Chapter III

From the End of the First Cycle of American Influences to the Present Day, 1660-1894

Up to the close of the eighteenth century the production of silver shows a remarkable steadiness and uniformity—the decrease on the yield of the Potosi mines being compensated by the increased output of Mexican silver. In the condition of the output of gold, however, there is a perceptible alteration, due to the increasing imports of that metal from Brazil. The change in the relative production of the two metals appears from the table on p. 155.

The effect on the ratio of this increased relative and absolute amount of gold was, however, considerably diminished by the increasing favour with which gold came to be regarded for currency purposes, from the end of the seventeenth century onwards. In general terms this process or tendency in favour of gold continued through the first sixty years of the eighteenth century, at which time the proportion of gold to the production of the two metals had risen as high as 40 per cent., whereas in 1600 it had only formed 17.2 per cent. of the total.

PRODUCTION OF THE PRECIOUS METALS, 1660-1893

From 1760, however, such relative preponderance of gold was not maintained. It gradually sank back until, by the beginning of the present century, it had come to form only a little over 23 per cent. of the total. From 1820 to 1840 a recovery took place, but it was not until the Californian gold discoveries that the second great disturbance in the relative production of gold and silver took place; such a disturbance, i.e., as can be fitly compared with that which the sixteenth century witnessed.

Period. Annual Production of Gold. Annual Production of Silver.Percentage of Gold to Total. Percentage of Silver to Total.

1661-1680 £1,291,750 £3,134,150 29.2 70.7

1681-1700 1,501,700 3,179,650 31.1 67.9

1701-1720 1,788,400 3,253,750 35.5 64.5

1721-1740 2,661,650 3,988,600 40.0 60.0

1741-1760 3,433,100 5,038,200 40.5 59.5

1761-1780 2,888,350 6,201,550 31.8 68.2

1781-1800 2,481,700 8,131,300 23.4 76.6

1801-1810 2,480,000 8,002,650 23.7 76.3

1811-1820 1,596,100 4,966,950 24.7 75.3

1821-1830 1,983 150 4,075,950 32.4 67.6

1831-1840 2,830,300 5,278,600 34.5 65.5

1841-1850 7,638,800 6,867,650 52.1 47.9

1851-1855 27,815,400 8,019,350 77.6 22.4

1856-1860 28,149,950 8,235,950 77.4 22.6

1861-1865 25,816,300 9,965,400 72.1 27.9

1866-1870 27,256,950 11,984,800 69.4 30.6

1871-1875 24,250,000 17,250,000 58.5 41.5

1876 23,150,000 18,250,000 55.9 44.1

1877 25,050,000 19,350,000 56.4 43.6

1878 25,950,000 19,750,000 56.8 43.2

1879 23,350,000 19,050,000 55.1 44.9

1880 22,800,000 19,100,000 54.4 45.6

1881 22,450,000 19,800,000 53.1 46.9

1882 21,450,000 20,900,000 50.7 49.3

1883 20,750,000 20,800,000 49.9 50.1

1884 21,750,000 21,850,000 49.9 50.1

1885 21,750,000 21,850,000 49.9 50.1

1886 22,450,000 20,300,000 52.5 47.5

1887 22,050,000 21,950,000 50.1 49.9

1888 22,950,000 23,850,000 49.0 51.0

1889 24,600,000 26,750,000 47.9 52.1

1890 24,360,000 26,620,000 47.8 52.2

1891 29,000,000 36,567,629 42.4 57.6

1892 30,164,536 40,668,247 42.5 57.5

1893 32,066,591 42,963,027 42.7 57.3[D]

As far as this relative production is concerned, the period, 1660-1840, is one of gradual and not abnormal variation, neither small nor inconsiderable in effect, but certainly not revolution-working, as had been the case in the sixteenth century with American silver, and as was to be in the nineteenth century with Californian and Australian gold, and in our own days with American silver for the second time.

With regard to the absolute production—gold shows a rise up to 1760, then a steady decline to 1820, followed by a second rise up to 1840. In the case of silver the decline in the absolute amount was steady from 1600 to 1680, then ensued a steady and strong rise to 1800, followed by an abrupt drop in the second decade of the present century, and then by a strong and steady recovery, commencing from 1830 and continuing until the present.

