Money: Speech of Hon. John P. Jones, of Nevada, On the Free Coinage of Silver Part 16

The larger the stock of gold, therefore, acc.u.mulated by us the lower, necessarily, must be the price which we can receive for our surplus agricultural products.

In order to maintain parity between the metals, it is not necessary for us to have all the gold we now have; $200,000,000, or even $100,000,000 of gold, would maintain that parity. The parity between the metals can never be broken until all the gold leaves, and provided we retain one or two hundred million, the rest can not be placed more advantageously than where our languis.h.i.+ng surplus products must be sold.

When gold leaves this country it is because prices here are rising.

Prices are now lower than they have been since 1847. Must they continue declining in order that we may be able to retain all our gold? It is manifestly impossible for the people of this country to prosper with a constantly lowering range of prices. It is equally impossible for the present level of prices to be maintained with a constantly increasing demand for, and as constantly diminis.h.i.+ng a supply of, gold. It is universally admitted that an increase in the money circulation of this country at the present time is an exigent necessity. The advocates of the single gold standard, while admitting that we must increase our money volume, the effect of which must be to maintain, if it does not raise, the level of prices here, insist that we shall let none of our gold go in order that prices abroad may rise.

Mr. BLAIR. May I ask the Senator a question?

Mr. JONES, of Nevada. Certainly.

Mr. BLAIR. Does the Senator mean to be understood that the falling of prices is an absolute demonstration of the increased value of the money without limitation?

Mr. JONES, of Nevada. I have already, in the early portion of my remarks, had occasion to state that when a fall in prices was brought about by a larger subordination of the forces of nature to the uses of man, as where the comforts and conveniences of life could be produced with less sacrifice than before, it was not an injury to society, but in advantage. In other words, if, by a certain amount of sacrifice seventeen year ago, only one pair of shoes could be produced, and if by the same sacrifice two pairs could be now produced, there would be a lowering of the price of shoes to about one-half of what it was seventeen years ago, which would be a very great benefaction to mankind.

But, as I then stated, there is one certain sign that that is not, except to the slightest extent, the cause of the present universal fall of prices. When prices fall owing to improvements in manufacture, business revives, the ma.s.ses of the people are at work, those who toil find themselves possessed of more of the comforts, of the conveniences, and even of the luxuries of life than before. They are better contented with their condition, and more buoyant and hopeful than before. On such occasions money becomes more and more in demand than it was before, and instead of being h.o.a.rded is put into active and productive business where it will make a profit. But when interest falls, pari pa.s.su, with the fall of prices, it shows that the fall of prices is not due, except in the smallest degree, to improved methods of production, but to the increased value of money.

Mr. BLAIR. I was not controverting the Senator's theory as to the existing facts in this country, but I understood him to be laying down an absolute principle, applicable under all circ.u.mstances and in all times, that the fall of prices is a demonstration of the increased value of money. I supposed that the fall in prices resulting from a protective tariff was beneficial, and not an indication of an increase in the value of money, and that that fall of price was not owing to the increased value of money, but was by improved machinery and all that. So it is possible that some of the fall in prices in this country may be owing to increased facility in the matter of production and to the beneficial operations of the protective tariff.

Mr. JONES of Nevada. Mr. President----

Mr. REAGAN. If the Senator from Nevada will permit me, I wish to ask the Senator from New Hamps.h.i.+re if he means to be understood as a.s.suming that a protective tariff reduces the value of the commodities produced?

Mr. BLAIR. I was simply asking for information of the Senator from Nevada, and he can answer that question much better than I; but the Senator from Texas understands very well that I do believe a protective tariff reduces prices.

