Henri Cernuschi.

Nomisma; or, Legal tender. online

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of gold and silver, I would call the attention of the
committee to the edict of Medina, which is frequently
referred to in treatises on money, issued by Isabella of
Spam in the year 1497. The legal ratio between gold
and silver coins was then established by Isabella and
her advisers as one to ten and three-quarters. Some
years prior to that the ratio had been different ; it had
been one to eleven and three-quarters. Now, all the
writers upon this subject contend that the discovery of
America brought so large a quantity of gold into Spain
that the queen was obliged in 1497 to change the ratio


and undervalue gold ; but I have found, in the Memorias
de la Real Academia de Historia of Madrid, that in the
year 1475 the ratio had been just the same as the ratio
which was enacted in 1497 by Queen Isabella. In 1475
Columbo was still in Europe, and it is impossible to
attribute the ratio established in 1497 to the discovery
of America. It was the restoration of a ratio existing
twenty-two years before.

Here I beg to make another quotation from an
American author. I refer to a letter written by Mr.
John White, who in 1829 was Treasurer of the Bank
of the United States, addressed to Mr. Ingham, Secre-
tary of the Treasury. The letter is a very interesting
one. It is as follows :


BALTIMORE, November 16, 1829.

Upon a careful review, it appears to me that the fol-
lowing singular but instructive conclusions are evidently
deducible :

Whatever degree of uncertainty may exist as to the
precise quantity of the precious metals which was im-
ported into Europe during the fifty-three years succeeding
the discovery of America, the records of that time abun-
dantly testify that gold constituted the chief part of the
supply, and that, nevertheless, its great preponderance did
not produce any sensible effect on the market-value, in
reference to silver. It is evident that the enormous im-


portations of silver consequent upon the explorations of
Potosi which mine alone is estimated to have supplied
one hundred and fifty millions of silver (in ten years sub-
sequent to 1545) did not vary the relative value of these
metals by a rise in gold, as we find that Queen Eliza-
beth and her eminent advisers considered it expedient, in
1560, to reduce the standard proportions from 11^ to a
fraction under 11.

The discovery of the alluvial mines in Brazil in 1695
quadrupled the annual average amount of gold previously
produced ; yet in 1717, when this inundation, as it may
be termed, was at its height, the value of gold remained
the same as in 1650 1 to 15.

Although it appears that the explorations of new
mines, but especially of Biscaina, Sombrero" te, Catorce, and
Valenciana, in Mexico, toward the middle and latter half
of the last century, increased to enormous amount, yet
the market-value of silver was almost uniformly higher in
England than in 1717.

These extraordinary circumstances in the history of
the precious metals appear to invite and authorize the
inference that it is impossible to affix with accuracy or
utility the value of gold and silver by a comparison of
the quantities produced.

You will observe that these statements (which will
be found in the Senate documents of 1830) are of the
greatest importance. Yet, if the variability in the rela-
tive production of silver and gold does not affect their


relative value, some reason must be found for explain-
ing why the old ratio 1 to 10 and to 12 has risen grad-
ually to 1 to 15-J, and why the gold coins relatively to
the silver coins are now lighter than they were during
the sixteenth and seventeenth centuries. It seems to
me that the fact is due to certain mint regulations con-
cerning the duties of seigniorage and brassage paid by
individuals whose gold and silver were coined at the
public mint. As these duties were levied rather with
reference to the weight of the metals than to their
legal value, the cost of coinage was less to the owners
of gold than to owners of silver. For coining a mill-
ion of dollars gold, the cost was much less than for
coining a million of dollars silver. This difference in
the cost of mintage gave certainly a preference to gold
against silver. When a payment was to be made by
one country to another, it was certainly more prefer-
able to send gold than to send silver, because, in melt-
ing down the gold in order to obtain a new coin in a
foreign country, the coinage expenses were much less
than the expenses in melting down and recoining silver.
When a country was so deprived of gold, its mint
changed its ratio in favor of gold in order to induce
the return of gold. Your law of 1834, raising the
value of gold as against silver from 1 : 15 to 1 : 16, was
enacted precisely with the aim of inviting the impor-
tation of gold, and furnishes an illustration of my
meaning. When the mint ol a country had so changed


the ratio between gold and silver in reducing the weight
of the gold coins, the mints of the other countries fol-
lowed the example ; and these migrations of gold coins
and reduction of their legal weight, being repeated
many times, have had the effect of raising, step by
step, the general mint-ratio from 1 : 12 to 1 : 15. Sub-
sequently the rise has ceased, because of the duties of
seigniorage and brassage having been considerably re-
duced, and then gold has lost the great advantage
which the former mint regulations assured to it.


