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TO MONSR. LEON FAUCHER
My Dear Sir,
I have fulfilled the promise I made you a few weeks since, by translating, I hope intelligibly, your remarks on the subject of the Production, &c., of the Precious Metals, which I read first in the August number of the “Revue des Deux Mondes,” and which have been subsequently published, somewhat amplified, in the reports of the “Académie des Sciences Morales et Politiques.” Since the date of your remarks, the production of gold in Australia has been greater than you anticipated; recent reports estimate the amount shipped, or ready for shipment, from thence, at not less than £8,000,000 sterling; at which figure, I think, we may safely place the produce of 1852.
A gentleman who was with me a few days since, just arrived from Victoria, told me that the gold diggings at Bathurst were nearly at an end, and that he did not believe that any more gold would be shipped from Sydney. Although Sydney is only one of the ports of Australia from which gold has been shipped, this would appear to confirm your views, that the first gatherings cannot fairly be assumed as data on which to found estimates of future production: at the same time when we hear of so great an increase of production in other parts of Australia, I can hardly agree with you, that there is so little ground for alarm as to a depreciation in the value of gold, in consequence of these late discoveries. The effects of the production in Australia can hardly be felt at present, considering that the export of English gold coin has been, up to this date, I think, equal to the amount of gold we have received thence; but when the sovereigns lately shipped are found to be in excess of the wants of the community in Australia, and are re-shipped to this country, together with the produce of the gold workings between this and next summer, I cannot but believe that the supply in the market of the world will be found in excess of the demand, and that ultimately a considerable and general alteration in prices will ensue.
I shall be very glad if I find that by this translation I have in any way contributed to increase the circulation of your remarks in this country. The subject is one of considerable interest, and I hope that you will, at no very distant period, give us some further observations, and let us know how far your first impressions have been then influenced by events which may have occurred subsequently to the present time.
I am, my dear Sir,Yours very faithfully,THOMSON HANKEY, Junr.
London, 30th November, 1852.
The Foreign Weights and Monies have been converted into English, at the following rates.
A kilogramme weighs nearly 2 lbs. 8 oz. 3 dwt. 2 grs. or nearly 15,434 grs. Troy.
Do. of gold at the standard value, viz. 77s. 9d. per oz. is worth about £125.
Do. of silver at 5s. per oz. is worth about £8 0s. 9¼d.
Do. of quicksilver weighs 2·2055 lbs. avoirdupois.
Do. Do. is worth about 5s. 1¾d. or 2s. 4d. per lb.
A Spanish marc weighs 7 oz. 7 dwts. 22½ grs.
Do. of gold at 77s. 9d. per oz. is worth £28 15s.
1 lb. of gold is equivalent to 46²⁹⁄₄₀ sovereigns.
A poud is equivalent to 36 lbs. English, and worth about £1679.
The weights and measures not enumerated here are explained at the foot of the page in which they occur.
REMARKS ON THE PRODUCTION OF THE PRECIOUS METALS, &c
From the commencement of the 19th century, gold appears to have been always esteemed in Europe above the price at which it has been legally fixed in relation to silver; the commercial value of the metal has remained on an average about 1 per cent. above its legal value. In England alone gold circulates as money: in those countries which have maintained a double standard, gold, rarely coined, became immediately an article of merchandize, and disappeared from circulation. Gold regions were discovered without restoring the equilibrium of value between the two metals. Civilization, in its development from historical times, has but realized the legends of ancient fables. Gold, from its importance and constancy of value, appeared likely to remain for ever the symbol and the essential agent of wealth.
In this regular course of the progress of the precious metals, a pause, or rather a deviation, appears to have occurred. Gold seems to be tottering in its monetary supremacy; the fortress appears to have succumbed in a paroxysm of alarm. Ten years ago, every one was frightened at the prospect of the depreciation of silver; during the last eighteen months, it is the diminution in the price of gold that has been alarming the public. Some countries, which, but a short time since, were but too anxious to attract and retain gold in circulation, even at great sacrifices, have already shown a feverish anxiety to banish it altogether.
