Remarks on the production of the precious metals

The like result is obtained from other channels of information. The Mint of London, which ordinarily coins gold at the rate of about £2,000,000 sterling per annum; and which, in 1850, had not coined more than £1,492,000 sterling; in 1851, increased their operations to the extent of a coinage of £4,200,000 sterling (above 105,000,000 of francs). The moiety of this gold must have come from California. In the same year, the mint of Paris coined in gold 192269,709,570 francs, of which about half was supplied by the conversion of 100,000,000 of Dutch Guillaumes into French money. In the accounts of the German Mints, we find about 193200,000,000 of Californian gold. If we are to judge from the operations of our own mint, the import of 1852 will be smaller than that of 1851; for we have coined but 14,000,000 pieces in gold during the first three months of this year.

Australia sends regularly large amounts of her gold to England; but a part of the export of gold dust, or “nuggets,” is returned in gold coin. Many vessels have lately cleared from London with £200,000 sterling; and this at a time when England had barely received £800,000 sterling, from Sydney and Melbourne. Considerable amounts will likewise be imported in plate and jewellery. The more wealth increases in the colony, the more gold will be employed both for circulation and for luxuries. The producing country will be most certainly, par excellence, the country of consumption. Europe contains 200,000,000 inhabitants, of whom not one-half are adequately supplied with metallic money. It would require, certainly, an addition of many milliards of francs to the quantity of the present metallic circulation, to put many of these countries in an equally favourable position in this respect with France, Belgium, Switzerland, Holland, and Great Britain. We know, that only nations of industrious habits are in want of a larger supply of gold and silver because they alone carry on trade to any extent. Abundance of production precedes and gives rise to a demand for money. Wealth must exist in a country before the sign of that wealth is required; but, at the same time, it cannot be denied that the circulation of the precious metals stimulates, to a great degree, the creation of richness; it acts like roads, canals, or other modes of transport, which, by opening the means of reaching markets, extend the radius of operations, and give additional value to commodities. One half of Europe has a trade of inconsiderable importance, and derives but a small part of the benefit of the produce of its own soil. It has neither industry nor credit. In many countries now, gold and silver are replaced by the use of paper-money, often discredited in its own, and in all cases valueless out of its own country.

Austria has just made, partly in London, and partly in Frankfort, a loan of £3,500,000, intended principally to restore the credit of her paper money. This will be the first step towards the restoration of metallic money, which had disappeared to such an extent, that the smaller notes were often divided into four, to use for change. Prussia, Poland, Russia, and Turkey, have experienced, in different degrees, the like embarrassment. Before these various markets are all superabundantly supplied with gold and silver, the treasures of Siberia, Australia, and the two Americas, may be diffused for many years over the continent of Europe.

The scarcity of gold had restricted its use; in France, for example, the smallest gold coin was 19420 francs. Since it has become more common, the Mint have coined pieces of 19510 francs, which are much liked, and are convenient for use. These smaller coins appear likely to take the place of a portion of our silver, which is needlessly cumbersome. It is supposed that the use of Bank-notes of 196200 and 100 francs has economised the use of several hundreds of millions of the precious metals. The 10-franc pieces, when more generally used in circulation, will take the place of, and drive out a portion of silver coin. The demand for silver then will diminish, whilst that for gold is increasing. Silver will be used as change for gold – as gold is for bank-notes. This is the case to such an extent in England, where the silver circulation is small, that the Mint in London, which coined £1,492,000 sterling in gold, in 1850, only coined £130,000 sterling in silver in the same year, whilst, in the same year, 19786,000,000 francs in silver were coined at the Mint in Paris. It must not be forgotten that the use of the precious metals is not confined to the limits of Christian civilization. The Chinese import Peruvian and Mexican dollars in exchange for their silks and teas; they attract by their trade the gold produced in the neighbouring Islands, and in the Straits of Sunda. This industrious nation has sent its contingent of labourers and traders both to California and Australia. A portion of Californian gold has already gone to China, but Australia appears better situated for the purpose of supplying the eastern regions and the southern portions of Asia with the precious metals. The Australian gold, however, sent there will be as so much lost treasure; for whilst the precious metals which are thrown into circulation in Europe continue in use as coin for a long time, that which is sent to China, or India, or Africa, altogether disappears; it is not required for circulation, but seems to be consumed.

Nothing appears more likely to restore the confidence of those who have taken alarm at the abundance of gold than the consideration of the almost unlimited extent of its market. What people, civilized or uncivilized, agricultural or manufacturing, do not enter into competition for a supply! What are the millions of francs extracted from the Cordilleras when compared with the capital created by the labour of the inhabitants of the whole globe?

