FRANCE: THE REFORM OF 1726
Ten years later a third recoinage was ordered, the louis d'or being issued at 15 livres, and the louis d'argent at 4 livres. By 1709 these species had sunk in equivalence to 12 livres 15 sols. and 3 livres 8 sols. respectively. In that same year, however, their issue value was raised to 20 livres and 5 livres. This extraordinary and arbitrary action was greatly to the detriment of French commerce, and the idea was entertained of gradually reinducing the standard of 14 livres and 3 livres 10 sols. This was ordered by proclamation of 30th September 1713, which was to continue in force till 1715. In the latter year a reformation of the coinage was again undertaken, thereformed species rising to 20 livres and 5 livres, and the worn species remaining at 16 livres and 4 livres. From this latter date up to 1721 the operations of the financier John Law wrought great disasters in the monies. At the time of the erection of the bank, 2nd May 1716, there were four species oflouis d'orand three oflouis d'argent. By 1720 the former had grown to forty in number and the latter to ten. (For the disorders of the period of John Law, see the account of French monetary system,Appendix VI.) It was to remedy this disorder that the great edict of 1726 was enacted. This edict, which formed the basis of the French currency system almost up to the days of the Revolution, prescribed the minting of louis d'or at a tale of 30 to the mark, and issued at a value of 20 livres; and of silverécusat 83â„10to the mark and issued at 5 livres—divisional coins in proportion. The legal ratio was therefore 145â„8. All foreign coins and the ancient species of gold and silver were decried, and ordered to be brought in for reminting. All the prohibitive regulations of an old régime against cutting and export, etc., were re-enacted with severest penalties. But as the rate at which the Mint was ordered to take in the old coinage did not represent the commercial value at the moment, the old coins were not brought in, and up to as late as 1749 the recoinage had not been accomplished, although the Mint prices had been at different times advanced on the whole a matter of 30 per cent. or more. In 1759 the want of currency had become so great that the King sent his plate to the Mint, and numbers of private individuals followed his example, receiving in reimbursement part payment at the rate of 861 livres 5 sols. 10 den. for the mark offine gold, and of 59 livres 5 sols. 10 den. for the mark of fine silver.
This latter tariff underwent no change until 1771, when, under the pretext of the changes which foreign coinage tariffs had undergone, those terms were fixed respectively at 709 livres and 48 livres 9 sols.
In this résumé the mention of billon money has been generally avoided, as unduly complicating the subject. But in the legislative action of France in the eighteenth century there is one act which necessitates a momentary departure from this standpoint.
In 1738 the Government of the United Provinces diminished the value of theirsols.by one-half. The French Government fearing that this diminution would lead to an immense influx of such sols. decided to follow suit. By a decree of August 1st of the same year, 1738, it was ordered that theDouzainsand pieces of thirty deniers should have course only for eighteen deniers. The important point to notice in connection with this is that, in order to mitigate the effect of this reduction, the same decree limited the tender of such billon money. It was ordered that in payments up to 400 livres not more than 10 livres should be tenderable in billon, and for payments of more than 400 livres not more than1â„40of the total. The restriction was ineffectual in preventing either the import of foreign billon specie or the operations of billonage or arbitrage, based on the differentiated value of the various kinds of billon circulating. This is quite evident from the preambleof the edict of the following October, 1738, which attempted the calling in of the 30-denier pieces, in order to put a stop to the process.
FRANCE: THE REFORM OF 1785
Such a failure is quite in keeping with all previous experience as recorded in these pages, and deserves no special reference. The point to note is rather the gradual evolution and adoption of the idea of limiting the tender of the lower species, so as to contract their action on the main species of the currency. This idea forms the complement of the idea of an agio, involved in the issue of fractional coins on a lower standard or basis than that of the greater specie. The one idea was—in long, over-long, periodsi.e.—impracticable without the other; but together, when finally evolved, thoroughly seized and put in practice, they formed the main basis of the truest modern currency system.
