270 



SCIENCE. 



[Vol. VII., No. 163 



land and at the great banks of the continent. As 

 every banker knows, whenever there is an evident 

 disposition to draw gold from the bank reserves 

 of Europe, the withdrawals of specie lower the 

 proportion of the reserves to the immediate lia- 

 bilities (which are, except at the Bank of France, 

 chiefly deposits). This alteration requires such an 

 increase in the rate of discount as will ward off 

 some of the demands for new loans, and allow the 

 stream of maturing loans to fill up the reserves. 

 The rise in the bank-rate is an evidence of a fear 

 that the gold reserve is too low, or may fall too 

 low. The London financial market is the chief 

 one of the world, and the Bank of England rate is 

 its sensitive barometer. What were the facts? In 

 the four years from 1874 to 1877 (inclusive), during 

 which year silver fell so exceptionally, the rate of 

 discount at the Bank of England averaged 3 1-8 per 

 cent. There was no evidence whatever of a diffi- 

 culty on the part of any great bank in keeping a 

 plentiful supply of gold in its cash reserves ; and 

 yet during this time Germany was supplying her- 

 self with $400,000,000 of gold to carry out her cur- 

 rency reform, and France was accumulating about 

 $180,000,000, in addition to her previous stock, in 

 order to resume specie payments (Dec. 31, 1877). 



It may be said in reply that the rate of discount 

 does not depend on the supply of money, but on 

 the supply of loanable funds. This, in the long- 

 run, is true ; but if, during this period, there had 

 been any scarcity of gold, any deficiency of the 

 quantity in comparison witli the demand for it, it 

 is inconceivable that during the process of ' grasp- 

 ing ' for it there should have been no serious 

 change in the rates of discount. 



5. Not only does there appear to be no evidence 

 of a scarcity of gold since 1873, as shown by the 

 absence of any difficulty experienced by the banks 

 in collecting and keeping sufficient reserves (while 

 in the United States never in the history of the 

 national banks have they held larger gold reserves 

 t han of late), but the facts of the production of gold 

 since 1850 give every reason to suppose that there 

 is an abundance now in existence. The facts of 

 production may be briefly summed up as follows : — 



[000,000 OMITTED.] 



Period. 



Gold. 



Per cent. 



Silver. 



Per cent. 



1493-1850 



$3,314 



43 



$6,742 



74.4 



1851-1883 



4,388 



5G.1 



2,318 



25.6 



Total 



$7,547 



100. 



$9,000 



100. 



It will appear from this that in the 88 years 

 since I860, and to L884, not only was the produc- 



tion of gold equal to all that produced in the 358 

 years from the discovery of America to 1850, but 

 it was even greater by almost a third. And it is 

 more than probable that the existing stock 1 in 1848 

 was not only doubled, but one-half more than 

 doubled. To 1840 the annual production of gold 

 was about $14,000,000, roughly speaking ; in 1841- 

 1850, $38,000,000 ; while in 1881-1884 it averaged 

 about $100,000,000. In the exceptional years be- 

 tween 1850 and 1860 the production was greater 

 than it is now ; but it is still two and a half times 

 what it was in 1848. 



In short, there is not the least doubt in my mind 

 that this very abundance of gold was the cause of 

 the fall in the value of silver. Both metals being 

 in use for money, when the better became more 

 plentiful, it drove the poorer out of use, — just as 

 steel rails are driv ing out iron rails on our railways, 

 — because gold is a better and more reliable tool of 

 exchange than silver. On the ground, therefore, 

 of a scarcity of gold, there is no reason whatever, 

 in my opinion, why the coinage of silver should 

 be continued. The theory that there is a vacuum 

 created by the lack of gold, and which must be 

 filled by the coinage of silver in order to prevent 

 prices from falling, is certainly not tenable. 



6. The fall of prices can be explained by causes 

 wholly independent of the quantity of gold in 

 existence, and connected with the contraction of 

 credit, the fall of profits due to increased compe- 

 tition in certain branches of industry, large pro- 

 duction, and the introduction of new processes and 

 improved machinery; and, unless it were absolutely 

 certain that the silver men were correct, it would be 

 a bold and unwarranted act of theirs, on the basis of 

 a mere fanciful supposition in regard to the dear- 

 ness of gold, to experiment on the finances of a 

 great country when a blunder might involve disas- 

 ter to our whole business prosperity. To lead us 

 to a single silver standard, on the mere theory that 

 gold has ' gone up,' is a piece of statesmanship 

 which should be treated with unequivocal con- 

 demnation. Even before we come to the single 

 silver standard, the uncertainty in regard to what 

 the future may bring forth, caused by the contin- 

 ued coinage of silver dollars, is injurious to all 

 legitimate business calculations. Uncertainty and 

 distrust destroy all initiative. The silver-money 

 doctors are dealing with a very complicated organ- 

 ism, and, if their diagnosis is incorrect, persistence 

 in their rude treatment will be of serious damage 

 to the financial body. 



J. Laurence Lauohun. 



1 Newmarch estimates the existing stock in 1848 at $2,716,- 

 000,000 of gold, and $3,880,000,000 of silver. Such estimates, 

 however, are only of the nature of guesses : there is noth- 

 ing accurate about them. 