Mr. JONES, of Nevada. Mr. President, so far as a tariff has the effect of reducing prices in any country, it is not by reason of the levying of any certain percentage of duty on the imported goods. The first effect of the tariff certainly always must be to raise prices. The fundamental theory of the tariff is--whether it be correct or not I am not now discussing--that by that tariff you place the price of manufactured goods up to a range at which they can be produced in the country in which the tariff is levied, and upon the level of the range of wages and manner of living which obtain in that country. By so doing, if you have a proper volume of money, you set all your people at work, and keep them at work at a variety of occupations. In such case every forge, furnace, and factory becomes a school, every machine-shop an academy, and every cunning device and invention becomes a lesson, teaching the people how to deal with the subtle forces of the universe. So far as this country is concerned the theory of the tariff is that 65,000,000 people should have a varied and complete system of manufactures, which should supply practically all their own wants, instead of an abnormal proportion of them being driven into the single occupation of farming and relying on foreign manufacturers to supply such finished products as they need. To draw out and develop the apt.i.tudes of a people a large variety of occupations is indispensable. When all men are employed at their apt.i.tudes new inventions multiply, progress is accelerated, and the secrets of nature are more rapidly unfolded. Hence the McCormick reaper; hence the sewing-machine, that great instrument which clothes the world, because of the discovery that the eye of the needle should be at the point; hence the air-brake, the telegraph, the electric light, and thousands of other inventions that a protected people originate and develop, which would perhaps not have been originated or might have been long delayed if it had not been for the discouragement to imports caused by the tariff, and the encouragement to our people to go into manufactures by which their varied talents are drawn out and cultivated.

There is no doubt that eventually as our conditions improve, increasing numbers of our people will by degrees emerge from agricultural and enter manufacturing pursuits. A tariff, by stimulating the organization and development of industries, trains men to greater skill and perfection of workmans.h.i.+p in a variety of departments, and with greater skill comes greater efficiency of labor, and so greater economy of time. In that way the prices of certain products are in time reduced; but that is not a reduction of which any one complains.

The true cause of the present discontent will not be found in the protective tariff, but in the exactions of the single gold standard.

Fifteen years ago England was on the gold standard. It is on the gold standard to-day; yet prices in England are 35 per cent. lower than they were fifteen years ago. There being no reason why there should be any change in the trend of prices, so long as a fierce contest for the possession of gold shall be waged between England, France, Germany, and the United States, we are justified in a.s.suming that a proportionate decline of prices will continue. That means a further decline of 30 or 35 per cent. in prices during the next fifteen years. Where is this tendency to stop? and if it does not stop, how long will it be before the ma.s.ses of the people become the bond slaves of the creditors? It is shocking to the moral sense of mankind that a few money-lenders and bondholders should thus be able, silently and insidiously, to wreck the business of every country in the world by constantly increasing the value of the money unit.

While admitting the necessity of more monetary circulation, our gold standard friends fail to show us how it is possible for an increase in the volume of money to benefit our merchants, farmers, or mechanics if the prices that prevail in gold standard countries are to prevail here; for that is what the gold standard means for us, Mr. President. It means that the prices that rule in gold standard countries are to rule here.

The extreme indefiniteness with which the term "gold standard" is used has so befogged the relation which gold money bears to industry and commerce that people lose sight of the essential feature of that relation. It is impossible to have a clear conception of the gold standard without keeping in view exactly what is implied by the term.

What men must mean in this country by "the gold standard" is not the touch of the metal, for they never touch it, and rarely, if ever, see it. The maintenance of the gold standard here simply means the maintenance here of the range of prices that prevail in gold-using countries; that is to say, that low and lowering range of prices rendered necessary by the attempt to measure the value of the constantly increasing ma.s.s of the products of industry in all the western world by the constantly diminis.h.i.+ng volume of gold. No relief can come to the toiling ma.s.ses of this country until we can lift our prices above those that now prevail in gold-using countries.