To return to the pure gold and silver species. The basis of 1726 remained at law unaltered until 1785. The edict of the 30th October of that year commanded a recoinage; no change was made in the silver coinage, which remained according to the tariff of May 1773, namely, 52 livres 9 sols. 2 den. to the mark fine. By the alteration of the tariff of gold, however, to 828 livres 12 sols. to the mark fine, the ratio of 145â„8, which had nominally prevailed since 1726, was altered to the memorable 151â„2. The reason was explicitly stated to be the increase in the value of gold during several preceding years—an increase which had banished or detained gold from the French Mint and even from France.
Writing in 1785, the minister, Calonne, who proposed and executed the recoinage in that year,spoke thus:—
"In 1726 the legal ratio was fixed in France at 14 marks 5 oz. of silver, to a mark of gold, and that which proves with how much sagacity this point was seized is the fact that during a long course of years France retained in her circulating medium a sufficiently large proportion of each metal. Nevertheless, her gold gradually became less common, and for some years this scarcity has rapidly increased, and this precisely because its legal value has always remained the same, while its metallic value has increased from year to year."
He estimated the amount of livres inlouis d'orexisting in the country at the time of the recoinage, 1785, as 650 million livres, which amounted to only a half of the total coinage (1300 million livres) of the period 1726-85. What seems to have determined Calonne to adopt 151â„2was the fact that Spain had the legal ratio of 16, and that there was a probability that, in future, gold would rise in value. As for the market price, he admits that it was only 15.08-15.12 in 1785. The recoinage, therefore, brought a profit of 7,255,216 livres to the King's purse, and a profit of 21,600,000 livres to the holders of the oldlouis d'or.
FRANCE: CALONNE'S POLICY IN 1785
His policy was severely criticised in a reportmade in 1790 to the National Assembly, which proposed a silver standard, with an authorised circulation of gold coins at the ratio of 147â„9and the abolition of seigniorage. It is well known that this was nearer to the market rate. Calonne's ratio, therefore, must be regarded as arbitrary and designing. Practically, the latter recommendation of the committee's paper of 1790 had been conceded in the decree of 30th October 1785, as the seigniorage was by it allowed to be no more than the net cost of reminting.
By this celebrated edict of Calonne's, which also enacted a recoinage, the right of seigniorage was practically finally relinquished for France. Fixity was given to silver as the principal money, and a definite ratio was established at which gold was to circulate by its side. In these, its chief points or characteristics, it formed the exact model for the later Act of Republican France, which is ignorantly looked upon as having created the bimetallic system. The Act of 7 Germinal anXI.did but re-enact and perpetuate the edict of 1785.
It is important to reaffirm and emphasise this point, as quite wild and blind estimates have been formed of the later action of Republican France. In merest fact, that later action created no new order, it instituted no new idea, it did not even promulgate its own theory.
FRANCE: CURRENCY LEGISLATION AT REVOLUTION
Republican France began her reform of the currency in a very temporary and opportunist manner by issuing a mass of inferior monies of 15 and 30 sous pieces to form the basis of the assignats, and to replace the gold and silver which had almost entirely disappeared from circulation. In the decree of 16 Vendémière anII.(7th October 1793), however, the question of standard was approached, and decided in a remarkable manner. The monetary unit was decreed to consist of the hundredth part of a kilogram, namedgrave, represented (1) by a piece of silver9â„10fine and weighing 10 grms., (2) by a piece of gold of the same weight and standard, to be current at 15 times the value of the silver piece.