Q. Assuming that the production from the mines
of gold and silver would vary relatively, would the
use of these metals in all the countries named, upon a
fixed relation, prevent any disturbance in those coun-
tries in the use of these metals ? A. That is precisely
what I was about to refer to. The change in produc-
tion would never produce any variation in the relative
value of the two metals. Upon that point I will give
a quotation from Isaac Newton, who was director of
the mint in London in 1717. He was asked why the
silver was always going abroad. Newton had com-
pared the laws of the ' different countries, and he re-
marked that the law of France and the law of Ger-
many were different from the law of England, and he
suggested to change the ratio in England in order to
maintain the circulation of silver in England. New-
ton says :


" And it appears by experience, as well as by reason,
that silver flows from those places where its value is low-
est in proportion to gold, as from Spain to all Europe,
and from all Europe to the East Indies, China, and Japan ;
and that gold is most plentiful in those places in which
its value is highest in proportion to silver, as in Spain
and England. It is the demand for exportation which
hath raised the price of exportable silver about %d. or 3d.
on the ounce above that of silver in coin, and hath thereby
created a temptation to export or melt down the silver
coin, rather than give 2cl or 3d. more for foreign silver ;
and the demand for exportation arises from the higher
price of silver in other places than in England, in propor-
tion to gold that is, from the higher price of gold in Eng-
land than in other places, in proportion to silver and
therefore may be diminished by lowering the value of
gold in proportion to silver."

And then he suggests :

" If gold in England, or silver in East India, could be
brought down so low as to bear the same proportion to
one another in both places, there would be here no greater
demand for silver than for gold to be exported to India ;
and if gold were lowered only so as to have the same pro-
portion to the silver money in England which it hath to
silver in the rest of Europe, there would be no tempta-
tion to export silver rather than gold to any part of Eu-
rope. And to compass this last, there seems nothing more
requisite than to take off IQd. or IZd. from the guinea,


so that gold may bear the same proportion to the silver
money in England which it ought to do by the course of
trade and exchange in Europe ; but if only 6d. were
taken off at present, it would diminish the temptation to
export or melt down the silver coin, and, by the effects,
would show hereafter better than can appear at present
what further reduction would be most convenient for the

So you see that the voyage of gold or silver is not
the result of the changing productiveness of the mines,
but that it is dictated by the laws alone. If you estab-
lish in India your ratio of 1834: 1 to 16 and in-
troduce in England your ratio of 1792 1 to 15
you will see all the gold of England going to India and
all the silver of India going to England. The relative
value in the market between gold and silver is the re-
sult of a struggle between the laws of the different
countries. If a treaty was made establishing every-
where the same relative weight between gold and sil-
ver coins, with everywhere a uniform charge for the
coinage of the two metals, there would be no more
reason for exporting the one than for exporting the
other. The globe is round : if the mint-laws are the
same in every nation, the exportation of gold or silver
leaves no profit. " No more temptation" as was rex
marked by Isaac Newton.

