FOOTNOTES:

ENGLAND: THE SITUATION IN 1638

The drain of coinage to France he distinctly attributes to the raising of the French coins. "At this present in France the native merchants there match us with such a point of policy that it would be hard for our merchants to be master of.... Since the raising of our 20s.-piece to 26s. there ... they have advanced the price of their commodities according to their advanced monies, to the full sum of 6s. in the pound more than they were before."

ENGLAND: SIR ROBERT STONE ON THE MINT

During the Civil Wars there is a remarkablepaucity of reference to the subject, doubtless owing to the supreme importance of the war itself. On the 26th August 1643, and on the 24th February 1643-4, the Long Parliament issued orders, on the petition of merchant strangers who were prevented from importing bullion by the rigours of the search of their vessels, for their due encouragement. The petitions would argue a tendency towards an importation of specie, but in 1649 this was again changed, and a heavy export became perceptible. There can be little doubt that the initial impulse came from the new coinage which was instituted by the Act of 17th July 1649, and by the table of weights for the Commonwealth coins which that Act adopted. For two years and more both Council and Parliament were exercised in mind with regard to this export of specie and the consequent decay of trade, and draft Acts to prevent the export, as well as many other propositions, were had under long consideration. No measures were adopted, and an Amsterdam correspondent of Sir Robert Stone, in May 1652, thus gave his opinion of the wisdom of the Mint officials and the Government in this process of drift: "Experience has taught me that when the State does not keep extraordinary watch, and the laws are not put into execution against culling and sorting out the heaviest coins to be transported, and the light and clipped left behind, it is a great debasing of the current value of coin. All your silver money (i.e.in England) is thus abused by goldsmiths and others. And when the State does not employ such as candiscover those offenders, but puts persons into the Mint who have had no experience, great damage must follow. For there are bankers and exchangers in Holland who know the ignorance of all your present Mint men that have any place of trust, and laugh at them. They say when the Mint in the Tower flourished, old Andrew Palmer, Mr. Rogers, and one Cojan were there, who were all subtle Mint men, and held correspondence here (i.e.in Amsterdam), and knew what to do to advance the Mint, and would always find a way to bring grist to the mill. But now your Mint comes to be neglected and money adulterated. Many of our bankers here have a great trade with your goldsmiths and merchants in London for English gold and heavy English silver. Your Mint will never go until this be discovered, for these men are the sluices that drain all your money. I believe there is at this day forty times more gold and silver in the Low Countries than in England. About twelve years since the French were forced to call in all their money, it being so clipped that their commerce ran into confusion, and you have almost brought yourself to the same point, the coin in Ireland being 20 per cent. less value since the war. In England almost all your gold is transported, and the little that is left is in hucksters' hands, that go to an exchange in Lombard Street, and you must pay from £6 to £10, and sometimes more, to have £100 in gold for silver. For who will take gold to the Tower to be coined, and lose 2s. in 20s. of whatthey can make by transporting it? We have more English gold in Amsterdam than you have (in England), all sent within those twenty years, and great quantities of English silver have weekly come over in pinks and Dutch men-of-war for years, to the value of many hundred thousands of pounds, in return for coin. I wondered at first how the merchants transported all the weighty and culled English money into Holland, until one of the bankers told me. I would have you inquire it and prevent it, for it is a most pernicious thing. It is the goldsmiths, especially those in Lombard Street, which are the greatest merchants, and London cashiers, and who will receive any man's money for nothing, and pay it for them the same or next day, and meantime keep people in their upper rooms to cull and weigh all they receive, and melt down the weighty, and transport it to foreign parts, sometimes without melting, and keep banks for all the principal coin in Christendom in their shops."

The succeeding years of the Commonwealth saw little change in the situation. In 1659 and 1660 the Council was still anxiously debating the question of the transport of bullion and coin. But this chain of phenomena refers to the third period in this history, and are to be treated of in that connection.

