Correspondence., July, 1879

Correspondence.

[From the Bullionist, July 19, 1879.]

bi-metallism.

To the Editor:

Sir: As supplementary to my letter of last week, may I ask space to present a few further facts and remarks on the silver and gold question, particularly with reference to India?

The subjoined figures, in sterling money, are based upon an assumed valuation of the silver rupee, ten to the sovereign. They commence with the time (1835) when India discarded gold as a legal tender, and retained silver as the sole standard of value. To this retrograde movement may be traced the present condition of affairs, of which nothing would have been heard if gold had then been proclaimed the sole standard and silver had been reduced to token currency, or even if the policy just before adopted by the United States had been imitated. Both countries, it will be seen, were in the same monetary difficulty; one acted wisely, the other unwisely. When India, in 1766, made gold a standard of value, it was at the rate of 1 to 16 for silver. The United States in 1792 fixed it at 1 to 15. India, in 1793, made it to 14.861, and in 1818 exactly 1 to 15. Gold being thus undervalued in the East and in the West would not circulate freely as currency. The United States in 1834 “took the bull by the horns,” and fixed the ratio at 1 to 16, or, to be precise, 1 to 15.980. This caused large importations of gold from Europe, and a large outflow of silver thereto. India, instead of following suit, the next year, in 1835, demonetized gold, leaving silver in possession of the field.

The total imports of silver, mostly in bullion, into India, were as follows:

A large portion of the silver coined has been converted into ornaments; that is to say, the coins themselves are linked together for necklaces, bracelets, &c. The surplus imports of silver within the period may be thus classified, in order to show the values before and after the discovery of gold in California and Australia:

The world’s production of silver since 1848 was about £360,000,000; so India absorbed nearly one-half.

The total imports of gold, mostly in sovereigns, into India, were as follows:

A large portion of the surplus imports of gold into India, as is the case with silver, is in use as ornaments; the remainder is hoarded, and used to settle transactions entered into upon a gold basis. The people of India are fond of personal decoration; the upper classes adorn themselves with jewels and gold, and the peasantry with silver. Although the peasantry live in wretched houses, the value of the ornaments they possess oftentimes exceeds that of their furniture and utensils.

The surplus imports of sold within the period may be thus classified:

The world’s production of gold since the year 1848 was about £600,000,000; so India absorbed over one-sixth.

The European and United States mints are open to the public for the coinage of gold. Except in the cases of the United States trade dollar, which is not a legal-tender, nor even a token—coined only for export—and of the mints of Mexico and South America, the coinages of silver on both sides of the Atlantic are on account of the respective governments. The Indian mints are open to the coinage of both metals. The fixed charge for coining is 2 per cent., supplemented by other charges, which run the cost up to about 2½ per cent. The silver imports, being, mostly in bullion, nearly all pass through the mints; while the gold imports, being mostly in sovereigns, render it unneccessary to incur that expense in respect to them.

It is right that gold, being now the international standard of value, should be coined on account of all comers, and that the wastage in connection with the handling of it, slight as it is, should be borne by those who use it. On the other hand, it is right that the respective governments should fabricate the money of the masses—the silver token currency—make the profit on the same, and redeem the coins when worn. This example, set by England in 1816, is a gain to the governments, for the profit on silver is greater than the losses by wear and expense of recoinage, and a saving to the community, who suffer no loss by the use of token currency, which answers their purposes as well as if it were the standard itself. Virtually, it is convertible into the standard, being equivalent to a government “promise to pay” in gold.

