Henri Cernuschi.

Nomisma; or, Legal tender. online

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quantity of silver than is usually sent. Secondly, the
American Legislature, which has decreed the purchase
of silver for the coinage of $50,000,000 fractional cur-
rency, has forced a rise in the price of that metal.
When this $50,000,000 shall have been coined, and if
next year the crop of silk is abundant in Europe, the
price of silver in London will very probably fall ; and
it will be impossible to attribute the phenomenon to the

Q. I believe that you stated yesterday, in answer to
a question, that the prices in a country depended upon
the volume of money in such country. Now, taking
into consideration these facts, that all the mints in Eu-
rope are closed to silver, but that there are countries in
which it can find a market (viz. ? South America, the
East Indies, and Asia), would there not be, even with-
out exceptional conditions, such as a failure of crops, a
tendency to a steady rise in prices in such countries ?
Moreover, does not the cheapening of the money-metal
of any country tend largely to the encouragement of


exports from such country and the discouragement of
imports into such country, and thus automatically bring
about that rise in the value of the money-metal to
which you refer as being occasioned by the increased
commerce with China and the Indies and the coining
of subsidiary coins by the United States? A. Sup-
posing that the demonetization of silver in Europe be
complete, and that the old coins of Europe, except the
limited fractional currency, would be sent to Asia;
supposing also that all the new silver produced annually
would be sent to Asia (which suppositions would be
the natural consequences of the practice of gold mono-
metalism in Europe and the United States), certainly
the value of silver would decrease in Asia, and conse-
quently the Asiatic prices stipulated in silver would
increase. I do not see how this change in the Asiatic
prices stipulated in silver could augment the exporta-
tion of the Asiatic articles and their consumption in
Europe. But that which is sure is this, that Europe
will no more have silver for the purpose of paying it to
Asia, and that the monetary relations between the two
halves of mankind would be impossible. It is for that
reason that I advocate with so great persistence univer-
sal bi-metalism.

Q. Under the circumstances which you depict,
would not the silver product of the mines of the West-
ern world furnish the Western world in the future, as
it has always in the past, with the money-metal with


which to transact its exchanges with the East ? A. The
new silver of the Western country will necessarily go to
Asia, the only country where it would be money ; but
when Asia will have something to pay in Europe, it will
be impossible for her to send her silver, this metal
being no longer, upon our hypothesis, money in Europe.
An example of this we have seen in 1876, between India
and England : India having to pay fifteen millions of
sterling gold per year to England, she had not, as
before, the possibility of sending silver to France,
where this metal was formerly coined ; and the Govern-
ment of India was losing 20 per cent, on banking ex-
change between India and London. So that the Gov-
ernment of India declared that famine, war, and drought,
are for India lesser evils than is the depression of silver
in London that is to say, the great increase in. the
price of gold in India.

Q. Is it not a fact that no nation, for any great
length of time, can buy more than it sells, and that,
except for the immediate settlement of temporary bal-
ances, the great bulk of trade between the two countries
must be by barter of commodities, the price being regu-
lated by money? A. Barter as between individuals
was abolished between the nations many thousand years
ago. The invention of money has had the effect of
facilitating the exchanges of all the commodities, and
certainly money is not consumed. But I cannot admit
that we call barter the exchange of commodities be-


tween nations, since all these exchanges are regulated
in money. We do not exchange silk for cotton, but we
sell or. buy the one as well as the other by the medium
of money.

Q. I will ask you if, in the operation of buying and
selling between nations by means of money, money is
not used as an instrument of valuation rather than as a
medium of exchange? A. Please read the definition
of money which I gave yesterday : " Money is at the
same time a scale of valuation and a valid tender for
payments." Without money there can be no sales, no
purchases, no prices, no payments, but only tedious and
expensive barters.