CLOSE OF THE SECOND PERIOD: RÉSUMÉ

In broadest and hastiest résumé, and this by way of justification of the length to which this chapter has been drawn out, the influence of American gold and silver makes itself perceptible in 1520. For forty years a level and equal advance in each of theprecious metals and in prices records itself, then the relative and absolute production of silver increases enormously over that of gold, and the ratio is disturbed. The inequality of the rate at which this change of ratio spreads to successive countries, and is adopted in their various Mint regulations, is the bullionist's or exchanger's opportunity, and the disastrous effect of their activity results in the crisis of 1570 in France, and 1622 in England and Germany. Properly speaking there has been no subsequent crisis in European history fitly comparable with the latter of these. If at all, there is only one comparison possible, and that is the currency situation in which the monetary world is at this moment, or which has come upon it since 1850—a period of bullion inflation in which silver has, finally as yet, outweighed gold, to the violent disturbance of the ratio. But, as will be seen, the other conditions of the comparison are not reducible to, or expressible in, similar terms, and so far the legitimate deduction fails. None the less, the currency history of Europe during the sixteenth and seventeenth centuries has a vital didactic importance.

FOOTNOTES:[9]The only accounts accessible are in Cabrera (see Philippson's "Estimate of the Revenues of Spain," in hisHenrichIV.and PhilippIII., vol. ii. p. 44), and relate only to the years 1599-1610. The amounts given are not the total yield of the American mines, which is out of the question, but the amount of metal brought yearly to Spain by the Silver Fleet. The amounts (without distinction of the metals) were as follow:—15998,000,000 Ducats.16009,926,192 Ducats.160010,000,000 Ducats.16011,000,000 Ducats.160210,000,000 Ducats.16037,000,000 Ducats.160414,500,000 Ducats.16069,000,000 Ducats.16064,500,000 Ducats.160712,200,000 Pesos.16089,000,000 Ducats.160910,600,000 Ducats.161010,000,000 Ducats.[10]For further details of the troubles of 1632-36, see Vicomte D'Avenel,Histoire de la propriété, etc., i. 120, 121.[11]Such is the statement of the proclamation itself. The difference between the ratios as there proclaimed and the ratios given in the table, pp.40and69, is presumably due to the calculation being made on the mark of pure metal. For the character of these figures of ratios see thePreface.[12]See Hirsch, i. 318.[13]"The second (cause for the decay of the trade of Spain) is the residence of many Genoa merchants amongst them, who are found in good numbers to abide in every good city, especially on the sea coasts, whose skill and acuteness in trade far surpassing the native Spaniards and Portuguese, and who, by means of their wealth and continual practice of exchanges, are found to devour that bread which the inhabitants might otherwise be sufficiently fed with; and by reason that the King of Spain is ever engaged to their commonwealth for great and vast sums at interest, he is their debtor, not only for their moneys, but also for their favour, which by many immunities throughout his kingdom he is found continually to requite them, and amongst the rest it is observed that there is no Genoa merchant resident in Spain, or any part, but has a particular licence to transport therialsandplateof this kingdom to a certain round sum yearly, which they seldom use really to do, but sell the same to other nations that are constrained to make their returns in plate for want of other more beneficial commodities, which, for the certain profit it is found ever to yield in other countries, is often preferred before all the other commodities of the kingdom."—Lewis Robert's Map of Commerce, p. 165.[14]By the action of bimetallic law is meant any action of bad money on good—of worn money on new—of higher rated (or lower valuable) money on lower rated (or higher valuable) money. It does not at all matter, especially in cases of debasement, whether there are two metals in the process or only one or even three. If a currency is silver, and part of it is debased and part left good there is bimetallic action, and the good disappears. Of course, the case is argumentatively and for deduction's sake much clearer if a currency is truly bimetallic in the ordinary sense.

[9]The only accounts accessible are in Cabrera (see Philippson's "Estimate of the Revenues of Spain," in hisHenrichIV.and PhilippIII., vol. ii. p. 44), and relate only to the years 1599-1610. The amounts given are not the total yield of the American mines, which is out of the question, but the amount of metal brought yearly to Spain by the Silver Fleet. The amounts (without distinction of the metals) were as follow:—15998,000,000 Ducats.16009,926,192 Ducats.160010,000,000 Ducats.16011,000,000 Ducats.160210,000,000 Ducats.16037,000,000 Ducats.160414,500,000 Ducats.16069,000,000 Ducats.16064,500,000 Ducats.160712,200,000 Pesos.16089,000,000 Ducats.160910,600,000 Ducats.161010,000,000 Ducats.

