If Not Silver, What? Part 1

If Not Silver, What?

by John W. Bookwalter.

"If you will show me a system which gives absolute permanence, I will take it in preference to any other. But of all conceivable systems of currency, that system is a.s.suredly the worst which gives you a standard steadily, continuously, indefinitely appreciating, and which, by that very fact, throws a burden upon every man of enterprise, upon every man who desires to promote the agricultural or the industrial resources of the country, and benefits no human being whatever but the owner of fixed debts in gold."--_Speech of the RIGHT HON. A. J. BALFOUR, at Manchester, England, October 27, 1892._

As a manufacturer and somewhat extensive land owner I have a great personal interest in the money question. As a traveller I have studied the situation in other nations, and thus, I may modestly say, have enjoyed the great advantage of getting a view in no wise disturbed by partisan politics. As one whose prosperity depends almost entirely upon that of the farmers, I have naturally thought most of the effect monometallism has had, and will continue to have, upon them. I have, in a sense, been compelled to think much on this great issue. These facts are my apology, if any apology is needed, for giving my thoughts to the public. But is any apology needed? Providence has granted to a few the leisure and the opportunity to study these economic problems, on the correct solution of which the welfare of millions, whose toil leaves them little leisure for study, depends. Is it not the supreme moral duty of those few to give their conclusions to the public? I have always thought so, and in that spirit I present this little work, and ask the laboring producers to give a candid consideration to the views herein presented. It may be that some of these views will be successfully controverted, but the duty remains the same. If they should aid in arriving at a correct solution of the great problem, though the solution be different from that I have indicated, I shall be many times repaid for my labor.

JOHN W. BOOKWALTER.

SPRINGFIELD, OHIO, August 5, 1896.

CONTENTS.

OBJECTIONS TO SILVER, AND COMMENTS THEREON

DEMONETIZATION OF GOLD

RELATIVE PRODUCTION OF GOLD AND SILVER

IS BIMETALLISM PRACTICABLE?

BIMETALLISM ABROAD

THE "DUMP" OF SILVER

ASIA'S DEMAND FOR THE PRECIOUS METALS

IF NOT SILVER, WHAT?

OBJECTIONS TO SILVER, AND COMMENTS THEREON.

=Silver is too bulky for use in large sums.=

That objection is obsolete. We do not now carry coin; we carry its paper representatives, those issued by government being absolutely secured. This combines all the advantage of coin, bank paper, and the proposed fiat money. A silver certificate for $500 weighs less than a gold dollar. In that denomination the Jay Gould estate could be carried by one man.

=But silver certificates would not remain at par.=

At par with what? Everything in the universe is at par with itself. The volume of certificates issued by the government would be exactly the amount of the metal deposited, and that amount could never be suddenly increased or diminished, for the product of the mines in any one year is very seldom more than three per cent. of the stock already on hand, and half of that is used in the arts. It is self-evident, therefore, that such certificates would be many times more stable in value than any form of bank paper yet devised.

=Gold would go out of circulation.=

It has already gone out. Under the present policy of the government we have all the disadvantages of both systems and the advantages of neither, with the added element of chronic uncertainty and an artificial scare gotten up for political purposes.

=And that very scare shows an important fact which you silverites ought to heed--that nearly all the bankers and heavy moneyed men are opposed to free coinage.=

Nearly all the slaveholders were opposed to emanc.i.p.ation. All the landlords in Great Britain were opposed to the abolition of the Corn Laws, and all the silversmiths of Ephesus were violently opposed to the "agitation" started by St. Paul. And what of it? The silversmiths were honest enough to admit the cause of their opposition (Acts xix. 24, 28), but these fellows are not. The Ephesians got up a riot; these fellows get up panics. "Have ye not read that when the devil goeth out of a man then it teareth him?"

=But are not bankers and other men who handle money as a business better qualified than other people to judge of the proper metal?=

Certainly not. On the contrary, they are for many reasons much less competent, as experience has repeatedly shown. All students of social science know, indeed all close observers know, that those who do the routine work in any vocation seldom form comprehensive views of it, and those who manage the details of a business are very rarely indeed able to master the higher philosophy thereof. This is a general truth applicable to all vocations except those, like law, in which a mastery of the science is a necessity for conducting the details. Experts in details often make the worst blunders in general management. Nearly all the inventions of perpetual motion come from practical mechanics. Nearly all the crazy designs in motors come from engineers. The educational schemes of truly colossal absurdity come mostly from teachers; all the quack nostrums and elixirs to "restore lost manhood" are invented by doctors, and nearly all the crazy religions are started by preachers.

On the other hand, three-fourths of the great inventions have been by men who did not work at the business they improved. The world's great financiers have not been bankers. Alexander Hamilton was not a banker.

