Henri Cernuschi.

Nomisma; or, Legal tender. online

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ard, do you think that the trade of the world would
still continue to be transacted upon the standard of
England, and that commercial values would be reduced
to their equivalent in pounds sterling? A. It is certain
that, wherever the English shippers and merchants are
established, they will continue to draft bills on London,
hut there is no disadvantage in that for the other nations.
They cannot suppose that India is not under English
rule, and that English merchants, English bankers, and
English steamers have not the supremacy on the coast
of China. English houses purchase in China an im-
mense quantity of tea, which is almost entirely con-
sumed in Kn.irlaml. English manufactures are consumed
in every part of the New World and of Asia. These



UNITED STATES MONETARY COMMISSION. 107

imports and exports constitute a trade which would
have been an English trade also if England had been
bi-metallic. The opium-commerce between India and
China is transacted in silver money taels and rupees
by English people. To say that the old commercial
and maritime genius of England owes its expansion to
the Lords Liverpool, the father and the son, the two
authors of the mono-metalisin, is a fallacy a fallacy
that not a single statesman would support in the British
Parliament. England, as well as all the nations, has
nothing to lose and much to gain by paying and being
paid in bi-metallic money.

Silver is still the principal money of Europe and
South America. Silver is the only money of Asia.
Silver has always been money. A general gold mono-
metalism is a ruinous revolution impossible to be
realized. To suggest a European and American gold
mono-metalism without legal par with the Asiatic sil-
ver mono-metal ism, is an inadmissible claim in favor
of barter. Directly or indirectly, before 1871 bi-met-
alism existed everywhere. Universal and uniform bi-
metalism will bring to perfection the old monetary con-
stitution of the world.



MONETARY PACIFICATION BY THE REHABILITA-
TION OF SILVER.*



I. THEORY.

THERE are paying mines and there are non-paying
mines. Gold may be dear, very dear, to him who ex-
tracts it, and it may be cheap, very cheap. Insignifi-
cant or ruinous, it is not the cost of production which
determines the value of gold. Let a ball of pure gold
weighing a thousand ounces fall from the sky : its value
is written upon it before it touches the ground. Every
ounce of new gold is worth exactly as much as every old
ounce ; but the more ounces there are, the less precious
every ounce is, the smaller its purchasing-power. It is
just the same with silver as with gold.

Should it be said that gold and silver are employed
as money because they are precious, or should it be said
that gold and silver are precious because they .-in- em-
ployed as money ? To answer this question, it is neces-
to be acquainted with the facts.

* From the Stick, Fchni.-iry, 1876.



MONETARY PACIFICATION, ETC. 1Q9

For a long time a given weight of gold was worth,
with some oscillations, 15^ times the weight of silver.
For some years, however, the value of silver has been
rapidly falling. At the present time IT of silver is
necessary to obtain 1 of gold. The depreciation is 10
per cent. Why this fall ? Nobody is ignorant of the
reason : it is that for some years the monetary employ-
ment of silver has been diminished. The fabrication of
silver money has ceased in Germany ; it has been re-
stricted in France, and elsewhere.

Let us suppose that the mono-metallic gold revolu-
tion, of which the German empire has made itself the
champion, everywhere succeeds in triumphing ; that
everywhere silver is deprived of the legal function of
money ; that, save the insignificant quantity employed
as tokens or change, all the coined silver in circulation is
called in and melted no more monetary employment
for silver what will it be worth ? More than copper,
certainly, but not much more.

The same fate would befall gold, if the whim of legal
mono-metalism took the other direction.

It must be admitted, then : gold and silver, al-
though fine and splendid, are not so rare that, if people
cease to employ them as money, they can retain a great
value.

On whom does it depend whether one or the other
metal is or is not employed as money ? On the legisla-
tors of each state. But is it, then, on legislators that



110 MONETARY PACIFICATION

the smaller or greater value of gold and silver depends \
Yes, evidently.

All mono-metallic gold legislation is favorable to the
value of gold, unfavorable to the value of silver such
is the English legislation of 1816. All mono-metallic
silver legislation is favorable to the value of silver, un-
favorable to the value of gold such was German legis-
lation prior to 1871. All bi-metallic legislation is fa-
vorable to the maintenance of the relative value of the
two metals according to the ratio sanctioned by it such
is the French legislation of 1803, which gives to the
silver franc the weight of 15 francs gold. It is the
effectiveness of legislation which determines the rela-
tive value of the two metals in the general market.
This relative value is not stationary, because the mone-
tary legislation of the different countries is discordant.