Even if our prices remain as they are and do not increase, gold will eventually leave the country if it continue to increase in value as it has been increasing during the past fifteen years. We have been enabled to maintain the gold standard here for the past twelve years notwithstanding a considerable addition of money other than gold to our currency, but we have been able to do so only because other countries have been using an equal or greater amount of money other than gold. We have been using no greater proportion of silver or paper money than other countries having the gold standard are using, hence we have been able to maintain their level of prices and still keep the metals together. But whenever we shall attempt to prevent a further fall or prices in this country, it will be impossible for us to retain our gold so long as prices in gold-using countries continue to decline as they have been declining. Gold will leave as quickly because of contraction abroad as of inflation here, if by "inflation" is meant a coinage of money sufficient to maintain prices at a steady level.

Should gold leave the country, then, in order to supply its place, in order to maintain the _status quo_ in prices, and prevent a further fall from the present low range, we should need to have as many dollars of silver in circulation as there are now dollars of gold. Gold would go out only because our prices were rising, and as it went prices would cease to rise. That process might continue until three or four hundred million dollars of gold had gone. In all this, where would be the disadvantage to our people?

Considering the rapidly increasing population and wealth of this country, all the silver that can be procured from the mines will be necessary to maintain the level of prices and to keep pace with the increasing demands for money. If, however, it slightly exceeds--and it could not at the utmost more than slightly exceed--the amount actually demanded by increasing population and business, the over-plus of each year would take a great many years to drive gold out of the country, dollar for dollar. For, when prices here, of things internationally dealt in, are at an equilibrium with prices of the same articles abroad, gold can not go any faster than silver comes in.

IF $2,500,000 SILVER PER MONTH HAS NOT DRIVEN OUT GOLD, HOW MUCH WILL DO SO?

For twelve years past we have had a silver coinage of nearly $2,500,000 a month, yet no gold has been driven out. Having tested the capacity of that quant.i.ty of silver to drive out gold, we find that instead of driving it out its coinage has resulted rather in bringing gold in. For, to whatever cause the influx of gold may be ascribed, it is unquestionable that the gold has come, and it has needed all that gold, and all the silver that we have coined, to maintain international prices here.

It is admitted by all that gold can not go out except by reason of a rise in this country of the prices of articles of international commerce beyond the prices of the same articles prevailing abroad. It is only then that it becomes more profitable to send out gold in payment for our foreign purchases than to send out commodities--the products of our own country. Commodities will always be sent out in payment for other commodities so long as it is more profitable to send them than gold, and when, by reason of low prices prevailing abroad and high prices here, it is no longer profitable to send out commodities, purchasers send out gold, but only because it is to their advantage to do so.

Now, having seen that the coinage of $2,500,000 of silver each month was insufficient to so raise prices in this country as to induce gold to go abroad, but that on the contrary it resulted in an influx and acc.u.mulation of a large amount of gold, we may safely a.s.sume that only so much of the amount of silver which Congress shall now provide for as exceeds $2,500,000 a month will have any influence in raising prices in this country above international prices, and so providing a stimulus for gold to go abroad in payment for commodities imported into this country.

If the amount of silver which shall be now provided should be, say, $5,000,000 a month, the excess over the present coinage would be $2,500,000 a month. This, then, would be the amount that would drive out gold. As one dollar of silver would drive out no more than one dollar in gold, no more than $2,500,000 could go out monthly. That would leave in circulation the same amount of money that is in circulation now. There would still be no increase in the money volume of the country, and, with no increase in the volume of money, prices here would not rise above international prices. At the rate of $2,500,000 a month, it would take twenty years to drive out $600,000,000 of the $700,000,000 of gold now in this country. It would take even longer than that, because the $600,000,000 driven out would tend to raise international prices abroad, and so check the outflow of gold from here.

Mr. McPHERSON. Will the Senator yield to me for a question, or does he prefer to go on?

Mr. JONES, of Nevada. I am always ready to answer a question.