This decree remained a dead letter, and two years later thefrancwas definitively adopted as the base of the French system. As determined by the two laws of 28 Thermidor anIII.(15th August 1795), that system was based upon the silver franc (weighing 5 grms.9â„10fine). A gold coinage was ordained, of the same fineness, in a piece of 10 grms. weight, but the ratio of value of the gold to the unit franc was not fixed. This was exactly the monetary system which Mirabeau had counselled in his memoirs to the Assembly in 1790. The silver5-francpieces prescribed under this system found acceptance, the bronze pieces were refused and had to be withdrawn, and as to the gold piece, its issue was not even attempted. Two years later the "Directoire" pronounced in favour of maintaining the 10-grm. piece of gold, but demanded the fixation of its value, proposing a ratio of 16:1. In opposition to this scheme, Prieur submitted to the "Council of the Five Hundred" a project adopting the silver and gold coinage, asalready determined as above, but leaving the value of the gold piece to fluctuate according to the market, its value being declared twice annually by public announcement. After being materially altered in the "Council of the Five Hundred," this scheme was definitively rejected by the "Council of Senators," and for several years the question of the monetary system of the Republic was allowed to slumber. When, in the yearX., the consideration of the subject was resumed, it was at the instigation of the Consuls. At their desire the Minister of Finance, Gaudin, laid before the Council of State a scheme in which he proposed the issue of 20 and 40-franc gold pieces, of a value based on the ratio enunciated in the edict of 1785, namely, 151â„2. He was, at the same time, careful to explain that silver remained the basis of the currency, and that the gold money could be reissued if a different market compelled a change in the ratio. In his report to the Consuls, Gaudin admits that the commercial ratio had for a long time been under 15. The decisive point which led him to maintain the ratio established in 1785 was, that to change thestatus quoby the adoption of 15 as a ratio would occasion great loss to the holder of gold coins, and that there was no sufficient reason for so great a change.
The Financial Committee of the Council of State at first rejected the scheme, preferring that of Prieur, already described, but on an inquest, ordered by the First Consul, who insisted on pressing the matter to a conclusion, M. Gaudin carried his propositionsthrough the Council of State, but with the important difference that the reference to any future change in the ratio of gold to the basis of silver was tacitly dropped. These propositions became the foundation of the law of 7-17 Germinal anXI.(28th March 1803), on which the monetary system of Republican France was finally built.
Theexposé des motifsof this law speaks of the gold coins in these words:—
"The gold pieces up to the present in circulation are the pieces of 24 and 48 livres tournois. Article 6 of this law substitutes in their place pieces of 20 and 40 francs. The adoption of the decimal system necessitates this change, which brings all parts of the system into accord. It is on the sameconsiderationthat the standard is fixed at9â„10, like that of silver."
Not a word is said as to the ratio, and much more stress is laid upon the suppression of billon money and on the abolition of seigniorage, as of greater importance and benefit to the nation's interests. By this law of GerminalXI.the monetary unit of the French system was declared to be the silver franc, weighing 5 grms. of9â„10standard. By the side of this franc and its multiples, were to be issued gold pieces of 20 and 40 francs, valued on a basis ratio of 151â„2to the silver.
FRANCE: THE REFORM OF 1803
It will be seen at a glance from the course of this previous history that this law instituted no new principle, or theory, or system in French currency. The decimal system was adopted in place of the old system of livres tournois, seigniorage was abolished, and fixation of value given to the unit money, and billon money discontinued. But in matter of standard and system there was not even innovation. The system of Republican France, as established by this law, was no more and no less bimetallic than in 1785, or than in 1610, or in the days of FrancisI.Theories as such did not occupy the mind of the legislator, and of any conception of a bimetallic theory or system such as we have learned to know there is no trace. The First Consul found at hand the two metals which had formed the currency of his country for centuries. The problem of their regulation was the same which had been faced by his predecessors for centuries, and he settled it in the same practical untheoretic way.
It was only gradually that in its totality of coins the French monetary system was made to conform to the metric system thus established. The old gold coins of 12, 24, and 48 livres were not suppressed until June 1829, the actual extinction of billon money was only accomplished in 1845, and the recoinage of the inferior monies in 1852-56. But such are mere matters of detail and apart from the subject.
The experience of France under this new régime is, therefore, in no wise differentin kind> from such experience as has been described for the preceding centuries. It is not until the broaching of a bimetallic theory as such, and until the expression of that theory, as a theory, in the formation of the Latin Union, that anything like a special significance attaches to the monetary system and experience of France in the nineteenth century, any more,e.g., than in the seventeenth. The main difference in the situation was not that France had changed her system, and that her experience was henceforth different and of different signification, but that England had changed hers, and that the brunt of the fluctuations of the precious metals about a fixed ratio was left to be borne by a smaller area. The influence and the instance is, therefore, more telling in degree, but in no way different in kind.