WIDE EFFECT OF MINT LAWS

The larger question of the relative distribution of this mass of precious metals depends for its determination upon a full understanding of the law of the various Mints. Speaking in large, during the eighteenth century the Mint ratio was in favour of silver in France, and her currency was almost entirely silver throughout the century; conversely the Mints favoured gold in England and Spain, and gold was almost the only constituent of the currency of either country for the greater part of the century. There can be little doubt that these simple facts had a great influence in actually determining the great currency legislation which closed the century and finally decided England in favour of gold, and France and the United States in favour of a bimetallism strongly favouring silver.

The statement of the ratio is as follows:—

South-West Germany.

1657-8015.10

Netherlands.

166314.43

England.

166314.48

169015.39

171515.21

France.

167914.91

COMMERCIAL STATEMENT OF THE RATIO (FROM 1687-1832, FROM THE HAMBURG EXCHANGE RATIO; FROM 1833 ONWARDS, FROM THE LONDON BULLION BROKERS' RATIO).

1687-8 14.94

1689-90 15.02

1691 14.98

1692 14.92

1693 14.83

1694 14.87

1695 15.02

1696 15.00

1697 15.20

1698 15.07

1699 14.94

1700 14.81

1701 15.07

1702 15.52

1703 15.17

1704 15.22

1705 15.11

1706 15.27

1707 15.44

1708 15.41

1709 15.31

1710 15.22

1711 15.29

1712 15.31

1713 15.24

1714 15.13

1715 15.11

1716 15.09

1717 15.13

1718 15.11

1719 15.09

1720 15.04

1721 15.05

1722 15.17

1723 15.20

1724-25 15.11

1726 15.15

1727 15.24

1728 15.11

1729 14.92

1730 14.81

1731 14.94

1732 15.09

1733 15.18

1734 15.39

1735 15.41

1736 15.18

1737 15.02

1738-9 14.91

1740 14.94

1741 14.92

1742-3 14.85

1744 14.87

1745 14.98

1746 15.13

1747 15.26

1748 15.11

1749 14.80

1750 14.55

1751 14.39

1752-3 14.54

1754 14.48

1755 14.68

1756 14.94

1757 14.87

1758 14.85

1759 14.15

1760 14.14

1761 14.54

1762 15.27

1763 14.99

1764 14.70

1765 14.83

1766 14.80

1767 14.85

1768 14.80

1769 14.72

1770 14.62

1771 14.66

1772 14.52

1773-4 14.62

1775 14.72

1776 14.55

1777 14.54

1778 14.68

1779 14.80

1780 14.72

1781 14.78

1782 14.42

1783 14.48

1784 14.70

1785 14.92

1786 14.96

1787 14.92

1788 14.65

1789 14.75

1790 15.04

1791 15.05

1792 15.17

1793 15.00

1794 15.37

1795 15.55

1796 15.65

1797 15.41

1798 15.59

1799 15.74

1800 15.68

1801 15.46

1802 15.26

1803-4 15.41

1805 15.79

1806 15.52

1807 15.43

1808 16.08

1809 15.96

1810 15.77

1811 15.53

1812 16.11

1813 16.25

1814 15.04

1815 15.26

1816 15.28

1817 15.11

1818 15.35

1819 15.33

1820 15.62

1821 15.95

1822 15.80

1823 15.84

1824 15.82

1825 15.70

1826 15.76

1827 15.74

1828-9 15.78

1830 15.82

1831 15.72

1832 15.73

STATEMENT OF THE RATIO, 1660-1893

Year.Price of Silver Pence per Oz. Ratio. Year.Price of Silver Pence per Oz. Ratio.

