The History of Currency, 1252 to 1896 Part 20

The later legislative action with regard to silver belongs to the final construction of the English currency system. In the main, the recoinage of gold was accomplished in the year 1774, though it lingered over the three succeeding years as appears by the items in the Appropriation Acts.

The accounts of grants for recoinage were as follows:--

1774. The first grant 250,000 0 0 1775. To the bank for receiving the deficient gold coin 46,846 0 0 For extraordinary charges of the Mint 22,824 19 0 1776. Further grant 92,421 14 1-1/4 1778. " " 105,227 8 3 ------------------ 517,320 2 2-1/4 ==================

The scope of this series of Acts of 1774 will be seen at a glance; as well as the tendency in policy, namely, in favour of gold, which it indicated. The gold coinage was renewed, and as a safeguard against its future depreciation the existing depreciated coin was cut off from any sapping action upon it by the above restriction as to tender by weight.

For the renewal of the silver coinage itself no actual measures were taken save the prohibition of the import of light coins.

For more than twenty years the defective state of the silver coin continued quite unheeded; evidently as no longer causing international embarra.s.sment, now that its function and differentiating action upon the companion metal had been partially tied down and limited.

In 1787 the depreciation of the silver coinage was ascertained experimentally, when it was found that half-crowns were defective by over 9 per cent., shillings by over 24 per cent., and sixpences by more than 38 per cent. of their proper weight. To this depreciation was added an exterior cause of drain by the action of France, who in 1792 increased the scarcity of silver coins and bullion by the issue of her a.s.signats. In that year not less than 2,909,000 oz. of silver were purchased with a.s.signats and sent into France. Five years later an attempt was made to supply the deficiency of the silver coins by the issue of Spanish _dollars_, countermarked with the hall mark of the King's head. This was after the Bank of England had, in accordance with the minute of the Privy Council of 26th February 1797, suspended cash payments.

[Sidenote: ENGLAND: ACT OF 1798]

On the 7th of February of the following year, 1798, the subsisting Committee of Council for Coins was dissolved, and a new committee appointed to consider the state of the coins and Mint. During its deliberations, and until it established the new rule, the further coining of silver was suspended by the Act already spoken of, which (21st June 1798) revived the old law against importation of light silver. This suspension of silver coinage was simply a temporary precaution. "Whereas," says the Act, "His Majesty has appointed a committee of his Privy Council to take into consideration the state of the coins of this kingdom, and the present establishment and const.i.tution of His Majesty's Mint, and inconvenience may arise from any coinage of silver until such regulations may be framed as shall appear necessary; and whereas from the present low price of silver bullion, owing to temporary circ.u.mstances, a small quant.i.ty of silver bullion has been brought to the Mint to be coined, and there is reason to suppose that a still further quant.i.ty may be brought, and it is therefore necessary to suspend the coining of silver for the present, be it therefore enacted that no silver bullion shall be coined at the Mint, nor shall any silver coin that may have been coined there be delivered."

There can be little doubt that this enactment was due to Lord Liverpool, and if so that it was intended as an arrest, with a particular intent or bearing; for Liverpool had formed his conception of a monetary theory as early as 1773. None the less it is quite inadmissible to state, as has been done, that this restriction, so evidently and expressly only a temporary or interim measure of self-defence, was equivalent to a placing upon the statute-book of Lord Liverpool's gold monometallical theory. There was as yet no restriction on the legal tender of silver.

It was still legal tender to any amount,--it was indeed the standard coin of the realm,--only, in order to avoid the effects of depreciation, and to prevent further depreciation, it was now the law of the land that payments of silver of sums over 25 should be made by weight, and the further coinage of silver was temporarily stopped.

This was not a gold monometallic system, and the Act which established that system was pa.s.sed eight years after the death of Lord Liverpool, and six years after the Bullion Report of 1810 had been printed.

