The History of Currency, 1252 to 1896 Part 23

Before the completion of these widespread changes, the great fall in the gold price of silver had begun, and the United States in her silver-producing interests, Great Britain in the interests of her Indian dependency and in those of her trade with silver-using countries, and the whole commercial world generally in the dislocation of international exchange, found themselves menaced by gravest danger.

[Sidenote: THE DEPRECIATION OF SILVER]

Before the inrush of silver to the Mint, caused by such a fall, the Latin Union first limited and then abandoned its coining of the 5-franc piece.

The fall of silver became thereby only the more acute and confirmed. By July 1876 it had sunk to 46-3/4 per oz. Apprehension was universally felt, and in both England and the United States fresh commissions were appointed to consider the question. The English commission on the depreciation of silver was appointed in March 1876, and sat from the 20th March to the 8th May, under the presidency of Mr. Goschen. The investigation turned upon the causes of the prevailing situation, without any attempt at the suggestion of a remedial positive system.

Later, in the same year (15th August), the American Congress voted the appointment of a like commission, to inquire into the causes of the depreciation of silver and into the feasibility of a reconstruction of a bimetallic system, as well as to devise a ratio and measures for the facilitation of a return to cash payments in the United States. This commission resulted in a double report, the 'majority' and the 'minority' report. The majority, comprising Messrs. Jones, Bogy, Willard, Groesbeck, and Bland, recommended the remonetisation of silver and the recourse to a fresh international conference. This latter proposition was expressed in the compromise known as the Bland Bill, the "Act to authorise the coinage of the standard silver dollar, and to restore its legal tender character, 28th February 1878." Section 2 of this law imposed it upon the President of the United States to invite the members of the Latin Union and the other interested nations to an international conference. On the invitation of France this conference met in Paris on 10th August 1878. The American delegates proposed the free coinage of silver in an international agreement and its unrestricted employ on a full equality of tender with gold. The delegates of Belgium, Switzerland, and Norway combated the proposals, and, on the part of England, Mr. Goschen declared that while the complete demonetisation of silver portended a commercial crisis to which no parallel could be found, England could consent to no serious modification of her currency system. Germany was not represented, and in her absence France adopted a waiting policy, and the conference closed with an impotent expression of opinion that, in view of the difference of opinion, it was useless to discuss an international ratio, and that, while it was necessary for the world to maintain the currency of silver, the choice and treatment of each or either metal must be left to the particular monetary situation and needs of each separate state.

It was not to be expected that so lame a conclusion could stand before the needs of the situation. On the 19th May 1879 the landed interest in Germany succeeded in driving the Chancellor of the Empire to suspend the further sale of silver. The circ.u.mstance gave fresh hope to the bimetallists, and a busy propaganda was carried on throughout Europe and the States. The renewed international conference of 1881 is to be regarded as an outcome of this movement.

[Sidenote: THE CONFERENCE OF 1881]

On the invitation of the United States and France the third international conference met in Paris on the 19th April 1881. All the European States, Canada, India, and the United States were represented.

France, through her delegates, Magnin, the president of the conference, and Henri Cernuschi, at once and boldly declared for bimetallism. The United States, Italy, Austria, the Netherlands, and British India followed suit. On behalf of their states the British and German delegates declared that no change in the currency systems of their countries could be entertained, but in case of an agreement among the chief nations certain regulations to increase the monetary employment of silver might be devised. Belgium, Switzerland, Greece, and the Scandinavian kingdoms declared against bimetallism. After a recess from the 30th June to the 19th May the conference closed on the 8th July 1881 with a nominal adjournment to the 12th April 1882, so as to give room for possible currency legislation in the meantime. On the day fixed, however, the conference, as need hardly be said, did not rea.s.semble.

Practically, in the interval between the second and third of these international delegations, the monetary situation had not perceptibly altered. The price of silver in 1878 had been 52-9/16, in 1881 it was 51-11/16: the general level of prices had, if anything, slightly improved, while the production of silver had not materially increased (from 2,551,000 kilogrammes in 1878 to 2,593,000 kilogrammes in 1881), though that of gold had certainly decreased. The close of the conference was, however, followed by a strong bimetallic agitation in England and Germany, which found united expression in the Bimetallic Congress at Cologne in October 1882.

This congress unanimously adopted the following resolutions:--

"That in order to the establishment of a firm ratio between gold and silver, it is desirable for England and Germany--

"1. To increase the employment of silver by minting full tender silver by the side of the divisional restricted tender silver.