1833 59 3⁄16 15.93 1864 61 3⁄8 15.37

1834 59 15⁄16 15.73 1865 61 1⁄16 15.44

1835 59 11⁄16 15.80 1866 61 1⁄8 15.43

1836 60 15.72 1867 60 9⁄16 15.57

1837 59 9⁄16 15.83 1868 60 1⁄2 15.59

1838 59 1⁄2 15.85 1869 60 7⁄16 15.60

1839-40 60 3⁄8 15.62 1870 60 9⁄16 15.57

1841 60 1⁄16 15.70 1871 60 8⁄16 15.57

1842 59 7⁄16 15.87 1872 60 1⁄4 15.65

1843 59 3⁄16 15.93 1873 59 1⁄4 15.92

1844 59 1⁄2 15.85 1874 58 5⁄16 16.17

1845 59 1⁄4 15.92 1875 56 3⁄4 16.62

1846 59 5⁄16 15.90 1876 53 1⁄16 17.77

1847 59 11⁄16 15.80 1877 54 3⁄4 17.22

1848 59 1⁄2 15.85 1878 52 5⁄8 17.92

1849 59 3⁄4 15.78 1879 51 1⁄4 18.39

1850 60 1⁄16 15.70 1880 52 1⁄4 18.04

1851 61 15.46 1881 51 11⁄16 18.24

1852 60 1⁄2 15.59 1882 51 5⁄8 18.25

1853 61 1⁄2 15.33 1883 50 9⁄16 18.65

1854 61 1⁄2 15.33 1884 50 5⁄8 18.63

1855 61 5⁄16 15.38 1885 48 5⁄8 19.39

1856 61 5⁄16 15.38 1886 45 3⁄8 20.73

1857 61 3⁄4 15.27 1887 44 5⁄8 21.13

1858 61 5⁄16 15.38 1888 42 7⁄8 21.99

1859 62 1⁄16 15.19 1889 42 11⁄16 22.09

1860 61 11⁄16 15.29 1890 47 11⁄16 19.17

1861 60 13⁄16 15.26 1891 45 1⁄16 20.92

1862 61 7⁄16 15.35 1892 39 3⁄4 23.74

1863 61 3⁄8 15.37 1893 35 9⁄16 26.49

Up to 1878 this table is derived from Soetbeer, Edelmetall-Produktion, pp. 130-2. From 1878-1890 I have calculated simply in accordance with Soetbeer's method. The figures for 1891-3 are taken from the United States Mint Report, 1893, already referred to, p. 251. In the table there printed the director of the Mint gives slightly different figures for several years from 1872 onwards.

As far as the conditions of production of the precious metals are concerned, and the connection between those conditions and the ratio, there is historic and understandable continuity between the period already passed in review and modern times. In the method of expressing that ratio, however, there is a remarkable difference.

EVOLUTION OF THE MODERN SYSTEM

With the close of the seventeenth century the advantage of the process of altering the denomination of the coinage, of diminishing the content and reducing the standard of fineness, began to be impugned on theoretic grounds, and in the course of the eighteenth century that process itself fell into disuse. Since that time no Mint or legislative change such as we have hitherto described was made on the expressed value or content of any European coinage. Bearing in mind the twofold importance which was attached to that process of legislative guarding of the currency, this change must be regarded as of vital import. The legislator, from the middle of the fourteenth century, had attempted two things by this mechanism—(1) to follow the general rise of prices, and meet it by reducing the contents of the coins in such proportion as he thought fit; (2) to prevent any disastrous outflow of the precious metals by altering the ratio. The control of the Mint rates of metal-purchase and metal-coinage was, therefore, a matter of importance financially and politically to the nation, and economically to international commerce. In just such measure, therefore, was the entire ceasing of this State control of the mechanism of international exchange and currency a matter of almost incalculable significance in the history of the European monetary system. In the domain of finance it effected a revolution as signal as that produced in the relations of labour to capital by the disuse of the old labour laws. The ceasing of the artificial arbitrary Mint rates made way for a naturally determined or commercial ratio, and the regulation of the international flow of the precious metals was left to the oscillation of trade balances, and to the action of interest rates and discount. The change is one from a mediæval, State-bound, merely legislative system to the modern system, in which the flow of precious metals is determined by the perfectly natural and automatic action of international trade—is indeed the index and safety-valve of it, and of the whole present commercial world-circle.

This was not merely a change of fact and practice, it was a revolution of theory.

For before the old State belief in the necessity of safeguarding the supply of precious metals at any cost and consideration could go by the board, the whole Mercantile Theory must have lost its force in men's minds.