[Sidenote: ENGLAND: THE BANK RESTRICTION]

Further than incidentally it is inconsistent with the design of this book to refer to the period of suspension of cash payments and the Bullion Report. These latter are banking phenomena, and will find their place in a treatise of currency in the fuller acceptance of the term, rather than in a treatise definitely restricted to the subject of the metallic currencies. The events of 1797 which led to the suspension,--the remittances to the Continent for war purposes, a failure of credit, a run on the country banks, and then upon the London banks,--had been experienced in 1793 as acutely as in 1797; and, according to the express statement of the report itself, even in the years 1796 and 1797, when the country bankers were making great demands in order to increase their deposits, the market price of gold never rose above the Mint price. These events were therefore one phase of the internal experiences of the country, and have no relation to an international outflow of gold, caused by the heightened ratio which definitely set in in 1794. On the mere ground of first principles, therefore, it is inadmissible to make argumentative use of this event, known as the Bank Restriction, for judgment and ill.u.s.tration in the wider question of bimetallism. Further, the argumentative use that has been made of it--viz. that if from 1773 to 1797 England had possessed a true rather than a halting bimetallic regime, she would have been supplied by its means with an amount of silver that would have increased the metallic reserve and strength of the country, and enabled it to avoid suspension--is inadmissible: and the argument itself is untenable.

Such bimetallic action supplying silver could only have begun to operate in 1794, three years before the suspension. It could only have operated by subst.i.tuting one metal for the other, not by adding silver to gold, but by taking away higher valued gold, and furnishing lower valued silver, i.e. by actually decreasing the metallic strength and reserve of the kingdom. And, lastly, there is the peculiar fact still requiring explaining, that the years of the bank restriction, until, that is, the new Mint law of 1816, saw the heaviest export of silver probably that England has ever experienced. During the ten years, 1801-10, nearly 10 millions sterling of silver was exported from England (over 38,176,016 oz.), while the gold exports amounted only to 2,088,483, so that, of the total export, silver formed 82 per cent. (net amounts used in both cases). It is still well known to what straits this export of silver put the country. In almost every town where there was any employment of labour the tradesmen were obliged to issue token money of their own--shilling tokens, sixpenny tokens, half-crown and five-shilling promissory-notes. Every conceivable form of hand-to-mouth unauthorised currency was resorted to, in order to relieve the needs of the situation caused by the want of silver coins. And stories are still remembered of the straits to which the working cla.s.ses were driven in order to make their purchases at the week end with one pound notes, for which they could get no change. The explanation of such a phenomenon can only be that the one pound notes having driven gold out of circulation, by a law which is merely another form of the bimetallic law, left only silver available for remittance to the Continent for loans and war purpose.

But, whatever the explanation, the fact cuts the ground from under the argument that bimetallism would have saved England from the bank restriction. If silver had not been legal tender to any amount (up to 25 by tale, and beyond that by weight), or again if it had been protected by an agio in 1808 as it was in 1816, it could not have left the country. The straits of the poorer cla.s.ses in those years of hardship were _due_ to the existing bimetallic system, and to it must, therefore, be attributed the aggravation rather than alleviation of the bank restriction.

If anything is required to confirm such view it can be found in the very terms of that statute of 1816 (56 Geo. III. c. 68), which established the gold standard in England. They reveal the fact that the Act was not so much a philosophical or theoretical declaration of monometallism, such as might have been expected if Lord Liverpool had still lived to dictate it, but a measure for the protection of and relating almost entirely to silver.

[Sidenote: ENGLAND: THE ACT OF 1816]

"Whereas the silver coins of the realm have, by long use and other circ.u.mstances, become greatly diminished in number and deteriorated in value, so as not to be sufficient for the payments required in dealings under the value of the current gold coins, by reason whereof a great quant.i.ty of light and counterfeit silver coin and foreign coin has been introduced into circulation within this realm, and the evils resulting therefrom can only be remedied by a new coinage of silver money...."

