729 



MONEY. 



MONEY. 



730 



gold discoveries. But it is impossible distinctly to assign the rise or 

 the fall in prices to the influx of the precious metals, during a period 

 when the operation of our new commercial system has unquestionably 

 placed, not only agricultural produce, but articles of luxury, more within 

 the reach of the majority of consumers. There may have been a 

 continuous fall in the price of the necessaries of life under a large 

 additional supply of Australian gold ; and there may also have been 

 a continuous rise, such as that of meat, from the greater stimulus to 

 industry demanding more labourers, and therefore raising the rate 

 of wages. Many variations in the price of products manifestly 

 depend on their own scarcity or abundance, and not merely on the 

 increase of gold. It is satisfactory to know that since the time of the 

 Australian gold discoveries, the rise in the wages for labour has 

 been more marked than the average rise in the price of commodities, 

 enabling the labouring population not only to increase, but to consume 

 more, and of a better quality, than they could previously, thus 

 maintaining' and extending the demand for, and the capability of 

 employing, almost any fresh amount of the precious metals, whether 

 silver or gold. 



There is a difficulty in deciding the question whether, or to what 

 extent, the price of gold fell on the influx of gold at the end of the 16th 

 centuiy or on the Ca ifornian and Australian discoveries in the middle 

 of the 19th. By the Windsor tables, the price of wheat in England 

 averaged about 34*. per quarter, from 1606 to 1625, sometimes how- 

 ever reaching as high as 58. per quarter and sometimes sinking as low 

 aa 30.. It subsequently ranged, under Charles I., from 40s. to 44s. 

 per quarter ; a sum not widely different from the present prices. Wheat, 

 taken in decennial averages from 1660 to 1860, has averaged only 

 49s. per quarter. But the rate of labour has permanently increased 

 nearly cent, per cent., while at the same time many articles of 

 luxury and convenience have become cheaper through the improve- 

 ments in the means of production. These variations, like all of similar 

 character, evidently depended on the abundance or the scarcity of 

 harvests, unrelieved by an extended foreign commerce. Except in long 

 averages, the prices of articles of consumption afford no proof of any 

 alteration in the value of money. Potatoes or meal oat, rye, or wheat 

 meal in Ireland, during the time of the potato-rot, or boots at the 

 Australian diggings, may have fetched fabulous prices ; but it is at once 

 seen in these cases, that it is the exceptional circumstances, and not any 

 real alteration in value, that has produced the difference. The general 

 effect of an influx of the precious metals appears to have been to stimu- 

 late industiy ; this industry, represented largely by manual labour, had 

 to be paid t'or ; this, in its turn, enabled a much larger proportion of 

 the population to consume more food, and of a better quality than 

 previously, and rye-, oat-, and barley-bread, disappeared in England 

 from the consumption even of the paupers. 



Gold, after all, only represents labour. On the discovery of the riches 

 of Peru and Mexico, they were found already accumulated, and were 

 merely transferred to new possessors, without labour and with little 

 rink. In the more recent discoveries, the produce has been the 

 result of labour. This labour has been looked at as wonderfully pro- 

 fitable. In a few lucky instances it may have been so, but on the 

 average it is doubtful whether the labour has not been sufficient to 

 maintain the value of the gold ; for if the labourer received high pay, 

 he had to pay exorbitantly for the necessary means of his mainte- 

 nance ; and those who supplied him with those means, though they 

 charged high, had to convey them to him at an immense expense, 

 and under great difficulties, so that no great excess of profit was made 

 by any one beyond what is gained by the early possession of a good 

 market. 



M. Chevalier predicts that the labourer will be a great ultimate 

 sufferer from the continued influx of gold, and its consequent deprecia- 

 tion ; because, he says, the price of labour, though it follows the price 

 of articles of consumption, does so very slowly ; and therefore, as the 

 vulue of gold descends, and the comparative value of all other articles 

 rises, he will never be able to maintain his relative position. This is 

 in some degree to appear to overlook a truth which so experienced an 

 economist as M. Chevalier cannot really have overlooked, that there is 

 no absolute relation between the wages of labour and the price of 

 commodities. If the influx of gold gives a stimulus to home industry 

 if the gold-digger of Australia becomes a new and profitable 

 customer to the manufacturer of Britain the increase in the demand 

 fo^ labourers causes a rise in wages which may be equal to, or even 

 exceed, a rise in the price of commodities. But further we must 

 take into account the difference between the precious metals and 

 articles of consumption. If a favourable season renders corn and cattle 

 abundant, the increase of so much capital gives means for enlarged 

 expenditure, promotes industry, tends to raise the rate of wages by 

 the extended demand for labour, and so far resembles the effect pro- 

 duced by an increased supply of gold. But a falling off in the supply 

 of articles of consumption has no similarity with that of gold. A 

 dearth not only suddenly raises the price, in a proportion far exceeding 

 the actual deficiency, but by concentrating expenditure upon articles 

 of necessity, checks or almost entirely stops industry. It is then the 

 labourer suffers. What he noeds has attained an exorbitant value, 

 while what he has to offer in exchange, his labour, has lost its value 

 from the want of means of employing it profitably. But no such 

 effect could posaibly follow from the total suspension for years of any 



supply of gold. There might be less stimulus to industry, but the 

 gold which was sufficient before the supply stopped, would remain to 

 be still employed in exchange ; and this would continue unaltered for 

 years. It is this property which renders gold so peculiarly the best 

 standard of value. 