In the domain of theory the transition from the Mercantile to the modern system was gradual, through the various intermediate steps of Physiocratic and Smithian economics, and the complete abandonment of that system for our own can only be put very late, if indeed its period can at all yet be written, for modern Protectionist ideas are only a lusty survival of it. In the domain of financial practice, however, it—the mercantile system—ceased from the moment that the Governments of Europe left their Mint rates stationary, and gave the flow of the precious metals and the declaration of the ratio to the free unhampered natural action of international trade. The steps of the completed process can hardly be detailed, for there was much fear attending it, and the various Governments frequently retraced their steps in uncertainty. The earliest direct enactment was made by England. By the Act of 15 Charles II., chap. 7, sect. 12 (1663), the statutes forbidding the exportation of bullion were removed at one blow of astounding boldness. "Forasmuch," says this Act, "as several considerable and advantageous trades cannot be conveniently driven and carried on without the species of money or bullion, and that it is found by experience that they are carried in greatest abundance (as to a common market) to such places as give free liberty for exporting the same, and the better to keep in and increase the current coin of this kingdom, be it enacted that from and after the 1st day of August 1663 it shall and may be lawful to and for any person or persons whatsoever to export out of any port of England and Wales in which there is a customer or collector, or out of the town of Berwick, all sorts of foreign coin or bullion of gold or silver, first making an entry thereof in such customhouse respectively, without paying any duty, custom, poundage, or fee for the same, any law, statute, or usage to the contrary notwithstanding."

FREE TRADE IN THE PRECIOUS METALS

Standing so early and so almost completely alone as it does, this Act evinces an unexampled prescience and boldness. It doubtless reflects the commercial traditions of Holland, but that it should have been at a single stroke transferred to England at a time when she was so economically different and distant from Holland, needs make us pause in admiration. The only parallel to it, if any, would arise if France should suddenly, and by a single enactment, adopt to the full the Free Trade policy of England. As a matter of fact this Act of 1663 proved itself for a long time, and through many oscillations, impossible of execution, and far into the eighteenth century the British Government meddled, by legislation and proclamation, with the export of the precious metals, and with the tariff of the coins, as will be seen immediately. It was not till 1780 that a similar Act was passed for Ireland.

In 1803 the Lords of the Treasury were by statute authorised to grant licences for the exportation of silver bullion without any such certificate or document whatsoever as had been required by the statute of 6 and 7 Wm. III. c. 17, sect. 5.

It was almost a century after this action of England that France followed in the same path. By a proclamation of 7th October 1755, permission was given to the free commerce in precious metals and in foreign monies. But in the case of France, as in that of England, the enactment was not immediately nor fully realisable. The exportation of the national specie was still forbidden, and more than once the State found itself obliged to return to the question of the tariffing of its coinage.

It is this vacillation—a vacillation, however, which must in every instance be attributed to sheer State necessity—which makes it impossible to trace in detail and point by point the fall of so much of the Mercantile System as concerned the regulating of international movements of metals. The practice of the commercial world was doubtless in advance of the legislator's standpoint, as indicated by such detached references, and was effectual in completing the revolution silently and under the surface, whether by the aid or in spite of laws and proclamations. The same had been the case, e.g., with the old usury laws.

When effected there are two highly important results which stand as the outcome of this change in the theory of international commerce.

1. The perception of a right theory of international balances opened the way to the separation of finance or currency phenomena pure and simple, and so prepared the ground for a scientific conception and treatment of them. In one direction this treatment resulted in the evolution of a theory and practice of a monometallic system—one, i.e., in which a single metal was made the legal tender, and a second or third metal bound to it in a hard-and-fast, subordinate relationship, so that they could not by their oscillations injuriously affect the tenderable metal. In another direction the same scientific conception and treatment resulted in the evolution (and after a time the practice) of a bimetallic theory. Modern currency history hinges on the antagonism of these two systems.

FUNCTION OF DISCOUNTS IN MODERN SYSTEM

This statement of the case will serve to show the enormous difference between nineteenth-century currency situations and problems and those of mediæval and seventeenth-century Europe. To-day the point at issue is between definitely and scientifically conceived rival theories, and the practical difficulty before the world is how to provide, not so much a permanent ratio, as a permanent rate of international settlement between countries using different monetary systems, between silver-using and gold-using countries. In the seventeenth century there was no conception of theory at all, and the practical difficulty was how to frustrate the operations of the bullionist and arbitragist and politicians, and the depletion of national treasure due to their activity, and based on a difference of ratio prevailing in different countries.