The Act therefore prescribes the coining of silver, 11 oz. 2 dwts. fine, at a tale after the rate of 66s. per Troy pound, whether the same be coined in crowns, half-crowns, shillings, or sixpences, or pieces of a lower denomination, but to be issued to the importer of the silver, or to the public, after a rate of 62s. per pound Troy.

"And whereas at various times heretofore the coins of this realm of gold and silver have been usually a legal tender for payments to any amount, and great inconvenience has arisen from both these precious metals being concurrently the standard measure of value and equivalent of property, it is expedient that the gold coin made according to the indentures of the Mint should henceforth be the sole standard measure of value and legal tender for payment, without any limitation of amount, and that the silver coin should be a legal tender to a limited amount only, for the facility of exchange and commerce." The Act therefore prescribes the limit of 40s. for the tender of silver.

This Act was repealed, but in substance re-enacted by the Coinage Act of 1870, and is still in principle and fact the law of the land and the basis of our monometallic system.

From the date of its enactment England has been withdrawn from that action of bimetallic law which had been her bane for centuries. The flow of gold in or out became automatic, representing the natural flow of world-balances, and therefore proving the greatest trade help and indicator; and such commercial crises as have come upon her have arisen from the peculiarly sensitive organisation of credit which distinguishes the modern system, and are to be cla.s.sed with banking rather than metallic currency phenomena.

The total coinage in England from 1816 to 1875 inclusive was 234,139,886 gold and 24,663,309 silver.

[Sidenote: ENGLAND: 1816-93]

+-------+-------------+-------------------+-------------------+ | | Coinage of | Imports of Gold | Exports of Gold | | Year. | Gold. | Bullion and | Bullion and | | | | Specie. | Specie. | +-------+-------------+-------------------+-------------------+ | 1855 | 9,008,663 | ? | 11,847,000 | | 1856 | 6,002,114 | ? | 12,038,000 | | 1857 | 485,980 | ? | 15,062,000 | | 1858 | 1,231,023 | 22,793,000 | 12,567,000 | | 1859 | 2,649,509 | 22,298,000 | 18,081,000 | | 1860 | 3,121,709 | 12,585,000 | 15,642,000 | | 1861 | 8,190,170 | 12,164,000 | 11,238,000 | | 1862 | 7,836,413 | 19,904,000 | 16,012,000 | | 1863 | 6,607,456 | 19,143,000 | 15,303,000 | | 1864 | 9,535,597 | 16,901,000 | 13,280,000 | | 1865 | 2,367,614 | 14,486,000 | 8,493,000 | | 1866 | 5,076,676 | 23,510,000 | 12,742,000 | | 1867 | 496,397 | 15,800,000 | 7,889,000 | | 1868 | 1,653,384 | 17,136,000 | 12,708,000 | | 1869 | 7,372,204 | 13,771,000 | 8,474,000 | | 1870 | 2,313,384 | 18,807,000 | 10,014,000 | | 1871 | 9,919,656 | 21,619,000 | 20,698,000 | | 1872 | 15,261,442 | 18,469,000 | 19,749,000 | | 1873 | 3,384,568 | 20,611,000 | 19,071,000 | | 1874 | 1,461,565 | 18,081,000 | 10,642,000 | | 1875 | 243,264 | 23,141,000 | 18,648,000 | | 1876 | 4,696,648 | 23,476,000 | 16,516,000 | | 1877 | 981,468 | 15,442,000 | 20,374,000 | | 1878 | 2,265,069 | 20,871,000 | 14,969,000 | | 1879 | 35,050 | 13,369,000 | 17,579,000 | | 1880 | 4,150,052 | 9,455,000 | 11,829,000 | | 1881 | ... | 9,963,000 | 15,499,000 | | 1882 | ... | 14,377,000 | 12,024,000 | | 1883 | 1,403,713 | 7,756,000 | 7,091,000 | | 1884 | 2,324,015 | 10,744,000 | 12,013,000 | | 1885 | 2,973,453 | 13,377,000 | 11,931,000 | | 1886 | ... | 13,392,000 | 13,784,000 | | 1887 | 1,908,686 | 9,955,000 | 9,324,000 | | 1888 | 2,277,424 | 15,000,000 | 14,250,000 | | 1889 | 7,257,455 | 17,570,000 | 14,000,000 | | 1890 | 7,662,898 | 23,900,000 | 14,250,000 | | 1891 | 6,869,119 | 29,500,000 | 25,000,000 | | 1892 | 13,944,963 | 21,250,000 | 15,450,000 | | 1893 | 9,318,021 | 23,630,000 | 18,800,000 | +-------+-------------+-------------------+-------------------+