Q. I call the attention of the witness to the fact
that the question put by the chairman had reference to
the more immediate function of money. A. The one
function without the other is nothing; they are insep-


Q. How much silver, in your estimation, will
Europe require for subsidiary coinage? A. Scarcely
any. England has her fractional currency in full, so
has the Latin Union, and the same is the case on all
the Continent. There remains still some fractional cur-
rency to be coined in Germany. But Germany employs
for this purpose a portion of the old fractional silver
currency, which she has demonetized. With regard to


the quantity necessary for small change, the Latin
Union has fixed and coined six francs per capita, pur-
suant to the treaty of 1865. Germany has enacted that
she will coin ten marks (about $2) per head of popula-

Q. What amount of silver do you estimate to be
necessary for the use of Europe for subsidiary coinage,
and to maintain that coinage intact? A. The maxi-
mum cannot exceed the ratio of France and Germany,
that is to say, between twenty-five and forty grammes of
pure silver per head of population. I say "grammes,"
because, if silver is everywhere demonetized, it is ficti-
tious to express its value rather than its weight.

Q. State more definitely the amount expressed by
twenty-five grammes of pure silver. A. It is near six
francs ; something more than the silver contained in
your trade-dollar.

Q. How do you account for the fact that Great
Britain has, and keeps for the purposes of subsidiary
coinage, nearly a hundred millions of dollars nominally,
and is able to maintain it at par with gold, although the
coins are very much under-weighted? A. In England,
the quantity of fractional currency is something greater
than it is on the Continent, because in England there
are no small bank-notes in circulation. The mainte-
nance of the par is simply due to that circumstance
that silver is no legal tender except for payments of
forty shillings. The pennies (which are in bronze) have


the same situation. They circulate for a value greater
than the value of the metal. But all which concerns
fractional currency is without importance upon the
great question of money that is to say, of the legal
tender in full, with unrestricted coinage, and without
monopoly of issue for the Government.

Q. I will say here that I only referred to the use
which would probably be made of four or five hundred
millions of dollars' worth of subsidiary coin in Europe
for the purpose of showing that, even if Europe de-
monetized silver, there would still remain a very
considerable demand in Europe for that metal. A. It
is a mistake. When the mint is closed, as it is closed
after all the fractional currency is coined, and it is
actually coined, the miners cannot have the hope of sell-
ing parcels of silver in Europe for the purpose of
having it coined into fractional currency.

Q. Have you made any careful estimates as to the
amount of silver used annually in the arts ? and, if so,
be good enough to state your estimates, and the basis
upon which they are made. A. I have never made the
calculation. I consider the employment of. silver in
ornaments as insufficient to keep open a single mine of
silver, if silver is not legal tender. The exploration of
the mines would be a miserable business, and the people
who at present like to have ornaments in silver because
silver is money, will cease to employ si Ivor as an orna-
ment. Before 1871 people possessing silver plate, for


instance, would lose the interest on the capital they had
spent ; but they knew there was nothing to lose on the
capital itself, because, without selling the silver plate, it
was possible to go to the mint. That was the case also
with the American silver plate until France coined
without restriction gold and silver. Silver was not
accepted at the mint in America, but the value of
silver was guaranteed by the French law.

Q. State whether it is or is not a fact, that in all the

products manufactured of silver in Europe and the

United States, the pure silver contained in the plate,

such as watch-cases or for other uses, is not worth more

than double the value of silver contained in them ; and

if, therefore, at all times, any modern manufacturer or

owner of plate and other similar material would not

have to suffer a loss of over fifty per cent, in turning it

into money. A. I myself possess a certain quantity of

silver plate, and I believe that I would have lost only

ten per cent., or thereabouts, if, before war was declared

by the mono-metalists against silver, I had brought it to

the French mint. With 15 ounces of silver plate one

was always sure to obtain one ounce of gold, as well in

London and in Paris as in Chili and in Belgium. The

silver plate before 1S71 had in Europe and in the United

States an invariable intrinsic value that is to say, a

legal monetary value in francs ; and these francs were

ever and always, without loss, convertible into sterling

pounds and gold dollars. Now, the intrinsic value of


silver plate can only be expressed in Indian rupees or
Mexican piasters, and nobody can say what may be in
Europe, from day to day, the value in European or
United States money of rupees and piasters.