2. The second practical outcome of the revolution was the development of the modern system of control of the flow of gold balances, viz. by means of the bank rate and the arbitrage transactions depending thereon, and on interest and discount rates generally.

The modern theory of international trade does not say that between two particular countries, or at any one particular point of time there is an equivalence of exchange, but that between a circle of commercially interconnected countries, and over a certain cycle of time or operations, there is an equivalence of exchange of goods and services. Movements of currency in the most elementary form assist the process, as far as immediate settlements are concerned; bills of exchange assist it when there is need of deferred payments, as, for instance, when a country imports steadily all the year round, but has only one export time, say after harvest; and, finally, bank and discount rates assist the process by providing currency media at times and places which would otherwise be unable to attract a supply. Over the whole circle of completed operations there is equilibrium of exchange, and the machinery by which that equilibrium is accomplished is currency in the widest sense. The index or indicator and safety-valve of the whole is the rate of interest. On these bank rates are based the operations of the modern bullion dealers or arbitragists, which serve to equalise or economise the distribution of the precious metals all over the world.

It will be seen at a glance, therefore, that they fulfil, in an automatic and perfectly natural manner, all that was vainly attempted to be accomplished by the repressive savage action of the State, and the interfering unscientific handling of the Mint and coinage rates. It is in this feature that the great distinction between the modern and the seventeenth-century world consists. Such a difference can only be based upon, and have arisen from, a true theory of international trade. But the process of development which alone made it possible—the development of modern banking, the invention of paper currency media, the breaking down of international trade restrictions, all the mechanical and scientific inventions which have resulted in the binding of the world together in one whole as far as commerce is concerned,—all this would comprise in brief the essential features of the complete commercial development of two centuries or more, and how far they are related as cause or effect it would be hard to say.

In this secondary period, therefore, the separate history of each individual state gradually loses its distinct or isolated importance, as far as mere Mint edicts are concerned. As a consequence the bimetallic action which we have hitherto sought in the history of each individual currency must now increasingly be sought in the wider field of the world currency, that congeries or completed whole of currency of which each national system now forms only a part, and that not an independent part.

France.

In this third period the first change which France made in her silver monies was in 1674, when she for a time coined 4-sol. pieces of a quality below that of the écus blancs by more than a fifth. A great outcry was made by the Mint officers and mercantile community against this money as implying a debasement.

In 1679 there was a noticeable quantity of Spanish pistoles and large écus d'or in circulation, and as a remedy it was ordered that they should be recoined into louis d'or and louis d'argent, the King offering to forego the seignorage as an inducement to bring them to the Mint. In 1686, however, the louis d'or itself was raised from 10 livres to 11 livres 10 sols., and the ratio thus changed to 15 1⁄2. This being found greatly in excess, in the following year it was lowered to 11 livres 5 sols. (a ratio of 15 1⁄4). In 1689 both silver and gold were again raised, the louis d'or to 11 livres 12 sols. and the louis d'argent to 3 livres 2 sols., but almost immediately a general recoinage was resolved upon. In this great operation, effected towards the close of 1689, the weight and standard of the previous coinage was exactly retained, but the louis d'or was issued at 12 livres 10 sols. and the louis d'argent at 3 livres 6 sols. Only two years later again the standard had to be altered, and the value of 1693 somewhat raised. It will give some slight idea of the sapping of the coinage that the pieces which in 1691 were minted at 12 livres 10 sols. were, in 1693, called in at a valuation of 11 livres 14 sols. The new species of 1693 were issued at 13 livres and 3 livres 8 sols. respectively.