+-------+-------------+-------------------+-------------------+ | | Coinage of | Imports of Silver | Exports of Silver | | Year. | Silver. | Bullion and | Bullion and | | | | Specie. | Specie. | +-------+-------------+-------------------+-------------------+ | 1855 | 195,510 | ? | 6,981,000 | | 1856 | 462,528 | ? | 12,813,000 | | 1857 | 373,230 | ? | 18,505,000 | | 1858 | 445,896 | 6,700,000 | 7,062,000 | | 1859 | 647,064 | 14,772,000 | 17,608,000 | | 1860 | 218,403 | 10,394,000 | 9,893,000 | | 1861 | 209,484 | 6,583,000 | 9,573,000 | | 1862 | 148,518 | 11,753,000 | 13,314,000 | | 1863 | 161,172 | 10,888,000 | 11,241,000 | | 1864 | 535,194 | 10,827,000 | 9,853,000 | | 1865 | 501,732 | 6,977,000 | 6,599,000 | | 1866 | 493,416 | 10,777,000 | 8,897,000 | | 1867 | 193,842 | 8,021,000 | 6,435,000 | | 1868 | 301,356 | 7,716,000 | 7,512,000 | | 1869 | 76,428 | 6,730,000 | 7,904,000 | | 1870 | 336,798 | 10,649,000 | 8,906,000 | | 1871 | 701,514 | 16,522,000 | 13,062,000 | | 1872 | 1,243,836 | 11,139,000 | 10,587,000 | | 1873 | 674 | 12,988,000 | 9,828,000 | | 1874 | 890,604 | 12,298,000 | 12,212,000 | | 1875 | 594,000 | 10,124,000 | 8,980,000 | | 1876 | 222,354 | 13,578,000 | 12,948,000 | | 1877 | 420,948 | 21,711,000 | 19,437,000 | | 1878 | 613,998 | 11,552,000 | 11,718,000 | | 1879 | 549,054 | 10,787,000 | 11,006,000 | | 1880 | 761,508 | 6,799,000 | 7,061,000 | | 1881 | 997,128 | 6,901,000 | 7,004,000 | | 1882 | 209,880 | 9,243,000 | 8,965,000 | | 1883 | 1,274,328 | 9,468,000 | 9,323,000 | | 1884 | 658,548 | 9,633,000 | 9,986,000 | | 1885 | 720,918 | 9,434,000 | 9,852,000 | | 1886 | 417,384 | 7,472,000 | 7,224,000 | | 1887 | 861,498 | 7,819,000 | 7,807,000 | | 1888 | 755,113 | 6,000,000 | 7,500,000 | | 1889 | 2,215,742 | 9,000,000 | 10,500,000 | | 1890 | 1,708,415 | 10,300,000 | 10,500,000 | | 1891 | 1,049,113 | 10,500,000 | 11,800,000 | | 1892 | 773,353 | 12,375,000 | 14,075,000 | | 1893 | 1,089,707 | 11,320,000 | 13,532,000 | +-------+-------------+-------------------+-------------------+

United States

Under British dominion the American colonies retained the silver standard, as did their mother country, with such variation of actual coins and of their tariff as the situation of the country and the immense variety of metallic values prevailing in the different colonies gave rise to. The coin most commonly current was the Spanish _piece of eight_, but the system of weights and measures was the English system, and reckoning was by pounds, shillings, and pence. The method by which such a composite system was regulated consisted in those coinage tariffs with which early European monetary history is so well acquainted.