If discordant legislation is succeeded by an interna-
tional legislation, on it alone will depend the relative
value of gold and silver. If the international legisla-
tion is mono-metallic, the metal which is not money will
lose so much of its value as to be no longer precious.
If the international legislation is bi-metallic, the relative
value of gold and silver which it recognizes will remain
always and everywhere invariable. We proceed to
prove it :

Let us lay down the most extreme of hypotheses : let
us say that by the international legislation the relative
value of the two monetary metals shall be fixed, not at



BY THE REHABILITATION OF SILVER. JH

1 to 1 5^ as in France, not at 1 to 10, not at 1 to 20, but
at 1 to 1.

The law is everywhere promulgated. Its first effect
will be to render a large number of gold-mines unre-
munerative, and a large number of silver-mines much
more remunerative. The production of gold will un-
dergo a diminution, the production of silver will be
augmented. What will next happen ?

Either the passion for gold jewels and ornaments is
strong enough to seize on the totality of coined gold
and in that case gold will be worth more than silver,
but there will no longer be gold money, it will be the
reign of silver mono-metalism or that passion is not
powerful enough to absorb the totality of gold, and in
that case a certain quantity of gold will circulate as
money on an equal footing with, and with the same
value, as silver. But, then, the gold jewelry, taken by
weight, will not be worth more than if it were of sil-
ver ; for there cannot be two golds, one worth no more
than silver, the other worth more.

No help for it. The most extravagant legislation,
if it is accepted by the nations, is itself irresistible :
either one of the two metals will spontaneously be de-
monetized by private individuals, or the relative value
of the two metals will remain invariable.

People are at liberty to reject bi-metalism, but it is
not possible to prove that the bi-metallic thesis is un-
sound. Let us sum it up :



112 MONETARY PACIFICATION

The cost of production does not settle the value of
gold and silver. The value is determined by two ele-
ments the employment and the quantity.

The monetary employment gives great value to the
metal.

It is the legislator who decides whether one or the
other metal, or both, shall be employed as money. On
his decision depends the smaller or greater value of gold
and silver.

If legislation is discordant, the relative value of the
two metals may vary.

If there is a bi-metallic international legislation, the
relative value of the two metals can no longer vary.

n. APPLICATION.

It is scarcely necessary to point out that the de-
monetization of gold, effected spontaneously by pri-
vate individuals under the bi-metallic system, 1 to 1,
could in no way be anticipated under the system 1
to 15J.

If, however, under the pressure of metallic events
beyond all foresight, this spontaneous demonetization
should happen ? Well, we should find ourselves in full
silver mono-metalism. But what a difference between
that spontaneous mono-metalism and the legal mono-
mrtulism which we are combating!

The spontaneous mono-metalism would leave us for



BY THE REHABILITATION OF SILVER. H3

money the more abundant metal, whereas it is precisely
this more abundant metal which the promoters of the
legal mono-metalism want to have demonetized. The
spontaneous mono-metalism would drive out of circu-
lation the metal greedily sought for other purposes,
whereas the legal mono-metalism intends to proscribe
the metal which loses its value on ceasing to be money.
The spontaneous mono-metalism, if it ever happened,
would not stop the extraction either of gold or silver,
and would impose no sacrifice on anybody ; whereas the
legal mono-metalism discourages the working of silver-
mines, and begins by imposing on governments the obli-
gation of buying all the silver money at par in order to
resell it at ridiculous prices.

The bi-metallic science has no special predilection
for the proportion 15. Strictly speaking, any propor-
tion is admissible. But the 15 J has this advantage,
that it already exists almost everywhere on the Conti-
nent of Europe ; in France, in Italy, in Belgium, in
Switzerland for a long time, in Germany since the crea-
tion of the gold mark, which circulates simultaneously
with the thalers.

The bi-metalism at 15 is conservative, therefore, in
France and in Germany. Would it be revolutionary in
England? In no wise; no gold-piece to melt down,
and, as the only innovation, the public authorized to
have struck, in silver, five-shilling pieces.

