Money: Speech of Hon. John P. Jones, of Nevada, On the Free Coinage of Silver Part 6

To show from another source the same general fact of the decline of prices, I quote from an article published in the New York Tribune early in 1886.

The New York Tribune is pretty good authority. These figures are undoubtedly from the calculations and from the pen of Mr. Grosvenor, of the editorial staff of that able journal, formerly editor and proprietor of the "Public," whose estimates of prices have, in my judgment, been more correctly made than those of any other statistician in the world.

The article is as follows:

Quotations of about two hundred articles are compared since 1860, and the amount of money is ascertained which would purchase, at different dates, of these various articles, quant.i.ties corresponding as closely as possible to their ascertained consumption in 1880, the date of the last census. Among the articles compared are wheat, corn, oats, rye, barley, beans and pease, mess pork, bacon, ham, live hogs, lard, fresh beef, tallow, live sheep, poultry, b.u.t.ter, cheese, eggs, milk, hay, potatoes, turnips, cabbage, onions, apples, raisins, sugar, brown and crushed; mola.s.ses, coffee, tea, tobacco, whisky, malt and hops, mackerel, codfish, salt, rice, nutmegs, cloves, pepper, cotton, print-cloths and standard sheeting, wool of different qualities, blankets, carpets, flannels, leather, boots, shoes, hides, silk, India rubber, iron (pig and bar), nails, steel rails, coal, oil (crude and refined), tin and tin plates, copper, lead, hemp, lumber, spruce and pine, oak, ash, walnut, and white wood, lath, brick, lime, turpentine, linseed oil, soap, gla.s.s, paper, white lead, and twelve other kinds of paints, fertilizers, and over fifty kinds of drugs and chemicals.

_Cost of products at different dates._

---------------------+-----------+----------+--------- Dates. Cost in Price of Cost in currency. gold. gold.

---------------------+-----------+----------+--------- 1860, May 1 $100.00 $100.00 $100.00 1865, November 1 174.77 145.87 119.81 1866, May 1 157.60 125.12 126.04 1866, November 1 170.31 146.25 117.82 1871, November 1 122.03 112.00 108.95 1872, May 1 137.13 112.50 121.81 1873, November 1 115.14 108.50 106.01 1874, May 1 122.77 112.87 108.77 1875, January 1 113.01 112.37 100.37 1876, October 1 97.30 110.00 88.45 1877, May 1 99.29 106.75 93.01 1878, May 1 82.09 100.37 81.81 1878, October 18 77.94 100.37 77.65 1879, November 1 93.48 -- -- 1880, January 1 103.42 -- -- 1881, January 1 95.98 -- -- 1882, May 16 106.59 -- -- 1883, March 13 97.82 -- -- 1883, November 1 88.71 -- -- 1884, January 1 88.37 -- -- 1884, November 21 78.47 -- -- 1885, January 1 79.66 -- -- 1885, May 9 80.22 -- -- 1885, August 22 74.56 -- -- 1885, November 1 75.35 -- -- 1885, Close 78.53 -- -- ---------------------+-----------+----------+---------

It is not only clear from this comparison that the prices of 1885 have been the lowest in our history for twenty-five years, but that there has been a general tendency toward lower prices. From 1866 to 1871, and again from 1872 until 1885, prices fell quite steadily. Indeed, had not the short crop of 1881 caused a temporary advance in the spring of 1882, the range of January, 1880, would have been the highest of the later period, and it might have been said that the present era of declining prices had continued with little intermission for six years. None will fail to observe how swift and sharp the advances have been--about 12 per cent. from November, 1871, to May, 1872, and 25-1/2 per cent.

from October, 1878, to January, 1880. But these spasmodic advances, by which the general tendency downward is interrupted, only serve to make it more clear that prices have been tending irresistibly toward a lower level than that of 1860, not only during the period of paper depreciation, but since gold has been the measure of value.

In order to show that the United States are not alone in their complaint of falling prices, but that the complaint is universal, and in order that we may have before us a broad view of the field of general prices, I submit a table showing the relation to each other of the range of prices from 1809 to 1849, by decades, based on the prices of fifty leading articles of commerce, prepared by the distinguished Professor Jevons and published in the London Economist for May 8, 1869.

Taking the range of prices of 1849 as a datum line (the range for that year being the lowest of the century) Mr. Jevons works backward to 1809, when the revolt of the South American colonies against the authority of Spain shut off at a blow the supplies of the precious metals, and set on foot a money famine from which the world knew no relief till the discovery of the mines of California and Australia.