The combined washings of the Altai, California, and Australia, during a quarter of a century, would be required to produce a sum equal to the annual revenue of England alone. This unexpected harvest of the precious metals is but an addition to a common fund of wealth; it cannot produce a deep or a durable impression on the almost incalculable mass of wealth already existing in the world.

After all, Europe herself does not preserve gold and silver as relics. Money is used by wear and tear to such an extent that it must from time to time be recoined, and the consequent loss falls on the community at large. The use of silver and gold plate, of gold work and jewellery, is increasing every day, as a distinguishing mark of the rise of the middle classes; the manufacturers of France, England, and Switzerland are at work for all the world. English statisticians have estimated the loss, from use, disasters at sea, and export without return of the precious metals, in the United States and Europe, at more than 198125,000,000 francs a-year. A more moderate estimate reduces this sum to 19975,000,000 francs. As to articles of luxury, the sums of gold and silver employed therein annually, have been estimated by Mr. Jacob, at 200148,000,000 francs, without including the consumption of the United States of America. Mr. M’Culloch, who embraces the United States in his calculations, puts the amount at 201150,000,000. France, herself employing upwards of 20230,000,000 francs, it may be admitted, without fear of exaggeration, that the sum of 203125,000,000 of gold is used for domestic purposes. Here, then, we have an annual consumption of 204200,000,000 francs; the proportion borne by gold in this absorption of the precious metals is every day becoming more important. What remains, at the present time, of the enormous masses of the precious metals which Mexico and Peru have poured forth during the last three centuries? The amount of gold and silver now in the form of circulation would scarcely equal the produce of the mines during the last fifty years. The 30 milliards which America sent to Europe, from the Spanish Conquest to the beginning of the 19th century, has almost entirely disappeared. It would appear as if industry, in its contact with gold and silver, must have volatilized it. France converted into coin a large amount of the precious metals; but when coined, it did not remain there. Exportation appears constantly to produce the effect of banishing it from the country. Thus, in twelve years, from 1840 to 1852, we have imported 205123,012 kilogrammes of gold, and we have exported 20671,217 kilogrammes; the difference in favour of the import being 20751,795 kilogrammes, equal to 208181,138,000 francs, showing an average of 20915,000,000 francs per annum. Jewellery, goldsmith’s work and gilding, employ, annually, in France, quantities of gold exceeding that sum in amount. The excess, then, is taken from the coinage, which accounts for the ordinary premium on gold in our market. The average would be considerably reduced if we except the year 1851, during which the import has exceeded the export by 21034,503 kilogrammes; but the results of 1851 may be considered as exceptional. Already, the greater part has disappeared; gold finds its way from France to London. The Bank of France, whose metallic reserve in 1851 included an amount of 211100,000,000 francs of gold, now does not hold above 21215,000,000 to 20,000,000. French gold coin, common enough in Paris, is scarcely seen in the provinces.

From 1840 to 1852, French commerce imported 21310,175,312 kilogrammes of silver, and exported 2143,688,279 kilogrammes. The excess of import, 2156,487,033 kilogrammes, represents a sum of 1,303,893,633 francs, or 108,657,802 francs a year. Admitting that 21615,000,000 are annually absorbed in the demands for articles of luxury, and 21710,000,000 or 12,000,000 for wear, our monetary reserve of silver would have increased at least 2181,100,000,000 since 1840. This leaves a large margin in the circulation of France for the displacement of silver by gold coin. When the import of gold shall have exceeded the export by an amount equal annually to 219200,000,000 francs, with this accumulated reserve of 2201,100,000,000 and with an annual excess of 22180,000,000 to 90,000,000 francs over the import and consumption of silver, it will require at least ten years to restore the equilibrium between the two metals, to the state in which it was in 1840.

No subject has given rise to more rash and speculative opinions than that connected with the trade in gold and silver. Amidst the great variety of conflicting phenomena, statistics appear almost valueless; but so long as gold continues to bear a premium, in spite of the apparent superabundance, and notwithstanding its partial demonetization, it may well be considered doubtful whether the relative proportions, established by law between gold and silver in so many countries, will be materially affected for at least some years to come.

Various remedies have been proposed by alarmists, to prevent the evils of the influx of Californian and other gold. Some have desired that government should limit the quantity of gold to be annually coined. This expedient, in the event of a depreciation in value, would be of little avail, for the quantity imported and kept in the shape of bars, would equally augment the general stock, and weigh down the price. Others have thought of altering the legal value, but this plan would be useless as long as gold remained at a premium. If gold became depreciated it would be injurious only until the fall was ascertained, and considered durable; this once determined, things would go on as before.