Holland took the lead in this movement, and in July, 1850, demonetized the gold 10-florin piece and the Guillaume. Portugal has partially followed this example, by prohibiting any gold to have a current value, except English sovereigns. Belgium, which in order to increase its gold circulation, had given a legal value to our 20 and 40-franc pieces, and had struck, in 1847, a mixed coinage of gold and base alloy, has demonetized its gold circulation, both home and foreign. Russia, by a ukase of 29th December, 1850, wishing to maintain the former equilibrium, has prohibited the export of silver. The French Government itself, struck with the novelty, and the sudden change, issued a commission for the purpose, as the Minister of Finance stated in his minute of the 14th December, 1850, of examining the questions connected with the simultaneous use of the precious metals, gold and silver, as a circulating medium of value.
From public authorities, alarm has spread to private interests, and the price of the precious metals has experienced in European markets a very sensible disturbance in value. In the space of only a few months, the premium of gold has given way to a reaction, only checked by the tariff. From 1st July to the 25th December, 1850, the price of English sovereigns in Paris has fallen about 2 per cent. On the Amsterdam Exchange, the fall in the price of gold, in the same year, amounted to 4 per cent.; at the same time silver rose in London almost as much (from 4s. 11½d. the ounce, to 5s. 1⅝d.); the relative value of gold to silver, which our laws had fixed at 15½ ounces of fine silver to one of pure gold, and which the constant premium on gold in Europe had raised in the Spanish tariff to 15¾, fell to 15¼ in Holland, Belgium, and Hamburg; in all places where gold, from having been demonetized, had become a mere article of merchandize; almost realizing, in fact, the tariff of Russia, a country where the abundance of gold and the scarcity of silver had induced a legal relative value of 15 to 1.
However great the present depreciation of gold, the depression appeared likely to increase still further, and the gloomy forebodings of the press have added to public alarm. Newspapers of all parties, and of all countries, prophesied that, under the combined influence of California and Siberia, the value of gold would soon fall to nine times that of silver. Whilst crowds of emigrants were forcing their perilous way across the Rocky Mountains, or doubling, for economy, Cape Horn, or, in their impatience, taking the shorter but dearer passage by Panama, hurrying on to the capture of the golden fleece, this very treasure which they were unduly appreciating, was becoming as unduly depreciated in Europe; the article, which but six months before bore the greatest fixity of value, seemed rapidly undergoing an important change, and to the Auromania of ages, an Aurophobia appeared to be succeeding. England alone has shown no sign of fear. During the period of continental alarm, the Bank of England was not afraid even to check the export of its gold; as in the beginning of 1851, the directors raised the rate of discount from 2½ to 3 per cent., and almost immediately the exchange turned. The pound sterling, which fell for a short time to 24 fr. 70 cents., equal to a fall of 2 per cent., rose in a few days to 24 fr. 95 cents.; it oscillates now between 25 fr. 35 cents., and 25 fr. 45 cents., which is equal to a premium of ½ to ¾ per cent. upon gold. Again, the mint of Paris, which received gold by millions in December, 1850, and January, 1851, has seen this influx slacken until its weekly receipt now scarcely equals its former daily supply. At the present moment, the oscillations of the market seem to have terminated; a calm has succeeded the storm, and the value of the precious metals seems to be in almost a normal state. The present moment, then, appears to be a fitting one to examine if the late disturbing causes were of an ephemeral nature, or whether they are likely to be permanent in their effect.
On this important subject, the French Government, which at first appeared ready to attempt an immediate solution of the question, did not hesitate to recognize the necessity of more profound examination. In the Moniteur of the 15th January, 1851, it is stated, “that the commission of 14th December, presided over by Mr. Fould, Minister of Finance, for the examination of the subject of money, is of opinion, that the late depreciation in the value of gold has been produced by causes of an accidental nature, which are beginning to be less sensibly felt; that influences of a permanent character bearing upon this depreciation cannot at present be sufficiently ascertained; and in such a state of affairs it is necessary to have precise information as to the production of the precious metals in California and in Russia; and that with its present knowledge of facts, the Commission is of opinion, that there is no ground for a modification in our monetary system.”
This determination was a wise one, and subsequent events have justified it; while on the one hand gold has again risen to nearly its former value, and on the other, the discovery made in 1851 of rich deposits of gold in Australia, renders the subject worthy of further investigation; the present seems a suitable opportunity for the renewal of a controversy by no means exhausted.