Professor Jevons's figures are as follows, the prices of 1849 being represented by 100:

_Relation of prices, 1809 to 1849, by decades, those for 1849 being rated at 100._

1809 245 1819 175 1829 124 1839 144 1849 100

From these figures it will be observed that the fall from 1809 to 1849, a period of forty years, was as 245 to 100, or 59 per cent.

By the next table which I submit, that of Dr. Soetbeer, it will be seen that the general range of prices rose gradually from 1849 to 1873, in the last of which years the figures bore to those of 1849 the relation of 138 to 100. It has never been denied that this rise was due to the increase in the world's money supply by the yield of the precious metals from the mines of California and Australia, the effects of which, however, as will be seen by the table, were not felt on prices till 1853--five years after John Marshall's discovery of the yellow metal in the tail-race at Sutter's mills. Yet, because it interferes with the pecuniary interests of a large and influential cla.s.s, it is vehemently denied that the fall of prices since 1873 is due to a decrease in the volume of the money caused by the demonetization of silver in that year throughout the western world.

From and after that year, as will be perceived by an examination of the figures; in other words, from the year when one-half the world's money supply was deprived of the money function, we find an almost uninterrupted decline of prices. The figures of 1873 and 1885 will be seen to bear to one another the relation of 138 to 108, or a fall of 22 per cent. in twelve years. Should the fall continue at that rate without interruption--and there is no reason apparent why it should not, we shall in forty years have witnessed a decline of 72 per cent. in the general range of prices--a decline considerably greater than that from 1809 to 1849. And these are not the figures of bimetallists or silver "theorists," but of p.r.o.nounced advocates of the single standard of gold.

Where, I would inquire, is the fall of prices to stop?

Dr. Soetbeer's table represents the general average price of one-hundred leading articles of commerce each year for a period of nearly forty years. He takes as a basis the general range of gold prices prevailing between 1847 and 1850, and calling that range 100, shows the relative standing toward it of the general range of prices for subsequent years, up to 1885.

_Relation of prices by years from 1849 to 1885, the general range of prices of 1849 being rated at 100._

1849 100.00 1851 100.21 1852 101.69 1853 113.69 1854 121.25 1855 124.23 1856 123.27 1857 130.11 1858 113.52 1859 116.34 1860 120.98 1861 118.10 1862 122.65 1863 125.49 1864 129.28 1865 122.63 1866 125.85 1867 124.44 1868 121.99 1869 123.38 1870 122.87 1871 127.03 1872 135.62

1873 138.28

1874 136.20 1875 129.85 1876 128.33 1877 127.70 1878 120.60 1879 117.10 1880 121.89 1881 121.07 1882 122.14 1883 122.24 1884 114.25 1885 108.27

Mr. Sauerbeck, also an advocate of the gold standard, and whose work has the approval of the Statistical Society, takes as a datum line the prices ruling from 1867 to 1870. Rating those at 100 he finds that by 1873 prices had risen to 111, by 1886 they had fallen to 69, and by September, 1887, to 68.7. He declares the average prices for the first nine months of 1887 to have been the lowest reached for a hundred years.

BOTH GOLD AND SILVER VARIABLE IN VALUE.

The fact that the metals have separated considerably since 1873, and that silver bullion now sells at less than par value of $1.29 per ounce, is taken to signify that silver has fallen--not that gold has risen.

This proceeds from the a.s.sumption that whenever a change takes place in the relation between gold and any other article the change must necessarily be in the other article. This a.s.sumption, in turn, is based on the absurd idea that calling gold a "standard" will insure it against change.

Among political economists it is a well-recognized principle that neither gold or silver is exempt from the universal application of the law of supply and demand. That law governs gold and silver, not only as commodities, but as money, and governs as well all other kinds of money that may be used. And while the advocate of the single gold standard is at all times ready to concede the truth of this a.s.sertion as to silver, he is confident that it does not and can not apply to gold; that the economic law which makes supply and demand a regulator of value is suspended as to gold.

That a metallic money, whether of gold or silver, is very far from being stable is admitted by innumerable authorities, of whom I will cite only a few.

Dr. Adam Smith, in his "Wealth of Nations," book 1, chapter 5, says:

Gold and silver, like every other commodity, vary in their value.

The discovery of the abundant mines of America reduced in the sixteenth century the value of gold and silver in Europe to about a third of what it had been before. This revolution in their value, though perhaps the greatest, is by no means the only one of which history gives some account.

And again:

Increase the scarcity of gold to a certain degree and the smallest bit of it may be more precious than a diamond.

