FOOTNOTES:

FOOTNOTES:[8]Adapted from Wesley Clair Mitchell,A History of the Greenbacks, Part II, The University of Chicago Press, 1903.[9]Adapted from A. D. Noyes,Forty Years of American Finance, pp. 7-20. G. P. Putnam's Sons, New York and London, 1909.[10]Ibid., pp. 21-22.[11]Ibid., pp. 23-31.[12]Ibid., pp. 44-47.[13]A. Piatt Andrew, The Essential and the Unessential in Currency Legislation, inQuestions of Public Policy, Addresses delivered in the Page Lecture Series, 1913, before the Senior Class of the Sheffield Scientific School, Yale University, pp. 55-59. Yale University Press, New Haven, Connecticut. 1913.[14]Adapted from George Gary Eggleston,A Rebel's Recollections, pp. 78-107. Hurd and Houghton. Boston, 1875.

[8]Adapted from Wesley Clair Mitchell,A History of the Greenbacks, Part II, The University of Chicago Press, 1903.

[9]Adapted from A. D. Noyes,Forty Years of American Finance, pp. 7-20. G. P. Putnam's Sons, New York and London, 1909.

[10]Ibid., pp. 21-22.

[11]Ibid., pp. 23-31.

[12]Ibid., pp. 44-47.

[13]A. Piatt Andrew, The Essential and the Unessential in Currency Legislation, inQuestions of Public Policy, Addresses delivered in the Page Lecture Series, 1913, before the Senior Class of the Sheffield Scientific School, Yale University, pp. 55-59. Yale University Press, New Haven, Connecticut. 1913.

[14]Adapted from George Gary Eggleston,A Rebel's Recollections, pp. 78-107. Hurd and Houghton. Boston, 1875.

[15]... There are natural and commercial causes which may operate to produce either an incessant fluctuation in the relative value of silver and gold, or a wide and increasing divergence, from year to year, through a long period, from the ratio of exchange existing between the two metals at the commencement of the period. So far are the sources and conditions of supply of the one different from those of the other that, notwithstanding the influence of the durableness of the metals in giving steadiness of value to either by turns, and hence to the two in their relation to each other, it would be in the highest degree unreasonable to assume that the ratio of exchange between gold and silver would remain unaltered through any considerable term of years. The annual or monthly variations may take the form of oscillations, now on one side and now on the other of any historical ratio, or they may be cumulative on one side of that ratio, producing a divergence increasing from month to month, and year to year; but variations in some degree, in some direction, are to be expected under the unrestrained operation of causes influencing the demand for, or the supply of, each metal.

The conditions, natural and commercial, which determine the ratio of exchange of the two metals being such, we have seen that government may enter, and, by making the two indifferently legal tender for debts at a ratio fixed by law, may, for the time, counteract the operation of any and all forces tending to produce divergence. So long as any country establishing such a principle holds a considerable amount of that metal which, under the natural and commercial conditions of supply and demand prevailing at the time, tends tobecome the dearer of the two, it is impossible that the cheapened metal should there, or in any market, fall far below that ratio. By the force of the bimetallic law, the substitution of the cheapened for the dearer metal will at once begin; and so long as that continues, the divergence of the market ratio from the mint ratio can never be wide. Why should any one in London or New York pay much more than fifteen and a half ounces of silver for an ounce of gold, when gold can, at any time and in any amount, be obtained for silver at the rate of fifteen and a half in Paris?

This operation of the bimetallic system can not be denied; but there is ground for dispute as to the degree of the advantages to result, and as to the cost at which those advantages are to be obtained. The monometallist, or advocate of the so-called single standard, is disposed to disparage the benefits to be expected, and to magnify the expense of this system. He points to the fact that the two metals do not actually circulate in the same country, at the same time, in any considerable degree; that it is always the one metal or the other which is used as money, according as the market ratio diverges to the one side or the other of the mint ratio, while the coin made from the dearer metal acquires a premium, and is exported or hoarded. Hence it is said bimetallism really means the use of but one metal in a country at a time. It is not a double standard, but an alternate standard.

To this the bimetallist replies that the concurrent use of the two money metals, side by side, in the same markets, is a matter wholly of indifference. The merit of the bimetallic scheme does not depend on this at all.

The object of bimetallism is, by joining the two metals together in the coinage, at a fixed ratio, to diminish the extent of the fluctuations to which the value of each would be separately liable, by generating a compensatory action between the two, by which the cheapening metal shall receive a larger use, while the appreciating metal drops partially out of its former demand, thus making the two fall together, if there must be a fall, or rise together, in the opposite case: or, conceivably, making the tendency of one to fall precisely counteract the tendency of the other to rise.

Thus we may suppose four successive cases to illustrate the working of this principle.

The first is, where the demand for the use of either metal in trade remaining the same, a large increase in the supply of one metal, A, takes place, the supply of the other, B, remaining unchanged. In this case, without the bimetallic system, the value of A would tend to fall rapidly through a considerable space, while the value of B would stand fast. With the bimetallic system, the joint supply of the two metals would be applicable to meet the joint demand for the two. Now, as the joint supply has been increased without any change in the joint demand, there must be a fall in value; but the fall will be in the two indistinguishably, except for a slight degree of delay and friction in exchange. Both will fall, but the depth of the fall will be diminished as the surface over which it is to take place has been enlarged.

The second is where, the demands of trade for both metals remaining the same, a diminution occurs in the supply of A, while the supply of B remains unchanged. Here, by the operation of the same principle, a rise in the value of money will take place, since the joint supply has been reduced without any corresponding change in the joint demand. The rise will be a rise of the two metals indistinguishably, the height of the rise being diminished as the surface over which it is to take place has been enlarged.

The third case is where, demand remaining the same, the supply of both metals undergoes a change in the same direction, either of increase or of diminution, at the same time. In this event, the fall or rise will again be of the two indistinguishably, the point reached being a mean between the points which would have been reached by the two severally.

The fourth case is where, demand remaining the same, the supply of the two metals undergoes a change at the same time, but in opposite directions, A through diminution, B through increase. In this case, the opposite tendencies will counteract each other. If of equal force, the value of money will be stable; if of unequal force, there will be movement in the direction of the stronger to the extent of the difference between the two. Instead of one falling and the other risingin value, the change will be wrought in the two indistinguishably.

It will appear from the foregoing statements that, under the bimetallic system, the value of money will be liable to vary more frequently than under the monometallic system. That is, a change in respect to either constituent of the money mass will produce a change of value; and it is apparent that the chances of change are greater with two constituents than with one. On the other hand, the variations under the bimetallic system are likely to be less extensive. Indeed, it is a matter of practical certainty that they will be far less extensive than they would be under the monometallic system, whichever metal were adopted as the standard of deferred payments.