The second idea which is commonly entertained with regard to the action of France during this later period, viz. that her action secured for the world at large a fixed and steady ratio, is equally—indeed, still more—fallacious. At no point of time during the present century has the actual market ratio, dependent on the commercial value of silver, corresponded with the French ratio of 151â„2, and at no point of time has France been free from the disastrous influence of that want of correspondence between the legal and the commercial ratio. The opposite notion, which prevails and finds expression in the ephemeral bimetallic literature of to-day, is simply due to ignorance. From 1815 England has been withdrawn from this action of a bimetallic law, and the modern insular pamphleteer has before his eyes no sign ofits workings in his own country. He therefore assumes an universality of such experience, and attributes it to the French legislative ratio. It is in no polemic spirit, but simply in the interest of science that this particular misapplication of history to the squaring of a theory is to be branded. The plainest facts of history are thereby absolutely misrepresented, and the assumption of cause and effect is so far from being true that the repose of the English currency history in the nineteenth century is to be attributed to theabsenceof a bimetallic system; to its despite rather than its presence and influence. To instance only by France for the moment.
FRANCE: COURSE OF THE RATIO
The course of the actual or market ratio has been already stated in the table (supra, pp.157-59). In the graphic representation of this (opposite) the legal ratio of 151â„2is represented by the fixed linex.y., the actual ratio by the fluctuating black linez. At no point do these lines coincide. After three years of fluctuations, 1803-06, now above and now below, the ratio sinks persistently below for seven years, 1807-13, touching the lowest point (a ratio of 16.24) in 1813. For the succeeding five or six years, 1813-19, the ratio was as consistently above the legal rate, though with less violence and width of divergence. From the latter year, 1819, up to 1850, its course was undeviatingly below 151â„2, then from 1851-67—the period,i.e., of the greatgold outputs of Australia and America—as undeviatingly above. From the last-named date until the close of the bimetallic system in France, and, indeed, up to our own days, the course of the commercial ratio has been again unbrokenly below the 151â„2ratio, and, as is too well known, with an ever-increasing enormity of divergence.
So much for the claim that the French law has dowered the world with a steady ratio.
Secondly, what has been the influence of this divergence of the commercial from the legal ratio upon France's store of precious metals? It has been exactly similar in effect and force with that wielded by similar trains of event and circumstance, in the monetary history of France during the four preceding centuries. The exact official figures of the import and export of gold and silver are not obtainable before 1822, and in a continuous stream not before 1830 (separably for the two metals, that is to say).[15]
FRANCE: BIMETALLIC EXPERIENCE, 1803-75
From the latter date, however, the testimony of the figures is as explicit as it is forceful. From 1830 to 1850, while the ratio remained continually below the legal 151â„2, there was a profit on the import of silver, and a persistent and heavy import took place. In 1830 the (balance of the) silver imported amounted to a matter of 6 millions sterling, in1831 to 71â„4millions, in 1834 to 4 millions, in 1837 to over 51â„2millions, in 1838 to nearly 5 millions, in 1841 to nearly 5 millions, in 1843 over 4 millions, in 1848 to over 81â„2millions, and in 1849 to nearly 10 millions. There was not a single year that was not accompanied by this import, and over the whole twenty-two years the total of importations reached the enormous figure of, approximately, 92 millions sterling. It must be clearly understood that this sum represents not the gross but the net importation or balance of imports over exports, and that the money passed into the currency of the country, taking its place as such and displacing goldpari passu. The movement of gold in the same time is represented by the red line in the accompanying diagram. Within the limits of very considerable exceptions, the correspondence of its fluctuations with those of gold is clearly perceptible. The silver, on whose coinage a profit or premium was offered by the existing French law to individuals, could only be bought or paid for by the export of gold or services and goods. During these years, 1830-50, it was quite apparently by the latter method, namely, by remittance of goods, as on the whole period there is a slight gain of gold, nearly 3 millions, contrary to what bimetallic law would have led to expect. The correspondence, however—a simultaneity—of the two movements, of import of silver and export of gold, is strongly marked in the years 1834-39 and 1841-48, and the failure of correspondence of the totals is to be explained by the statistics of French foreign trade balances during the years named.