According to a tariff issued in 1750, the ounce of silver was declared worth 6s. 8d. the Spanish milled _piece of eight_ was to be equal to 6s.; and "whereas there is great reason to apprehend that many and great inconveniences may arise in case any coined silver or gold or English halfpence and farthings should pa.s.s at any higher rate than in a just proportion to Spanish pieces of eight, or coined silver at the ratio aforesaid," a tariff list was appended according to which the guinea was 28s., the _English crown_ 6s. 8d., and so on for other European coins.

[Sidenote: UNITED STATES: MORRIS'S SCHEME, 1782]

In accordance with this system the earliest financial steps of the Continental Congress in 1775--its issues of bills of credit--were based upon, and the bills were declared payable in, the Spanish _dollar_ or _piece of eight_, to which, on the report of a special commission, appointed on 19th April 1776, the various gold and silver coins circulating by different standards in different colonies were rated by a tariff. According to this tariff the guinea weighing 5 dwts. 8 grs. was to be equivalent to 4-2/3 dollars, and the English crown equal to 1-1/9 dollar.

Gold bullion was rated 17 dollars per oz. Troy weight; sterling silver at 1-1/9 dollar per oz.

a.s.suming the coins to be of full weight, the ratio here established is nearly the English ratio of 15.21. The ratio for bullion is slightly different, but hardly materially.

Six years later, at the request of a committee of Congress, the superintendent of finance, Robert Morris, submitted a scheme for a national coinage (15th January 1782). This scheme is remarkable for its clear-sightedness and grasp, as well as the testimony it bore to the European monetary system of the time. After deciding on silver as a necessary unit, the report thus proceeds:--

"The various coins which have circulated in America have undergone different changes in their value, so that there is hardly any which can be considered as a general standard unless it be Spanish dollars. These pa.s.s in Georgia at 5s., in North Carolina and New York at 8s., in Virginia and the four Eastern States at 6s., in all the other States except South Carolina at 7s. 6d., and in South Carolina at 32s. 6d."

As a common denominator, calculated from part of these figures, Morris proposed a monetary unit of 1/4-grain in fine silver, the multiples to be by the decimal system, the dollar containing 1440 units, and the Mint price of fine silver being 22,237 units per pound.

On the following 21st February 1782 Congress approved of the establishment of a Mint, and directed Morris to prepare and report a plan for conducting it.

In a concurrent paper of notes on the establishment of a money unit, and of a coinage for the United States, Jefferson proposed, in opposition to Morris's scheme, a decimal system resting on the dollar, and with a ratio of 15:1.

[Sidenote: UNITED STATES: REPORT OF 1785]

"Just principles," he says, after stating the legal ratio in the chief European countries, "will lead us to disregard legal proportions altogether, to inquire into the market price of gold in the several countries with which we shall be princ.i.p.ally connected in commerce, and to take an average from them. Perhaps we might well safely lean to a proportion somewhat above par for gold, considering our neighbourhood and commerce with the sources of the coins, and the tendency which the high price of gold in Spain has to draw thither all that of their mines, leaving silver princ.i.p.ally for our and other markets."

The settlement of the matter was, however, delayed, although in the course of the year Morris declared that "all our dollars are rapidly going to the enemy in exchange for light gold, which must eventually cause a considerable loss and a scarcity of silver which will be seriously felt."

In this undetermined state the matter rested till 13th May 1785, when the grand committee on the money unit made its report.