But, again, the monometallist interposes the objection that the bimetallic system is only to be supported at great expense to the States maintaining it; that they lose by the exchange of the dearer for the cheapened metal, even though they acquire a certain premium in doing so, and that sooner or later the stock of the dearer metal in the bimetallic countries will become exhausted, and the system will collapse, the price of the two metals no longer being held closely or nearly at the former ratio by the possibility of exchanging them at that ratio, freely, in any amount.

How far a bimetallic country loses by the alternation of the metals in circulation, as now one and now the other becomes the cheaper at the coinage ratio, is a nice question.

That the service rendered to the commerce of the world by establishing a normal price for each metal in terms of the other, and thus creating and maintaining a par-of-exchange between gold countries and silver countries, is worth far more than its cost, seems to me beyond a rational doubt. It would, in my view, be as reasonable to doubt whether London Bridge repays the expense of its erection and repair. Were the cost of this bimetallic service, whatever it is, properly assessed upon and collected from each commercial nation of the world by turns, according to the proportion in which it derives advantage therefrom, I think it might safely be said that no one of these nations would sustain a single other charge which so fully justified itself in the return it made, whetherthat other charge were for works of construction, for the administration of justice, or for any other strictly necessary purpose.

But there is no assurance that the cost of the bimetallic system will be thus equitably assessed. If the whole charge of erecting and repairing London Bridge were thrown upon the merchants of the two or three streets nearest thereto, while yet the whole population were allowed to use the bridge, free of toll, there would not unnaturally arise a strong sense of injustice on the part of those who bore this burden for the public benefit; it might even become a question whether the undoubted advantages derived by them from the use of the bridge repaid the disproportionate expense which it caused them. If the maintenance of the bimetallic system involves a certain burden on the nations which sustain it, as I am disposed to think is the case, it fairly becomes a question whether those individual nations are compensated for bearing the whole expense of the service by their share of the advantages resulting therefrom to the trade and industry of the world.

That England could well have afforded, throughout the present century, to maintain this system for her own benefit, whatever it cost, even though other nations profited by it in greater or less degree, is clear as the light. That France, a country of far less extended international trade, has been compensated for bearing so large a part as she has done of the burden of maintaining a par-of-exchange for the commerce of the world, by her share of the resulting advantages, I make no question; but it must be admitted to be fairly a matter of dispute.

On such a point it is evidence of no small value that the French people themselves and the French statesmen, though singularly acute and sagacious in matters of finance, have apparently not doubted that the bimetallic system was for the interest of their country. Certain of the French political economists—MM. Chevalier, Levasseur, Bonnet, Mannequin, Leroy Beaulieu—from their theory of the subject have held that France lost by her policy in this respect; but the financiers of that remarkable nation held firmly to the "double standard"from 1785 to 1874. And though France at the latter date restricted her silver coinage, and two years later stopped it altogether, it was not done as the result of any change of views. Partly it was from deference to her monetary allies, Belgium and Switzerland, but chiefly because the demonetization of silver by Germany and the sale of the discarded metal of that empire brought a sudden strain upon the bimetallic system which threatened to break it violently down. Hence France closed her mints to silver, but not with any confession that her policy had been erroneous under the conditions previously existing; not from any desire to abandon that policy should the future offer conditions which would admit the resumption of bimetallism. It was the declaration of M. Léon Say, the French Minister of Finance, the President of the International Monetary Conference of 1878, that France, in suspending the coinage of silver, had taken no step towards the single gold standard, but had placed herself in a position to await events, a position which she would not leave till good reasons for action should appear, and then most probably to re-enter on the system of the double standard....

The objection that the stock of the dearer metal in the bimetallic States must, if the drain be indefinitely continued, become after a while exhausted, and that the system will then lose all its efficiency in holding the two metals together, is unquestionably valid; but an altogether unreasonable weight has been assigned to it in the discussion of bimetallism as a scheme of practical statesmanship.

If we look at almost any treatise written from the monometallic point of view, we shall find that it is taken as conclusive against that scheme, that conditions of supply and demand can be assumed for the two metals separately which would result in the complete exhaustion of the dearer metal, and the consequent loss of all virtue in the bimetallic scheme. The bimetallist is confronted with a series of adverse conditions, taken each at its maximum and piled one above the other without the least regard to the modesty of nature, or the experience of the past; and is then challenged to say whether the system he proposes could be maintained under such circumstances. If he is candid enough to admit thatbimetallism would fail there, it is taken for granted that the whole question is disposed of.

Now, human institutions are not to be judged of, and approved or disapproved, by such methods. The folly of reasoning like this would be seen at once were it applied to ordinary political matters. No government on earth could stand against one-fourth or one-tenth of the elements of hostility which might conceivably be arrayed against it. Mankind do not, therefore, refuse to form governments.

Bimetallism is a political institution for practical ends, and is entitled to be judged with reference to reasonable probabilities. It may claim the benefit of the chance that adverse conditions will be offset by conditions favourable, and that the adverse conditions will not prove so severe at the start as they may be conceived, and that their force will be more quickly spent than might be feared.

It would be perfectly legitimate ground on which to establish European bimetallism, that the French system, with so little of support from other States, passed within a quarter of a century through the three successive shocks of the gold discoveries of Siberia, the gold discoveries of California, and the gold discoveries of Australia, and yet was not brought to the ground.

With Germany, France, and England joined in a monetary union, no changes reasonably to be anticipated in the conditions of supply of the one metal or the other would succeed in moving the market ratio far apart from the mint ratio thus supported by maintaining over so wide a surface a legal equivalence between the two metals in payment of debts.

And, moreover, while bimetallism is entitled to be judged like any other political institution, with reference to the reasonable probabilities of the future, the allowance which requires to be made for error and extraneous force is less than in most political institutions, inasmuch as the failure of bimetallism involves no disaster to industry or society.