With the year 1852, the decisive change in the ratio sets in with the new gold influx.The ratio rises above the 15.5 of the French law, and the profit on the importation and coining of silver vanishes. Its place is taken by a corresponding profit on the importation and coinage of gold. The fourteen years during which the ratio remained above the legal 151â„2witnessed the importation into France of a total net (or balance) of gold to the amount of 135 millions sterling, and a total net or balance of exportation of silver of 662â„3millions sterling. The coincidence of actual fluctuation will best be seen by the graphic representation of it in the table. With 1865 the final and, so far as the nineteenth century is concerned, the fatal change of the commercial ratio sets in. It sinks persistently and increasingly below the legal 151â„2, in face and spite of the united mintings of the Latin Union, and at once the premium on the importation and coinage of gold changes into one on silver. From 1865 to 1875, one year before the abandonment of the coinage of the 5-franc piece and the consequent relinquishment by France of the bimetallic system, her net imports of silver amounted to 56 millions sterling.
As far as these figures of import and export are concerned, they show only thefinalresults of the action of bimetallic law. The metal on whose importation and minting a premium was obtainablewasimported, and in large quantities. That is the single fact standing out in large. The reciprocal fact—of a corresponding export of the metal over whosehead the premium offered—does not emerge so distinctly, simply by reason of the complication of the subject of exports of metals with the wider general movement of trade balances. It also is, however, distinctly perceptible and demonstrable. But this is to speak only in large and of final results. What the intermediate course of events—of see-saw and flux, was, can only be adequately grasped from the records of the mintings, conjoined with the records of net import or export of the two metals.
TABLE OF THE NET IMPORTS OR EXPORTS OF GOLD IN FRANCE UNDER THE BIMETALLIC LAW, 1822-75.Year.Net Import (Francs).Net Export (Francs).Year.Net Import (Francs).Net Export (Francs).18224,000,000...185217,000,000...1823...19,000,0001853289,000,000...182437,000,000...1854416,000,000...183010,000,000...1855218,000,000...183110,000,000...1856375,000,000...1832...39,000,0001857446,000,000...183324,000,000...1858488,000,000...1834...7,000,0001859539,000,000...1835...20,000,0001860311,000,000...1836...14,000,0001861...24,000,0001837...6,000,0001862165,000,000...1838...4,000,000186312,000,000...183924,000,000...1864125,000,000...184049,000,000...1865150,000,000...1841...5,000,0001866465,000,000...1842...12,000,0001867409,000,000...1843...41,000,0001868212,000,000...1844...6,000,0001869275,000,000...1845...14,000,0001870119,000,000...1846...9,000,0001871...214,000,0001847...13,000,0001872...53,000,000184838,000,000...1873...108,000,00018496,000,000...1874431,000,000...185017,000,000...1875454,000,000...185185,000,000.........
TABLE OF THE MOVEMENT OF SILVER DURING THE SAME PERIOD.Year.Net Import (Francs).Net Export (Francs).Year.Net Import (Francs).Net Export (Francs).1822125,000,000...1852...3,000,0001823114,000,000...1853...117,000,0001824124,000,000...1854...164,000,0001830151,000,000...1855...197,000,0001831181,000,000...1856...284,000,000183260,000,000...1857...360,000,000183375,000,000...1858...15,000,0001834101,000,000...1859...171,000,000183574,000,000...1860...157,000,000183627,000,000...1861...62,000,0001837144,000,000...1862...86,000,0001838120,000,000...1863...68,000,000183975,000,000...1864...42,000,000184096,000,000...186572,000,000...1841117,000,000...186645,000,000...184292,000,000...1867189,000,000...1843103,000,000...1868109,000,000...184482,000,000...1869112,000,000...184590,000,000...187035,000,000...184647,000,000...187115,000,000...184753,000,000...1872102,000,000...1848214,000,000...1873181,000,000...1849244,000,000...1874360,000,000...185073,000,000...1875194,000,000...185178,000,000...