In default of official documents, we have the stories of the adventurer, and the statistics of commerce. Sufficient light appears to come from the north, the south, and the west, to enable us to form some opinion of the results of the general movement regarding the precious metals. I would add, that we can approach the subject now, freed from some of the questions which appeared to encumber it; the trade in the precious metals appears to be again in its natural channels. The phantom of rise or fall does not appear to be materially affecting trade: quite lately, to prevent the export of gold, the Bank of France raised the premium for purchase. In London and in Paris, the metallic reserves are full. The Bank of England has above 1500,000,000 francs, and the Bank of France above 2600,000,000 in their vaults. The import of the precious metals goes on but slowly. Nothing opposes, then, such a patient and careful examination of the subject as can alone satisfy the inductions of science.
I
The value attached to the precious metals in their character of money, is not of an arbitrary nature. Neither governments nor councils can change it at their will and pleasure. The power publicly possessed in this respect is but the organ of facts, which it submits to and proclaims as law. The head of the Government stamped on the coin creates a value only by the declaration of its intrinsic weight and fineness; but the price of the gold and the silver is exactly that of their commercial value in exchange. In this consists the stability and the regularity of the circulation of money.
The cause which determines the value of the precious metals is the same as that which affects the price of every other article of merchandize; the supply and the demand – the comparative abundance or scarcity of gold or silver in the market. The larger the metallic supply, the smaller value will it bear; its commercial value will vary in exact proportion to the increase in quantity. On the other hand, the smaller the quantity of money in circulation, the larger will be the value attaching to each separate piece; a smaller quantity of such money will then suffice to buy a larger amount of goods, and goods are said to be cheap – or what if in effect the same, money, – may be called dear. This money, in the time of Charlemagne, possessed a power eleven times greater than at present – that is to say, it was eleven times more scarce. It is well-known that the discovery of America, in overpowering with a fresh supply of the precious metals the metallic circulation of Europe, brought about a sudden and large depreciation of their value, which, notwithstanding a variety of oscillations, has been generally maintained to the present time. Not only does the state of the market mark the value of gold and silver with reference to other articles; but there is positively no other base on which the comparative value between the two metals can be determined, but the abundance or scarcity of either.
The relation between gold and silver is variable in its nature. In vain has Garnier, the commentator on Adam Smith, attempted to establish his position, that the value of gold in ancient times differed little from its value in our days; and that it then represented, according to Herodotus, and under Darius in Persia; and again, during the time of Plato, in Greece, weight for weight and purity for purity, about fifteen times the value of silver. Criticism has not failed to demolish entirely this ingenious but frail hypothesis. It has been clearly demonstrated that silver did not hold in ancient days, the important place it has obtained in ours, and which has subsequently rendered it the all-powerful agent of circulation.
When we seek to examine minutely the various monetary changes which have occurred, and to lay hold upon some principle to guide our inquiry, we quickly recognize the fact, that the difference in value between gold and silver increases in proportion to the development of civilization and industry. It is not without some show of reason, that mythology, transporting the analogy of the physical into the moral world, made the age of silver succeed that of gold. Historically, in fact, the discovery of and the working of gold preceded that of silver. Gold is almost always found either pure or mixed with silver. In searching the beds of rivers and streams, it has been obtained by the mere process of washing. This work is within the reach of the rudest state of society. It appears like a treasure spread over the surface of the earth, under the very feet of the first occupier of the soil. Silver, on the contrary, is embedded in rocks of primitive formation, and is seldom found near the surface of the earth; its extraction requires a combination of science, machinery, and capital. It is the work of a state of civilization already far advanced and firmly established.
In almost every age, whatever its social position, the use and the value of gold has been known. From India to Iberia, and from Ethiopia to the Poles, there is not a race which has not attempted to discover this source of wealth on its surface. What country has not had its Pactolus! What Prince or Satrap has not been a gold collector, like Midas or Crœsus! The luxuries of ancient monarchs appear to prove an abundance of metallic treasure, which has been subsequently unequalled, but the sources of the supply have faded away in their turn. Dureau de la Malle observes, that from the death of Alexander, the golden sands of Asia and Greece appear to have been exhausted; those of Gaul and Spain seem to have been abandoned after the fall of the Roman Empire. Gold has long since disappeared from the surface of the older inhabited countries; there is only now to come, in quantities of appreciable amount, or capable of affecting the circulation, the produce of those countries which have been unknown to European commerce, or which have been discovered in modern times.
