Part 8

Mr. S. Dana Horton says that on the basis of prices "The national debt, regarded as a principal sum, has increased its weight upon the shoulders of the British taxpayer between 1875 and 1885 by nearly two hundred millions sterling, an amount nearly equal to the Franco-German war fine."

This gives us the explanation of the fact that the consols on which the interest was reduced by Mr. Goschen, when Chancellor of the Exchequer, to 2-3/4 per cent., are now selling at a much higher premium than formerly; the smaller amount of money paid in interest will purchase a very much larger amount of commodities than the former larger interest did.

The matter is very clearly set forth by Hon. Samuel Smith, M. P.: "If the question of protection is to be introduced into the discussion, then it will be found to tell more forcibly against our opponents. What do they seek for, but the protection of gold as against silver? They wish, as far as lies in their power, to boycott silver and throw the world upon gold alone, even though such a course should change the value of gold. In trying to boycott silver, they are giving protection to the wealthy capital class, just as truly as the old corn laws did to the landed owners of this country. The only difference is that the amounts involved are much larger and the protected class much richer and the confiscation of the fruits of the toiler much greater than under the old system of the corn laws. When the masses of this country awake as those of America have awakened to the magnitude of this question, they will brush away this idle talk that we are trying to restore protection." If Mr. Smith were in Congress instead of Parliament, what a howl there would be about him as an anarchist!

It being now the unanimous opinion of English statesmen and financiers that gold has greatly appreciated, and that such enhancement has already wrought great evil, the important question arises, Will this process continue? In the speech already quoted Mr. Giffen says: "I am bound to say that all the evidence seems to me to point to a continuance of the appreciation. It is impossible to suppose that the movement will not extend to other countries. All these facts point to a continued pressure on gold. The better probability seems to be, that the increase of the purchasing power of gold will continue from the present time."

The Right Hon. A. J. Balfour, now the head of the British Cabinet, in a speech delivered at Manchester, October 27, 1892, said: "We want two things of our currency. We require that it shall be a convenient medium of exchange between different countries, and we require of it that it shall be a fair and permanent record of obligation over long periods of time. In both of these great and fundamental requirements of a currency, our existing currency totally and lamentably fails." After showing that within fifteen years the money of Great Britain and Ireland had advanced in purchasing power no less than 30 or 35 per cent., he went on to say that of its further progressive appreciation "No living man can prophesy the limit." A little later he spoke of it as progressing "steadily, continuously, indefinitely," and closed his remarks on that subject in these words: "If you will show me a system which gives absolute permanence, I will take it in preference to any other. But of all conceivable systems of currency, that system is assuredly the worst which gives you a standard steadily, continuously, indefinitely appreciating, and which by that very fact throws a burden on every man of enterprise, upon every man who desires to promote the agricultural or industrial resources of the country, and benefits no human being whatever but the owner of fixed debts in gold."