TABLE OF THE COINAGE OF GOLD IN FRANCE, 1803-75, DURING THE BIMETALLIC RÉGIME.Year.Gold (Francs).Silver(Francs).Year.Gold (Francs).Silver (Francs).180310,209,84023,171,988181046,070,60057,170,216180438,463,98047,517,1951811132,135,740256,399,040180520,474,50046,385,909181297,717,880160,786,409180638,533,76025,241,651181362,659,680134,900,313180718,019,9205,008,903181464,544,72061,244,121180832,311,26067,833,922181555,379,84037,673,806180915,206,44044,296,494181615,151,28034,917,526
TABLE OF THE COINAGE OF GOLD IN FRANCE, 1803-75, DURING THE BIMETALLIC RÉGIME—continued.Year.Gold (Francs).Silver (Francs).Year.Gold (Francs).Silver (Francs).181752,197,08037,143,57918477,706,02078,285,157181895,410,46012,406,076184839,697,740119,731,095181952,410,66021,235,077184927,109,560206,548,663182028,781,08018,436,620185085,192,39086,458,4851821404,14067,533,8661851269,709,57059,327,30818224,718,100100,679,137185227,028,27071,918,4451823408,18082,911,6801853312,964,02020,099,48818247,071,700114,476,0071854526,528,2002,123,887182545,616,36075,203,2911855447,427,82025,500,3051826925,54090,835,6231856508,281,99554,422,21418273,160,940153,868,9781857572,561,2253,809,61118288,025,740161,466,1331858488,689,6358,663,56818291,118,180102,642,6171859702,697,7908,401,813183023,516,640120,187,0891860428,452,4258,034,198183149,641,380205,223,764186198,216,4002,518,04918322,046,260141,353,9151862214,241,9902,519,397183316,799,780157,482,8631863210,230,640329,610183430,231,200218,288,3041864273,843,7657,296,60918354,550,06099,966,1491865161,886,8359,222,39418365,097,04043,242,3991866365,082,92544,821,40918372,026,740111,858,6971867198,579,510113,758,53918384,940,14088,489,3241868340,076,685129,445,268183920,670,00073,637,742186934,186,19068,175,897184040,998,24063,795,527187055,394,80069,051,256184112,375,06077,517,941187150,169,88023,878,49918421,852,72068,391,1701872—26,838,36918432,826,60074,148,9981873—156,270,16018442,742,26069,134,980187424,319,70060,609,9881845119,14089,967,6091875234,912,00075,000,00018462,086,42047,886,145
During the years 1820-50, when the ratio remained below the legal 151â„2and there was a profit on the import of silver, the total silver coinage of the French Mint amounted to £127,458,322, while that of gold reached only £19,333,854. In the succeeding period, 1850-66, when the ratio changed and remained for fifteen or sixteen years in favour ofgold, the total gold coinage reached £292,416,951, while the total silver coinage was scarcely more than 11â„4millions (£1,315,532).
At the beginning of this second period, 1851, the Bank of France held in its reserves approximately only 31â„2millions sterling of gold, whereas its silver amounted to more than 19 millions. At the close of the period indicated, 1866, the bank was holding 23 millions sterling of gold against nearly 51â„2millions of silver. In the former case the proportion of silver formed 85 per cent. of the total, in the latter only 19 per cent.
TABLE OF THE RESERVES OF THE BANK OF FRANCE, 1851-76.Year.Gold (Million Francs).Silver (Million Francs).Percent of Silver to Total.Year.Gold (Million Francs).Silver (Million Francs).Percent of Silver to Total.18518347885186427394271852694428618652382084418531022146718665761361918543011933918676973183118557214766186866247442185694104531869461798631857110126521870429691418582942604718715548013185925032956187265613417186014427265187361114819186122510030187410133142418621871083618751168504301863119723718761349540281â„2
The statistics of the Latin Union, up to the suspension of the bimetallic system will be separately dealt with.