Let us suppose the quadruple alliance signed. In




114 MONETARY PACIFICATION

England, in France, in Germany, in the United States,
the public treasuries will collect the taxes and loans in
bi-metallic money ; in bi-metallic money they will pay
the interest of the public debt, the employes, and the
articles purchased. Private individuals will follow
suit; they will pay each other in bi-metallic money.
Gold and silver will - circulate fraternally, themselves
present or represented by notes. No money more
varied, hence no money more convenient.

What will the miners, the seekers of gold and sil-
ver, say ? " Henceforth," they will say, " the relative
value of the two metals can no longer vary. So much
the better. It is a risk the less in our risky occupa-
tion."

Like the tobacco-grower in the country where the
crop is bought by the state at a price fixed beforehand :
the grower plants for the sake of profit ; he may lose,
but once he plants, he is certain of the value of the to-
bacco harvested.

To extract 1 of gold or 15| of silver will be to pro-
duce the same quantity of money. Never will gold and
silver miners have lived under a more advantageous
legislation.

The equality of value between 1 of gold and 15 of
nlvor makes a single money of the two metals. Gold
becomes yellow and light silver ; silver becomes wliitc
and heavy gold.

Let 15J be sanctioned by London, Washington,



BY TIIE REHABILITATION OF SILVER. H5

Paris, Berlin, and in twenty-four hours silver goes up
to 15, and maintains itself there forever.

At this news, all parliamentary nations, and Russia,
and the Mussulmans, and Japan, so prompt to imitate
us, and the Indies, subject as they are to Europeans,
will hasten to adhere to the great compact which con-
solidates and guarantees the value of the two metals.

China alone will hold aloof from bi-metalism. It
will retain its silver mono-metalism a rude mono-metal-
ism, for the silver is not even coined ; it circulates in
ingots, which are neither of the same weight nor the
same standard. So much the worse for it. As for us,
we shall always be able to receive the Chinese ingot ;
we shall make money with it, and with our coined sil-
ver we shall always be able to pay the Chinese.



THE BI-METALLIC FUTURE.*



THE logic of Turgot, the good sense of Franklin,
the wisdom of Peel, the frankness of Bismarck, have
at last met together round a green-baize table, and the
monetary peace of the world has been signed. The
day when this good news is announced, the bi-metallic
future will open. In idea we may transport ourselves
thither. Everywhere there circulate white coins and
yellow coins ; everywhere the white coin weighs 15 J yel-
low coins. Henceforth English gold is no longer exposed
to German, Dutch, and French drains : the city breathes.
Henceforth the rupee has recovered its value : India
is at ease ; the India-Office is smiling. Henceforth
silver is worth gold : the Austrian consols regain their
old quotations. Henceforth Germany laughs at Herr
Ludwig Bamberger's mad mono-metallic wager: all
Germany freely coins gold marks and silver mark> .it
pleasure; the Government washes its hands of the

* From the Sttcle, March, 1876.



THE BI-METALLIC FUTURE. H7

matter, and the thalers are saved. Henceforth silver
is a legal tender at London as at New York : Nevada,
California, all America, is in ecstasies. Henceforth
gold and silver everywhere form one sole and joint
valuating and paying specie ; the old French science is
satisfied. Henceforth silver ware is rehabilitated; it
becomes again certain money, always precious, always
salable, always convertible into coin ; families rejoice
at it. Everything goes well.

Thunderstruck, the mono-metalists are thrown head-
long down the abyss a spectacle which makes a pen-
dant to Michael Angelo's " Last Judgment." Charon
receives the convoy in his boat and lands them on the
shores of the infernal regions.

Still impenitent, the mono-metalists set themselves
under the Yery eyes of Pluto to conspire handsomely.
Avernus communicates by tellurian and pyritic routes
with the gold and silver mines. The mono-metalists
repair thither, take up their quarters, and for years
provoke there the most terrible revolutions, followed by
the most merciless reactions, in order to disturb the
peaceful existence of the 15J- which secures on the
earth the monetary happiness of the human. race.

Indefatigable in their lust for revenge, the under-
ground mono-metalists put in the miners' way nuggets
of gold of enormous dimensions, and so easily ex-
tracted that the cost of production is quite insignifi-
cant. The gold-diggers become Croesuses, almost



118 THE BI-METALLIC FUTURE.

Midases. At the same moment silver, by the artifice
of the mono-metalists, conceals itself from the miners,
and, what is worse, the mines of mercury are almost
exhausted : without mercury the working of silver-
mines is very difficult. ... In short, the proprietors
of silver-mines are ruined ; they are as poor as Job.