When an engineer designs a bridge which is intended to sustain a weight of eighty tons, he introduces a "factor of safety," say three or five, and makes the bridge strong enough to bear two hundred and forty or four hundred tons. Thegreater the calamity which would result from the breaking down of the bridge—the deeper the chasm which it spans, the swifter the torrent below—the larger the factor of safety. With many political institutions, likewise, the consequences of failure would be so disastrous that the statesman seeks to introduce a high factor of safety; but in the case of bimetallism no catastrophe whatever is to be anticipated, even in the event of failure. At the worst, after the drain of the dearer metal, in consequence of changes in the conditions of supply, is completed, the bimetallic country is simply in the same position with the countries of the single standard using the cheapened metal. While the process of substitution is going on, it sells the dearer metal at a premium; when the process is over, it is no worse off than it would have been had it originally selected as its sole money of full legal-tender power the metal which it has bought at a discount, and which other countries, perhaps its immediate neighbours, are still using. It is not the case of a country seeking to reject the cheapening metal, and to supply its place with the metal which is continually becoming scarcer and dearer.... There is all the difference, in the two cases, between going down hill and going up hill.

Not only is no catastrophe involved in the failure of bimetallism through the exhaustion of the dearer metal, but it is always in the power of the Government to arrest the drain at any point without shock.

Thus, in 1874, France and her monetary allies, seeing the prospect of a considerable drain of gold through the importation of the discarded and cheapened silver of Germany, and having decided, whether wisely or unwisely, not to prevent that drain, restricted the coinage of silver without repealing or suspending the law which made gold and silver legal tender indifferently at a fixed ratio. Two years later, finding that the forces operating to lower the value of silver were powerful and persistent, the coinage of silver was peremptorily stopped.

Can one point to any sign that France has suffered any special injury to her trade and production from this act?...

We now have to note ... that every additional State which joins the bimetallic group, having the same mint ratiobetween gold and silver, does not only share the cost or the burden with those already in the system, but diminishes the aggregate cost or burden to be borne, and this, not in a slight, but in an important degree, so that should the monetary league become general, the total cost or burden to be divided among the many allies would be inappreciable; while, should the system come to embrace all commercial States, there would, in theory, be no burden at all to be borne by any one.

Thus let us suppose the commercial world to be divided into sixteen States, A to P, inclusive, the first six having the single gold standard, four, G to J, the so-called double standard of gold and silver, say at 15-1/2:1; the remaining six States having the single standard of silver, thus:

A, B, C, D, E, F (G, H, I, J), K, L, M, N, O, P.

It is evident that in the case of a change in the conditions of supply tending to cheapen silver relatively to gold, the new silver would pass into the countries of the double standard, G to J, be there exchanged for gold at the rate of 15-1/2: 1, with some small premium as the profit of the transaction, and the gold would go to the gold countries, A to F, in settlement of trade balances.

The rapidity with which this substitution of silver for gold will go forward will depend, first, on the force of the natural causes operating to cheapen silver, and, secondly, on the force of the commercial causes operating to maintain or advance the value of gold. The length of time during which the drain of the dearer metal can be sustained without exhaustion will (given the rate of movement) depend solely on the stock of that metal existing in the bimetallic States jointly when the drain begins.

But chief among the commercial causes operating to maintain or advance the value of gold is the exclusive power with which gold is invested by law to pay debts within States A to F; while the stock of the dearer metal available to sustain the drain described is made up, not of all the gold in the sixteen States A to P, or in the ten States A to J, but only of the gold in the four bimetallic States, G to J.

Hence we see that for every gold State which adopts the "double standard" the amount of gold available, in the caseof a cheapening of silver, to meet the drain of the dearer metal (on which the virtue of the bimetallic system depends) is increased; while the demand for gold in preference to silver at 15-1/2:1 (the only cause which threatens the stability of the bimetallic system) is, in just so far, diminished. On the other hand, every silver State that adopts the "double standard" strengthens the bimetallic system in the case of a cheapening of gold.

Let us suppose the sixteen commercial States to be divided as four gold States, eight gold and silver States, and four silver States, as follows:

A, B, C, D (E, F, G, H, I, J, K, L), M, N, O, F.

We see that the bimetallic system is now not twice as strong merely as in the case first assumed, but many times as strong, since not only is the amount of the dearer metal (whichever that may at the time be) subject to drain greatly increased, but the demand for that metal, in preference to silver at 15-1/2:1, now comes from four countries only, instead of six, as formerly. The transfer of still another State from each of the two single-standard groups would vastly increase the stability of the bimetallic system, A, B, C (D, E, F, G, H, I, J, K, L, M), N, O, P. Not only would the base of the system be broadened by bringing the dearer metal of ten States, D to M, under tribute in the event of changes operating on the supply of either to affect its value; but the force of the causes threatening the equilibrium of the system would be reduced, since the demand for the dearer metal would now come from only three States: A, B, C, in the case of a cheapening of silver relatively to gold; N, O, P, in the case of a cheapening of gold relatively to silver.

Bring still another State from each group into the monetary union, and the danger of a breaking down of the system, under any change in the conditions of supply which it would be reasonable to anticipate, almost disappears.

A, B (C, D, E, F, G, H, I, J, K, L, M, N), O, P. Twelve States now supply the dearer metal; only two States will take it in preference to the other at the ratio of the mint. Those two States—whether A, B, or O, P—can not take the dearer metal indefinitely. They will soon be surfeited. Afurther increase of money in them would only be followed by a fall in its value, which would soon proceed so far as to bring the metals together again. What the one metal would tend to lose in value through increase of supply, the other would tend to lose through diminution of demand.

This is the Modern Bimetallic Scheme advocated by Wolowski and Cernuschi in France, Malou and de Laveleye in Belgium, Mees and Vrolik in Holland, Schneider in Germany, Haupt in Austria, Seyd and the Liverpool writers in England, Horton, Nourse, and George Walker in the United States.

It differs widely from the plan of the so-called "double standard," which was pronounced impracticable by Locke, Adam Smith, and Ricardo. Not the smallest presumption against the reasonableness of this scheme is created by the fact that eminent economists of the past century, and of the first half of the present, declared in favour of the single standard, whether of gold or of silver. Those writers contemplated a condition of international relations in which anything like general and permanent concert of action, in establishing and maintaining a ratio between the metals in the coinage, would have been wholly beyond reasonable expectation....

A general or universal system of bimetallism would involve no machinery, no international accounts, no detail whatever. The simple agreement of governments to coin at a certain ratio would be sufficient for all the objects that have been discussed. If unification of coinage, identity of moneypieces, and mutual acceptance of coins by the several nations forming such a monetary league, were to be added, some machinery for the redemption of worn pieces might require to be brought into existence; but this is not a necessary feature of successful bimetallism, which would be entirely compatible with the retention by each State of its own devices and denominations, and with the exchange of moneys as at present effected....

FOOTNOTES:[15]Francis A. Walker.Money in Its Relations to Trade and Industry, pp. 164-176; 178-182. Henry Holt & Company. New York. 1889.