Speaking only of the experience of France during these years of bimetallic régime, the ebbing andflowing experience which has throughout been instanced as the chief characteristic of such régime is most strongly marked. The legal ratio did not give the market ratio, and so far was it from giving France a stable currency, it was the one thing which unsettled it and made a stable currency impossible. Theexposé des motifsof the law of 1876, which will be referred to in another connection below, puts the matter with official brevity. "The variations of the commercial from legal 151â„2ratio remained normal during the years 1824-67. All the same they sufficed to modify greatly the composition of the French circulation. After the predominance of silver, which became marked in 1847, the ratio from 1847-67 introduced gold in a large proportion, and measures had to be taken to retain in France the smaller silver coinage. Our silvermonnaie d'appointof .835 fine was created for this purpose."
To regard this question from a theoretic and international point of view, to the exclusion of any regard for the separate national interests of France, is a sheer absurdity. It mattered little or nothing to France that by unloading the stores of silver she happened to possess at the time of the gold discoveries of the Fifties she helped to steady the ratio for the world at large. It did however matter, and very much, that this process of exchange from the one metal to the other was attended with public loss, balanced only by illicit private gain, and with a disturbance of trade in every town of Francethrough the disappearance of the smaller silver specie. Whether or not France or any other country is called upon to sacrifice herself thus—not once but every time the ratio fluctuates from below to above the legal ratio orvice versa—for the sake of an ideal, bimetallic, regulating, function, let common sense decide.
The French monetary commission of 1867 speaks thus of the situation—
"It is well known by all that this ratio [of 1803] by the simple reason of its being fixed could not remain correct. There was quickly a premium on gold, and silver remained almost alone in circulation until near 1850. The discovery of the mines of California and Australia suddenly changed this situation by throwing into the European market a very considerable quantity of gold. By the side of this force, which tended to create a divergence from the legal ratio by lowering gold, there was another which occasioned a rise of silver. Under the influence of various circumstances, too long to enumerate, the needs of the extreme East had grown in unusual proportions, and as silver is alone in favour there, it was exported in enormous masses. There was a premium on silver to the extent of 8 per mille, and it disappeared almost completely from circulation, yielding place to gold.
"Preoccupied by the situation the Government charged a commission to study the measures to be taken. Its labours are summed up in the report ofM. de Bosredon (1857). After examining the system tending to preserve silver money intact by lowering the value of gold money, and conversely the system tending to the adoption of the gold standard by reducing the silver money to the state of billon, the commission did not decide between them. It confined itself, in fact, to counselling the Government to a transitory step—the raising of the export duties on silver.... The exportation of silver, therefore, continued; and if the disappearance of 5-franc pieces was not remarked, because they were replaced by gold, it was not the same with the scarcity of pieces of a smaller value employed in petty payments.
"Being informed of the obstruction to retail commerce by complaints carried before the Senate, and instructed by the example of Switzerland, which had in 1860 reduced the standard of its divisional money, the Minister of Finance appointed a commission, 1861, to study the remedy to be applied to the evil. This commission counselled the reduction of the standard of pieces of less than 5-francs to .834 fine. It did this in complete knowledge of the cause, fully recognising that in so doing the monetary unity of silver, characteristic of our system, would be thereby broken, at anyrate for its circulating form; for while the franc no longer existed in law, the 5-franc was disappearing in fact, so that the change was equivalent to the establishment of a gold standard."
This advice of the commission was however, bythe law of 1864, applied only to pieces of 50 or 20 centimes.
The next step in the process was the formation of the Latin Union in the year following. The above-quoted commission speaks of the intentional aspect of this Union in these words: "This convention places in the front rank gold money, and reduces the pieces of silver of 2 francs and less to therôleof token money. It therefore definitely determines [consacre] the ascendency of the gold francs, and solves practical difficulties arising from the double standard."
This was written in 1867, less than two years after the formation of the Latin Union. It is not the view which prevails among bimetallists to-day as to the purpose and intentional bearing of that Union; but it is the historic truth none the less, and it was only the complete revolution in the conditions of production of the precious metals which made itself felt from 1871, which has given the Latin Union the aspect of a theoretic concert for the maintenance of, rather than as a defence against, a bimetallic system. If silver had not fallen in 1871 the Latin Union would still be the bulwark of defence of bimetallic France against the action of bimetallic law.