By-and-by a complete revulsion. Gold becomes
undiscoverable, and silver is to be had for almost
nothing, close to the surface. The effort of the sub-
terranean mono-metalists is Titanic, and is displayed
alternately in different directions, now in favor of
gold production, now in favor of silver production,
but always, as they believe, to the prejudice of the
bi-metalism which the diplomatists have sanctioned.

Bi-metalism, however, is not at all the worse for it.
In spite of so many extraordinary and varied events,
the value of gold and silver always remains in the ratio
of 1 to 15. In vain does silver abound; it cannot
fall relatively to gold, for the producer has the right
to have it himself converted into coin at the mint of
no matter what state. Now this coin has legal cur-
rency ; nobody can refuse it in payment of any debt,
and the governments receive it in discharge of taxes,
just as they receive the gold coin at 15^.

To say that silver cannot fall relatively to gold,
and to say that gold cannot become dearer relatively
to silver, is to say one and tin- >:mu- tiling. How, in-
deed, could gold rise beyond 15? If for his weight



THE BI-METALLIC FUTURE. H9

of gold the digger demands more coin than ifc pro-
duces at the mint at the rate of 15J, the goldsmith
and jeweler will make use in their manufacture of the
gold coins in circulation ; and the miner, despairing of
selling his gold at a higher price than that given by
the mint, will be induced by the persuasive force of
his own interest to have his gold coined on the legal
basis of 15J.

When legislation is everywhere alike, there is no
means of exporting the monetary metal to sell it else-
where dearer than at home 15^ regne et gouverne.

Under the universal bi-metallic system gold and
silver mining may be compared to fishing. People do
not catch fish-matter ; they catch fish. They will not
extract from mines mineral matter; they will really
extract coin, yellow coin and white coin, the white
heavier than the yellow, but all everywhere and al-
ways having the same value, though the production
of both may be now more now less plentiful, and
whatever the difference may be between the amount
expended in extraction and the amount which is ex-
tracted.

As to that, there will always be paying mines, and
there will always be non-paying mines.



SILVER VINDICATED.

Paper read by Mr. HENRI CERNTTSOHI before the " Trade and
Economy Section " of the National Social Science Association,
Liverpool Meeting, October, 1876.



I. THE SILVER CRISIS.

UP to the promulgation of the German law of the
4th of December, 1871, against silver, the production
of that metal in the whole World had amounted for
about ten years to 10,000,000 per annum. Since
1872 it has amounted on the average to 13,700,000
(depreciation not deducted). The increase is thus 3,-
700,000, and this is the extent of that immense excess
of production so much talked of.

Since 1872 the annual production of gold has been
19,000,000 a year ; it is therefore more by one-third
than the production of silver.

In view of these figures, it is altogether impossible,
even for those who have been so much afraid of the
fertility of silver-mines, to attribute the depreciation



SILVER VINDICATED. 121

of silver to natural causes ; it is wholly and exclusively
due to the action of legislators.

The production of gold, which was 6,000,000 a
year up to 1850, rose to 36,000,000 in 1852, yet gold
was never depreciated relatively to silver. Up to 1830
the annual production of silver was thrice that of gold
in value; after 1850 the fact was just the reverse, the
annual production of gold becoming thrice that of sil-
ver in value ; yet gold and silver never altered in rela-
tive value. The reason is that France was then bi-
metallic, and that, through her, entire Europe was,
indirectly at least, in the enjoyment of bi-metalism.
England coined only gold, but she drew silver from
France, or sent it thither in exchange for gold at the
fixed rate of 15J. Germany coined only silver, but she
drew gold from France, and sent it thither in exchange
for silver at the fixed rate of 15J.

France being a market at the fixed rate of 15^ a
market always open to all nations the 15^ was en-
forced on every nation. Neither in England nor in
America, neither at Constantinople nor at Calcutta,
were people willing to give more than 15^ of silver for
1 of gold, nor more than 1 of gold for 15J of silver.
The legal rate of France was the regulating rate of the
whole world. It was in this manner that the relative
value of gold and silver always remained stationary in
the world so stationary, indeed, that in English sta-
tistics the quantity of silver could always be expressed
6



122 SILVER VINDICATED.

in gold sovereigns. A gold sovereign always repre-
sented the same weight of silver.

