280 



CURRENCY, BIMETALLIC. 



1870 an amount of $375,000,000 was outstand- 

 ing, of which about $270,000,000 have been 

 withdrawn, leaving about $105,000,.000 still 

 outstanding. Of the amount withdrawn, only 

 $141,000,000 has been sold as bullion in the 

 open market, to May, 1879, when sales were 

 suspended by the German Government. About 

 $106,000,000 of the old silver was, by 1880, re- 

 coined in small denominations, and this amount 

 will probably be increased, because of an in- 

 crease of population. 



The presence of the new gold has thus had 

 a great effect on the currencies of France and 

 Germany. Both gold and silver being used as 

 money, an increase in the one displaces the 

 other and less preferred metal. Silver began 

 to fall as early as 1872, inasmuch as India and 

 the East could not take as large an amount as 

 before. This tendency received another stimu- 

 lus from the action of the Latin Union. The 

 process already described, by which France 

 allowed gold to displace silver from 1852 to 

 1865, acted in the same way in" all the coun- 

 tries that used the franc system Belgium, 

 Switzerland, and Italy. And, as at that time 

 the smaller coins were of the same standard as 

 the five- franc pieces, whenever it became prof- 

 itable to displace the large silver coins, the 

 small ones also disappeared. This difficulty 

 was met (just as in the United States in 1853) 

 by reducing the standard of the small coins. 

 But the several countries did not adopt the 

 same standard. Switzerland chose '800 and 

 France "835, and the cheaper Swiss coins drove 

 out the dearer French coins, since both were 

 received equally in the two countries. Such 

 difficulties brought the suggestion from Bel- 

 gium for some uniform system of coinage, 

 which was followed by the establishment, 

 through a treaty signed Dec. 23, 1865, of the 

 Latin Monetary Union, " so far as regards the 

 weight, fineness, diameter, and circulation of 

 their gold and silver coinage." Desired at first 

 to secure a uniform subsidiary currency, the 

 convention extended to all their coins. Their 

 gold and silver coins, down to and including 

 the five francs, were all to be '900 fine (-& pure), 

 and the silver pieces below five francs to be 

 835 fine. The ratio of 1 : 15 was retained, 

 and any one could bring either gold or silver 

 bullion to be coined at the mints. As soon, 

 however, as silver began to fall in value after 

 1872, the market ratio diverged from the legal 

 ratio, and it was evident that, if " free coinage" 

 were allowed, silver alone would be presented 

 to the mints and gold withdrawn from circu- 

 lation. In November, 1873, the market ratio 

 was 1:16. To prevent the loss of their gold, 

 which had come in since 1850, the Latin Union, 

 Jan. 30, 1874, promptly suspended "free coin- 

 age " of silver, and, as silver continued to fall in 

 value until the extraordinary panic in the silver 

 market in 1876, they were led in 1878 to cease all 

 coinage of silver whatever. So that to-day the 

 mints of the Latin Union are closed to silver. 



In July, 1876, the fall of silver, which 



began in 1872, reached its lowest recorded 

 price of 46d., indicating a ratio of gold to sil- 

 ver of 1 : 20-17 (found by dividing 943 by the 

 price in pence). As compared with 60Jd., the 

 average price in 1 872, this is a fall of 22 per 

 cent. It may be asked, however, whether this 

 was a fall in silver or a rise in gold, since silver 

 is quoted in gold prices. Of course, if the 

 purchasing power of gold remained unchanged 

 during this time, this fall in the gold price of 

 silver would indicate a fall not merely in re- 

 lation to gold, but to all other commodities. 

 The movement of prices at this time may be 

 seen by the following portion of the figures 

 given annually by the London "Economist": 



It will be seen from this table of index num- 

 bers that prices were as high in 1876 and 1877 

 as they were in 1875, and even higher than 

 they were from 1868 to 1871. It is 'true, there- 

 fore, that, so far as these prices show anything, 

 the fall in the value of silver was a fall rela- 

 tively to all commodities, and not gold alone. 

 The chart on page 281 will show the move- 

 ment of the value of silver from 1870 to 1884. 

 The line shows the movement of the average 

 prices for each year, without giving the ups 

 and downs in each year. During the month of 

 September, 1885, the price fell to 47d., which 

 is a price not produced by a panic, but is the 

 result of more or less permanent causes. So 

 that the ratio of gold to silver in the market is 

 now more than 1 : 20. The following table 

 will give the average prices for the year, and 

 the corresponding ratios, from Pixley and 

 Abell's tables since 1833 : 