15998,000,000 Ducats.16009,926,192 Ducats.160010,000,000 Ducats.16011,000,000 Ducats.160210,000,000 Ducats.16037,000,000 Ducats.160414,500,000 Ducats.16069,000,000 Ducats.16064,500,000 Ducats.160712,200,000 Pesos.16089,000,000 Ducats.160910,600,000 Ducats.161010,000,000 Ducats.

[10]For further details of the troubles of 1632-36, see Vicomte D'Avenel,Histoire de la propriété, etc., i. 120, 121.

[11]Such is the statement of the proclamation itself. The difference between the ratios as there proclaimed and the ratios given in the table, pp.40and69, is presumably due to the calculation being made on the mark of pure metal. For the character of these figures of ratios see thePreface.

[12]See Hirsch, i. 318.

[13]"The second (cause for the decay of the trade of Spain) is the residence of many Genoa merchants amongst them, who are found in good numbers to abide in every good city, especially on the sea coasts, whose skill and acuteness in trade far surpassing the native Spaniards and Portuguese, and who, by means of their wealth and continual practice of exchanges, are found to devour that bread which the inhabitants might otherwise be sufficiently fed with; and by reason that the King of Spain is ever engaged to their commonwealth for great and vast sums at interest, he is their debtor, not only for their moneys, but also for their favour, which by many immunities throughout his kingdom he is found continually to requite them, and amongst the rest it is observed that there is no Genoa merchant resident in Spain, or any part, but has a particular licence to transport therialsandplateof this kingdom to a certain round sum yearly, which they seldom use really to do, but sell the same to other nations that are constrained to make their returns in plate for want of other more beneficial commodities, which, for the certain profit it is found ever to yield in other countries, is often preferred before all the other commodities of the kingdom."—Lewis Robert's Map of Commerce, p. 165.

[14]By the action of bimetallic law is meant any action of bad money on good—of worn money on new—of higher rated (or lower valuable) money on lower rated (or higher valuable) money. It does not at all matter, especially in cases of debasement, whether there are two metals in the process or only one or even three. If a currency is silver, and part of it is debased and part left good there is bimetallic action, and the good disappears. Of course, the case is argumentatively and for deduction's sake much clearer if a currency is truly bimetallic in the ordinary sense.

From the End of the First Cycle of American Influences to the Present Day, 1660-1894

Up to the close of the eighteenth century the production of silver shows a remarkable steadiness and uniformity—the decrease on the yield of the Potosi mines being compensated by the increased output of Mexican silver. In the condition of the output of gold, however, there is a perceptible alteration, due to the increasing imports of that metal from Brazil. The change in the relative production of the two metals appears from the table on p.155.

The effect on the ratio of this increased relative and absolute amount of gold was, however, considerably diminished by the increasing favour with which gold came to be regarded for currency purposes, from the end of the seventeenth century onwards. In general terms this process or tendency in favour of gold continued through the first sixty years of the eighteenth century, at which time the proportion of gold to the production of the two metals had risen as high as 40 per cent., whereas in 1600 it had only formed 17.2 per cent. of the total.

PRODUCTION OF THE PRECIOUS METALS, 1660-1893

From 1760, however, such relative preponderanceof gold was not maintained. It gradually sank back until, by the beginning of the present century, it had come to form only a little over 23 per cent. of the total. From 1820 to 1840 a recovery took place, but it was not until the Californian gold discoveries that the second great disturbance in the relative production of gold and silver took place; such a disturbance,i.e., as can be fitly compared with that which the sixteenth century witnessed.