Mr. McPHERSON. I do not want to interfere with the Senator's line of argument, or with his speech in any form, but it does seem to me that there is something fallacious about the Senator's argument, or else my judgment and the experience of the world is all wrong. I wanted to ask the Senator this question: If it be known that the Government of the United States, if you please, by such an increase of the silver coinage in this country as will be produced by the free coinage of silver, to which theory, as I understand, the Senator is fully committed--if that be the theory of the Government hereafter by the command of Congress, I want to ask the Senator if he broadly and boldly a.s.serts that no gold can be driven out of the country to a greater extent than dollar for dollar for the silver that comes in?

Mr. JONES, of Nevada. Absolutely; I say so.

Mr. McPHERSON. Then I want to ask the Senator another question, which seems to be pertinent. Does the Senator a.s.sert that if a 72-cent dollar, the value in bullion of a silver dollar during the year 1889, as has been furnished us by the Director of the Mint and the Secretary of the Treasury, were coined without limit (I say without limit, the limit being, of course, the amount of bullion that is brought to the Treasury to coined), and the people of this country who have been in favor of a safe and honest currency, a currency either gold or as good as gold, which the Treasury has been able to maintain, having forced no silver upon the people if they did not wish it, and in that way the silver dollar having been maintained equal to the gold dollar, I want to know, with the people of this country to-day the holders of $500,000,000 of gold, how it is possible for the Senator to believe that with a 72-cent dollar to take its place the gold coin would circulate for a single week, or a single day, or a single hour? If they have the gold will they not hold it?

Mr. JONES, of Nevada. The Senator has so involved his question with his argument that I can scarcely get at what he wants me to answer.

Mr. McPHERSON. The question I want the Senator to answer is this: Will the people of this country, the financiers of this country, the banks, the moneyed men holding $500,000,000 of gold, with a certainty of the free coinage of silver and going to a silver basis, for that is what it means, put their gold in circulation, or will they h.o.a.rd it? Will it disappear?

Mr. JONES, of Nevada. I scarcely know what the Senator means by a "silver basis." He talks about a 72-cent dollar. We have never seen a 72-cent dollar. The papers in the East have told us that the silver dollar was worth 72 cents. I recollect talking on that subject once with some Senators in the cloak-room. During the conversation one of the Senate pages brought me a telegram, on which he said the telegraph messenger had told him there were 50 cents due. I give the page a silver dollar and said to him: "I have been informed by some very respectable and intellectual gentlemen in here, some of them now candidates for the Presidency even, that this dollar is worth only 75 cents. I do not want to cheat a little boy. Take this out, and if the boy thinks it worth only 75 cents he can send me back 25 cents, and if he thinks it is worth a dollar he can send me back 50 cents. I will leave it to him." The page brought back 50 cents and said the telegraph boy told him he did not know what those old "duffers" in there might say, but it was as good a dollar as he wanted and was very hard to get. [Laughter.]

The Senator talks about the bullion value as though that had anything whatever to do with the value of the dollar. I have attempted to demonstrate that the material that was in the dollar has nothing whatever to do with it. Let me ill.u.s.trate. Suppose the entire supply of silver of the world to-day were $60,000,000. Suppose the law limited the coinage of it to $58,000,000, and every dollar coined was at par with gold. Suppose there were a demand for half a million dollars of silver, to be used in the arts, and that the remainder ($1,500,000) of uncoined silver were barred from the imperial money use. That supposes a supply of $2,000,000 left after satisfying the requirements for coinage, and supposes only half a million dollars' demand for use in all the arts. In that case there would be a $2,000,000 supply bearing down a half million dollars' art demand, or a proportion between supply and demand of 4 to 1. Suppose that under those circ.u.mstances silver bullion went to 50 cents an ounce. Would the Senator then say that 50 cents an ounce was the value of the $58,000,000, and all the rest of the coined silver of the western world, while by coining another million and a half, which would be nothing to a country like this, all the silver would be at par with gold? Every ounce of silver coined in Europe and the United States is at par with gold, a thousand or twelve hundred million dollars of it to-day in France, $200,000,000 in Germany, $370,000,000 of it here. We are not dealing with the price of silver bullion, that portion of silver that is deprived of its immemorial use as money. We do not say what the commodity demand for silver may make that worth. Such a consideration has no bearing whatever on the value of money.