Q. Would your answer apply to the greater quantity
of the silver manufactured into plate, or does it only
apply to very heavy plate, such as is not ordinarily in
use ? A. I speak especially of forks, spoons, and ordi-
nary table-service.

Q. Is not the use to which silver is applied in the
arts much more extensive than that to which it is applied
for purposes of ornamentation ? Among other uses, to
which I refer, are those of the manufacture of nitrate of
silver and in looking-glass manufacture, and its increased
uses for photographic purposes, where silver seems to be
the best material that is available for purposes for which
it is required. A. It is possible that such is the case.
But the value of a monetary metal does not depend
upon its employment and consumption in the arts. On
the contrary, it depends only upon its legal use as
money The monetary stock permanently circulating
has a purchasing-power proportionate to its volume.
The metal employed in the arts and industries dimin-
ishes the volume of the circulating stock, and conse-
quently increases the purchasing-power of every coin.
But if the metal was not declared money by law ; if
silver was everywhere demonetized, except for the ir-
relevant limited quantity employed as fractional cur-


rency, its value would be almost entirely lost. A sub-
sequent possible rise in the price of silver as merchandise
would be without importance. The miners are indiffer-
ent to the amount of metal absorbed in the arts and
industries; they produce legal tender. Jewelers and
silversmiths take a certain portion of this legal tender
out of circulation ; that is all. The producers of silver
would be ruined if they had for customers only jewel-
ers, silversmiths, looking-glass manufacturers, and pho-
tographers. Mines are only opened when mints are

Q. State, if you remember it, what was the relative
production of silver and gold at the beginning of the
present century, the time of the adoption in France of
the relation of 15J between the two metals ? A. I sup-
pose that the production of silver was, in weight, about
50 to 1 of gold. That is to say, the production was
about one to three in the value of the two metals, at
the then valuation of 15.

Q. State, if you remember it, what was the relative
value of the production at about the middle of the pres-
ent century, say in 1849 or 1850 ? A. I suppose the
production was, at that period, about equal in value.

Q. State, if you remember it, what was the relative
production from 1852 to 1865 ? A. As three or four
to one in the value of gold as compared with silver.

Q. Up to that time, 1865, how many countries were
transacting business under the single gold standard ?


A. There were three Great Britain, Portugal, and
Turkey. Holland, in 1849, had adopted the single
silver standard. In 1834 the United States, having
adopted a ratio more favorable to gold than the old ra-
tio of 1792, had become in fact, a gold-paying coun-
try ; but in 1862 this country adopted paper-money.

Q. Do you remember what was the average annual
yield of gold from 1852 to 1865? A. About $130,-

Q. What nations in Europe, between the years 1852
and 1865, were operating under the bi-metallic standard
of gold and silver, at a fixed relation, established by
law, between the two metals? A. I have here a table
in which I give the mint regulations of several states.
It can answer :


1 tO


Belgium, I The coinage of silver stopped, but the old

Switzerland, \ silver coins still circulating as legal tender

Spain, in full.

1 to 15.604 Holland.

England and Portugal only silver used for tokens.


1 to 15.50 Italy, )

1 to 15.45 Austria, > Ratio if specie payments were resumed.

1 to 15.30 Russia, )

Turkey, gold-mono-metallic, if specie payments were re-

Until last year the ratio in Spain was something
less than 1 to 15. This ratio has been enacted only


recently. Holland was silver-mono-metallic between
1849 and 1872. At present she coins gold gulden at a
ratio with silver gulden, which differs very little, as you
observe, from the general ratio, 15J.

