The History of Currency, 1252 to 1896 Part 18

The manner in which the Vienna Convention met the difficulty has the appearance of plausibility, though it proved in the end ineffectual. It determined not to establish a fixed ratio but to follow the market price of gold, apparently in the hope of attracting a natural or market supply.

"For the purpose of further facilitating mutual transactions, and for the promotion of trade with neighbouring countries, the contracting powers may coin convention trade coins in gold, under the names _crown_, and _half-crown_.

"1. The crown = 1/50 of a pound of fine silver.

"2. The half-crown = 1/100.

"The contracting powers may not coin any other gold piece, except Austria, which retains the right of coining _ducats_ of the present value, to the end of 1865.

"The silver value of the convention gold coins in ordinary intercourse is entirely fixed by the relation of the supply to the demand. They must not, therefore, be considered as a medium of payment of the same nature as the legal silver currency of the country, and no one is legally bound to receive them as such.

[Sidenote: THE VIENNA CONVENTION, 1857]

"Each state is at liberty to permit convention gold coins to be paid into their offices instead of silver, according to a previously settled fixed rate, and to extend this permission either to all transactions and offices, or only to some. Such previous settlement of the rate is, however, never to last more than six months, and must at the expiration of the last month always be renewed for the following official treasury period of exchange. The rate cannot be fixed at a higher value than that given to such coinage by the average of the official commercial rate of exchange during the previous six months. Each government also reserves to itself the right to alter the rate at any time within the period fixed, and to suspend it when it thinks proper.

"A treasury rate of exchange shall henceforth only be fixed for convention gold coins, and not for other kinds of coined gold.

"The widest circulation to be given to the notices by which the official rate of exchange is fixed. They must be published beforehand, even when a change in rate for the next fixed period is not intended, and must contain--

"1. The statement of the average trade exchange at the princ.i.p.al places of exchange, during the six months immediately preceding.

"2. The treasury rate fixed accordingly.

"3. The duration of the value of the same.

"4. The reservation to alter or recall this rate of exchange if necessary, even before the expiration of the term named.

"5. The declaration that such rate of exchange only affects payments to be made into offices of the state.

"In the countries of the contracting powers pay-offices of the State, as well as public inst.i.tutions, banks, etc., shall not be allowed in future, in payments to be made by them, to make any proviso with regard to the medium of payment in silver or gold, in such a way that for the latter a certain fixed relative value should be expressed beforehand in silver money."

From the point of view of Austria, this convention had been entered upon with the desire of effecting a gradual adoption of gold coinage, together with a concurrent ceasing of the compulsory note circulation.

The outcome of the conference was, however, in quite distinct opposition to this desire, as the agreement which was finally arrived at established the maintenance of a pure silver currency. The continuance of the gold _crown_ of 10-grs. fine gold was recognised only as a trade medium. This experiment of a trade gold coin failed completely, though it is none the less interesting intrinsically, as well as for its reflex bearing on the similar schemes which were proposed in the early years of the French Revolution. The premium on the minting of gold drew it to France, in preference to any other place where a simple market price prevailed. And the 20-franc gold pieces of France overflowed, while the German crowns could not struggle into existence.

[Sidenote: GERMANY: ATTEMPTS AT REFORM, 1860-70]

The attempt which was made by a commercial conference at Hamburg, at the time of the meeting of the Vienna Conference, to secure the introduction by the Hamburg Bank of a gold instead of a silver _valuta_, remained equally ineffectual.

As far as concerns the establishment of a simple and single monetary system for Germany was concerned, this Vienna Convention, the last great convention which Germany saw previous to the reconstruction of her system in 1871, was as futile as that of Dresden in 1838, or as all the conventions of the seventeenth and eighteenth centuries previously.