"2. That Germany should withdraw all gold and paper below the value of 10 marks [and replace it by silver].

"3. That Germany should sell no more silver.

"4. That the Bank of England should put in practice the clause of her charter which allowed her to employ silver as part of the bank reserve."

The conclusions of this congress had, however, no practical influence on the course of policy of either nation.

In the United States a parallel though more interested agitation was conducted, centring round the yearly proposed repeal of the compulsory minting clauses of the Bland Bill.

[Sidenote: THE ENGLISH GOLD AND SILVER COMMISSION]

In England the commercial depression, consequent upon falling prices and the dislocation of exchanges with India and the East, ran its full course, and gave fresh ground for activity to the then recently formed Bimetallic League.

In the course of 1886 silver had sunk to 42d. per oz., and when the royal commission on the depression of trade and industry closed its investigations, with the expression of a desire for an inquiry into the state of the precious metals, the British Government only too gladly acceded. On the 20th September 1886 the royal commission "to inquire into the present changes in the relative values of the precious metals"

was appointed. Its final report was made in October 1888, and, as is well remembered, was of a divided nature. All the members of the commission agreed that the action of the Latin Union in 1873 broke the link between gold and silver, which had kept the price of silver, as measured by gold, constant at about the legal ratio, and thereby left silver exposed to the influence of all the factors which go to determine the price of a commodity. On the question of bimetallism, in reference to the actual and to any possible currency system, the commissioners disagreed, and made separate reports. Lord Hersch.e.l.l, Sir C.W.

Fremantle, Sir John Lubbock, Sir Thomas Henry Farrer, J.W. Birch, and Leonard H. Courtney expressed themselves adversely.

"Though unable to recommend the adoption of what is commonly known as bimetallism, we desire it to be understood that we are quite alive to the imperfections of standards of value, which not only fluctuate but fluctuate independently of each other, and we do not shut our eyes to the possibility of future arrangements between nations which may reduce these fluctuations. One uniform standard of value for all commercial nations would, no doubt, be a great advantage. But we think that any premature and doubtful step might, in addition to its other dangers and inconveniences, prejudice and r.e.t.a.r.d progress to this end.

"We think also that many of the evils and dangers which arise from the present condition of the currencies of different nations have been exaggerated, and that some of the expectations of benefit to be derived from the changes which have been proposed would, if such changes were adopted, be doomed to disappointment.

"Under these circ.u.mstances we have felt that the wiser course is to abstain from recommending any fundamental change in the system of currency under which the commerce of Great Britain has attained its present development."

From these opinions dissent was directly expressed in Part III. of the report by the remaining members--Sir Louis Malet, A.J. Balfour, Henry Chaplin, Sir D. Barbour, Sir W.H. Houldsworth, and Sir Samuel Montague.

[Sidenote: DISSENT FROM REPORT OF COMMISSION]

"We cannot doubt that if the system which prevailed before 1873 were replaced in its integrity most of the evils which we have above described would be removed; and the remedy which we have to suggest is simply the reversion to a system which existed before the changes above referred to were brought about--a system, namely, under which both metals were freely coined into legal tender money at a fixed ratio over a sufficiently large area.

"The remedy which we suggest is essentially international in its character, and its details must be settled in concert with the other powers concerned.

"It will be sufficient for us to indicate the essential features of the agreement to be arrived at, viz.:--

"1. Free coinage of both metals into legal tender money.

"2. The fixing of a ratio at which the coins of either metal shall be available for the payment of all debts at the option of the debtor.

"We submit, therefore, that the chief commercial nations of the world, such as the United States, Germany, and the states forming the Latin Union, should, in the first place, be consulted as to their readiness to join with the United Kingdom in a conference, at which India and any of the British colonies which may desire to attend shall be represented, with a view to arrive, if possible, at a common agreement on the basis above indicated."

Such a report was claimed as a victory for either side, but its doubtful tenor only confirmed the rooted suspicion of the English administration as regards any change of the currency system. And when, on the occasion of the Paris Exhibition in 1889, a free International Monetary Congress was held, as one of the numerous special congresses connected with the celebration, Great Britain was not represented among the 194 members who attended on the invitation of the organising committee. M. Magnin, governor of the Bank of France, presided at the sittings, which covered from the 11th to the 15th September. Like its predecessor, the international conference, this congress closed without direct or practical resolution. Putting out of view this congress as of a more informal nature, a period of eleven years elapsed between the still only prorogued conference of Paris of 1881 and the conference of Brussels in 1893. This--as yet the last--conference was summoned on the initiative of the United States, but from the commencement a distinct difference of tone and method made itself felt; the Government of the United States recognising that some European countries might not be willing to adopt the remedy which they would prefer, namely, "the establishment of some fixity of value between gold and silver, and the free use of silver as a coin metal, upon a ratio to gold to be fixed by an agreement between the great commercial peoples of the world." The invitation to and purpose of the conference were conveyed in quite general terms, namely thus, "For the purpose of considering what measures, if any, could be taken to increase the use of silver in the currency systems of nations."

