Barbara Villiers: History of Monetary Crimes - Alexander Del Mar

Equitable Money

Reply of Hon. Alexander Del Mar to Prof. Thorold Rogers' address delivered in the London Chamber of Commerce, March 20th, 1S90. (From the financial and Mining Record, April 19th, 1890.)

A Special meeting of the Chamber of Commerce was held in the Council-Room, East Cheap, on March 20th, 1890, at 4:30 P.M. Sir John Lubbock, M.P., presided. Among those present were Mr. David Howard, chairman of the Council, Sir Vincent Kennet-Barrington, Sir John Coode, deputy chairman, Mr. Herman Schmidt, author of "Tates Cambist," and numerous other distinguished gentlemen.

Prof. J.E. Thorold Rogers, author of "Agriculture and Prices during the Middle Ages," "A Manual of Political Economy," etc., read a paper on "Facts illustrating the epoch during which a double standard was legal tender in Great Britain, 1759-81."

The cards of admission to the Chamber contained the following notice: "It is not proposed to enter into the metallic controversy but to deal with the facts as established by past experience. It is, therefore, desired that those taking part in the discussion will confine themselves to facts more than theories."

Prof. Rogers, who was received with applause, occupied about an hour, and said in effect:

He had chosen the period in question because previous to it, from 1714, the government had practically adopted a single gold standard, by overvaluing gold in the coinage: and that at about the end of it, strictly speaking in 1774, Parliament passed an act limiting the legal tender of silver coins to £25. The double standard was in fact a Parliamentary experiment which was tried during three-quarters of the 18th century, doubted during its continuance, and finally abandoned as unworkable. The period 1759-81 comprised 23 years of this period. He had collected from the newspapers of the period the prices of gold and silver bullion, under the respective heads of foreign gold, standard gold bars, Spanish silver coin and standard silver bars.

Altogether he presented nearly 2,000 different quotations. He had not averaged them for each year, because he thought that statistical averages were misleading and that each one of these quotations ought to be studied by itself. It would be instructive to work them out. He found an excuse for the fullness of his evidence in the wish that in case the Chamber discussed the figures, they should have all the facts before them and added:

"Now what did these exhaustive facts prove? They proved how seldom the market price of bullion coincided with the English mint prices and therefore what an utter failure the double standard has been. The double standard was merely a plausible hypothesis, an economical generality; and the proposals of the Bi-Metallic league of the present time are an entirely new departure in the theory of currency. The adoption of their views would make a serious addition to all business risks. I do not doubt the good faith of those who believe that government regulation of the two metals has induced uniformity of value; I only question the extent of their information.

"Out of my protracted researches into prices I have had constant occasion to repudiate conclusions drawn by eminent men for whose abilities and integrity I have the sincerest respect, who would have arrived at very different conclusions, if they had possessed the evidence which I have had the good fortune to collect and that at no little pains and expense. I have put a specimen of such evidence before you.

"The ratio of value between silver and gold embodied in the mint price of these metals during the period under review was 15.07 to 1. In the bullion market the ratio at certain dates in 1763 was 14.37 to 14.66; in 1764-5 it was 14.98; in 1772 it was 14.12 to 14.42; in 1778-9 it was 15.07 and in 1781 it was 13.54. Generally speaking silver was at a premium over the mint price. These figures and calculations are essential to the interpretation of the situation. Debtors will inevitably pay in the cheapest metal. The attempt on the part of England to establish a legal proportion between gold and silver was a total failure.

"The existing monetary system of England is a gradual development; it has no parallel in the civilized world; and it smoothly and successfully carries on a system of trade, vast beyond computation. It sprang from sagacity and is based upon a well-grounded confidence. One might well hesitate before tampering with such a fabric." (Applause.)

Mr. Del Mar rising to reply, spoke rapidly and without notes as follows:

"That the Chamber could scarcely fail to be impressed with the enormous industry of Prof. Rogers in collecting the quotations of gold and silver bullion which he had presented to them (applause). However, he could not help expressing regret that the Professor's exertions had been so protracted and his pains and expense so great; for he might have saved them all. The statistics which he claims to have rescued from the columns of ancient and obscure newspapers will be found printed in all of the following modern works:

  1. "An Inquiry on National Currency," by Robert Mushet, of his Majesty's Mint, London, 1811;
  2. "Executive Document, No. 117, First Session, Twenty-first Congress of the United States of America;" and
  3. "A History of the Precious Metals" by Alex. Del Mar, London, 1880.