The consciousness of the need of such simplification and unification, however, became thereby only the more apparent. Four years later the first German Handelstag, which met in May 1861 at Heidelberg, turned its first and special attention to the erection of some common currency system. The recommendation which it finally concluded upon was the adoption of the _Drittelthaler_ as the unit mark, with a decimal subdivision. Four years later the third Handelstag, which met at Frankfort (September 1865), confirmed the resolution, with the additional proposition of the minting of a gold piece identical with the 20-franc piece, the value of which should be regulated from time to time; the scheme being, therefore, as before, that of a silver standard, with gold as trade money. The fourth Handelstag met at Berlin in October 1868, and again the matter was most seriously discussed. With the single exception of the Berlin members, all the deputies declared for the adoption of the gold standard. As, in the preceding year, Austria had withdrawn from the German Monetary Union of 1857, she no longer stood in the way of this proposition, and the erection of the North German Union distinctly favoured the project.

In June 1870 the Bundesrath of the North German Union resolved upon a reform and unification of the paper money, as preparatory to a complete currency reform, and in the same month the Chancellor of the North German Union had decided to call a Mint Convention. The outbreak of the Franco-German War immediately afterwards put a short stop to the proposal.

A long train of preparation had thus been laid, and there can be little doubt as to what the ultimate direction of German monetary legislation would have been, even without the war, and the consequent erection of the Empire. That the latter event, however, enormously facilitated the process cannot for a moment be questioned.

[Sidenote: GERMANY: NEW IMPERIAL SYSTEM, 1871]

When the subject was taken up after the Franco-German War, the determination to adopt a gold coinage was only gradually arrived at. In the original plan, as drafted soon after the conclusion of peace, the new gold coinage proposed was intended not to be tenderable, for the meantime, in private commerce. Such a provision roused all the opposition of the mercantile community, and in consequence of the agitation the scheme, as finally submitted to the Reichstag, was for a gold monometallic system. The law pa.s.sed on the 4th December 1871, and the great operation of recoinage and conversion was immediately entered upon. It was greatly favoured by the ratio existing at the moment, and by the metallic condition of the world. The ratio taken as the basis of the computation was the French 15.5, accepted because of its long and present wide employment.

The previous silver standard thalers were taken as equivalent to 3 marks.

30 thaler = 90 mark = 1 pound fine silver.

90 15.5 = 1395 marks.

The gold piece of 10 marks was therefore coined at a tale of 139-1/2 to the pound of fine gold.

Propositions were made to the Reichstag that the 20-franc piece should be made equivalent to the English sovereign, or to the 25-franc piece, giving respectively a ratio of 15.17 or 15.31, but at the moment the price of silver in the London market ruled between 60-7/8 and 60-3/4 pence per ounce, i.e. at a mercantile ratio of 15.49-15.52. It was this fact which decided the adoption of the French ratio.

The chief Acts which have accomplished the reform are of dates 5th December 1871 and 9th July 1873, the first declaring the monetary system and the latter the law of tender.

The unit of the system is the mark, which is the 1/1255.5 part of a pound of gold of 500 grammes at 9/10 fine, and is coined into pieces of 20 and 10 marks. The gold crown is a 10-mark piece, is 9/10 fine, and struck at a tale of 139-1/2 pieces to the German pound; charge for coinage, 3 marks per pound of fine gold.

The pound of fine silver is struck into 100 marks, 9/10 fine. The total amount of silver coin not to exceed 10 marks per head of population. No individual need accept more than 20 marks of imperial silver coin in payments. They are accepted in any amount by the Empire and by the Federal States.

All other German coins are no longer legal tender, and have been withdrawn, with the single exception of the thaler pieces. Whatever pieces of this kind still exist are legal tender to any amount, like the imperial gold coins, each being equal to 3 marks. An Act of 20th April 1870 provides that _Vereinsthalers_ coined in Austria before 1867 should also be full legal tender. An Act of 6th January 1876 has authorised the Bundesrath to put the thaler pieces and the Austrian _Vereinsthalers_ on the same footing as imperial silver coins, i.e. to make them legal tender only up to 20 marks, the thaler being still reckoned at 3 marks.

Since the suspension of silver sales and of the withdrawal of the silver thalers (May 1879) there is no likelihood that the Bundesrath will make use of this authority conferred upon it.

In briefest resume, the course of the silver coinage during the preceding century may be presented thus:--

GERMANY--COURSE OF THE 1-THALER PIECES.

Thalers.