John Locke, "Considerations, etc., in relation to money" (published in 1691), says:

The greater scarcity of money enhances its price and increases the scramble; there being nothing that does supply the want of it; the lessening of its quant.i.ty, therefore, always increases its price and makes an equal portion of it exchange for a greater of any other thing.

Prof. Francis A. Walker, "Money," etc., page 210, says:

Gold and silver do, over long periods, undergo great changes of value and become in a high degree deceptive as a measure of the obligation of the debtor of the claim of the creditor. Thus Professor Jevons estimates that the value of gold fell between 1789 and 1809, 46 per cent., that from 1809 to 1849 it rose 145 per cent., while in twenty years after 1849 it fell again at least 20 per cent.

Jevons, "Money and Exchange," chapter 6, says:

In respect to steadiness of value the metals are probably less satisfactory, regarded as a standard of value, than many other commodities, such as corn.

And again, in chapter 24 of the same work, he says:

We are too much accustomed to look upon the value of gold as a fixed datum line in commerce; but in reality it is a very variable thing.

Sir Archibald Alison (England, in 1815 and 1845), says:

The coining of gold and silver, which is universal in all civilised nations, and affixing to them one definite and permanent value by authority of law, has no effect whatever in preventing the fluctuations in the real value of the current coin of the realm.

Professor Laughlin, of Harvard, in his work on Political Economy (page 72), says:

It is quite evident that the name dollar does not always have the same value, although people often think it does. We get into the habit of using names without thinking what they really mean. The 23.22 grains in a gold dollar may be exchanged sometimes for more, sometimes for less, of other commodities. When it is exchanged for less, its value has fallen relatively to all other commodities, and, even if the name dollar remains the same, its value has fallen. One must then offer more dollars than before for the same commodities. That is, when money falls in value, prices rise; when money rises in value, prices fall.

Now, we shall say a few words in regard to another function, a means of paying long contracts, or debts which run over a long term of years.

Suppose that I loaned you in 1880, $1,000 for twenty years. In that year the $1,000 bought a certain quant.i.ty of corn, wheat, sugar, salt, wood, hats, and shoes. In 1900, when you are to pay me back the $1,000 in money, if prices have changed, you may give me back the same amount of money, but you will not return to me the same purchasing power over other things. If for some reason prices have fallen between 1880 and 1900, it will take less money to buy the same quant.i.ty as before of corn, wheat, etc. If so, the $1,000 you return me in 1900 will be of more value than the $1,000 I gave you, and it would be unjust to oblige you to give me more than you borrowed. If, on the other hand, prices have risen, then the $1,000 in money would buy me less than before, so that I should lose. * * * Hence, the value of money (gold or silver) does not remain the same for any length of time; and the precious metals, while they are very satisfactory for exchanges which do not take very long to complete, can not serve as a proper measure of value during a long term or years.

Ricardo, the greatest authority on the gold standard, the financial writer, more highly regarded throughout the world than any other that has ever appeared in Great Britain, whose logical utterances have never failed to attract the attention of mankind, stated the true condition of things in 1810, and advocated the true policy for Great Britain.

In his "Proposals for an Economical and Secure Currency," Ricardo makes the following statement, which I commend to the careful attention of the advocates of the single gold standard:

While a standard is used, we are subject to only such a variation in the value of money as the standard itself is subject to; but against such variation there is no possible remedy, and late events have proved that, during periods of war, when gold and silver are used for the payment of large armies distant from home, those variations are much more considerable than has been generally allowed. This admission only proves that gold and silver are not so good a standard as they have been hitherto supposed--that they are themselves subject to greater variations than it is desirable a standard should be subject to. They are, however, the best with which we acquainted.

If any other commodity less variable could be found, it might very properly be adopted as the future standard of our money, provided it had all the other qualities which fitted it for that purpose; but while these metals are the standard the currency should conform in value to them, and whenever it does not, and the market price of bullion is above the mint price, the currency is depreciated. This proposition is unanswered and is unanswerable. Much inconvenience arises from using two metals as a standard of our money; and it has long been a disputed point whether gold or silver should by law be made the princ.i.p.al or sole standard of money. In favor of gold it may be said, that its greater value under a small bulk eminently qualifies for a standard in an opulent country.

And I may here remark that it requires an opulent country to maintain the single gold standard, and the country does maintain it at very great expense. I do not wonder that he thought an opulent country, a creditor country, the only one that ought to adopt it, for no other country can afford to adopt it. But, like many people who in attempting to improve their condition in society attempt luxuries and extravagances which they can not maintain and which force them back into the ranks from which they came, so nations in attempting to establish the gold standard may find themselves reduced from opulence to poverty.