Neither was Albert Gallatin, nor Robert J. Walker, nor James Guthrie, nor Salmon P. Chase. William Patterson, who founded the Bank of England, was a sailor and trader; and of the British Chancellors of the Exchequer whose names s.h.i.+ne in history, scarcely one was a banker. One of Christ's disciples was a banker, and the end of his scientific financiering is reported in Acts i. 18. John Law also, whose very name is a synonym for foolish financial schemes, was a banker, and a very successful one. Where was there ever a crazier scheme than the so-called "Baltimore Plan,"

exclusively the work of bankers?

=But as the bankers and great capitalists have no faith in it, the free coinage of silver would certainly precipitate a panic.=

The gold basis has already precipitated several panics. Even in so conservative a country as England they have, since adopting monometallism, had a severe currency panic every four years, and a great industrial depression on an average once in seven years. The only reason we have not done worse is that the rapid development of the natural resources of the country saves us from the consequences of our folly. We draw on the future, and in no long time it honors our drafts. Nevertheless, in the twenty-three years since silver was demonetized we have had two grand panics, several minor currency panics, hundreds of thousands of bankruptcies with liabilities of billions, and five labor wars in which 900 persons were killed and $230,000,000 worth of property destroyed.

Could a silver basis do worse?

=You admit, then, that the immediate adoption of free coinage would, for a while at least, drive gold abroad?=

And what then? Why do the gold men always stop with that statement and so carefully avoid inquiry into what would follow? Let us look into it. We may have in this country $500,000,000 in gold, though no one can tell where it is. a.s.suming that free coinage would send it all abroad, the inevitable result would be a gold inflation in Europe, which would cause a rise in prices. I observe that of late the gold organs have been denying this--denying, in fact, the quant.i.tative principle in finance, something never denied before this discussion arose. It is too true, as some philosopher has said, that if a property interest depended on it, there would soon be plenty of able men to deny the law of gravitation. But as the men who deny it in one breath admit it in the next by a.s.suring us that we shall soon have a great increase in the production of gold, and that prices will therefore rise, we may with confidence adhere to the established truth of political economy.

Sending our gold to Europe, then, would raise prices there, which would raise the price of our staple exports, such as wheat, meat, and cotton; the great rise in the price of these would, of course, stimulate exports, and thus aid us in maintaining a favorable balance, would restore to the farmers that income which they have lost by the decline of prices, would thus put into their hands the power to buy manufactured goods and to pay our annual interest debt to Europe by commodities instead of gold. In short, if the gold went abroad, it would necessarily be but a short time till much of it would come back to pay for our agricultural exports, and at the same time our farmers would get the benefit of higher prices by both operations. If any man doubts that an increased gold supply in Europe would increase the selling price of our farm surplus, I ask him to examine the figures for the twelve years following the discovery of gold in California, or the history of prices in the century following the discovery of America--an era described by all economists as one of inflation. Is there any reason why a like cause should not now produce like effects?

=In the meantime, however, all the other nations would dump their silver upon us and we should be overloaded with it.=

Where would the silver come from? The best authorities agree that there is not enough free silver in the world to even fill the place of our gold, which, you say, would be expelled. And right here is where the advocates of the gold standard contradict every well-established principle of political economy, and every lesson of experience, by declaring that the transfer of all our gold to Europe would not cheapen it there, and that free coinage would not increase the value of silver. They insist that we should still have "50-cent dollars." Stripped of all its fine garniture of rhetoric, their proposition simply amounts to this: The sudden addition of 20 per cent. to Europe's supply of gold would not cheapen it, and making a market here for all the free silver in the world would not raise its value; laying the burden of sustaining an enormous ma.s.s of credit currency on one metal instead of two has added nothing to the value of that metal; a thirty years' war on the other metal was not the cause of its depreciation in terms of gold, and if the conditions were reversed, greatly increasing the demand for silver and decreasing the demand for gold, they would remain in relative values just the same. If those propositions are true, all political economy is false.

=Government cannot create values, in silver or anything else.=

You have seen it done fifty times if you are as old as I. During the war, government once raised the price of horses $20 per head in a single day.

On a certain day the land in the Platte Valley, for perhaps one hundred miles west of Omaha, was worth preemption price; the next day it was worth much more, and in a year three or four times as much. Government had authorized the construction of the Union Pacific Railroad, and before a single spade of earth was turned, millions of dollars in value had been added to the land. It had created a new use for the land. Value inheres in use when the thing used can be bought and sold. Whatever creates a use creates value, and a great increase in use forces an increase in value, provided that the supply does not increase equally fast; and with silver that is an impossibility. If you think government cannot add value to a metal, consider this conundrum: What would be the present value of gold if all nations should demonetize it? It can be calculated approximately.

There is on hand enough gold to supply the arts for forty years at the present rate of consumption. What, then, is the present value of a commodity of which the world has forty years' supply on hand and all prepared for immediate use?