[15]Francis A. Walker.Money in Its Relations to Trade and Industry, pp. 164-176; 178-182. Henry Holt & Company. New York. 1889.

[16]Such was the singular combination of events after the peace of 1865 that almost at the moment when a million citizens were turned from organised destruction to pursuit of peaceful industry, the avenues of American employment and production were widened in a degree unprecedented in the history of trade. Within eight years after Lee's surrender, the railway mileage of the United States was literally doubled. Only a fraction of this increase belonged to the transcontinental lines which linked the two oceans in 1869. Quite aside from the 1,800 miles of the Pacific railways, upwards of 30,000 miles of track were laid in the United States between 1865 and 1873. Four noteworthy economic developments accompanied this extension of the transportation system. A fertile interior domain, hitherto untouched, was opened up to industry. With the rush of population to these Western districts, not only did the disbanded army resume production without industrial overcrowding such as followed the Napoleonic wars, but provision was made for three or four hundred thousand immigrants annually. European capital in enormous volume was drawn upon to provide the means for this development. Finally, the United States rose from the position of a second- or third-class commercial State to the first rank among agricultural producers and exporters. Each of these several phenomena had its special influence on the period.

Not less immediately connected with this opening up and settlement of our agricultural West was still another phenomenon, of peculiar interest to the study of the ensuing period. The average price of grain had advanced with great rapidity during the Civil War. In 1867, the price of wheat,even on the Chicago market, reached the remarkable level of $2.85 per bushel; nor was this price very greatly above the annual maximum of the period. In a large degree, this advance resulted from inflation of the American currency. But the upward movement was world-wide; in 1867 and 1868 the average price, even in England, was close to the equivalent of two dollars a bushel. That any such abnormal market could be maintained in the face of the new American supplies was at least improbable. The increase in cereal production was twice as rapid as the country's increase in population; the United States became therefore the leading figure in the world's export markets; and this was certain to have important influence on prices.

As in America, so in Europe, production received immediate stimulus. While American capital was opening up the Mississippi Valley, European capital was similarly busy along the fertile river basins of the Dnieper and the Danube. The Russian railway system grew during this period from something like 2,000 miles to upwards of 13,000. In Austria-Hungary the percentage of increase was almost equally large. All of these new transportation lines, like our own new Granger railways, were at once engaged in carrying to the seaboard supplies of grain which never before had reached an export market. The problem of an earlier generation had been how to feed the constantly increasing population; a wholly new problem was presently to arise, based on the question how to find a ready and profitable market for the year's output of breadstuffs. Prices, in short, which rose almost continuously throughout the world during the period of slack production from 1858 to 1873, receded almost as continuously in the ensuing generation. Nowhere was this phenomenon destined to have more immediate importance, economically, socially, and politically, than in the United States.

The opinion is more or less widely held that the decline in prices, notably of grain, has resulted from legislation on the currency. Without for the present arguing that proposition, it may be affirmed with entire safety that a good share of the period's currency legislation has resulted from the decline in the price of grain. The fall in wheat has been the typicalargument for arbitrary increase of the silver or paper currency in almost every Congressional debate since 1872. What is perhaps even more significant, the division in almost every Congressional vote upon these subjects has been, not political but geographical—the commercial East against the agricultural West.

[17]In the summer session of 1876, several bills had been introduced, providing for increased silver coinage and for remonetization of the silver dollar. None of these propositions came to anything; they were chiefly remarkable from the fact that they first gave vogue to the theory of the "crime of 1873"—a theory which assumed that the dropping of the silver dollar from the list of coins in the statutes of that year was the outcome of a conspiracy which carried its legislation through in secret. The entire baselessness of this assertion has been demonstrated often enough and in convincing detail; this very provision regarding the silver dollar was a subject of public discussion in the House, and met with no serious opposition. The assertion in itself is so patently absurd that I shall not pause to discuss it. The truth is that silver in 1873, and during a generation before that date, was worth more to its owner in the form of bullion than in the form of coin. In 1872 the silver requisite to coin a dollar at the established ratio was worth $1.02. For years, therefore, nobody thought of bringing his silver to the mint for coinage; he sold it in the commercial markets. The total silver-dollar coinage of the United States, between 1789 and 1873, was barely eight million dollars, and when, in 1873, the law provided that except for the so-called trade dollar coined for export, "no deposit of silver for other coinage shall be received," no one had interest enough in the matter to offer criticism.

But in 1874 and 1875 came one of those curious coincidences which render possible for all time conflicting theories of an economic event. Germany, having adopted the goldstandard of currency in July, 1873, began to sell its old silver coin as bullion. At exactly the same time, Mackay and Fair, in the heart of the Nevada Mountains, were opening up the Great Bonanza. The Pacific Coast was in fact going wild over the rise in mining shares while the East was financially and industrially paralysed.

The statute dropping the silver dollar from this country's coinage list was enacted February 12, 1873; the German law for retirement of silver coinage was adopted July 9, 1873; and a year later the news of the rich Nevada "ore-finds" became public property. Between the German sales and the sales at Nevada City, the price of silver yielded. In 1874, for the first time in a generation, 412-1/2 grains of standard silver would have been worth more when coined into a legal-tender dollar than when sold in the bullion market. The motive of the mining interest in the free-silver coinage agitation of 1876 and 1877 was not mysterious.

The motive of the anti-Administration party in Congress was somewhat different. There is not the slightest question that the silver-coinage movement, in the agricultural West particularly, had the same origin and the same following as the paper inflation movement of a few years before. Mr. Bland himself, the author of the silver bill, declared that the question was presented as between what he called "honest resumption" with silver coinage, "or on the other hand a forced unlimited inflation of paper money." In the heat of debate on the silver bill, the same statesman declared in Congress that if his coinage plan could not be passed, he was "in favour of issuing paper money enough to stuff down the bondholders until they are sick." The point of these remarks lies in their frank assumption that the free-silver sentiment and the fiat-money sentiment were interchangeable.