In his work "The Bimetallic Question" Hon. Samuel Smith, M. P., presents as an evidence of the hardships due to the increasing purchasing power of money these facts: "The English landlords who borrowed L400,000,000 on their property, agreeing to pay, let us say, L16,000,000 a year, interest at 4 per cent., supposing that it represented one-quarter of their rents, now find, owing to the fall of prices, that it represents one-third, or even in some cases one-half of their rent.... The factory owner, the mine owner, the ship owner, who thought it safe twenty years ago to borrow half the value of his plant in order to find capital for his business, now finds that the mortgagee is the virtual owner. Nearly all the profits go to pay the mortgagee's claim, and in many cases he has foreclosed, and sold out the unhappy borrower, ruined through no fault of his own, but through the extraordinary sinking of prices. As a matter of fact, I believe that if all the fixed capital engaged in trade in England could be valued to-day at its real selling price, it would be found that it would do little more than pay the mortgages and debts upon it. Trade is very greatly and injuriously affected by sudden alterations in the standard of value, especially when the alteration is, as now, towards increased values. It arises in this way: trade is largely carried on by borrowed capital, or, in other words, by the use of credit in some shape or other; the vast banking deposits are mainly loaned to traders; a very great deal of the invested capital of this country is lent upon mortgages upon trading property such as ships, factories, and warehouses. A prudent trader usually considers it safe to draw considerably beyond his floating capital, and to borrow say 50 per cent. upon his plant or a fixed capital. Now, the constant decline in prices within the last few years has virtually swept away his own portion of the capital, and only left him enough to pay the loans and mortgages. For instance, a ship or a factory built at a cost of twenty thousand pounds, of which ten thousand were borrowed, is now worth only twelve thousand pounds, or 40 per cent. less; and so the mortgage represents five-sixths of the value instead of one-half, the trader's interest having sunk to two thousand pounds in place of ten thousand. Probably, if trade is unprofitable, he fails to pay the interest and the mortgage is foreclosed; the property is forced off at just sufficient to cover the loan and he is ruined. I have no doubt that this exactly describes the condition that confronts numbers of traders in this country and other countries having the gold standard. A great portion of the commercial capital of the country has passed into the hands of the mortgagees and bondholders who have neither toiled or spun. The discouragement this state of things produces is intense. After it has gone on for several years, a kind of hopelessness oppresses the commercial community, all enterprise comes to a standstill, many works are closed, labor is thrown out of employment, and great distress is felt, both among laborers and the humbler middle class. Indeed, it strikes higher than this; for multitudes of people who were once prosperous traders have now become dependent on charity. I know many such myself."

How fitly that describes the condition of the United States to-day. This was written some years ago, and so rapid has been the subsequent decline in prices that it almost equals the decline he had estimated for the fifteen or twenty years preceding the date of his work. And the end is not yet.

In his comments upon Mr. Goschen's address, delivered in 1883, wherein he pointed out that in the decade from 1873 to 1883 the annual supply of gold had decreased in a marked degree, and concurrent with this there was a marked increase in the demands upon the world's stock of gold, which was intensified by the substitution of gold for silver as money in Germany and other countries, Mr. Smith makes the following observations:

"The gold production, which for some years exceeded L30,000,000 annually, has fallen to 19,000,000 a year; and the best continental authorities, such as Soetbeer and Laveleye, reckon that more than half that amount is consumed in the arts.

"It may, therefore, be reckoned that since 1873 only some 10,000,000 on the average has been available for currency purposes.

"But Germany during that period has introduced a gold currency of 80,000,000, the United States has used up 100,000,000, and Italy has drawn some 20,000,000 for a similar purpose.

"So that 200,000,000 have been drawn for these special purposes, whereas the whole supply of new gold for coinage has not exceeded in that time 130,000,000.

"The balance must have been drawn out of existing stocks. Besides, a steady drain of some 4,000,000 a year has gone to India, further depleting stock in Europe.

"While trade and population constantly grow and demand more metallic currency, there is a steadily diminishing quantity to meet it. If you put the present product of gold at L19,000,000 a year, and the requirements of the arts at 8,000,000 or 10,000,000 a year, while the India demand is 4,000,000, there is only left 5,000,000 to 7,000,000 a year for Europe, America, and the British Colonies.

"It will seem to subsequent ages the height of folly that just at this period, when gold was running short, the chief states of the world decided to close their mints against silver, and cut off, so to speak, one-half the money supply of the world from performing its proper functions.

"Had the world continued to use both metals as freely as before, the painful crisis we have passed through would have been much mitigated. But by a suicidal policy silver was cut off at the very time it was most needed, and a double burden thrown upon gold just when it was able to bear only half of its former burden.

"As Bismarck has well said, two men were struggling to lie under a blanket only big enough for one."

Bad as have been the effects of monometallism in England, they have been far worse in Ireland; and dark as is the future of the former, it is light itself compared with that evidently in store for the latter. Those familiar with Irish affairs know that after a long agitation several acts have been passed to enlarge the rights of tenants and to secure them a larger share of what they produce. The Act of 1881 reduced the rents and fixed the amount to be paid at a specific annual sum in money for a long term of years; and the subsequent Ashbourne Act (so called from Lord Ashbourne, who introduced it) gave tenants a chance to buy and pay for lands in fixed yearly installments for forty-nine years. The intent was to create a peasant ownership somewhat like that of France. It was the end of a long fight, and was supposed to be a great victory and the inauguration of a very great reform.