FRANCE: THE REFORM OF 1726

Ten years later a third recoinage was ordered, the louis d'or being issued at 15 livres, and the louis d'argent at 4 livres. By 1709 these species had sunk in equivalence to 12 livres 15 sols. and 3 livres 8 sols. respectively. In that same year, however, their issue value was raised to 20 livres and 5 livres. This extraordinary and arbitrary action was greatly to the detriment of French commerce, and the idea was entertained of gradually reinducing the standard of 14 livres and 3 livres 10 sols. This was ordered by proclamation of 30th September 1713, which was to continue in force till 1715. In the latter year a reformation of the coinage was again undertaken, the reformed species rising to 20 livres and 5 livres, and the worn species remaining at 16 livres and 4 livres. From this latter date up to 1721 the operations of the financier John Law wrought great disasters in the monies. At the time of the erection of the bank, 2nd May 1716, there were four species of louis d'or and three of louis d'argent. By 1720 the former had grown to forty in number and the latter to ten. (For the disorders of the period of John Law, see the account of French monetary system, Appendix VI.) It was to remedy this disorder that the great edict of 1726 was enacted. This edict, which formed the basis of the French currency system almost up to the days of the Revolution, prescribed the minting of louis d'or at a tale of 30 to the mark, and issued at a value of 20 livres; and of silver écus at 8 3⁄10 to the mark and issued at 5 livres—divisional coins in proportion. The legal ratio was therefore 14 5⁄8. All foreign coins and the ancient species of gold and silver were decried, and ordered to be brought in for reminting. All the prohibitive regulations of an old régime against cutting and export, etc., were re-enacted with severest penalties. But as the rate at which the Mint was ordered to take in the old coinage did not represent the commercial value at the moment, the old coins were not brought in, and up to as late as 1749 the recoinage had not been accomplished, although the Mint prices had been at different times advanced on the whole a matter of 30 per cent. or more. In 1759 the want of currency had become so great that the King sent his plate to the Mint, and numbers of private individuals followed his example, receiving in reimbursement part payment at the rate of 861 livres 5 sols. 10 den. for the mark of fine gold, and of 59 livres 5 sols. 10 den. for the mark of fine silver.

This latter tariff underwent no change until 1771, when, under the pretext of the changes which foreign coinage tariffs had undergone, those terms were fixed respectively at 709 livres and 48 livres 9 sols.

In this résumé the mention of billon money has been generally avoided, as unduly complicating the subject. But in the legislative action of France in the eighteenth century there is one act which necessitates a momentary departure from this standpoint.

In 1738 the Government of the United Provinces diminished the value of their sols. by one-half. The French Government fearing that this diminution would lead to an immense influx of such sols. decided to follow suit. By a decree of August 1st of the same year, 1738, it was ordered that the Douzains and pieces of thirty deniers should have course only for eighteen deniers. The important point to notice in connection with this is that, in order to mitigate the effect of this reduction, the same decree limited the tender of such billon money. It was ordered that in payments up to 400 livres not more than 10 livres should be tenderable in billon, and for payments of more than 400 livres not more than 1⁄40 of the total. The restriction was ineffectual in preventing either the import of foreign billon specie or the operations of billonage or arbitrage, based on the differentiated value of the various kinds of billon circulating. This is quite evident from the preamble of the edict of the following October, 1738, which attempted the calling in of the 30-denier pieces, in order to put a stop to the process.

FRANCE: THE REFORM OF 1785

Such a failure is quite in keeping with all previous experience as recorded in these pages, and deserves no special reference. The point to note is rather the gradual evolution and adoption of the idea of limiting the tender of the lower species, so as to contract their action on the main species of the currency. This idea forms the complement of the idea of an agio, involved in the issue of fractional coins on a lower standard or basis than that of the greater specie. The one idea was—in long, over-long, periods i.e.—impracticable without the other; but together, when finally evolved, thoroughly seized and put in practice, they formed the main basis of the truest modern currency system.

To return to the pure gold and silver species. The basis of 1726 remained at law unaltered until 1785. The edict of the 30th October of that year commanded a recoinage; no change was made in the silver coinage, which remained according to the tariff of May 1773, namely, 52 livres 9 sols. 2 den. to the mark fine. By the alteration of the tariff of gold, however, to 828 livres 12 sols. to the mark fine, the ratio of 14 5⁄8, which had nominally prevailed since 1726, was altered to the memorable 15 1⁄2. The reason was explicitly stated to be the increase in the value of gold during several preceding years—an increase which had banished or detained gold from the French Mint and even from France.

Writing in 1785, the minister, Calonne, who proposed and executed the recoinage in that year, spoke thus:—

"In 1726 the legal ratio was fixed in France at 14 marks 5 oz. of silver, to a mark of gold, and that which proves with how much sagacity this point was seized is the fact that during a long course of years France retained in her circulating medium a sufficiently large proportion of each metal. Nevertheless, her gold gradually became less common, and for some years this scarcity has rapidly increased, and this precisely because its legal value has always remained the same, while its metallic value has increased from year to year."