Then comes the question as to the demonetization of gold; doubtless no point is of greater importance for a standard of circulation than a fixed value. It is a fact that in all those countries where a double standard of gold and silver is established, one or other has always obtained the ascendancy, and maintained a premium, and has ceased to appear in the shape of money; logically, it would appear quite enough to regulate all prices by the value of one metal, without exposing trade to the uncertainty of an alteration in value of two. In the adoption of one only, however, it is desirable to examine which of the two has, over any given period of time, been subject to the least variation. Before the discovery of California, silver would certainly have had little chance of being selected. Even now it appears to me that the question has not so materially changed as might at first sight be supposed.

It should be remembered also, that it is not so easy for all countries who may have adopted the double standard to exclude one from their monetary code. The example of Holland has proved that gold, having lost its character as legal money, will no longer be used as a token. To demonetize gold is to exclude it from the market. For a great commercial country like Holland, living in the greatest freedom, and carrying on its trade by exchanging and carrying the products of all the countries in the world, to exclude one of its habitual means of exchange, may not be attended with great risks. England, though little disposed to imitate Holland at present, might perhaps do so with less danger, from having the commerce of the whole world in its hands. France, unless under pressing necessity, could not demonetize her gold without exposing herself to a complete disturbance in all her relations, both at home and abroad. Our trade is tied up by a completely protective system, without alluding to those direct prohibitions which disgrace our customs’ tariffs; almost all the duties which affect articles of primary consumption are, in short, disguised prohibitions. In exchange for the products of our own country, which we have to sell to the foreigner, we can hardly purchase in return anything but raw materials. Thus, bar and pig-iron, those articles of primary importance, have been subjected to duties at the rate of 100 per cent. on their value. In those countries enjoying a legislation attentive to the wants of trade, and where the custom-houses are only for the objects of revenue, the imports and the exports will show an even balance. In our country, where we have been desirous of opposing a barrier to the free course of exchange, goods exported have always a preponderance in value over those imported. In 1850, for example, the imports represented a value of 222790,000,000 francs, and the exports 2231,068,000,000 francs, showing a difference of 224278,000,000. England and the United States, together, receive of our products an excess of 225236,000,000 above the exports we receive from them; and as those countries with which we trade cannot pay us in goods, they must make their return in gold and silver. This was the reason of the import of 226220,000,000 francs in coin in 1850, as shown in our official returns. So long as the system of protection is the ruling policy of France, so long will it be impossible to deprive gold of its value as money; to attempt it would be to withdraw from trade one of its most useful means of exchange. It would check, if not stop, all intercourse with those countries who can only pay in gold, or who can only sell us those commodities which we endeavour to exclude by our tariffs. Gold flows naturally only to those countries where it is marketable; and it is only so where it is in use as coin as well as in commerce. A profit of half per thousand is sufficient in the present day to turn the current of the precious metals. This circumstance ought not to be lost sight of in the consideration of monetary legislation.

In fact, the change in the relative value of gold and silver, which was so strongly anticipated, appears anything but imminent; if any great change is now taking place, it appears rather to be that of a simultaneous depreciation in the value of both metals. Deep thinking persons are not content with expressing their fears; they are already providing themselves with the means of averting the evils which they anticipate. This is one of the causes which have raised the value of railroad stocks, and of landed property; and this explains the comparative abandonment, not of speculation, but of capital ordinarily seeking investment in government stocks. Alarm is felt at placing money on security, of which both the capital and the interest may remain at a fixed value; these may be the more sensibly affected, if the value of the precious metals is altered; whereas the shareholder of a railroad would have a chance of having his income increased; and the landed proprietors that of having their capital augmented in the same proportion in which the value of money would be depreciated.

In dwelling on these facts, I have no idea of setting myself up as a prophet. I would confine myself to the wish to indicate some of the symptoms of the present position of these matters; the danger, if any exists, is certainly not very near at hand. We have already seen the use of bank notes in France increased to an extent which, owing to the stability of their value, has largely taken the place of specie. It is but reasonable to suppose, that the present abundance of gold and silver will make no greater disturbance within a short time, than has the great increase of paper money.