"These works were all to be found in the British Museum Library, where the Professor had toiled so long upon the London Courant and Lloyds Evening Post.

"What is more, they all gave those annual average prices of bullion which the Professor has affected to despise, but without the aid of which the speaker need hardly remark, life was too short to test the merits of the contention to which they had been invited. (Laughter.)

"Now, what did these quotations convey, not the quotations merely, of twenty-three years selected by Professor Rogers, but the whole period from 1710 to the latest date mentioned by him. Let me run them over rapidly for you.

"Table showing the average Decennial ratio of value in London between gold and silver bullion 1710 to 1760 and the average Annual ratio, 1760 to 1774. (Calculated chiefly from sales of Spanish and other foreign coins and from the foreign exchanges.)

1701-10 15 27 1768 14 58
1711-20 15 15 1769 14 45
1720-30 15 09 1770 14 35
1731-40 15 07 1771 14 36
1741-50 14 93 1772 14 19
1775-60 14 56 1773 14 73
1760 14 29 1774 15 05
1761 13 94 1775 14 62
1762 14 63 1776 14 34
1763 14 71 1777 14 04
1764 14 91 1778 14 34
1765 14 69 1779 14 89
1766 14 41 1780 14 43
1767 14 45 1781 13 33

"From the remarkable regularity of these quotations, it is evident that there was some cause behind which governed them. That cause I will presently endeavor to point out. Meanwhile, let us consider the conditions under which this discussion has been invited.

"In the first place, no notice has been given of what was intended to be argued, beyond what is conveyed by the card of admission. In the second place, this card asks us not to discuss the lecturer's theory, but rather to confine ourselves to the facts which he proposes to adduce. This looks too much like peppering your guest with a concealed weapon after you have got him to tie his own hands.

"What has the Professor himself brought into this discussion? Has he confined himself to facts and avoided controversial theories? Not at all. On the contrary, he has gone back 150 years to select certain market prices, which he appears to suppose had never been collected before and would, therefore, not be questioned now. Upon this ocean of ancient figures he has floated a dozen questionable currency theories.

"The very title of his paper launches several of them. It is a theory, not a fact, that a double standard was ever legal tender in Great Britain; it is a theory, not a fact, that it was legal tender, during the particular years 1759-81; and it is a theory, not a fact, that the statistics of Professor Rogers illustrate this epoch fairly, or illustrate it at all. Indeed, the very term 'standard' in the sense in which he has employed it, involves a theory.

"Properly speaking, standard relates to the degree of fineness of coins, as the Sterling or Easterling standard, meaning eleven-twelfths fine. Prof. Rogers erroneously uses it to mean the kind of metal or metals of which coins are made; and by averring that a double standard was legal tender he advances the theory that gold and silver bullion was legal tender in the 18th century; which is not a fact; coins were and are legal tender; money was and is legal tender; but not bullion. You might own a stack of bullion as high as St. Pauls and yet be unable to pay a debt of a single pound sterling with it. It would be quite competent for your creditor to refuse it and demand money. None of Prof. Rogers' figures are facts, but merely inferences of prices and ratios founded upon quotations of foreign exchanges and sales of foreign coins.

"This confusion of thought and the misuse of nummulary terms here alluded to, is distinctly of modern and recent growth. Thousands of books have been written on the subject of money, but in none of them, previous to the 17th century, so far as I am aware, was money ever confused with metals, or metals with money. Metals are the product of God; money is the invention of man. There is no difficulty whatever to distinguish them.