Period.Annual Production of Gold.Annual Production of Silver.Percentage of Gold to Total.Percentage of Silver to Total.1661-1680£1,291,750£3,134,15029.270.71681-17001,501,7003,179,65031.167.91701-17201,788,4003,253,75035.564.51721-17402,661,6503,988,60040.060.01741-17603,433,1005,038,20040.559.51761-17802,888,3506,201,55031.868.21781-18002,481,7008,131,30023.476.61801-18102,480,0008,002,65023.776.31811-18201,596,1004,966,95024.775.31821-18301,983 1504,075,95032.467.61831-18402,830,3005,278,60034.565.51841-18507,638,8006,867,65052.147.91851-185527,815,4008,019,35077.622.41856-186028,149,9508,235,95077.422.61861-186525,816,3009,965,40072.127.91866-187027,256,95011,984,80069.430.61871-187524,250,00017,250,00058.541.5187623,150,00018,250,00055.944.1187725,050,00019,350,00056.443.6187825,950,00019,750,00056.843.2187923,350,00019,050,00055.144.9188022,800,00019,100,00054.445.6188122,450,00019,800,00053.146.9188221,450,00020,900,00050.749.3188320,750,00020,800,00049.950.1188421,750,00021,850,00049.950.1188521,750,00021,850,00049.950.1188622,450,00020,300,00052.547.5188722,050,00021,950,00050.149.9188822,950,00023,850,00049.051.0188924,600,00026,750,00047.952.1189024,360,00026,620,00047.852.2189129,000,00036,567,62942.457.6189230,164,53640,668,24742.557.5189332,066,59142,963,02742.757.3[D]

[D]The figures for the last three years are taken from the Report of the Hon. R.E. Preston, director of the United States Mint, 1893 (Report on the Production of the Precious Metals, pp. 274-5). Seeibid. for a most carefully compiled table of the production of the precious metals from 1493 to 1893, differing from the above in material details.

As far as thisrelativeproduction is concerned, the period, 1660-1840, is one of gradual and not abnormal variation, neither small nor inconsiderable in effect, but certainly not revolution-working, as had been the case in the sixteenth century with American silver, and as was to be in the nineteenth century with Californian and Australian gold, and in our own days with American silver for the second time.

With regard to theabsoluteproduction—gold shows a rise up to 1760, then a steady decline to 1820, followed by a second rise up to 1840. In the case of silver the decline in the absolute amount was steady from 1600 to 1680, then ensued a steady and strong rise to 1800, followed by an abrupt drop in the second decade of the present century, and then by a strong and steady recovery, commencing from 1830 and continuing until the present.

WIDE EFFECT OF MINT LAWS

The larger question of the relative distribution of this mass of precious metals depends for its determination upon a full understanding of the law of the various Mints. Speaking in large, during the eighteenth century the Mint ratio was in favour of silver in France, and her currency was almost entirely silver throughout the century; conversely the Mintsfavoured gold in England and Spain, and gold was almost the only constituent of the currency of either country for the greater part of the century. There can be little doubt that these simple facts had a great influence in actually determining the great currency legislation which closed the century and finally decided England in favour of gold, and France and the United States in favour of a bimetallism strongly favouring silver.

The statement of the ratio is as follows:—

South-West Germany.1657-8015.10Netherlands.166314.43England.166314.48169015.39171515.21France.167914.91

COMMERCIAL STATEMENT OF THE RATIO (FROM 1687-1832, FROM THE HAMBURG EXCHANGE RATIO; FROM 1833 ONWARDS, FROM THE LONDON BULLION BROKERS' RATIO).1687-814.941689-9015.02169114.98169214.92169314.83169414.87169515.02169615.00169715.20169815.07169914.94170014.81170115.07170215.52170315.17170415.22170515.11170615.27170715.44170815.41170915.31171015.22171115.29171215.31171315.24171415.13171515.11171615.09171715.13171815.11171915.09172015.04172115.05172215.17172315.201724-2515.11172615.15172715.24172815.11172914.92173014.81173114.94173215.09173315.18173415.39173515.41173615.18173715.021738-914.91174014.94174114.921742-314.85174414.87174514.98174615.13174715.26174815.11174914.80175014.55175114.391752-314.54175414.48175514.68175614.94175714.87175814.85175914.15176014.14176114.54176215.27176314.99176414.70176514.83176614.80176714.85176814.80176914.72177014.62177114.66177214.521773-414.62177514.72177614.55177714.54177814.68177914.80178014.72178114.78178214.42178314.48178414.70178514.92178614.96178714.92178814.65178914.75179015.04179115.05179215.17179315.00179415.37179515.55179615.65179715.41179815.59179915.74180015.68180115.46180215.261803-415.41180515.79180615.52180715.43180816.08180915.96181015.77181115.53181216.11181316.25181415.04181515.26181615.28181715.11181815.35181915.33182015.62182115.95182215.80182315.84182415.82182515.70182615.76182715.741828-915.78183015.82183115.72183215.73