The influx of the precious metals has been, in a certain sense, a providential occurrence during the revolutionary state of Europe. Credit had either disappeared, or had at least become stagnant. Everywhere, amidst the tempest of the times, both past and prospective, business had been suspended, or carried on only for ready money. Affairs had assumed an aspect of a primitive state of exchange. An increase of metallic circulation might again restore confidence, and calm agitation. The average excess of money imported over that exported, which, before 1848, was not above 22780,000,000 to 100,000,000 francs, amounted in 1848 and 1849 to nearly 228300,000,000 francs for each year. Specie in these times supplied the wants of trade, and maintained prices; but, in more easy times, when used not alone, but concurrently with paper money and bills of exchange, for the purposes of circulation, gold and silver would naturally be in use in proportion to the movements of trade. The reason why 229600,000,000 of francs in coin now encumbers the vaults of the Bank of France, is, because capital is only employed in the stock markets, and that the restoration of trade on a large scale is still confined to a sort of anticipation; but let the industry of the country experience a complete restoration of confidence in the future, and we shall soon see the metallic reserve of the bank diminish; and, as a natural consequence, our market will attract an import of the precious metals from abroad. In short, gold and silver will then be wanted; the state of trade will improve, and we shall have to seek for an increased supply.

Let us not then either despair or be too confident; the world is not entering on an Eldorado, nor is it on the eve of a state of ruin. Those who consider gold and silver as positive wealth, who confound an abundant supply of the precious metals with an abundance of capital, and who affirm that the gold imported from California must lower the rate of interest, should remember that the rate of interest is determined by the state of confidence, as well as by the general rule of the supply and demand for loanable capital, and that confidence depends upon the good order existing throughout the civilized world. California itself shows the delusion of such an idea – for there, where gold is strewing the land, interest has risen as high as from eight to ten per cent. per month. Those on the contrary, who, at the idea of the galleons seeking freights in the western continent, dream only of ruin and catastrophes – who anticipate that the day will arrive that the Bank of France will pay persons to take away her gold – should not forget that she sells it now without difficulty even at a small premium, and that this increased trade in gold has not hitherto ruined anybody.

Paris, August, 1852.

1

£20,000,000

2

£24,000,000

3

lbs. 797,629=£37,209,423

4

£4,000,000

5

A kilogramme is equal to about 2 lbs. 8 oz. 3 dwts. 2 grs., and is worth about £125; 30 kilogrammes would therefore weigh about 80 lbs. 3oz. 20 dwts. 12 grs., and would be worth about £3750.

6

£5,960,000

7

lbs. 6,381,530=£297,700,000

8

lbs. 295,717,106=£887,151,318

9

£1,280,000,000

10

£320,000,000

11

£240,000,000

12

£80,000,000

13

lbs. 42,336=£1,975,000

14

lbs. 2,331,070=£6,923,210

15

lbs. 63,504=£2,962,500

16

lbs. 2,411,562=£7,234,686

17

lbs. 169,479=£7,906,250

18

lbs. 2,344,574=£7,033,792

19

lbs. 66,989=£200,967

20

lbs. 80,386=£3,750,000

21

£5,896,000

22

£2,400,000

23

£2,800,000

24

£540,000

25

£4,160,000

26

£800,000

27

£1,800,000

28

£8,000,000

29

£6,400,000

30

£1,080,000

31

£800,000

32

£320,000

33

£400,000

34

£450,000

35

£600,000

36

£3,000,000

37

£2,500,000

38

£8,041,666

39

£14,333,333

40

£2,500,000

41

£4,166,666

42

£514,583

43

£1,819,666

44

£20,370

45

£2,520,000

46

£2,333,333

47

£2,416,666

48

£1,637,362

49

£2,836,064

50

£4,473,426

51

£14,480,000

52

£9,440,000

53

£1,080,000

54

£3,400,000

55

£10,760,000

56

lbs. 13,397=£625,000

57

lbs. 4,614=£215,250

58

lbs. 10,718=£500,000

59

lbs. 26,795=£1,250,000

60

lbs. 53,590=£2,500,000

61

A poud is equal to about 36 lbs. English; and is worth about £1679.

62

lbs. 76,422=£3,565,125

63

£4,400,000

64

lbs. 75,705=£3,531,500

65

lbs. 69,873=£3,259,625

66

lbs. 65,176=£3,040,500

67

£3,120,000

68

lbs. 653=£30,500

69

A Russian rouble is worth about 3s. 2d.

70

lbs. 10,718=£500,000

71

A metre is equal to 39.371 English inches, a sagene is equal to about 7 English feet, and a werst contains 1,166⅔ yards, or 3,500 feet, equal to about ¾ of an English mile.

72

£3,600,000

73

£4,000,000

74

£5 to £10

75

£6,000 to £8,000

76

£2 2s. 6d.

77

£5 to £8

78

4s.

79

£16

80

£10

81

£1000

82

£3 to 4.

83

£1 to 2.

84

28s. to 32s.

85

24s. to 32s.

86

8s. to 12s.

87

£80 to £100.

88

£8,000,000

89

£214

90

£14,680,000

91

£13,160,000