He estimated the amount of livres in louis d'or existing in the country at the time of the recoinage, 1785, as 650 million livres, which amounted to only a half of the total coinage (1300 million livres) of the period 1726-85. What seems to have determined Calonne to adopt 15 1⁄2 was the fact that Spain had the legal ratio of 16, and that there was a probability that, in future, gold would rise in value. As for the market price, he admits that it was only 15.08-15.12 in 1785. The recoinage, therefore, brought a profit of 7,255,216 livres to the King's purse, and a profit of 21,600,000 livres to the holders of the old louis d'or.

FRANCE: CALONNE'S POLICY IN 1785

His policy was severely criticised in a report made in 1790 to the National Assembly, which proposed a silver standard, with an authorised circulation of gold coins at the ratio of 14 7⁄9 and the abolition of seigniorage. It is well known that this was nearer to the market rate. Calonne's ratio, therefore, must be regarded as arbitrary and designing. Practically, the latter recommendation of the committee's paper of 1790 had been conceded in the decree of 30th October 1785, as the seigniorage was by it allowed to be no more than the net cost of reminting.

By this celebrated edict of Calonne's, which also enacted a recoinage, the right of seigniorage was practically finally relinquished for France. Fixity was given to silver as the principal money, and a definite ratio was established at which gold was to circulate by its side. In these, its chief points or characteristics, it formed the exact model for the later Act of Republican France, which is ignorantly looked upon as having created the bimetallic system. The Act of 7 Germinal an XI. did but re-enact and perpetuate the edict of 1785.

It is important to reaffirm and emphasise this point, as quite wild and blind estimates have been formed of the later action of Republican France. In merest fact, that later action created no new order, it instituted no new idea, it did not even promulgate its own theory.

FRANCE: CURRENCY LEGISLATION AT REVOLUTION

Republican France began her reform of the currency in a very temporary and opportunist manner by issuing a mass of inferior monies of 15 and 30 sous pieces to form the basis of the assignats, and to replace the gold and silver which had almost entirely disappeared from circulation. In the decree of 16 Vendémière an II. (7th October 1793), however, the question of standard was approached, and decided in a remarkable manner. The monetary unit was decreed to consist of the hundredth part of a kilogram, named grave, represented (1) by a piece of silver 9⁄10 fine and weighing 10 grms., (2) by a piece of gold of the same weight and standard, to be current at 15 times the value of the silver piece.

This decree remained a dead letter, and two years later the franc was definitively adopted as the base of the French system. As determined by the two laws of 28 Thermidor an III. (15th August 1795), that system was based upon the silver franc (weighing 5 grms. 9⁄10 fine). A gold coinage was ordained, of the same fineness, in a piece of 10 grms. weight, but the ratio of value of the gold to the unit franc was not fixed. This was exactly the monetary system which Mirabeau had counselled in his memoirs to the Assembly in 1790. The silver 5-franc pieces prescribed under this system found acceptance, the bronze pieces were refused and had to be withdrawn, and as to the gold piece, its issue was not even attempted. Two years later the "Directoire" pronounced in favour of maintaining the 10-grm. piece of gold, but demanded the fixation of its value, proposing a ratio of 16:1. In opposition to this scheme, Prieur submitted to the "Council of the Five Hundred" a project adopting the silver and gold coinage, as already determined as above, but leaving the value of the gold piece to fluctuate according to the market, its value being declared twice annually by public announcement. After being materially altered in the "Council of the Five Hundred," this scheme was definitively rejected by the "Council of Senators," and for several years the question of the monetary system of the Republic was allowed to slumber. When, in the year X., the consideration of the subject was resumed, it was at the instigation of the Consuls. At their desire the Minister of Finance, Gaudin, laid before the Council of State a scheme in which he proposed the issue of 20 and 40-franc gold pieces, of a value based on the ratio enunciated in the edict of 1785, namely, 15 1⁄2. He was, at the same time, careful to explain that silver remained the basis of the currency, and that the gold money could be reissued if a different market compelled a change in the ratio. In his report to the Consuls, Gaudin admits that the commercial ratio had for a long time been under 15. The decisive point which led him to maintain the ratio established in 1785 was, that to change the status quo by the adoption of 15 as a ratio would occasion great loss to the holder of gold coins, and that there was no sufficient reason for so great a change.