STATEMENT OF THE RATIO, 1660-1893Year.Price of Silver Pence per Oz.Ratio.Year.Price of Silver Pence per Oz.Ratio.1833593⁄1615.931864613⁄815.3718345915⁄1615.731865611⁄1615.4418355911⁄1615.801866611⁄815.4318366015.721867609⁄1615.571837599⁄1615.831868601⁄215.591838591⁄215.851869607⁄1615.601839-40603⁄815.621870609⁄1615.571841601⁄1615.701871608⁄1615.571842597⁄1615.871872601⁄415.651843593⁄1615.931873591⁄415.921844591⁄215.851874585⁄1616.171845591⁄415.921875563⁄416.621846595⁄1615.901876531⁄1617.7718475911⁄1615.801877543⁄417.221848591⁄215.851878525⁄817.921849593⁄415.781879511⁄418.391850601⁄1615.701880521⁄418.0418516115.4618815111⁄1618.241852601⁄215.591882515⁄818.251853611⁄215.331883509⁄1618.651854611⁄215.331884505⁄818.631855615⁄1615.381885485⁄819.391856615⁄1615.381886453⁄820.731857613⁄415.271887445⁄821.131858615⁄1615.381888427⁄821.991859621⁄1615.1918894211⁄1622.0918606111⁄1615.2918904711⁄1619.1718616013⁄1615.261891451⁄1620.921862617⁄1615.351892393⁄423.741863613⁄815.371893359⁄1626.49Up to 1878 this table is derived from Soetbeer,Edelmetall-Produktion, pp. 130-2. From 1878-1890 I have calculated simply in accordance with Soetbeer's method.The figures for 1891-3 are taken from the United States Mint Report, 1893, already referred to, p. 251. In the table there printed the director of the Mint gives slightly different figures for several years from 1872 onwards.

Up to 1878 this table is derived from Soetbeer,Edelmetall-Produktion, pp. 130-2. From 1878-1890 I have calculated simply in accordance with Soetbeer's method.

The figures for 1891-3 are taken from the United States Mint Report, 1893, already referred to, p. 251. In the table there printed the director of the Mint gives slightly different figures for several years from 1872 onwards.

As far as the conditions of production of the precious metals are concerned, and the connection between those conditions and the ratio, there is historic and understandable continuity between the period already passed in review and modern times. In the method of expressing that ratio, however, there is a remarkable difference.

EVOLUTION OF THE MODERN SYSTEM

With the close of the seventeenth century the advantage of the process of altering the denomination of the coinage, of diminishing the content and reducing the standard of fineness, began to be impugned on theoretic grounds, and in the course of the eighteenth century that process itself fell into disuse. Since that time no Mint or legislative change such as we have hitherto described was made on the expressed value or content of any European coinage. Bearing in mind the twofold importance which was attached to that process of legislative guarding of the currency, this change must be regarded as of vital import. The legislator, from the middle of the fourteenth century, had attempted two things by this mechanism—(1) to follow the general rise of prices, and meet it by reducing the contents of the coins in such proportion as he thought fit; (2) to prevent any disastrous outflow of the precious metals by altering the ratio. The control of the Mint rates of metal-purchase and metal-coinage was, therefore, a matter of importance financially and politically to the nation, and economically to international commerce. In just such measure, therefore, was the entire ceasing of this State control of the mechanism of international exchange and currency a matter of almost incalculable significance in the history of the European monetary system. In the domain of finance it effected a revolution as signal as that produced in the relations of labour to capital by the disuse of the old labour laws. The ceasing of the artificial arbitrary Mint rates made way for a naturally determined orcommercialratio,and the regulation of the international flow of the precious metals was left to the oscillation of trade balances, and to the action of interest rates and discount. The change is one from a mediæval, State-bound, merely legislative system to the modern system, in which the flow of precious metals is determined by the perfectly natural and automatic action of international trade—is indeed the index and safety-valve of it, and of the whole present commercial world-circle.