And if the relative value of gold and silver has
always been determined by the conflict of the several


legislations, how can we deny that, when the legisla-
tions will be everywhere and forever the same, the
relative value of the metals will always remain the

To fix by law a relative value between sugar and
coffee, between two perishable commodities, or between
a legal tender and a commodity, would be a ridiculous
attempt. But nothing is easier, nothing more rational
and convenient, than to fix by law the relative value
between two everlasting legal tenders, gold and silver.
If it is admitted that law can fix the weight of the gold
coins, how can we assume that law cannot fix simul-
taneously the weight of the gold coins and of the silver
coins '{

Q. Have you any knowledge of the state of public
opinion or official policy in Europe that you can give
to the committee, which will enable us to judge wheth-
er an effort to establish a uniform ratio for the coinage
and use of silver and gold would be successful ? A.
There is at present in Europe a great reaction in regard
to the mono-metallic doctrine a reaction almost as sig-
nificant as that which prevails in the United States. I
saw, the other day, a petition from the Chamber of
Commerce of New York, addressed nearly a year ago
to the Congress of the United States, asking for " a
provision in order to promote an international conven-
tion for establishing the relative value of gold and sil-
ver." This petition was signed, among others, by Mr.


Samuel Ruggles, the delegate of the United States at
the monetary conference held in Paris in 186T. In
that conference, on the 20th of June, Mr. Ruggles de-
clared that " the people of the United States had suffi-
ciently learned, if not by study, at least by experience,
that the system of the double standard was not only
without prudence, but also impossible, because this sys-
tem implies necessarily a fixed ratio between the value
of two different kinds of merchandise, gold and sil-

Now, the conversion of Mr. Ruggles to bi-metal-
ism is so complete, frank, and sincere, that, in Novem-
ber last, he printed, for the use of the Chamber of
Commerce of New York, a letter to the Director of
the Mint of the United States, entitled " Yital neces-
sity of preliminary international monetary conference
for establishing the relative legal values of gold and
silver coin." The opinion of Mr. Ruggles has changed ;
the public opinion in the United States has changed ;
and so, also, the public opinion in Europe is changing.
In France the Government, the Bank of France, and
the prominent bankers, among others M. Rothschild
and M. d'Eichthal, are opposed to gold-mono-metal-
ism. Some writers M. Michel Chevalier, for in-
stance are still contending for the exclusion of silver,
as they contended some twenty years ago for the exclu-
sion of gold ; but France sees clearly that the operation
is impossible, and that the demonetization of the five


franc pieces would be for the public finances a terrible
loss, to be computed by hundreds of millions. The
Journal des Debats, which was mono-metallic, is now
sustaining the bi-metallic system. The Republique
Frangaise, the journal of M. Gambetta, has always
been against the demonetization of silver. Of the
Siecle, in which my own writings appear, I need not
speak. In Belgium the Government is bi-metallic, and
M. Laveleye has reduced to silence all the mono-metal-
ists. In Holland the public opinion is favorable (as it
is in Austria) to the preservation of silver. A bi-me-
tallic petition has been addressed to the king for the
convocation of an international conference. M. Vro-
lich, formerly Minister of Finance, is the author of the
petition. In Germany, also, many pamphlets have
been published against the demonetization of silver ;
and if you reflect that the old silver thalers are still
circulating with the enforced value of three gold marks
per thaler, and that this proportion represents the ratio
of 1 to 15 between gold and silver, you see imme-
diately that for Germany nothing is easier than the
adoption of bi-metalism. As bi-metalism would save
to Germany all the loss resulting from the sale of her
thalers, it is natural to believe that, if the United
States recommends an international bi-metalism, Ger-
many will not oppose any great resistance.

The chief champion of the Gen nan mono-metalists,
Professor Soetbeer, of Gottingen, published a letter in


the Neue Freie Presse of Vienna, on the 10th of Oc-
tober last, in which he says :

" The views of the advocates of the double standard,
and especially of Cernuschi, are, at least in one respect,
not without justification.

"If all commercial states, without exception, in law and
in practice adopt and maintain the bi-metallic standard at
one ratio (say 1 to 15) for their entire coinage, with un-
conditional freedom of coinage of both metals, it cannot
be denied that in such case, for the present, and probably
for a long period to come, a permanent and stable relation
between gold and silver would be secured."