The proposed ratio was justified thus: "In France 1 grain of pure gold is counted worth 15 grs. of silver. In Spain 16 grs. of silver are exchanged for 1 of gold, and in England 15-1/5. In both England and Spain gold is the prevailing money, because silver is undervalued. In France silver prevails. Sundry advantages would arise to us from a system by which silver might become the prevailing money. This would operate as a bounty to draw it from our neighbours, by whom it is not sufficiently esteemed. Silver is not exported so easily as gold, and it is a more useful metal. Certainly our exchange should not be more than 15 grs. of silver for 1 of gold." The charge for coinage was to be 2-1/2 per cent. for gold, and slightly over 3 per cent. for silver. The unit was to be a dollar of 362 grs. of pure silver, with a multiple gold piece (5 dollars) and decimal aliquot pieces.

On the 6th July following, 1785, the Congress by vote adopted the silver dollar as the basis of the currency on a decimal system, but the resolution was not followed by the establishment of a Mint, although the States were experiencing great loss by the circulation of base copper coins made in Birmingham.

On the 8th April 1786, a report was made in triplicate by the Board of Treasury to the President of Congress, the first of the three forms of the report advocating a silver dollar of 375.64 grs. fine and a ratio of 15.256. These proposals were adopted by resolution on the 8th August following, and on the 16th October of the same year, 1786, the ordinance for the establishment of the Mint of the United States of America, and for regulating the value and alloy of coin, finally pa.s.sed Congress.

In accordance with the resolutions of 8th August, the mint price of the pound Troy of gold (11 parts fine) was fixed at 209 dols. 7 dimes, 7 cents, and of silver at 13 dols. 7 dimes, 7 cents, and 7 mills.

The Mint charge here comprised is about 2 per cent. on both silver and gold, "bringing the ratio of bullion at the Mint to 15.22, a little below the ratio in the coin."

[Sidenote: UNITED STATES: HAMILTON'S REPORT, 1791]

For several years all these regulations of Congress were not put in force, and it was not until 5th May 1791 that the matter was again brought before the Senate by the report of the Secretary of the Treasury, Alexander Hamilton.

Hamilton's scheme, as contained in his most remarkable paper, was for a silver unit or dollar of 371-1/4 grs. of pure silver and a ratio of 15, and instead of the allowance of 2 per cent. for waste and coinage the principle was adopted of free coinage--of delivering at the Mint the same weight of pure metal coined as should be brought to it in bullion or foreign coin. Hamilton justifies his ratio thus: "The difference established by custom in the United States between coined gold and coined silver has been stated to be nearly 1:15.6. This, if truly the case, would imply that gold was extremely overvalued in the United States, for the _highest actual_ proportion in any part of Europe very little, if at all, exceeds 1:15, and the average proportion throughout Europe is probably not more than 1:14.8." He also deduces his ratio of 15 as a mean between the two lately preceding issues of dollars. "Taking the rate of the late dollar of 374 grs., the proportion would be as 1:15.11. Taking the rate of the newest dollar of 374 grs., the proportion would be as 1:14.87. The mean of the two would give the proportion of 1:15 very nearly, less than the legal proportion in the coins of Great Britain, which is as 1:15.2, but somewhat more than the actual or market proportion, which is not quite 1:15." As to the express selection of one or other metal for the unit, Hamilton makes a departure which marks clearly that he was creating and not continuing a system, and that if bimetallism is a feature of modern conception that conception is due to American rather than French statesmanship:[18]--"Contrary to the ideas which have heretofore prevailed in the suggestions concerning a coinage for the United States, though not without much hesitation arising from a deference for those ideas, the secretary is, upon the whole, strongly inclined to the opinion that a preference ought to be given to neither of the metals for the monetary unit ... because this cannot be done effectually without destroying the office and character of one of them as money and reducing it to the situation of mere merchandise, which, accordingly, at different times, has been proposed from different and very reputable quarters, but which would probably be a greater evil than occasional variations in the unit, from the fluctuations in the relative value of the metals, especially if care be taken to regulate the proportion between them, with an eye to their average commercial value. To annul the use of either of the metals as money is to abridge the quant.i.ty of circulating medium."

[Sidenote: UNITED STATES: SCHEME OF 1792]