This was not merely a change of fact and practice, it was a revolution of theory.

For before the old State belief in the necessity of safeguarding the supply of precious metals at any cost and consideration could go by the board, the whole Mercantile Theory must have lost its force in men's minds.

In the domain of theory the transition from the Mercantile to the modern system was gradual, through the various intermediate steps of Physiocratic and Smithian economics, and the complete abandonment of that system for our own can only be put very late, if indeed its period can at all yet be written, for modern Protectionist ideas are only a lusty survival of it. In the domain of financial practice, however, it—the mercantile system—ceased from the moment that the Governments of Europe left their Mint rates stationary, and gave the flow of the precious metals and the declaration of the ratio to the free unhampered natural action of international trade. The steps of the completed process can hardly be detailed, for therewas much fear attending it, and the various Governments frequently retraced their steps in uncertainty. The earliest direct enactment was made by England. By the Act of 15 CharlesII., chap. 7, sect. 12 (1663), the statutes forbidding the exportation of bullion were removed at one blow of astounding boldness. "Forasmuch," says this Act, "as several considerable and advantageous trades cannot be conveniently driven and carried on without the species of money or bullion,and that it is found by experience that they are carried in greatest abundance (as to a common market) to such places as give free liberty for exporting the same, and the better to keep in and increase the current coin of this kingdom, be it enacted that from and after the 1st day of August 1663 it shall and may be lawful to and for any person or persons whatsoever to export out of any port of England and Wales in which there is a customer or collector, or out of the town of Berwick, all sorts of foreign coin or bullion of gold or silver, first making an entry thereof in such customhouse respectively, without paying any duty, custom, poundage, or fee for the same, any law, statute, or usage to the contrary notwithstanding."

FREE TRADE IN THE PRECIOUS METALS

Standing so early and so almost completely alone as it does, this Act evinces an unexampled prescience and boldness. It doubtless reflects the commercial traditions of Holland, but that it should have been at a single stroke transferred to England at a time when she was so economically different and distant from Holland, needs make us pause in admiration. Theonly parallel to it, if any, would arise if France should suddenly, and by a single enactment, adopt to the full the Free Trade policy of England. As a matter of fact this Act of 1663 proved itself for a long time, and through many oscillations, impossible of execution, and far into the eighteenth century the British Government meddled, by legislation and proclamation, with the export of the precious metals, and with the tariff of the coins, as will be seen immediately. It was not till 1780 that a similar Act was passed for Ireland.

In 1803 the Lords of the Treasury were by statute authorised to grant licences for the exportation of silver bullion without any such certificate or document whatsoever as had been required by the statute of 6 and 7 Wm.III.c. 17, sect. 5.

It was almost a century after this action of England that France followed in the same path. By a proclamation of 7th October 1755, permission was given to the free commerce in precious metals and in foreign monies. But in the case of France, as in that of England, the enactment was not immediately nor fully realisable. The exportation of the national specie was still forbidden, and more than once the State found itself obliged to return to the question of the tariffing of its coinage.

It is this vacillation—a vacillation, however, which must in every instance be attributed to sheer State necessity—which makes it impossible to trace in detail and point by point the fall of so much of the Mercantile System as concerned the regulating of internationalmovements of metals. Thepracticeof the commercial world was doubtless in advance of the legislator's standpoint, as indicated by such detached references, and was effectual in completing the revolution silently and under the surface, whether by the aid or in spite of laws and proclamations. The same had been the case,e.g., with the old usury laws.

When effected there are two highly important results which stand as the outcome of this change in the theory of international commerce.

1. The perception of a right theory of international balances opened the way to the separation of finance or currency phenomena pure and simple, and so prepared the ground for a scientific conception and treatment of them. In one direction this treatment resulted in the evolution of a theory and practice of a monometallic system—one,i.e., in which a single metal was made the legal tender, and a second or third metal bound to it in a hard-and-fast, subordinate relationship, so that they could not by their oscillations injuriously affect the tenderable metal. In another direction the same scientific conception and treatment resulted in the evolution (and after a time the practice) of a bimetallic theory. Modern currency history hinges on the antagonism of these two systems.