In Spain, the legal ratio between gold and silver
was fixed, some months ago, at 1 to 15J exactly.
In England, also, the business community see very
clearly how gold mono-metalism is pernicious. Since
France stopped the coinage of silver, no par of ex-
change longer exists between England and Asia or
between England and South America. The Chamber
of Commerce of Liverpool has adopted a petition to
the Parliament in. favor of bi-metalism ; and the presi-
dent of that chamber, Mr. Samuel Smith, has published
three letters of the greatest importance, in which he
recommends the coinage of silver in England at the
ratio of 15J- with gold. Mr. Smith is a distinguished
writer and a practical man. Another merchant, a
prominent ship-owner of Liverpool, Mr. "William-


son, of the firm of Balfour & Williamson, has published
many able and persuasive pamphlets to the same effect.
Mr. MacLeod, the author of " Theory and Practice of
Banking," and Mr. Stanley Jevons, the author of
" Money and the Mechanism of Exchange," who has been
the director of the mint in Australia, have both written
to me and to my friends, that from a scientific view the
position of bi-metalism is impregnable. Before leaving
for Cairo as director of the Egyptian railways, Major-
General Marriott, formerly general secretary of the
Bombay Government, author of "A Grammar of Politi-
cal Economy," said to me that he was strongly in favor of
bi-metalism, as well in England as in India and every-
where. In his excellent book, " Bullion and Foreign
Exchanges," published many years ago, Mr. Ernest
Seyd recommended the unlimited coinage of a silver
piece of four shillings as legal tender in full. So it
cannot be controverted that the public opinion of Eu-
rope in favor of the bi-metallic policy is increasing ; and
if the United States is disposed to promote an interna-
tional conference, it is easy to foresee that, by gem-nil
consent, silver will be rehabilitated.

If you will permit me, I will here explain how the
mono-metallic campaign was begun. In 1867, wlu-n
Mr. Ruggles was in Paris as your delegate in the mone-
tary conference, that conference was almost unanimous
in recommending the universal uniformity of coinage,
taking the franc for a basis. There was a difficulty


with regard to England, as the pound sterling contained
as much gold as is contained in twenty-five francs and
twenty-two centimes, and for obtaining the proposed
uniformity of coinage it was necessary to reduce the
weight of the sovereign to the exact weight of twenty-
five francs. The Chancellor of the Exchequer, Hon.
Robert Lowe, favored the reduction, and spoke in its
behalf in the House of Commons. I quote his language :

" The French Government have put themselves into
communication with us. They have written to me on the
subject of international coinage, and wish to know what
steps the Government of England are willing to take in
the matter. In my answer, I ventured to say that, under
any circumstances, we could not have any hope of estab-
lishing an international coinage with a country that has
two standards. France has a gold and a silver standard,
and it would be impossible to hold out hopes of assimila-
tion until France made up her mind to give up the silver
standard, and have only a gold standard; and I am happy
to say that France is favorable to the abandonment of her
silver standard, as I gather from the report of a commis-
sion on the subject which I have received."

You see by this speech that the idea of demonetiz-
ing silver has arisen from the desire of introducing
everywhere the franc system a desire which, after the
subsequent adoption of the mark in Germany, is no
longer entertained.


The speech of Hon. Robert Lowe was made on Au-
gust 6, 1869 ; and when, in 1871, after the war, Germa-
ny took her position with reference to the proscription
of silver, there was an excuse for it, because Germany
knew that in France there was a party desiring to intro-
duce gold mono-metalism ; and, after her victory, she
preferred to take the advance. But afterward public
opinion, as I have said, changed as well in France as in

Mr. BOGY. I wish to ask the witness a question, not
exactly in the line of his argument, but one which, I
think, is pertinent to the inquiry of the committee:
What was the influence in 1816 which brought England
to the idea of a single standard, and why does she now
maintain it with so much pertinacity ?

The "WITNESS. An erroneous view. The original
author of the error was Lord Liverpool, in his letter to
the king in 1805. His son introduced the error into
the law of 1816. Yet, at that .time, the adoption of
gold mono-metalism was for England an easy opera-
tion. There was no silver in England, and England
has never sold an ounce of silver. Many English mono-
metalists whom I met in England stated to me : " Only
one metal can be money ; we cannot have two measures
of value." ' Why not ? " I inquired ; " you have two
|nunels the pound troy and the pound avoirdupois; a
thermometer can present simultaneously two difl'nvnt


scales a scale Fahrenheit and a scale Reaumur with-
out derangement."