"Early in the 17th century the King of Spain, after deducting for the Royal Treasury a quinto, or fifth, from the production of the precious metals in America, saw fit to open the Government mints to the coinage of all bullion into money without charge to the depositors. In effect, this was a standing offer on the part of the Government to purchase an unlimited quantity of tax-paid gold or silver bullion and to pay for it in coin. It was also an offer to buy coins and pay for them in bullion, weight for weight, in fine metal. A legal ratio of value, namely 13.33 weights of silver for one of gold, was fixed upon between the metals. As anybody could melt his coins into metal and the Government was always ready to work the metal into coins, it followed that legally, money was now metals and metals were money. This piece of legislation being idiotically regarded by courtiers as the source of Spain's military grandeur and commercial prosperity, it was quickly imitated in Holland about the middle of the century and in England in the year 1666, by the act of 18th Chas. II.; an act that so far as gold is concerned, is still in force in the British Empire.

"Out of this act at once sprang a new philosophy mis-called political economy; the whole of which, when you come to look at it closely, is based upon the act of 1666. It had no existence before that act and it will vanish whenever that act is repealed. The corner stone of this philosophy is the theory that 'the value of every object or service in demand depends upon the cost of producing or supplying it.' These are the very words of Professor Rogers. So imagining this theory to be incontrovertible and that it applied to gold as well as to commercial products, he seeks to-day to show you how much superior the theory is to the act of Parliament which offered to buy 15 silver for 1 gold or 1 gold for 15 silver!

"This is strange logic. Here is a theory, in fact the mere spawn of one Act of Parliament, but which the economists, conceitedly imagining it to be their own precious offspring, have held to be superior to all acts of Parliament. The tenacity with which they hold to this remarkable conclusion, presents a rare case of paternal pride. (Great laughter.)

"Yet the gentleman who throws around us this theory and so many other theories, says he wants facts, not theories. He is a seller of theories and a buyer of facts. But need I remind him, in the words of Buckle, that a mere accumulation of facts, without knowing or explaining the relations between them, is the work of the pedant; not that of a philosopher? The paper which he has read to us defines his position on this point even better than the card of admission. It is not that he is averse to theories, but to other people's theories; for he has given us plenty of his own. (Laughter.)

"It is a theory that England adopted a 'gold standard' from 1714 to 1759, and a 'double standard' from 1759 to 1774; it is a fact that both gold and silver coins had been full legal tender in England substantially since the 13th Century and this continued down to 1816.

"It is a theory that Parliament in 1774 limited the legal tender of silver coins to £25. It is a fact that this provision only applied to worn and clipped coins. Good silver coins remained full legal tender as before.

"It is a theory that the concurrent use of gold and silver money was an experiment, either ephemeral or otherwise, or that it was abandoned as unworkable. It is a fact that full legal tender gold and silver coins have circulated side by side in nearly all countries since the dawn of history and that in fact at the present moment there is more silver coin employed as full legal tender money in America, than there is gold coin in England.

"It is a new and startling theory that statistical averages are misleading. On the other hand it is a well known fact that selected statistics are worthless.

"It is a theory that the figures of Prof. Rogers present all the facts of the case he has brought forward. How few facts they do present will be shown hereafter.

"It is a theory that the discrepancy between some of those figures and the English-mint prices of bullion proved the concurrent use of gold and silver coins to have been a failure. It is a fact that the quotations obeyed the prices of that and other Government mints which competed at the time for the purchase of bullion.

"It is a theory that the concurrent use of gold and silver coins was a hypothesis, or an economical generality, or that the proposals of the Bi-Metallic League constitute a new departure in currency. It is a fact that this system of money is of the highest antiquity and that it has been found difficult to devise a better one.

"What this country wants, what every progressive country wants, is a system of money which shall conform to the requirements of equity. What is wanted is an Equitable Monetary Measure, a measure of value fixed in volume, either absolutely or relative to population, or to some certain other mark of growth. We neither want the limitless greenback of the ignorant, nor the dwindling gold currency system of the pedantic. What the expanding trade of this great empire demands is a sound and uniform money for all its domains; and nothing better than the concurrent use of gold and silver coins with paper adjuncts, all of full legal tender, has yet been devised for it. The dislocation between the British and Indian currencies at the present time is a serious menace to British commercial prosperity.

"It is a theory that the use of silver money would add to business risks. On the contrary, it is a fact that these risks, owing to the fluctuations of exchange, were never greater than at present and were much less so previously to 1873, down to which year the French and American mints were open to the purchase of all of our silver, at a fixed price in gold. (Applause.)