Contemplating the iiltirnate depreciation of gold, the writer of the 

 article in the ' Edinburgh Review' recommends the adoption of a 

 system of corn averages. He proves very satisfactorily that any con- 

 siderable depreciation in the value of gold, as money, would press with 

 great and undue severity on all persons with fixed incomes, and on the 

 labourer. The adoption of his suggestion, we believe, would rather 

 increase than mitigate the evil ; for depending on the seasons, there are 

 few things necessarily subject, from the variation in both quantity and 

 quality in successive years, to such large and sudden alterations as the 

 price of corn. In the year ending Michaelmas, 1853, after the supply 

 of gold had been much increased, the average price of wheat was 

 45s. Sd. per quarter ; in the following year it was 73s. Irf. ; and it con- 

 tinued as high, or somewhat higher, for the following two years; but 

 in 1858, with all the fresh importations of gold, the average was only 

 46s. per quarter, and in 1859 only 43s. 



As M. Chevalier and the Keviewer admit that in speaking of 

 relative values, it is difficult to decide which rises and which falls, 

 should we not select that article which suffers the least physical 

 change, and is least dependent on the seasons ? Gold is peculiarly 

 such an article. Abstractedly, gold may be less valuable than iron, 

 but from its beauty, and the difficulty and labour of procuring it, it 

 has been accepted by all mankind as the representative of value. 

 From its indestructibility, the amount remains unwasted, which is the 

 case with few other articles ; from its portability and intrinsic value 

 it can be secured with less danger, and used with greater convenience, 

 than most other materials ; its value is therefore more likely to be fixed 

 than anything else. 



Both gold and silver are alike subject to the general law of demand 

 and supply, and are therefore imperfect standards of value. If one be 

 the standard independently of the other, it is liable to change in itself, 

 and also in its relation to other commodities : if both be adopted as 

 standards at the same time, they will not only each vary in themselves, 

 and in relation to other commodities, but they will vary also in regard 

 to each other. And thus another element of uncertainty is introduced 

 into the coinage, which becomes still more imperfect as a standard. 



But it is not customary for the state to allow coins to fluctuate in 

 their legal value according to the circumstances which determine the 

 market prices of gold and silver. Coinage does not merely authenti- 

 cate the weight and fineness of a piece of metal, leaving it to find its 

 own level in exchange for other commodities ; but it attaches to it a 

 definite value, by fixing the standard price of the metal as well as the 

 weight and fineness of the coin. The object of this regulation is to 

 maintain a greater equality in the standard ; and as regards small 

 fluctuations in the value of the precious metals, it will generally have 



' that effect, at any rate for the country for which they were coined. 



j But if any considerable disproportion should arise between the standard 

 price of bullion and the market price, no such regulation can prevent 

 a practical change in the standard. If the market price should become 

 considerably higher than the standard price, the coins would be 

 melted down for the sake of the profit arising from the difference. If 



j it should become considerably lower for any length of time, the value 



i of the coins, though nominally unchanged, would in fact be depre- 

 ciated ; .for they would exchange for a less quantity of other com- 

 modities than they exchanged for before. And thus a currency com- 



j posed exclusively of metals cannot be made an accurate standard of 

 value by any expedients of law. 



We may here remark, however, that a seignorage, or charge by 

 government to cover the expenses of coinage, acts as a protection, 

 within certain limits, against the melting of coins, because unless their 



; value be depreciated by over-issue, the whole charge will be a Ided to 

 their value as coins, and will be lost when they are melted. For this 



I amongst other reasons a seignorage should always be charged by the 

 state. 



There is yet another imperfection in coins as standards of value. 

 Notwithstanding their natural durability, they are subject to con- 

 tinual wear, and must be gradually diminished in weight. They are 

 also exposed to the fraudulent experiments of men whose trade it is 

 to rob them of a portion of their weight by artificial wear. The value 

 of coins is therefore certain to be continually depreciated by loss of 

 weight, apart from any other causes of variation. 



From all these circumstances it is evident that gold and silver coins 

 have qualities inherent in them which render them necessarily imper- 

 fect standards of value, with whatever care and skill they may be 

 regulated. But, in addition to these natural causes of imperfection, 

 others have been artificially produce 1 by erroneous or dishonest politi- 

 cal expedients. There is no country perhaps in which the coinage has 

 never been debased by the government. Debasement of coins was 

 formerly a common artifice for increasing the revenue of states, and it 

 has been efl'ected in three different ways: 1. By diminishing the 

 quantity of metal, of the standard fineness, in coins of a given denomi- 

 nation ; 2. By raising their nominal value and ordaining that they 

 shall pass current at a higher rate ; and, 3. By debasing the metal 

 itself, that is, by leaving the coin of the same weight as before, but 