I will suppose that in some one county of the United States a law were pa.s.sed that the wheat grown in that particular county should have no right to go through the grist-mill, and that that wheat, as it might very naturally do, being deprived of use, fell to one-half the price of the wheat grown elsewhere in the country. Would the price of the wheat of that one county thus under interdiction and denied the grist be a fair gauge by which to measure the value of the entire wheat crop of the country? Manifestly not. All we have to do is to take up the little "slack" of silver, and all of it will at once be at par with gold; then we shall hear no more about the "commodity value" of silver. That is the contention that the bimetallists make.

Mr. HEARST. It will be $1.29.

Mr. JONES, of Nevada. It will be $1.29 an ounce in one week--in three days--in fact the very moment you give it back its ancient right of coinage and restore to it its full money power. You coin of gold all that is brought to the mint, and you deny to a certain portion of silver that same long-established privilege, and then you measure the value of the whole supply of silver by that of the little fraction that is not coined, and which therefore has to find a market as a commodity.

Mr. McPHERSON. Then, if the Senator will permit me, he necessarily proposes that the Government of the United States shall take up all this "slack," as he calls it, in the surplus quant.i.ty of silver and shall use it in the coinage. The mints of Europe being closed against the coinage of silver, there is no other place where it will be coined. Now, if the Government of the United States should use all the surplus silver in the country, which has simply forced the price down since we remonetized silver in 1878 more than 20 per cent.----

Mr. JONES, of Nevada. Gold has risen 35 per cent.

Mr. McPHERSON. Then I think the Senator's argument is upon this idea and upon this plan, that after we are upon a silver basis, as we should be most a.s.suredly, there would be no inequality in the money, because it would be all silver.

Mr. JONES, of Nevada. And no inequality between it and gold.

Mr. McPHERSON. Certainly not, because there would be no gold in circulation. But let me ask the Senator another question. While he can use his short-legged silver dollar for the payment of debts, when he comes to make a new obligation would not the price of the goods a.s.sume a price equal to the difference between gold and silver? In other words, while you can use a debased currency for the payment of debts, if a legislative decree requires that you shall accept it, you can not use it for any other purpose.

Mr. JONES, of Nevada. I can not understand the Senator. We have not provided any "short-legged" dollar. The Senator is a.s.suming a good many facts and attempting to adjust me to them. I ask the Senator to wait until he has heard my argument, and I invite the Senator then to make reply to it.

Mr. McPHERSON. I am sorry that I interfered with the Senator.

Mr. JONES, of Nevada. It was no interference on the part of the Senator, except that I can not separate the Senator's questions from the argument and a.s.sumptions that he makes. As to the outflow of gold, as I have said, it would take a long time for even $400,000,000 of it go. The amount of gold driven out would tend to raise prices abroad by making money more plentiful there, and so check the outflow of gold from here.

When Senators speak about $600,000,000 of gold being withdrawn from circulation here a question that is a little curious arises. What are these people who own it going to do with that gold after they have withdrawn it from circulation? Are they going to invest it in Great Britain? Are they going to invest it in France? Are they going to the Cape of Good Hope to invest it? If they are they will reverse the policy that English capitalists are pursuing now and have been pursuing for years--bringing their gold over here for investment. The Senator tells us that gold is to disappear from circulation. What will the owners do with it? Where and in what are they going to invest it?

Mr. McPHERSON. It will be held for a premium.

Mr. JONES, of Nevada. But who will buy it at a premium? Who needs it at all? For what purpose is it needed? Who is going to pay any premium for it? n.o.body is "short" on it, and there is no law which forces anybody to have it.