If India were to adopt gold as her sole standard of value, the transition from silver would be no more disturbing (if as much) than was the reversion from greenbacks to gold in the United States, as the discount on silver is not so great as that upon greenbacks was. Actual values would not be affected, There would, of course, be an apparent shrinkage for awhile, but the purchasing power on the gold basis would be precisely the same as on the silver basis, no more, no less. If a 10-rupee gold piece were coined of the exact value of the sovereign, it would circulate side by side with it as the Australian sovereign does. All accounts between the United Kingdom, Australia, and India would then be simplified. The silver rupees would become tokens of the value of the English florins, or near enough for all practical purposes, as for facility of calculation, it is only necessary that the marks or measures or weights, so to speak, of the standard of value, should divide and multiply with exactitude. The rupee is 180 grains standard; the florin 174.18, both with l-12th alloy; and as the Indian mints do not redeem the worn coins as the mints of Europe and the United States do, the rupees in circulation may be no heavier than the florins, or not even so heavy. Let the Indian Government take the profit on all the future coinage of silver and redeem the coins when worn, and thus save the loss to the peasantry, who can badly afford it. That loss tends to keep up the system of barter in India, which retards the absorption of silver, and thereby prevents a rise in its intrinsic value as compared with gold. The silverists, in their blindness, do not see this; neither do they see that if India were to adopt the gold standard the large amount of gold hoarded there would reappear, and would aid in restoring the values of all other commodities, silver included. Among the gold hoardings of India there must be at least 15,000,000 unpunched sovereigns which would answer for a like number of 10-rupee gold pieces without recoinage, or 150,000,000 gold rupees. Punched sovereigns to the number of 35,000,000 more would probably find their way to the mints for recoinage into 350,000,000 gold rupees, making a total of 500,000,000. These, with the paper currency, to which reference will presently be made, will be sufficient to conduct all the large transactions. The payments to actual producers in India are so small that silver will continue to be largely used, even when the currency is placed upon a gold basis. The present silver circulation cannot be over 1,400,000,000 rupees. They will all be needed, and more too, as when the worn silver coins become redeem able for full weighted coins or receivable for taxes they will gradually displace “cowries” and barter. As things are, one-fourth the people of India never see a coin. The adoption of gold as a standard of value would cause no drain from other parts of the world, and the surrender of the gold hoardings would create a large amount of potential capital. It is gold, not in use as hand-to-hand currency, but which might at any moment become so, that forms that capital. Gold is never hoarded in countries where it is the recognized standard of value.

The government paper currency of India, introduced March 1, 1862, is on the increase. It is secured by government bonds and coin and bullion, just like that of the Bank of England. The amount of notes in circulation in India is about £12,000,000. Were gold the sole standard of value in India, the paper money would be greatly increased, as paper represents and economizes the use of gold in large—not silver in small—transactions.

When the coinage act of 1835 was adopted, there were two kinds of silver rupees in circulation—the sicca and the sunnut—both of greater value than the new rupees. 100 sicca rupees were equal to 106f, and 106⅔ sunnut rupees to 104½ new rupees. Agreements, therefore, which were based upon “siccas” or “sunnuts” were carried out in accord with their respective values in the new rupees. So, if India adopts the gold standard, a similar arrangement can be made without injustice to any one, debtor or creditor.

No less than thirteen European countries have assimilated their gold coinages, namely, France, Italy, Belgium, Switzerland, Greece, Austria, Hungary, Sweden, Denmark, Norway, Finland, Roumania, and Spain. Their gold coins are 0.900 fine, and are exactly 310 to a kilogram. The gold pieces of Holland are nearly so; but a miss is as good as a mile. The standard legally in Great Britain, Germany, Portugal, and Turkey, and practically in the United States and Japan, is gold; but their coins do not assimilate with those of the other countries mentioned, although, practically, their standard of value—gold—is the same. When coinages of the standard do not assimilate, weighing comes virtually into practice. In paper-currency countries, where the premium on gold does not exceed 15 per cent., silver is at a discount as compared with paper money. This proves that gold, whether legalized or not, is the real standard of value, and that depreciated paper money merely represents it in an inflated manner. The silver coins of many countries of Europe, the United States, and South America are identical in intrinsic value; but, excepting in the countries of the Latin Union, the respective silver coins do not circulate outside their own localities. This is another evidence that gold is, after all, the real standard of value.

Your obedient servant,