You see that if the countries where bi-metallic
money is now in circulation would agree to reopen
their mints for the unrestricted coinage of silver at
their ratio 15, and if you adopt the same ratio, bi-met-
alism at 15-J- would become general without melting
down either the silver or the gold coins now in circu-


Q. "What do you mean by % the terms "single
standard" and "double standard?" -.4. "Standard"
is the metal selected by law to be legal tender in full,
with unlimited mintage. The " standard " is bi-metal-
lic when by law gold and silver are legal tenders in full
at a fixed ratio, and both coined to all comers without

Q. You include free importation of the metals ?
A. Of course.

Q. Then I understand that in stating, in answer to
the question of the chairman, that the bi-metallic
standard prevails in the countries you have designated,
you meant to be understood as saying that in those
countries there was no limitation upon the coinage, no
tax upon the importation of the metal? A. Exactly


Q. There is no distinction made in favor of the
one metal as against the other? A. No. But I am
obliged to say, that in the bi-metallic countries gold
was treated with some preference with regard to the
cost of the coining ; this cost was taken in consider-
ation of the weight, and as a sum in gold is lighter
than the same sum in silver, it costs something less to
obtain from the mint gold coins than silver coins. In
other words, the ratio of fifteen and a half, which was
the ratio in France between gold coin and silver coin,
was not exactly the ratio between gold bullion and silver
bullion. It was necessary to bring to the mint not only
fifteen and a half of silver, but fifteen and fifty-eight
hundredths, in order to obtain the same quantity of
money which was obtained in bringing there one of
gold. If the nations will come to an agreement for
adopting a uniform legal bi-metalism, I would suggest
the fixing the cost of mintage on the legal value, and
not on the legal weight of the two metals.


Q. Between the years 1852 and 1865, was the legal
relation in Europe uniform between the metals operat-
ing under the double standard ? A. We can consider
it as uniform, because in Austria and in Russia, where
there was some difference, the paying money was in
paper, just as at present.

Q. What countries in Europe, from 1852 to 1865,
operating under the bi-metallic system, were in the active


use of such money ? A. The Latin Union, and espe-
cially France, which was the great centre of the bi-
metallic action.

Q. Did those bi-metallic countries during that peri-
od keep their mints open to the free coinage of both
metals ? A. Entirely open.

Q. Can you state what was the relative production
of gold and silver between the years 1852 and 1865 ?
A. About three of gold to two of silver.

Q. Was any substantial variance in the relative value
of the two metals such a variance as would cause in-
convenience in business observable during the whole
period from the commencement of the century to the
year 1872 ? A. There was some slight inconvenience
for the mono-metallic countries, which were obliged to
pay some small premium to bi-metallic France when
they wanted the one or the other metal. So England,
when she constructed the railways in India (which is a
silver-paying country), was obliged to go to France with
her gold in order to obtain five-franc pieces, and the
French people made a profit in the operation. If India
and England had been bi-metallic, as was France, the
incident and the profit would not have occurred.

Q. "We are now led to a consideration of these facts,
that, at the commencement of the century, the produc-
tion of silver was as 3 to 1 of gold ; that the relative
production decreased until the middle of the century,
when it was about equal in value with that of gold,


and still further decreased between the years 1852 and
1865, so that not more than one-fourth in value of sil-
ver was produced in the world as compared with gold,
and then increased until about the year 1870, and be-
tween that and 1876 (when the yield of silver was as 2
to 3 in gold) ; and that France, principally by reason of
free coinage of both metals, was enabled to stop a great
rise in gold, and to keep the two metals practically at a
parity at the relation of 15. Does it not therefore
follow as a consequence, that, if France and the Latin
Union should now open their mints to free coinage in
the presence of a much smaller yield of silver, and if
the United States came in as an auxiliary with free
coinage at the same relation between the metals which
obtains in France, it would insure absolute parity be-
tween the metals at the relation of 15J ? A. Undoubt-
edly. But, before obtaining this desirable effect, two
conditions are necessary : First, that the monetary
transformation of Germany should be at an end, in or-
der that France should not be alone in absorbing all
the silver thalers of neighboring Germany ; secondly,
that the United States shall resume specie payments,
because as long as they pay in paper they cannot be a
very effective ally for France.