"It is very kind of the Professor not to doubt the good faith of those who decline to accept his theories. He evidently regards their refusal as a mild form of lunacy, which is only to be cured by studying his own original and 'protracted researches' into the prices of bullion, with some thirty printed pages of which he has just favored us. Now that he is made aware that others have preceded him in these researches and that concerning them they came to entirely different conclusions, perhaps he will give his adversaries credit for practical sense as well as good faith, and forthwith join the ranks of Currency Reform.

"It was a theory (both of Aristophanes and Gresham) that debtors pay in the cheapest metal; it is also a theory that they pay in any metal at all. The law obliges them to pay in money; and unless the mint insanely choosed to turn their metal into money for nothing, the metal would not avail for payments at all. These petty theories are not laws of Nature, but the by-products of old acts of legislation, which will disappear the moment the pruning knife of reform is applied to the subject.

"It is a theory that the monetary system of England has no parallel for merit or that it is the product of sagacity, or that it smoothly and successfully conducts our trade. The facts are that its groundwork is the treacherous mint act of 1666 and the idiotic one of 1816; that it has never worked successfully; that at the present moment it depresses and threatens the entire British trade with the East; that it has broken up many Lancashire industries; that it is cutting the ground under the feet of British agriculturists and working men; that it is driving the bullion trade to America and has seriously impaired the power of the Bank of England to draw in emergencies upon the bullion supplies of the world; and that if not very soon repealed by our going back to the old system of gold and silver payments, we will have to suspend coin payments altogether and adopt greenbacks for money.

"The gentleman advances another theory, viz.: that the cost of producing gold and silver governs their value. Did he ever calculate this cost; did anybody else ever calculate it; is it at all calculable? To all of these questions my reply is a decided No; and I challenge a contradiction. The gentleman says in his 'Manual of Political Economy'—and these are the theories he has brought with him here to-day—that 'gold and silver are produced in nearly equal quantities by nearly equal labor, or at nearly equal cost; and that in the rough it may be said that the cost of producing a pound of gold is fifteen times as great as that of producing a pound of silver, and that therefore a pound of gold is worth about 15 pounds of silver!'

"What is the gentleman's opinion of the intelligence of this Chamber that he should imagine it could swallow such cheap diet as this? The fact is that the vast metalliferous product of Spanish America, of Japan, of India, of Brazil, was obtained by Europe chiefly through plunder and slavery. After the Spaniards and Portuguese had plundered it from the natives, the English and the Dutch plundered it from the Spaniards and Portuguese. This is what distinguished Drake, Morgan, Raleigh, and the other maritime adventurers of the 17th century. They captured the Spanish plate ships at sea, or sacked the mining camps and bullion depositories on the Spanish Main, and the product came into the markets for sale. You might as well calculate the cost to the burglar of producing your silver spoons when he breaks into your house and steals them, as try to calculate the cost of this bullion to Europe. (Loud laughter and applause.)

"Though a member of this commercial Chamber, I have followed the business of gold mining for many years and am practically familiar with the conditions surrounding the production of the precious metals. Moreover, I have conversed with hundreds of intelligent mining men, who had gone into the subject very carefully, but I never yet met one who could tell me what was the average cost of producing gold or silver, nor can I imagine what it is, even approximately. Will the gentleman pretend to say that he can calculate it either from the statistics of former times, or the return of the mining companies which have been recently floated in London? (Great laughter, in which Prof. Rogers joined.)

"We have had 600 mines brought to us from California, Nevada and Colorado, and 1,200 from Australia, and goodness knows how many more from Mysore and South Africa, each costing us several hundred thousand pounds. Does the gentleman derive his idea of the cost of producing the precious metals from the experience of these companies? (Applause.)

"I hope it wasn't like that of a friend of mine, who one day showed me a gold button, weighing perhaps a quarter of an ounce, which he said had cost him £200,000. The Comstock was probably the richest lode ever discovered, and consisted both of gold and silver. It yielded the enormous sum of £60,000,000; yet it cost no less than £300,000,000. Both the product of California and Australia cost in labor alone several times as much as it fetched at the mints. During the days of plunder and slavery the precious metals cost little or nothing; at the present time they cost much more than their value. The immense stock left from the old times depresses the value of the new supplies.