[Sidenote: THE BRUSSELS CONFERENCE]

The invitation was accepted by all the most important states, and at the first meeting, on 26th November 1892, the delegates of twenty Governments were present, namely, Austria, Hungary, Belgium, Denmark, France, Germany, Great Britain, British India, Greece, Italy, Mexico, The Netherlands, Norway, Portugal, Roumania, Russia, Spain, Sweden, Switzerland, Turkey, and the United States.

The proceedings were opened by M. Beernaert, President of the Council and Finance Minister of Belgium. M. Montefiore Levi, senator, and delegate of Belgium, was chosen as president, and his Excellency, M.

Edwin H. Terrell, Minister of the United States at Brussels, and one of the delegates of the United States, was chosen vice-president.

At the second meeting the American delegates submitted a scheme for international bimetallism, but, in conformity with the terms of the invitation, at the same time expressed a hope that the powers represented would consider and submit other plans for the enlarged use of silver. Two such proposals they themselves suggested for discussion--(1) the plan of M. Moritz Levy, proposed at the conference of 1881, and (2) the plan proposed by the late Dr. A. Soetbeer. The main design of both these proposals was to increase the use of silver, by subst.i.tuting silver coins or notes based on silver, for such small gold coins and small notes based on gold as are at present in circulation.

At the same session the delegates of Germany, Austria, and Russia explained that they were instructed not to express an opinion or to vote upon any resolution. Roumania, Portugal, Turkey, and Greece not having special instructions, felt themselves compelled to take up a similar att.i.tude. Finding that France and the States of the Latin Union were apparently more disposed to criticism of, rather than to cordial co-operation with, the objects of the conference, the delegates of the United States did not press for a resolution on the wider question of bimetallism, and the attention of the conference was accordingly fixed on the subsidiary suggestions. To these latter, as above, was added on the same day a third, made by Mr. Alfred de Rothschild, to the effect that on condition of the United States continuing her purchases of 54 million oz. of silver yearly the different European powers should combine to make certain yearly purchases, say to the extent of 5,000,000 yearly; these purchases to be continued over a period of five years, at a price not exceeding 43 pence per oz. On a rise of silver above that price the purchases for the time being to be immediately suspended.

In committee this latter proposal was thus modified--

1. The European states which agree, upon the basis of this proposal, will buy in each year 30 million oz. of silver, on condition that the United States agree to continue their present purchases, and that unlimited free coinage be maintained in British India and Mexico.

2. The proportion of the purchases to be made by each country will be determined by agreement.

3. The purchases will be made at the discretion of and in the manner preferred by each Government.

4. These amounts of silver will be devoted in each country to the monetary uses authorised by the legislation of that state, and the silver will be either coined or made the guarantee for an issue of ordinary or special notes, as Government may think fit.

5. The arrangement will be made for five years. The obligatory purchase of silver will be suspended should the metal reach in the London market a price determined by agreement between the Governments. The purchases may be renewed, if the delegates of the different countries interested should agree upon the fixing of a new limit of price. They should be renewed in any case if the price falls below the original limit.

With regard to the Soetbeer plan it was abandoned in committee, while the Levy plan was drawn up in the following terms:--

"1. The withdrawal from circulation within a period of ... of gold coins containing a weight of less than 5.806 grms. of fine gold (20-franc pieces).

"2. The withdrawal of notes of a less value than the coin of 20 francs or its equivalent, an exception being made of notes representing a deposit of silver."

The manner of adopting and recommending these schemes to the conference from the committee was peculiar. The British delegate, Sir C. Fremantle, declared that he could not entertain the "Levy" except in conjunction with the "Rothschild" scheme, and while recommending the latter to the conference for discussion, the states of the Latin Union declared that even if pa.s.sed, they could not recommend the plan to their Governments.

At the fourth session M. Boissevain declared that there were insurmountable obstacles to its adoption by the Government of the Netherlands. General Strachey said that unless it received more favour than was indicated by the report, he would be unable to support it. Mr.