Q. When I refer to the United States as being an
ally of France in this bi-metallic system, I mean to be
understood as intimating that the adoption of such a
system would he concurrent with the resumption of


specie payments. The statistics show that in seven or
eight years France with free coinage was enabled with-
out inconvenience in fact, greatly to her interest to
coin a large amount of gold subsequent to the year 1852,
amounting to about $600,000,000. Now I ask, Could
not France herself, assisted by the states of the Latin
Union, take the silver which Germany has to offer, as
well as any surplus from the mines over and above the
demands of the rest of the world, and thus maintain
the parity between silver and gold, as she did formerly
in the presence of a large supply of gold? A. The
position of France is not at present what it was before
1871. Then, France had on the one side England (mono-
metallic gold), on the other side Germany (mono-metal-
lic silver). Being bi-metallic herself, it was easy and
usual for her to be changing the coinage of the two
metals. To-day all is different. If France coins silver,
" all the silver of the world, beginning with the German
silver, would flow into France. France is not prepared
now, I suppose, to pay to Germany 1 of gold for ob-
taining in exchange 15 of silver.

In 1874 I published many letters with a view of
inducing France to maintain the unlimited mintage of
silver. A different policy has prevailed, that of limitation
of coinage the worst of all possible measures, because
this limitation has necessarily the effect of giving to the
coined metal a privilege over the uncoined, and there-
fore a greater value. The metal coined under these


conditions is deprived of international paving power;
it is to be considered more as token than as true money.
To-day the limitation has been abandoned : the French
mints now refuse all silver ; they receive only gold.
If that system had been adopted in 1871, when the
German law was promulgated, the fall of silver in Lon-
don would have been so great that Germany, perhaps,
would have been obliged to adopt immediately the bi-
metallic system either the immediate stoppage in the
coining of silver, or the continuance of the unrestricted
coinage. Both these policies had their advantages,
the limitation had none. But to-day it is too late for
choosing. At the present moment France has nothing
to do but to wait. If she recommends anything to the
other nations, she is suspected of pretending to dic-
tate to the the regulation of their mints. Moreover,
in the present monetary crisis which the mono-metallic
action has created, France is the country which suffers
the least.

Q. How much silver do you estimate Germany has
for sale ? A. In comparing all that has been published,
I am of opinion that there remains to be sold a quan-
tity of silver which would be sufficient to coin about
70,000,000 trade-dollars.

Q. If the United States should now take measures
for the resumption of specie payments, and should es-
tablish the legal relation between gold and silver at 15J
to 1, with unrestricted coinage of both metals, and


France and the Latin Union should permit unrestricted
coinage, would that $70,000,000, added to the current
surplus supply from the mines of the world (provided it
was all thrown out at any one time), produce any appre-
ciable effect upon the value of silver ? or would not the
great demands of the United States for the purposes of
resumption (which would be made in silver, unless silver
remained of less value than gold at that relation) speedi-
ly take the value of silver, until there should be parity
between it and gold at 15 J to 1 ? A. When the United
States will really resume, and coin silver at the same
ratio relatively to gold at which it is coined by France,
and declare that every silver dollar has for every pur-
pose the same legal value as the gold dollar, the
value of the two metals will instantly be and remain
forever at 15, notwithstanding the German and the
Nevada silver.

WEDNESDAY, February 7, 1877.

Present : Senators Jones, of Nevada, chairman, and
Boutwell ; and Representatives Willard and Bland.


Question. Have you given attention to the financial
situation of the United States, especially with reference
to the resumption of specie payments, together with
the feasibility of utilizing our great silver products as a
means to that end ? Answer. I have.


Q. Be kind enough to give your conclusions in that
regard. A. During my stay in Washington, I have
had the opportunity of hearing the debates of the House
of Representatives on the silver question. They were

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Online LibraryHenri CernuschiNomisma; or, Legal tender. → online text (page 4 of 10)