"If it be asked why such an unprofitable industry is continued, why gold and silver mining is carried beyond the limit of prudence, the answer is: Because mines cannot be found at pleasure and because no man owning a mine knows when to stop, for the next stroke of the pick may bring him a fortune. He is buoyed up by hope; hope in a gambling industry, in a lottery, in a mere football of fortune; for such is gold and silver mining. When anybody says that he has calculated and knows the cost of the precious metals on hand in the world, I simply turn my back upon him; for I know that he has not done so, and he does not know what they cost. The calculation is an impossible one, because every ounce added to the stock on hand changes the value both of the old product and of the new. And this fact is not only a proof that such a calculation is impracticable; it also proves that the value of these metals depends upon their quantity and not upon their cost of production.

"If the cost of production theory was sound, there could never be a general rise of prices; indeed, many of the economists, finding themselves logically forced into this stupid conclusion, have actually made it an article of their faith, and asserted as a fact, what was merely a logical deduction and one that their own observation belied.

"Adam Smith is among this number. In one place he denies the possibility of a rise; yet in another place he most emphatically notes that general rise of prices which actually followed the Plunder of America. Said he: 'The discovery of the abundant mines of America seems to have been the sole cause of this diminution in the value of silver [money] in proportion to that of corn. It is accounted for in the same manner by everybody; and there never has been any dispute either about the fact or about the cause of it.'"

Prof. Rogers (interrupting)—"Please repeat that."

Mr. Del Mar, after repeating Adam Smith's words, continued as follows:

"Having thus shown the fallacy of some of Prof. Rogers' theories, I now turn to some of his bullion quotations and the lessons they teach. I said that their extraordinary regularly indicated a governing cause behind. I will now state what that cause was; and as this appears to have entirely escaped the observation of the learned Professor, perhaps the next time he comes up to London to teach the subject of money to the Chamber of Commerce, he will come better prepared. (Laughter.)

"At the time to which he alludes, namely, 1759 to 1781, there were five or more governmental mints open to the purchase of silver in gold coins and of gold in silver coins. The prices paid for bullion by these mints, or the 'ratio' between the metals, was altered by legal enactments from time to time, and was rarely or never the same in any two of these countries simultaneously. There was sharp competition for bullion; a cutting of rates.

"The ratio in Spain in 1740-50 was 14.244 silver for 1 gold; in 1775 this was changed to 15.5; in 1779 to 15.8. The ratio in Portugal was fixed by the act of 1688 at 16; in 1747 this was changed to 13.33. The ratio in France was fixed by the act of 1726 at 14.46 and this lasted until 1785, when it was changed to 15.5. In Holland the ratio was from 14.35 to 14.5. In England the ratio was fixed in 1717 at 15.2 and this lasted until 1816. The Professor says it was 15.07, but this difference between us is of no practical importance.

"Here are nine different prices offered for bullion and for bullion in any quantity. Confining ourselves strictly to the 23 years selected by the Professor, we have six different prices offered by the principal producing and coining nations of the period. The extremes of these prices are 13.33 on the one hand and 16 on the other.

"In face of all this competition the Professor wonders why silver did not stand petrified at 15.07, which was mere the English mint price! He says he wants facts not theories. Well, here are facts. The fact is that five different nations were bidding for bullion at the same time; the fact is that they bid six or more different prices; the fact is that the lowest price for gold, viz., 13.33 was bid by Portugal from the year 1747 onward; and the highest price, viz., 15.8 was bid by Spain from the year 1779 onward; and the fact is that the so-called market price in London fluctuated between, but never moved beyond, these limits. It was like a pendulum vibrating in a clock case; yet the Professor not only wonders why it did not stand still, but also why it didn't go through the case! These aberrations in the price of bullion may be marvels in the world of political economy, but I can assure the gentleman that they are quite explicable in that of every-day fact and of common sense." (Loud applause.)

Mr. Del Mar was followed by Mr. Hermann Schmidt and others.