Section CXLIII.. The Price of Gold As Compared with That of Silver. (continued.)

The Price Of Gold As Compared With That Of Silver. (Continued.)

If the gold-production of California should be attended(895) by a notable depression of the value of that metal, it becomes a question whether or not silver would be necessarily depreciated with it. Senior claims that it would not, for the reason that the two precious metals do not, for most purposes, act as substitutes each of the other. If a country needed 1,000 pounds of gold and 15,000 pounds of silver as money,(896) and these two sums of metal were equal in value, an increase of gold by one-half, which would depreciate its price in relation to silver to 10:1, would not overflow the channels of circulation. The 1,500 pounds of gold are now also equal to only 15,000 pounds of silver, and vice versa.

I would put very important limitations to this assertion. Even a moderate depreciation of gold would drive out the silver from all those countries which had a mixed coinage made up of the two metals; and hence the supply of silver would be increased in the other countries. And so it is quite possible, up to a certain point, that the larger silver coin should be replaced by small gold ones, ten and five franc pieces etc. Rau is certainly right in his surmise that a general rise in the price of commodities as compared with coin, the result of a great increase of gold, would go farthest in countries in which the gold is the medium of circulation, begin later in those which had a mixed circulation, and continue for the the shortest time in those countries which, by force of law, had a silver circulation only.(897)(898)