Now, however, the old bi-uietallic constitution is no
longer at work in Europe. The (lerman law, which
put a stop to the coinage of silver in all the states of
the empire, placed Holland, then France, and all the
Continent, under, the necessity of entirely suspending
the fabrication of silver money. France now coins gold
alone. Europe is making a mono-metallic experiment.
Here is the sole cause of depreciation of silver. No-
where does the law any longer link the value of silver
with the value of gold, hence the reason why the value
of silver will no longer have any fixity.

II. THE INDIAN EXCHANGE.

Between two countries having the same metal as
money, bills of exchange never cost more than the
transport and coinage of the metal would do. Thus,
the exchange on Paris can never fall lower in London
than 25 francs, for, this limit passed, there would be no
advantage in bills of exchange ; it would be cheaper to
send sovereigns to the Paris mint.

The case was just the same between India and Eng-
land as long as in Europe bi-metallic francs were
coined. The value of the rupee in relation to sover-
eigns did not then run very great risk, for, at worst,
people could get rupees sent to Europe, have them



SILVER VINDICATED. 123

coined into francs, and with those francs obtain at Paris
either bills on London or gold at the rate of 15.

This possibility of dispatching rupees to be con-
verted into European money always sufficed to keep
the Indian rate of exchange within the limits of the
cost of transport and coinage of the metal.

If the German law of 1871 against silver had not
come into being, Europe would still coin silver ; that
metal would still be common money between Euro-
peans and Asiatics ; the Anglo-Indian exchange thanks
to French bi-metalism would still be at its old level,
and the Indian Council would dispose of its bills with-
out incurring any loss.

It is not the sale of bills on India which has made
silver fall ; it is the fall of silver caused by laws of
proscription which has lowered the value of the bills.

Whether Indian commerce was more or less pros-
perous ; whether the quantity of merchandise imported
from India into Europe and from Europe into India
was more or less considerable ; whether India absorbed
more or less silver all this would in no way have
affected the Anglo-Indian exchange, had not the old
monetary system of the world been overturned by the
mono-metallic revolution which broke out in Germany.



124 SILVER VINDICATED.

III. THE SUFFERINGS.

Notwithstanding the crusade in favor of gold alone,
the old mass of coined silver is still in circulation ; but
the value of this silver is now only nominal, and gov-
ernments cannot melt it down without incurring enor-
mous loss. Such is the situation on the Continent.

Instead of producing 15,000,000 as formerly,
the 150,000,000 rupees sold every year by the In-
dian Council in London in bills on India produce
only 12,000,000, and it can be worse hereafter. The
Indian budget is disarranged, public works are coun-
termanded, and all administrative and financial policy
in India has no longer but one aim : to recover, by no
matter what reduction of expenditure, what is lost by
the fall in exchange. Never was so paltry a pro-
gramme imposed on a great government. The Eng-
lish merchandise sold in Asia and South America is
paid for in silver, that is, in the metal the coinage of
which in Europe is at present prohibited, and with
which gold can no longer be procured at a fixed rate of
exchange. To the risk incurred by the merchandise is
added the risk which will be incurred by the payments.

It is no longer possible for English capital to under-
take anything in India. The rupees to be gained are
of too uncertain and precarious a value.

The purchasing-power of the rupee is not yet im-
paired in India, but it will be so by the continuous im-



SILVER VINDICATED. 125

portation of silver. The ruin of the rupee will be the
ruin of many ; and who will persuade the Hindoos that
the English law cannot, if it chooses, ward off the blow
struck by the German law ?

For the United States to resume specie payments, it
is necessary for them to rehabilitate silver, give the
silver dollar the same value as the gold dollar, then
accept silver at the custom-houses, and be able to pay
their European bondholders in silver dollars. To enable
this plan, however, to be adopted, it is first of all neces-
sary to be sure that Europe will become bi-metallic.
Without this, European creditors receiving silver dollars
inconvertible into European money would undergo too
serious losses. The demonetization of silver in Europe
is an obstacle, therefore, to the resumption of specie
payments in the United States ; and they have still such


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