Referring to history, we find that the employment of silver as money is of no very ancient date, and that it was introduced as a medium of exchange, not by conquerors, but by people of industry and of commerce. It would be sufficient to cite the Phœnicians, those planters of colonies, – the Athenians, and the Carthagenians. On the first discovery of America, silver money was found in use amongst only two nations holding any political position – Peru and Mexico. And again, if silver at a later period has taken the place of gold in circulation, it has been maintained with more regularity and permanence. The mines – from wherever it has been extracted, penetrating into and ramifying throughout the bowels of the earth, – are almost inexhaustible. It is thus shewn that the production of silver is found to continue where that of gold is at an end, and hence the variations which past experience has shown to exist in the relative position of the precious metals.
The learned researches of Boeckh, Letronne, Humboldt, Jacob, and Dureau de la Malle have thrown much light on the causes, and on the importance of these monetary oscillations. They agree in the admission, that originally the value of silver in some countries has equalled, if not exceeded, that of gold. The laws of Manon state a value of gold as 2½ times that of silver. M. Dureau de la Malle considers that between the fifth and sixth century before our era, everywhere, excepting in India, the relative value of gold to silver, had been 6 or 8 to 1, as it was in China and in Japan at the end of the last century. It has been found to have been as 10 to 1 in Greece, in the time of Xenophon, 350 years before the Christian era; and even 100 years later, the treaty between Rome and Etolia proves a similar ratio.
In the present day, the discovery and the working these new metallic stratifications are the only causes which can materially change the relative value of the precious metals. Formerly, conquest, by which one nation became rich at the expense of another, or the pillage of those great reservoirs of money called public treasures, throwing suddenly vast sums of money into circulation, could not fail to depreciate either one or other, if not both, of the precious metals. It was thus that the conquests of Alexander, opening the gates of the East, inundated the Greek world with the precious metals, which were lowered in value by their abundance, and dissipated from their very excess. After the capture of Syracuse by the Romans, silver, the foundation of the treasure they had seized, fell suddenly in price, so that seventeen pounds of silver were valued at one of gold. A little later the relative price was as 12 to 1, when Cæsar, having plundered the two milliards contained in the public chest, so reduced the value of gold, which then predominated, that the proportion fell to 9 to 1. Under the Roman Emperors, the production of gold began to slacken, – the progress of mechanical science, on the other hand, gave a constant impetus to the working of the silver mines of Asia, Thrace, and Spain. The comparative value of the two metals again changed; it was as 18 to 1 in the time of Theodosius the Younger, 412 years after the birth of Christ.
At the commencement of the fall of the Roman Empire, in the 4th century, the value of the precious metals approached that of our own days. The invasion of the barbarians, in dispersing and dissipating the accumulated treasures of the West, destroyed for a time the industry required for their renewal. Money, on account of its scarceness, acquired an extraordinary power; the price of every article fell, or, in other words, the value of silver rose to a most extraordinary degree. Not only did the value of money and of the precious metals increase in that long dark night of the middle ages, but the relative value between silver and gold, which had been established by the progress of industry, again changed. The value of gold, in relation to other commodities, was preserved longer than that of silver, owing to its greater general value, and to its being the less destructible metal; and also because its supply was fed by the washings of the golden sands; a fit occupation for the knowledge and tastes of an ignorant people. The working of the silver mines, on the other hand, being a work befitting a civilized and scientific people, was naturally interrupted, and languished during a period of spoliation and endless warfare. Hence, as we may suppose, arose the scarcity, both relative and absolute, of silver; the comparison with gold remained at 11 and 12 to 1 from the 9th to the middle of the 16th century. It required the excessive and sudden abundance, springing from the working of the mines of Potosi, and in Peru, and of Zacatecas in Mexico, to reduce the proportion to 14 and 15, the average rate at which it remained in Europe until the end of the last century.
