Part 11

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 assumption 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 assumption, 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 assertion 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 quantity, 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 quantity 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 quantity 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.