At the present moment the London Economist is
desirous that the United States should coin a great quan-
tity of silver, and that France should recoin the five-
franc pieces. " Well," I said to the editor of the Econ-
omist, " how is it that, after having preached to all
nations for many years that gold mono-metalism is the
best money, to-day you recommend silver to the other
nations, and persist in recommending only gold to Eng-
land ? If mono-metalism is good in itself, it is good
for the other nations as well as for you. If bi-metal-
ism is bad for you, it is also bad for the others. For
my part, I consider bi-metalism good and necessary for
all nations for England as for others ; and it is for
that reason that I am working for the general adoption
of bi-metalism."

Mr. Bagehot, the editor of the Economist, is a man
of great scientific and literary attainments, but he has
never answered to my dilemma. Still, I do not despair
of the Economist. That paper knows very well that at
certain moments a great change may be necessary in the
economical policy of the country. It cannot bring itself
to despise the example of Robert Peel, who became the
leader of his enemies in accepting the principle of the
free corn-trade.

Mr. BLAND. Supposing that one-half of the commer-
cial world was to use silver and the other half to use


gold, would not that be the same in effect as the adop-
tion of the double standard ?

The WITNESS. Bi-metalism does not consist in the
independent use of the two metals as money. It
requires that the two metals should be used every-
where at a fixed ratio by law. If one-half of the na-
tions are paying in gold and one-half are paying in
silver, they are just in the bad position in which Eng-
land and India now are without par of exchange.

Mr. BOGY. Supposing that in this country we restore
our relation at 16 to 1, while in France and Europe
generally it would remain at 15 to 1, what would be
the effect upon this country, and what would be the
effect upon Europe ?

The WITNESS. If you coin at the ratio of 16,
France cannot coin at the ratio of 15. Eemember the
experience of 1834. What has been the effect of the
ratio 16 then established ? The effect has been that no
silver dollars have been coined in the United States
since 1834, because there was a profit of three per cent,
in sending silver to France. France knows that if
she coins silver at 15^-, all the German and American
silver would be presented to the French mint ; that not
an ounce of silver would be coined here. Then, if you
coin at 16, you remain alone ; and it were better to
i Maintain the greenbacks than to coin silver, if this
metal is not also coined in Europe.


By Mr. BOGY :

Q. By retaining 16 here and 15|- there, our silver
would, of course, go right to France. Would not that
compel France to abandon the bi-metallic system ? A.
The policy of France would be not to coin, but to
wait. France committed a great mistake when, in
1874, after the example given by Belgium, she limited
the coinage of silver. This has been a great mistake.
If France had continued to coin silver freely, the Ger-
man silver would have flowed into France; and some
gold of France would have flowed into Germany, but
silver would have maintained everywhere its value rela-
tively to gold. In limiting the mintage, a difference
has been created between the value of bullion and the
value of coin.


Q. If it was a mistake on the part of France and
the Latin Union to limit the coinage in 1874, when
they could readily have absorbed whatever of silver
Germany had to dispose of without seriously affecting
their trade, would it not be an ample guarantee for the
stability of silver if the United States should resume
specie payments and adopt the relation of 15 to 1 (the
same which the Latin Union have adopted), without
reference to any of the gold-using countries ? A.
Certainly. If the United States adopt the bi-metalism
at this same ratio, IS^ to 1, the effect would be very


good for the restoration and the maintenance of the
relative value of the two metals.

Q. Would it be necessary, for the maintenance of
such relative value between the two metals, that all the
countries establishing that relation should join in a con-
vention ? A. I do not say that it is necessary to have
all the countries, but it would be sufficient to obtain
the concurrence of some leading countries of Europe,
and, if possible, of India.

Q. If the United States should wait until all the
nations of Europe, or the major part of them, had joined

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Online LibraryHenri CernuschiNomisma; or, Legal tender. → online text (page 2 of 10)