So much, then, for the origin and nature of the silver movement. The Bland Bill passed the House on November 5, 1877, under the previous question and without debate, by a vote of 164 to 34, and the resumption operations of the Government came to an instant halt. The market price of silver then was such that the legal-tender dollar of the Act would have been worth intrinsically less than ninety cents. Foreignsubscribers to our resumption bonds suspected instantly that payment of the Government debt in a depreciated coin was planned by Congress; their suspicions were confirmed by a resolution introduced December 6th by Stanley Matthews, Mr. Sherman's own successor in the Senate, and passed by both houses. The resolution explicitly declared that in the opinion of Congress, all the bonds of the United States, "issued or authorized to be issued," were payable in the silver dollars of the Bland Law. The extraordinary character of this resolution may be judged from the fact that it was proposed and passed in both houses while the Coinage Act was still pending, and while, therefore, there was not in existence the coin which was duly declared a legal tender for settlement with public creditors. To the conservative portion of the public, the resolution seemed a piece of financial lunacy; to the Treasury, it was not only embarrassing but humiliating. Hardly a month before, in his annual report to Congress, the Secretary had repeated his official statement, previously made to bond subscribers, that payment of the bonds in gold might safely be anticipated. The publication of this statement in New York and London had been followed by greatly increased subscriptions to the bonds, in payment of which gold was required by the Government. The Matthews resolution amounted, so far as Congress was concerned, to repudiation of a formal bargain of which the Government had already obtained the fruits. The debate was such as might have been expected on a measure of the sort. It centred repeatedly on denunciation of Government bond investors. Foreign subscribers were treated with especial scorn; indeed, our foreign customers in general were not spared. It was this debate which drew forth Senator Matthews's somewhat celebrated query: "What have we got to do with abroad?"—a remark which was perhaps as typical of the session's deliberations as any utterance made from the floor of Congress.

The situation, during the early months of 1878, was extremely critical. For the time the three direct assaults on the public credit were warded off. The Matthews resolution was "concurrent," and hence a mere expression of opinion without binding force. The bill repealing the Resumption Act of 1875was killed by disagreement in the Senate. Meantime the Silver-Coinage Act was modified by the Senate into a compromise requiring purchase and coinage by the Government of two to four millions' worth of silver monthly. Even thus modified, it encountered the veto of the President, but was passed over his veto, without a day's delay, by the requisite two-thirds majority. Executive conservatism seemed to be fruitless; nevertheless, there is no doubt whatever that the steadfast policy of Mr. Hayes did much to stem the current of reaction.

Congress adjourned on June 19th. Even before Congressional adjournment, the canvass for the November State elections had begun. The State Convention platforms in the summer of 1878, were not in all respects such as the session's work in Congress would have suggested.

The opposition had gone too far in Congress, and popular opinion to that effect was expressed with sufficient emphasis in November, 1878. The Administration party gained what amounted to a decided victory. There were but four States, East or West, where opposition majorities were increased in 1878 or Administration majorities diminished, and these were agricultural States, where the season's sharp decline in wheat had stirred up discontent. There was not much danger from the closing session of a Congress whose earlier ventures had received this response from the people.

[18]Although the silver dollar of which the coinage was resumed in 1878, dates back as a coin to the earlier days of the Republic, its reissue in that year marks a policy so radically new that the experience of previous years throws practically no light on its working. The act of 1878 provided for the purchase by the Government, each month, of not less than two million dollars' worth, and not more than four million dollars' worth of silver bullion, for coinage into silver dollars at the rate of 412-1/2 grains of standard silver (or 371-1/4 grains of fine silver) for each dollar. The amount of the purchases, within the specified limits, was left to the discretion of the Secretaryof the Treasury. As every Secretary of the Treasury, throughout the period in which the act was in force, kept to the minimum amount, the practical result was a monthly purchase of two million dollars' worth of silver bullion.

The act is sometimes described as having called for a monthly issue of two million silver dollars; but this was not the exact situation. The amount of silver obtainable with two million dollars obviously varies according to the price of the metal in terms of the dollars with which the purchases are made. In February, 1878, when the first purchases were made, those dollars were the inconvertible United States notes, or greenbacks, worth something less than their face in gold. The amount of silver bullion obtainable with two million such dollars depended, on the one hand, on the price of silver bullion in terms of gold, and on the other hand on the value of the dollars themselves in terms of gold. When specie payments were resumed, on the first of January, 1879, and the greenbacks became redeemable in gold, the measure of value in the United States became gold, and the extent of the coinage of silver dollars under the act of 1878 became simply a question of how much silver bullion could be bought with two million dollars of gold. The price of silver in 1878 was, in terms of gold, not far from a dollar for an ounce of standard silver. Since 1878 it has gone down almost steadily, and ... in 1889 was barely above 80 cents an ounce.[19]The silver dollar of 412-1/2 grains contains less than an ounce (480 grains) of standard silver. The monthly purchase of two million dollars' worth of silver has therefore always yielded more than two million silver dollars, the amount being obviously greater as the price of silver went lower. On the average, the monthly yield [was] not far from two million and a half of silver dollars.... Thirty millions of silver dollars a year was roughly the addition to the currency of the community from the act of 1878.

[20]An important provision of the act of 1878 was that authorising the issue of silver certificates against the deposit of silver dollars. This authority was limited at the time to certificates in denominations only of ten dollars and upward: a restriction which ... proved to be of great importance. At the time it does not seem to have been expected that the silver certificates would enter directly into the circulating medium; we may infer from the restriction to large denominations that no such expectation was entertained. But in fact, it has been chiefly in the form of certificates that the silver has entered into circulation. These certificates, it is true, are not, like the dollars themselves, a legal tender; but they are receivable for all public dues, customs included, and they pass from hand to hand at least as readily as the bulky pieces which they represent.

[21]The passage of that act was due to causes easily described. It was part of the opposition to the contraction of the currency and the resumption of specie payments which forms the most important episode in our financial history between 1867 and 1879. The resumption of specie payments had been provided for by the act of 1875, and was to take place on January 1, 1879. In the meanwhile, the long-continued depression which followed the crisis of 1873 intensified the demand for more money and higher prices. That demand led to the inflation bill passed by both Houses of Congress in 1878, and killed by the veto of President Grant. The same feeling led to the silver act. The great fall in the price of silver, beginning in 1873, and showing itself markedly in 1876, made silver, at the old ratio, a cheaper currency than gold, and so caused the opponents of the return to specie payments to prefer silver to gold, as they preferred paper to either. No doubt some additional force was given to the movement in favor of the use of silver from the desire of the silver-mining States and their representatives,that the price of the metal should be kept up through a larger use of it for coinage....