FUNCTION OF DISCOUNTS IN MODERN SYSTEM

This statement of the case will serve to show the enormous difference between nineteenth-century currency situations and problemsand those of mediæval and seventeenth-century Europe. To-day the point at issue is between definitely and scientifically conceived rival theories, and thepracticaldifficulty before the world is how to provide, not so much a permanent ratio, as a permanent rate of international settlement between countries using different monetary systems, between silver-using and gold-using countries. In the seventeenth century there was no conception of theory at all, and the practical difficulty was how to frustrate the operations of the bullionist and arbitragist and politicians, and the depletion of national treasure due to their activity, and based on a difference of ratio prevailing in different countries.

2. The second practical outcome of the revolution was the development of the modern system of control of the flow of gold balances, viz. by means of the bank rate and the arbitrage transactions depending thereon, and on interest and discount rates generally.

The modern theory of international trade does not say that between two particular countries, or at any one particular point of time there is an equivalence of exchange, but that between a circle of commercially interconnected countries, and over a certain cycle of time or operations, there is an equivalence of exchange of goods and services. Movements of currency in the most elementary form assist the process, as far as immediate settlements are concerned; bills of exchange assist it when there is need of deferred payments, as, for instance, when a country imports steadily all the year round, but has only one export time, say after harvest; and, finally, bank and discount rates assist the process by providing currency media at times and places which would otherwise be unable to attracta supply. Over the whole circle of completed operations there is equilibrium of exchange, and the machinery by which that equilibrium is accomplished is currency in the widest sense. The index or indicator and safety-valve of the whole is the rate of interest. On these bank rates are based the operations of the modern bullion dealers or arbitragists, which serve to equalise or economise the distribution of the precious metals all over the world.

It will be seen at a glance, therefore, that they fulfil, in an automatic and perfectly natural manner, all that was vainly attempted to be accomplished by the repressive savage action of the State, and the interfering unscientific handling of the Mint and coinage rates. It is in this feature that the great distinction between the modern and the seventeenth-century world consists. Such a difference can only be based upon, and have arisen from, a true theory of international trade. But the process of development which alone made it possible—the development of modern banking, the invention of paper currency media, the breaking down of international trade restrictions, all the mechanical and scientific inventions which have resulted in the binding of the world together in one whole as far as commerce is concerned,—all this would comprise in brief the essential features of the complete commercial development of two centuries or more, and how far they are related as cause or effect it would be hard to say.

In this secondary period, therefore, the separate history of each individual state gradually loses itsdistinct or isolated importance, as far as mere Mint edicts are concerned. As a consequence the bimetallic action which we have hitherto sought in the history of each individual currency must now increasingly be sought in the wider field of the world currency, that congeries or completed whole of currency of which each national system now forms only a part, and that not an independent part.

In this third period the first change which France made in her silver monies was in 1674, when she for a time coined 4-sol. pieces of a quality below that of theécus blancsby more than a fifth. A great outcry was made by the Mint officers and mercantile community against this money as implying a debasement.

In 1679 there was a noticeable quantity of Spanishpistolesand largeécus d'orin circulation, and as a remedy it was ordered that they should be recoined intolouis d'orandlouis d'argent,the King offering to forego the seignorage as an inducement to bring them to the Mint. In 1686, however, the louis d'or itself was raised from 10 livres to 11 livres 10 sols., and the ratio thus changed to 151⁄2. This being found greatly in excess, in the following year it waslowered to 11 livres 5 sols. (a ratio of 151⁄4). In 1689 both silver and gold were again raised, thelouis d'orto 11 livres 12 sols. and thelouis d'argentto 3 livres 2 sols., but almost immediately a general recoinage was resolved upon. In this great operation, effected towards the close of 1689, the weight and standard of the previous coinage was exactly retained, but the louis d'or was issued at 12 livres 10 sols. and the louis d'argent at 3 livres 6 sols. Only two years later again the standard had to be altered, and the value of 1693 somewhat raised. It will give some slight idea of the sapping of the coinage that the pieces which in 1691 were minted at 12 livres 10 sols. were, in 1693, called in at a valuation of 11 livres 14 sols. The new species of 1693 were issued at 13 livres and 3 livres 8 sols. respectively.

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