172

Economic law is in

instrument and article of commerce.

exorable.

"England adopted the single-standard in 1819, and Germany, the Latin Union, and minor European states, at a later day. Since 1819 the Bank of England has suspended specie payment nearly a dozen times, the land-owners of England have been reduced from 165,000 to less than 30,000. Her $3,500,000,000 national debt is as large as at the close of the Napoleonic wars, yet bread riots have periodically startled her cities and agitated her statesmen. But two years ago, when heavy drafts were made on her gold by Russia, her Barings touched the borders of insolvency, and, in spite of all the assistance of the Bank of England, plunged several leading New York banks into ruin and carried our country to the edge of panic and financial disaster, Goschen, the chancellor of the British Exchequer, announced to Parliament that the perils attending the increasing competition for gold made a consideration of the return to bi-metallism advisable.

it

"The rule or law of Sir Thomas Gresham did not apply to gold and silver. In the reign of Queen Elizabeth, I think was, the coin in circulation was found to be degraded by clipping and general short weight. It was found that as long as any clipped or abraded piece of silver would buy as much as a full-weight piece of silver, the heavy piece was kept out of commerce and used in the arts, and the spurious piece did the trade of the realm. The light displaced the heavy in commerce, or had such tendency, and this is all that the Gresham law meant."

However these things may be in theory, in fact our early gold coins, being worth more, when compared with silver, than the value which was stamped upon them, began to depart either from circulation or from the country entirely.

This movement began almost simultaneously with the passage of our first Coinage Act. It was very perceptible by 1810, and continued until 1834. In all that time there were less than $12,000,000 in gold coined, a large per cent. of which was lost entirely to the country by export. By 1814 the mintage of gold coins had fallen to $77,000. In 1815 it fell to $3,000. In 1816 the coinage of gold amounted to nothing. After 1819 gold disappeared as a circulating medium in the United States.

During this time (1792-1834) there were only 1,439,417 silver dollars coined, and none of these were coined after 1805. The coinage of the silver dollar was in all probability discouraged by the fact that gold was seen to be disappearing, and with the hope that a scarcity of silver dollars might enhance their value. Or, their coinage may have ceased by reason of the fact that the foreign silver coins of that denomination were ample for trade purposes, the bulk of our metallic currency being at that time of foreign make. The mint was not, however, idle. It was busy on fractional or subsidiary coins. By 1834 it had coined $50,000,000 of silver half dollars, and a proportion of lesser coins, which, with the large per cent. of foreign subsidiary coins, furnished an ample minor currency.

This currency condition was far from satisfactory. Bimetallism was not proving the theories of its authors. The question of a change began to be mooted. Some few alterations were made in the Coinage Act from time to time, but the original Act remained in all its essential features up till 1834.

By 1831 Hon. Campbell P. White, an authority on such matters, had reached the conclusion that a system which sought to regulate the standard of value in both gold and silver had inherent and incurable defects. He thought it

had been clearly ascertained by experience that it was impossible to maintain both metals in concurrent, simultaneous and promiscuous circulation.

In 1832 a Committee on Coinage reported that it could not find "that both metals have ever circulated simultaneously, concurrently and indiscriminately in any country where there were banks or money dealers; and they entertain the conviction that the nearest approach to an invariable standard is its establishment in one metal, which metal shall compose exclusively the currency of large payments."

The time had now come for a substantial change in the Coinage Act of 1792. What was chiefly apparent to all in 1834 was the fact that the ratio between gold and silver, established by that Act, was no longer, if it had ever been, correct. It undervalued gold. But there was no general departure, so far as the debates show, from the bi-metallic idea. Statesmen still preferred to struggle with the intricate problem of finding a ratio between gold and silver which would prove to be the ratio of commerce.

The Director of the Mint, in his report to the Congress for the year 1833, said that the "new coined gold frequently remains in the mint uncalled for, though ready for delivery, until the day arrives for a packet to sail for Europe.” And he concluded that the entire coinage of gold in the future, amounting to perhaps $2,000,000 annually, would be exported, unless there was a reform of the gold standard.

In his advocacy of a change in the ratio between gold and silver, Hon. Thomas H. Benton, in a speech delivered in the Senate in 1834, said: "The false valuation put upon gold has rendered the mint of the United States, so far as the gold coinage is concerned, a most ridiculous and absurd institution. It has coined, and that at large expense to the United States, 2,262,177 pieces of gold, valued at $11,852,820, and

where are the pieces now? Not one of them to be seen! All sold and exported! To enable the friends of gold to go to work at the right place to effect the recovery of that precious metal which their fathers once possessed-which the subjects of European kings now possess—which the citizens of the young Republics of the south all possess― which even the free negroes of San Domingo possess-but which the yeomanry of this America have been deprived of for more than twenty years, and will be deprived of forever unless they discover the cause of the evil, and apply the remedy to the root."

Under these auspices the Coinage Act of June 28, 1834, was passed. By this Act the pure gold in the eagle was reduced from 2471⁄2 grains to 232 grains, and a corresponding reduction was made in the half eagles and quarter eagles. The alloy was changed from 22% to 26, making the eagle contain 258 grains of standard gold instead of 270 grains. The Act of 1834 made no change in the silver coins. This change in the gold coinage made the ratio nearly 16 to 1, the exact ratio being 16.002 to 1. Why this ratio was established, or, for that matter, why any change at all was made, is difficult to understand, in view of the fact that at that date the commercial ratio between the two metals was 1 to 15.6, which, for convenience, Europe was calling 1 to 15%. The new currency ratio of 1 to 16 was as far removed from the commercial ratio of 1 to 151⁄2 as was the old currency ratio of 1 to 15. Only now the boot was on the other foot. By the Act of 1792 gold was undervalued and silver overvalued. By the Act of 1834 the matter was reversed, and gold was overvalued and silver undervalued. Or considering the bi-metallic views of the framers of these acts, the result of the Act of 1792 was to overvalue silver as to gold; and the effect of the Act of 1834 was to overvaluc gold

as to silver. In their practical workings these Acts quite threw their framers from their bi-metallic base, and inasmuch as in the Act of 1792 they attempted to exalt silver at the expense of gold, they became, according to the laws laid down in economics, silver monometallists. So, inasmuch as in the Act of 1834 they sought to exalt gold at the expense of silver, they became gold monometallists. There were not wanting those who sounded the note of warning that the Act of 1834 would but repeat that of 1792, in the respect that cheap gold would drive out the silver circulation just as cheap silver had driven out the gold circulation.

The Act of 1834 proved very unsatisfactory in its operation. Silver fluctuated, in a commercial sense, for years, but it did not fall in price to the ratio of 16 to 1 of gold. Consequently silver became worth more, in relation to gold, as bullion or plate than as coin, and it began to disappear, there being no inducement to coin it. After 1840, sight of a silver dollar was rare, and as a coin, it played no conspicuous part in our circulation, for very many years. Monometallists regard the effects of the Act of 1834 as another striking vindication of the truth of "Gresham's Law," that the cheaper money invariably drives the dearer from circulation.

ACT OF 1837.

Dissatisfaction with the Act of 1834 led to that of January 18, 1837, which was, in its form, a supplement to that of 1834, yet a complete revision of the laws of mintage, and was in fact known as "The Mint Act of 1837." This Act changed the standard of both gold and silver coins and the ratio between the metals. The standard for gold and silver coins was fixed at .900 fine, that is, 900 parts of pure metal to 100 parts of alloy. This increased the pure gold in the dollar from 23.20 to 23.22 grains, and fixed the ratio between