[22]Although the specific measure passed in 1878 thus rested on a long train of historical causes, it contained details that were essentially new, not only in our own experience, but in that of the world at large.... It ... provided for a regular mechanical addition of large amount to the general circulating medium. No precise experiment of this kind had ever been tried. It is true that Germany and the countries of the Latin Union possess, in their circulating medium, large quantities of overvalued thalers and five-franc pieces which are exactly like our silver dollars. They also are legal tender without limit; their total quantity is limited; and it is only by this limitation of the quantity that their value is kept above that of the bullion contained in them. But the thalers and francs in these countries are not new additions to the currency. They are remnants from an earlier period, when Germany had a silver standard, and the Latin Union a complete bimetallic standard. No addition whatever to the thalers is made in Germany; and if some coinage of five-franc pieces takes place in France and in other countries of the Latin Union, the additions are meant merely to fill the place of abraded coins, to provide for the ordinary losses from daily use, and to make any additions to the supply which may be needed for convenience in making small change. No other country has ever entered on an addition of overvalued coin to its circulating medium having the object and extent of that made by our silver act of 1878. This characteristic of the measure, it need hardly be said, was the result not of any deliberate intention to try a new experiment, but of the spirit of compromise which explains so many anomalies in the legislation of democratic communities. The silver act, as passed by the House of Representatives, provided for complete bimetallism—for the free and unlimited coinage of the silver dollar at the old ratio of 16 to 1. In the Senate, it was amended by the substitution ofthe provisions for a limited coinage, which were finally enacted. The compromise was meant to satisfy both those who objected to the cheaper standard and those who wanted more money; and it afforded a welcome escape to the legislators who were trying to satisfy all parties. At the time, no one probably expected that the measure would remain in force for any great length of time. The conservative element hoped that it would be repealed after a short trial; the inflationists (for by that name they might, then at least, fairly be called) believed that it would soon be superseded by the free and unlimited coinage of silver. As it happened, the act remained in force, unamended, and indeed without very serious attempt at amendment, for over twelve years; and the measure which succeeded it in 1890, though different in many details, followed the same method of forcing a large regular injection into the circulating medium of money based on silver purchases by the Government.

[23]The Government has made every effort to get the dollar coins out of its hands.... But the great bulk of the coins thus got out of the treasury return to it almost at once. The degree of favor which they meet with of course ... varies in different parts of the country, apparently reflecting in a curious way the popular feeling as to the desirability of having silver currency at all. They circulate very little east of the Alleghanies, but are used more freely and permanently in the Mississippi Valley. Among the negroes of the South the big pieces are said to be favorites, and to find a permanent lodgment. Their greatest circulation ... was reached in 1886; after that time the change in the denominations of silver certificates caused a decline in the amount used.

[24]The act of July 14, 1890, is[25]more remarkable than that of 1878. It is unique in monetary history. It provides thatthe Secretary of the Treasury shall purchase each month at the market price four and a half million ounces of silver bullion. In payment he shall issue Treasury notes of the United States, in denominations of between one dollar and one thousand dollars. These Treasury notes, unlike the old silver certificates, are a direct legal tender for all debts, public or private, unless a different medium is expressly stipulated in the contract. They differ from the silver certificates in another respect; they are redeemable either in gold or silver coin, at the discretion of the Secretary of the Treasury. The indirect process of redemption which,... was applied to the silver certificates, is replaced for the new notes by direct redemption. The avowed object is to keep the silver money equal to gold, for it is declared to be "the established policy of the United States to maintain the two metals at a parity with each other on the present legal ratio, or such ratio as may be provided by law." The act of 1878 is repealed; but the coinage of two million ounces of silver into dollars is to be continued for a year (until July 1, 1891). Thereafter it is directed that only so many silver dollars shall be coined as may be needed for redeeming any Treasury notes presented for redemption. Practically this means that the coinage shall cease; redemption in silver dollars will not be called for under present conditions. The coinage of silver dollars accordingly was suspended by the Treasury on July 1, 1891; a change which was the occasion of some vociferous abuse and equally vociferous praise, but which in reality was of no consequence whatever.

[26]The monthly issues of the new Treasury notes vary, like those of the old silver certificates, with the price of silver. But the new issues vary directly with the price of silver, while as we have seen, the old issues varied inversely with the price. The volume of Treasury notes issued is equal to the market price of four and one-half million ounces of silver. For a month or two after the passage of the act, the price of silver advanced rapidly, and at its highest, on August 19, 1890,touched $1.20. After September a steady decline set in....

[27]Shortly after the passage of the act [of 1890], some sort of understanding seems to have been reached between the Treasury Department and the banks of New York. The banks came to an agreement that the new notes were to be treated as "current funds," receivable in all payments, clearing-house settlements included....

The fact that the new notes were received by the banks from the Sub-Treasury in settlement of clearings, was of sensible advantage to the Government. The success of the Government in maintaining its nominal willingness to pay gold to all comers was due to the forbearance of the banks. Gold was called for by them only when needed for export.

[28]... Is it desirable that we should have more money? Does the maintenance of the gold standard involve injustice or hardship to debtors, or to any class in the community? Does it have any ill effects in hampering industry or checking the advance of production? Is the free coinage of silver, or any measure leading ultimately to a silver basis, fairly open to the objections commonly urged against it on the grounds of dishonesty and injustice?...

In considering these questions, we must look to the ultimate and permanent results of the silver standard. The details ... as to the mode in which the silver issues circulate and the degree of promptness with which they will affect prices, are here of no great importance. Under a silver standard the rise in prices will take place in the end; and we are concerned with the social consequences of such an eventual result....

I propose here to take up chiefly one set of serious arguments—thosewhich rest on the changes in general prices which have taken place throughout the civilised world in the last twenty years. The conclusions in favor of a wider use of silver, drawn from such changes, have been maintained by distinguished economists. It is true that the particular plans for the use of silver which are now in vogue in the United States have generally been opposed by these economists. They have urged international agreements for the wider use of silver, and have deprecated independent action by any one nation. But the more thoroughgoing advocates of free silver in the United States say, certainly with much force, that an international agreement has proved to be simply impracticable, and that if the wider use of silver is to be deferred until there is concerted action by the great nations, it will never come. If anything in this direction is to be done, some one country must be courageous enough to take the lead, trusting that others will follow in due time. And certainly it is true that the scheme for international bimetallism has practically no prospect of adoption; while, on the other hand, the serious arguments urged by its advocates tell, in some degree, in favor of any scheme for enlarging the use of silver as money. These arguments, moreover, are of weight, and deserve a more painstaking consideration than is often admitted by those who oppose the silver legislation of the United States.

