trade and the spread of civilization is the relative value of the precious metals, and we see that a net increase of $500,000,000, or an addition of 250 per cent. to the stock in the 16th century, trebled prices in half a century, while a net increase of $5,300,000,000, or 900 per cent., since the year 1600, has not trebled prices in the last 250 years.

INFLUENCE OF INCREASED PRODUCTIONS ON NATIONAL DEBTS.—But whatever may be the relative position of the two metals, it is very certain that the time is not far distant when the price of the two as compared with other products of human labor must fall. They are now increasing far more rapidly than is the demand for them, and at the present rate of increase they would soon have to begin to fall perceptibly. But the production will become much greater than it is. The vast improvements that have been made both in gold and silver mining within the last 20 years are applied to only a few mines; and the reward

*Chevalier, p. 18. Jacobs, Vol. II., pp. 71, 113, 216.

for those who introduce them into other parts of the world are so large and so certain that the introduction cannot be delayed to any remote period. If all the argentiferous lodes of Mexico, Peru and Bolivia, known to be rich, were worked with the machinery used at Washoe, their yield would really flood the world. The placers of Brazil, exhausted for the slow processes known a century ago, will yield treasure greater than they ever produced before. The hydraulic process is needed in Siberia, and in Africa, and in many placers as worked out.

It may do very well in European monarchies, where it is considered a wise policy, to preserve wealth in those families which have it now; but in the United States our customs and our laws favor the individual rather than the family. We have no nobility, no princely salaries for officials, no hereditary titles, no social reverence for blood, no primogeniture, no law of entail, no hampering of the sale of real estate, no restrictions of education to the wealthy, no exclusive governmental favor for the rich. We are accustomed to see the rich become poor, and the poor become rich; and we are proud of our country because here the career is open to talent, while in Europe it is, comparatively speaking, open only to hereditary wealth. Most of the rich men of Europe are the sons and grandsons of rich men; in the United States the rich men are mostly the sous and almost invariably the grand-sons of poor men. We are then not frightened to think that those families which hold large sums in government and other bonds should be poorer in half a century than they now are or were thousands of years ago. New deposits of silver will be found, and the innumerable rich lodes in the Pacific slope of the United States, not yet opened, will be worked with profit. The mining processes are now being studied by numerous learned and able men, and improvement after improvement will be made in the modes of reduction.

The inevitable fall in the value of the precious metals will be a benefit to mankind generally. It will reduce the wealth of the rich, and the debts of nations. The dollar of debt which represents the day's work of a common laborer, will, before the end of the century, represent only four-fifths, perhaps only two-thirds of a day's work. Thus, national debts now existing will be reduced 20 or 33 per cent.-the interest as well as the principal. The decrease, however, will be so slow that it will scarcely be felt by any one person; so the general public will be benefitted while individuals will lose little.

Chevalier thinks that government should do all in its power to keep the relative value of a dollar at the present standard; but it would be hard to find any good reason for such a policy.

The amount of bonds outstanding to be paid by the United States for national, State, county, city, and railroad debts is not less than $5,000,000,000, and a reduction of 50 per cent. in that debt by a fall of 50 per cent. in the value of gold and silver, will be a vast benefit to the nation. Chevalier assumes that gold will fall, and he urges France to make silver the only legal tender, so that loss to the bondholders and the gain to the government may be as little as possible. He says, "if both metals remain legal tender, as they then were in France, debtors will pay in whichever proves to be the least in value." While a change from the present policy in this country and in England, France and many other countries would seem to be of very doubtful expediency, it might be worthy of consideration, under certain contingencies, whether our government, looking at the matter from a different stand point, should not make both metals legal tender, so that the government should have the benefit of any change in relative value.