Total minted during 1750-1816 64,380,936 Withdrawn by the Government of the States 27,788,956 " under the new Imperial System, 1871-3 5,652,999 " " 1874 6,319,170 " " 1875 2,900,202 " " 1876 2,582,123 " " 1877 1,465,424 " " 1878 864,253 ---------- 47,573,127 ----------- Leaving a balance not accounted for of 16,807,809 ===========

Thalers.

Total minted during 1817-22 24,261,735 Withdrawn under the new Imperial System, 1871-3 3,623,511 " " 1874 5,147,970 " " 1875 2,580,580 " " 1876 2,373,496 " " 1877 1,421,719 " " 1878 766,908 ---------- 15,914,184 ----------- Leaving a balance not accounted for of 8,347,551 ===========

Thalers.

Total minted during 1823-1856 91,031,741 Withdrawn under the new Imperial System, 1874 40,000 " " 1875 566,677 " " 1876 11,250,277 " " 1877 5,753,269 " " 1878 4,640,068 ---------- 22,250,291 ----------- Leaving a balance not accounted for of 68,781,450 ===========

Thalers.

Total minted during 1857-71 215,863,120 Withdrawn by the Government of the States 2,538 " under the new Imperial System, 1875 3,000 " " 1876 25,958 " " 1877 64,806,347 " " 1878 18,915,167 ---------- 109,635,938 ----------- Leaving a balance not accounted for of 106,177,182 ===========

Thalers.

On the whole period, 1750-1871, the total minted 1-thaler pieces amounted to 395,537,532 Total withdrawn 195,423,540 ----------- Leaving a balance not accounted for of 200,113,992 ===========

Allowing 83,062,882 thalers as a rough equivalent for the loss by attrition, there is still a deficit of 117,051,000 thalers, or about 17,557,650 sterling to be accounted for (and laid to the account of remintings and loss by arbitrage).

ACCOUNT OF THE MINTING OF THE RECONSTRUCTED GERMAN EMPIRE--GOLD--FROM 1872 TO DEC. 1878

+--------------------------------+--------------------+----------------------+ | | Supplied for the | Supplied for Private | | | Empire. | Accounts. | | Origin of the Bullion supplied +--------------------+----------------------+ | to the Mint. | Pounds Weight Fine | Pounds Weight Fine | | | Gold. | Gold. | +--------------------------------+--------------------+----------------------+ | German gold coin of the old | | | | type | 64,092.3 | 11.4 | | Bars | 402,382.6 | 214,825.7 | | Austrian gold coins | 381.7 | 711.9 | | Francs and Napoleons | 391,166.5 | 809.7 | | Sovereigns | 30,181.3 | 223.1 | | Russian gold coins | 28,252.3 | 20,862.1 | | Isabellas | 12,822.9 | ... | | Dollars and Eagles | 16,860.1 | 20,548.8 | | Turkish gold coins | 51.0 | 1,084.0 | | +--------------------+----------------------+ | | 946,191.2 | | +--------------------------------+--------------------+----------------------+

Making a complete total, with odd amounts from various sources, and including imperial gold coins minted in 1877-78 but now no longer current, of 1,205,786 lbs. weight = 84,103,584.

SALES OF SILVER BY THE GERMAN GOVERNMENT FROM 1873 TO THE SUSPENSION OF THE SALES IN MAY 1879

+-------+----------------+----------------+---------------+ | | Pounds of Fine | Product. | Price Per oz. | | Date. | Silver. +----------------+---------------+ | | | Marks. | Pence. | +-------+----------------+----------------+---------------+ | 1873 | 105,923.372 | 9,296,682.77 | 59-5/16 | | 1874 | 703,685.175 | 61,135,670.29 | 58-3/4 | | 1875 | 214,898.594 | 18,208,449.08 | 57-1/4 | | 1876 | 1,211,759.204 | 93,936,482.37 | 52-3/8 | | 1877 | 2,868,095.533 | 230,424,238.51 | 54-5/16 | | 1878 | 1,622,696.403 | 126,203,852.08 | 52-9/10 | | 1879 | 377,744.712 | 27,934,417.89 | 50 | +-------+----------------+----------------+---------------+ | | 7,104,895.993 | 567,139,992.99 | | +-------+----------------+----------------+---------------+