The serious and important arguments, then, among those who, both in this country and in Europe, advocate a greater use of silver as money, are derived from the general fall in prices which has been so conspicuous among the economic phenomena of the last twenty years. To that fall they ascribe two evils: first, an unjust increase in the burdens of debtors; and, second, a check to enterprise and to the efficient working of the productive machinery of the community. The increase in the burdens of debtors is one which all economists have pointed to as the result of a general fall in prices, or rise in the value of the circulating medium. The debtor who borrows a hundred dollars now, and repays them five years hence, when all prices have fallen, gives back more than he received. On debts running for short periods of time, changes in general prices are not likely to be great enough to cause serious hardship;but on debts running over long periods the loss to debtors and the gain to creditors will be great and continuing. But such a steady and continuous fall, it is urged, has taken place since 1873; and the fall is likely to continue further, and to renew its hardships on each new act of borrowing, because its cause is a permanent one. That cause is found in the growing scarcity of gold, which has been selected as the sole standard of value among civilised countries. The production of gold, after having increased with great rapidity in the twenty years following the Californian and Australian discoveries in 1850, has gone on but slowly since 1870. Meanwhile, the population of the civilized countries, their wealth, their production of commodities to be exchanged, have increased with extraordinary rapidity; while the adoption of the gold standard by Germany in 1873, and the resumption of specie payments by the United States in 1879 and by Italy in 1883, have added to the demands for which the scanty annual supply of gold must suffice. Hence the general fall in prices; in other words, the appreciation of gold.

The second effect of the appreciation of gold, in checking industrial progress and promoting industrial depression, has been less insisted on in the United States than in European countries. The classic economists had generally reasoned that a general rise or fall in prices was indifferent, except in regard to the relations of debtor and creditor. If money became scarce, if its value rose and all prices fell, every producer, to be sure, would receive a smaller money income than before, and would have a smaller money capital. But he would be able to buy as many commodities and as much labor as before, and would be in reality just as rich and prosperous. In the middle of the eighteenth century, when economic thought was just beginning to assume its modern form, David Hume had argued that though a fall in prices is at bottom indifferent to everybody (except as debtor or creditor), it would yet, in its effects on men's spirits and expectations, which are all connected with money and with terms of money, exert a depressing influence on industry, and would so be harmful; while rising prices, though also really indifferent to all, would stimulate hope and confidence, and so arouse to more activeexertion and more plentiful production. The younger Mill, in hisPolitical Economy, thought it worth while to enter on a careful refutation of Hume's reasoning. But the bimetallists of our time are disposed to agree with the shrewd Scotchman. They say that the active manager of industry, the business man orentrepreneur, in the first place is always more or less in debt; in the second place, is always buying labor, or materials, or goods, with the intention of selling a product at a later date at an advance in price. He habitually measures his gains in terms of money, and not in terms of the commodities he can buy with the money. In times when prices are falling, he finds it harder to meet his debts, and to dispose of his goods in hand at a money advance over what they cost him. But the business man, or entrepreneur, in our day is the director and initiator of industry. He employs labor, borrows capital, sets the wheels of industry in motion; it is his expectations and fears and hopes which determine primarily whether the investment of capital shall take place in large or small amount, and whether the machinery of production shall move smoothly and effectively, or slowly, hesitatingly, inefficiently. The argument certainly does not lack plausibility; nor can it be said to have often been squarely met. No doubt it takes the form, in the United States, more frequently of confused encomiums on the inspiriting effects of plentiful money, than of direct reasoning as to the ill effects of too little money, such as I have endeavored to state with fairness in the preceding sentences. Yet it does not lack weighty backing. So eminent an economist as President Francis A. Walker has ... insisted on the evils of a deficient supply of money as strangling the arteries of industrial life.

On the whole, however, the other argument, bearing on the increase in the burdens of debtors under falling prices, has been more often heard in the United States, and certainly has been of more effect. Prosperity, activity, general industrial advance, have been in this country so great and so obvious that the argument as to any check to industry could take serious hold only in occasional periods of depression or slackened advance. The burden on American debtors from falling prices has therefore been much more steadily complained of, chiefly inregard to the debts of the farmers and other borrowers on a comparatively small scale. No doubt there are other debtors whose burdens are affected at least as much, notably the railways, among whom the practice of borrowing heavily on long time has sometimes had its serious effects. But it is the farmer whose case has received most attention, and in some ways doubtless has deserved it most.

The discussion of the relations of debtors and creditors under the gold standard has led to some further conclusions as to the "honesty" of the gold and silver standards. Those who oppose a silver basis speak of the silver dollar as a "dishonest" coin. But those who attack the gold standard retort that the really dishonest dollar is that of gold. It is pointed out by them that the fall in the price of silver which has taken place since 1873 has not been greater than that in the prices of commodities generally. As compared with commodities, therefore, silver has been more steady in value than gold. The fall in the gold price of silver, which is adduced by the mono-metallists to show that silver is not a good standard of value, is said to be the very thing which proves it to be a good standard of value; for a given amount of silver will buy the same amount of commodities, roughly, as it would twenty years ago, while a given amount of gold will buy more. If debts had been expressed in terms of silver, the debtor would have had to repay the creditor the same amount of commodities that he received—not more commodities, as he has had to do, with debts measured and repaid in terms of gold. So far as the attainment of the closest possible approach to ideal justice is concerned, a silver standard would have served the purpose better than a gold one.

The bimetallist agitation for a return to the wider use of silver concurrently with gold first became prominent in the years of depression which followed the crisis of 1873. For some time those who opposed it took the ground that the alleged evils did not exist—that in fact there had been no permanent fall in general prices. The decline in the years after 1873 was supposed to be simply the usual reaction from the rise inprices which marks a period of speculative activity. It was expected that the upward movement of the next period of activity would bring the average range of prices as high as it had been before. The general revival which set in after 1879 in all civilized countries did indeed check the downward tendency, and in some countries brought about an appreciable rise. But this counter-movement by no means offset the marked fall which had preceded it; and in any case it soon came to an end, and was followed by a new fall, which has continued with no considerable interruption to the present time (1891). It is true that some part of the fall is no more than a recoil from the abnormally high prices of the years 1871-73. It is true, also, that some commodities have shown a tendency to rise, and that in one very important respect—in money incomes and the money rate of wages—there has been a striking exception to the general movement. Further, it must be borne in mind that even the lowered level which has now been reached cannot be described as abnormally low, being still as high as that which obtained at the middle of the present century. But on the whole, the fact of a general fall in the prices of commodities during the last fifteen or twenty years cannot be denied. The fall has not been uninterrupted; it has not been so rapid or general as to bear on the face of it proof of harmful results; but it has been steady, and, in the opinion of the present writer at least, is likely to continue slowly and steadily for some time to come.