Scarcely, however, was the great victory won and the great reform inaugurated when it became evident that, owing to the demonetization of silver and increased purchasing power of gold, the tenants were, in reality, bound to much heavier payments than before. Whatever may have been the intent, the tenant, who bound himself to pay a fixed annual sum as rent for a long term of years, found himself bound to deliver a much larger share of produce; and the purchaser under the Ashbourne Act found that what looked so easy in figures soon became impossible in fact, as the prices of his produce fell so rapidly that each successive payment became more oppressive until it finally became impossible. Thus it looks now as if by the appreciation of gold all that was gained for the tenant is more than lost, and that in the future his condition may be worse than in the worst days of rack-renting. In recent years this has become plain to those who have the good of Ireland at heart; they have taken the alarm, and are outspoken on the threatening evils. Among these is the Most Reverend Dr. Walsh, Archbishop of Dublin. In a recent interview he says, referring to the rise in the value of gold:

"All this is indisputable; it is now fully in the public view; yet not even an attempt is being made in Parliament, or even out of it, to bring about an equitable readjustment of the conditions which are proving so disastrous in other nations, conditions too that are imposed under the provisions of statutes enacted as measures of protection for the tenants. The Irish Land Acts of 1881, 1885, and 1891 have, nevertheless--as a result of the increased and increasing value of our present unbalanced and consequently untrustworthy monetary standard of value--become fruitful sources of difficulty, and may very soon become fruitful sources of disaster, to those for whose benefit they were intended."

Again, referring to the importance of some remedy, possibly that which bimetallism might provide, he says:

"The adoption of bimetallism or of some equivalent remedy, if there be any equivalent remedy, is, I am convinced, a matter of imperative necessity; that is, if the agricultural tenants of Ireland--and I do not limit this to Ireland--are to be saved from otherwise irretrievable ruin. If things go on as they are, even the excellent land purchase scheme, which is associated with the name of Lord Ashbourne, may become, before many years are over, a source of widespread disaster to the tenants who have purchased under it."

Again, in view of the steady and dangerous increase in the burdens of the obligations entered into under either of the acts referred to, by reason of the continued enhancement in the price of gold, he says:

"The bimetallists may be right or they may be wrong; but, at all events, if they are right, then it is noticeably plain that the Irish tenants who have the misfortune to have their rents fixed for terms of ten or fifteen years under the Act of 1881, and in much the same way the Irish tenant purchasers who have the misfortune to have found themselves saddled with the obligation of making annual payments fixed for forty-nine years, are simply sliding down an inclined plane with bankruptcy awaiting them at the bottom of it."

And again:

"The point, as I have already stated it, is that so long as our monetary system remains what it is, every one who is placed under an obligation to make yearly payments of a fixed amount of money is thereby placed under a burden which is growing heavier from year to year."

In discussing the question of variability in the purchasing power of gold, he says:

"The reason of the liability to fluctuation in the purchasing power of the sovereign is plain: When gold rises in value a larger quantity of any other commodity, say of corn, of meat, of butter, or of cloth, will have to be given in exchange for any given quantity of gold, such, for example, as the quantity contained in a sovereign. On the other hand, when gold falls in value a smaller quantity of any other commodity, say of corn, of meat, of butter, or of cloth, will suffice to obtain in exchange any given quantity of gold, such as that which is contained in the sovereign. It is an obvious inference that our gold coinage, however useful as a medium of exchange, does not furnish us with a standard of value fixed and unalterable. It does not furnish us, for example, with such a standard as the yard is of length or as the pound troy is of weight. The popular notion that the pound sterling constitutes a fixed standard of value is merely a popular delusion. The sole foundation for that delusion manifestly is that in these countries the values of all commodities are commonly stated in terms of a pound sterling; in other words, in pounds, shillings, and pence; a shilling being a twentieth part of the pound, and a penny the twelfth part of that again.