Recently, therefore, those who combat the bimetallist reasoning have taken a different position. They have reasoned that while prices may in fact have gone down, the fall is not due, as the bimetallists allege, to an appreciation of gold. It is to be accounted for, they say, by other causes, notably by the extraordinary improvements in the production of commodities. New inventions and the perfecting of old ones have cheapened almost all manufactured articles. Raw materials and food products have been cheapened partly by the discovery of new sources of supply, and partly by that improvement which has been transforming the industrial situation more radically than any other—the wonderful cheapening of transportation by railways and steamships, which has made theresources of the plains of our West and of the sheep-runs of Australia available for the supply of the markets of London and New York.

So far as this train of reasoning undertakes to explain the mode in which the fall in prices has been brought about, it seems to me impregnable. But in so far as it endeavors to disprove the appreciation of gold, or to show that the general fall is not due to this appreciation, I have never been able to see its force. In truth, both the bimetallists and their opponents seem to confuse the question when they speak of the appreciation of gold as causing lower prices. The appreciation of goldisthe general fall in prices. The two are not related as cause and effect; they are simply two names for one and the same thing—namely, a different rate of exchange between gold on the one hand and commodities in general on the other, by which the same amount of gold buys more commodities than before. When the general fall in prices is admitted, the case of the bimetallists as to the appreciation of gold is established once for all. Improvements in the production of commodities may explain how it happens that they are more abundant, and exchange on less favorable terms with gold, of which the quantity has not been increased by new rich mines or great improvements in production; but the fact of the depreciation of commodities, or of the appreciation of gold, is not thereby explained away.

Nevertheless, the improvements in production do seem to me to have an important bearing on the question in hand: a bearing not on the simple fact of the appreciation of gold, but on the social consequences which are said to flow from it, and therefore on the questions of policy which are here under consideration. A moment's thought will show, for example, that a general increase in the efficiency of labor affects very materially the mode in which a fall in prices acts on the relations of debtor and creditor. If A borrows from B a hundred dollars, repayable in five years, and if at the end of the five years prices in general have fallen to one-half of the previous rates, B, in paying back to A the one hundred dollars, clearly returns twice as many commodities as he got. But if, at the same time, the efficiency of labor has been doubled by improvementsin production, B can produce with the same labor twice as many commodities as before; and he returns to A the product of the same quantity of labor as he received. The classic economists and the socialists (at least some schools of socialists) have maintained alike that the ideally perfect standard of justice in the exchange of commodities and services is equality of sacrifice or labor; that if things so exchanged for each other that equal sacrifice got the same reward, complete justice would be attained. Applying this test to the relations of debtor and creditor in the case supposed, we find it not one of hardship to the debtor, but apparently one of justice to both parties. It is true the creditor gets more commodities than he gave; but he gets the product of the same amount of labor as he devoted to the commodities originally lent; and why should he not share with the rest of the community the benefits of a general increase in the productiveness of labor?

This line of reasoning will become simpler and more concrete if we approach it from another point of view. Reference has already been made to the most striking and important exception to the general tendency of prices to fall, namely, that money wages and incomes in all civilized countries have shown a tendency not to fall, but to rise. Whether the incomes of the rich have increased faster than those of the poor, or whether the movement has shown itself with rough uniformity for all classes, is immaterial for the present discussion. The admitted fact of a general upward movement alike among rich, middle class, and poor is the significant thing. In other words, there has been an inverse movement of money wages and of the prices of commodities, the one going up while the other went down. Now, such an inverse movement is what must take place in case of any real improvement in material welfare. The only concrete way in which civilized people can become better off, is by being able to buy more—by their money incomes going further in the purchase of commodities. The improvement may take the form either of higher money incomes, with stationary prices; or that of stationary incomes, with lower prices; or the intermediate form which in fact seems to have occurred, of money incomes rising somewhat and prices at the same time falling somewhat. If we assume amonetary supply that is limited, or does not increase as fast as improved means of production cause the quantities of commodities to increase, one or the other of the two forms last mentioned must be found.

In such a state of things there can hardly be said to be any real hardship for the debtor. It is true that prices have fallen, and that the money he repays the creditor will buy more goods than it did when the loan was contracted; but his own money income has risen, or at least has not fallen, and the repayment of the loan can cause him no special hardship—none greater than he must have expected. The case clearly differs fundamentally from that of a simple rise in the value of money, or general fall in both prices and wages.... The fall in prices in the United States since 1879, and that in European countries in the period since 1873, are the result, on the whole and in the long run, of ... the general improvements in production; they have not been accompanied by a fall in money incomes, and they cannot be said to have caused an increase in the burden of debtors.

The reasoning of the preceding paragraphs bears also on the second part of the bimetallist indictment—that, namely, as to the depressing effects of falling prices on industrial enterprise. Whether a simple rise in the value of money, unaccompanied by any other circumstance, would have the depressing effects which the bimetallists predict and the classic economists deny, is a question radically different from that which in fact presents itself. It may be that in this simple case the bimetallists might prove to be, in some degree at least, in the right, and that the classic reasoning, here as on many other subjects, while sound in the long run, would need some qualifications and correction. In the long run, no doubt, it is immaterial whether prices are high or low, whether money returns fall or rise; and yet it might turn out that the habitual association of gain or loss with "making money" would cause a period of simple falling prices to be one of hesitating investment of capital and unenterprising conduct of business. But what the world in fact has seen has been the complex case of a fall in prices accompanied by great improvements in production. The business man and capitalist has had, to be sure, todeal with falling prices; but the same amount of capital and labor has turned out more commodities than before; and his total money returns, so far from declining, have generally increased. The money incomes of the managers of industry have shown the same upward movement as the money incomes of the other classes in society. So long as this is the case, it is idle to talk of a depressing effect on enterprise from the fall in prices, or of a strangling of the industrial organism from insufficiency of the circulating medium. In fact, the immediate cause of the fall in prices has been the pushing on the market for sale of larger and larger quantities of commodities, produced with profit at lower and lower cost: a state of things fortunate for the community, and surely not depressing for the business man....

This effect on the entrepreneur of improvements and of falling prices combined, doubtless accounts for the failure of the bimetallist agitation to secure any appreciable hold in the business world. The bimetallists, both in England and on the Continent, have labored zealously to engage support among the business men, but never with a degree of success at all proportionate to the energy displayed. The simple reason is that the business world has not been in any state of chronic depression. In the ups and downs of industrial activity there have been periods which seemed to confirm the pessimistic accounts of the bimetallist and of other persons malcontent with the present order of things; but in due time the tide has always turned....

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