The Financial Committee of the Council of State at first rejected the scheme, preferring that of Prieur, already described, but on an inquest, ordered by the First Consul, who insisted on pressing the matter to a conclusion, M. Gaudin carried his propositions through the Council of State, but with the important difference that the reference to any future change in the ratio of gold to the basis of silver was tacitly dropped. These propositions became the foundation of the law of 7-17 Germinal an XI. (28th March 1803), on which the monetary system of Republican France was finally built.

The exposé des motifs of this law speaks of the gold coins in these words:—

"The gold pieces up to the present in circulation are the pieces of 24 and 48 livres tournois. Article 6 of this law substitutes in their place pieces of 20 and 40 francs. The adoption of the decimal system necessitates this change, which brings all parts of the system into accord. It is on the same consideration that the standard is fixed at 9⁄10, like that of silver."

Not a word is said as to the ratio, and much more stress is laid upon the suppression of billon money and on the abolition of seigniorage, as of greater importance and benefit to the nation's interests. By this law of Germinal XI. the monetary unit of the French system was declared to be the silver franc, weighing 5 grms. of 9⁄10 standard. By the side of this franc and its multiples, were to be issued gold pieces of 20 and 40 francs, valued on a basis ratio of 15 1⁄2 to the silver.

FRANCE: THE REFORM OF 1803

It will be seen at a glance from the course of this previous history that this law instituted no new principle, or theory, or system in French currency. The decimal system was adopted in place of the old system of livres tournois, seigniorage was abolished, and fixation of value given to the unit money, and billon money discontinued. But in matter of standard and system there was not even innovation. The system of Republican France, as established by this law, was no more and no less bimetallic than in 1785, or than in 1610, or in the days of Francis I. Theories as such did not occupy the mind of the legislator, and of any conception of a bimetallic theory or system such as we have learned to know there is no trace. The First Consul found at hand the two metals which had formed the currency of his country for centuries. The problem of their regulation was the same which had been faced by his predecessors for centuries, and he settled it in the same practical untheoretic way.

It was only gradually that in its totality of coins the French monetary system was made to conform to the metric system thus established. The old gold coins of 12, 24, and 48 livres were not suppressed until June 1829, the actual extinction of billon money was only accomplished in 1845, and the recoinage of the inferior monies in 1852-56. But such are mere matters of detail and apart from the subject.

The experience of France under this new régime is, therefore, in no wise different in kind> from such experience as has been described for the preceding centuries. It is not until the broaching of a bimetallic theory as such, and until the expression of that theory, as a theory, in the formation of the Latin Union, that anything like a special significance attaches to the monetary system and experience of France in the nineteenth century, any more, e.g., than in the seventeenth. The main difference in the situation was not that France had changed her system, and that her experience was henceforth different and of different signification, but that England had changed hers, and that the brunt of the fluctuations of the precious metals about a fixed ratio was left to be borne by a smaller area. The influence and the instance is, therefore, more telling in degree, but in no way different in kind.

The second idea which is commonly entertained with regard to the action of France during this later period, viz. that her action secured for the world at large a fixed and steady ratio, is equally—indeed, still more—fallacious. At no point of time during the present century has the actual market ratio, dependent on the commercial value of silver, corresponded with the French ratio of 15 1⁄2, and at no point of time has France been free from the disastrous influence of that want of correspondence between the legal and the commercial ratio. The opposite notion, which prevails and finds expression in the ephemeral bimetallic literature of to-day, is simply due to ignorance. From 1815 England has been withdrawn from this action of a bimetallic law, and the modern insular pamphleteer has before his eyes no sign of its workings in his own country. He therefore assumes an universality of such experience, and attributes it to the French legislative ratio. It is in no polemic spirit, but simply in the interest of science that this particular misapplication of history to the squaring of a theory is to be branded. The plainest facts of history are thereby absolutely misrepresented, and the assumption of cause and effect is so far from being true that the repose of the English currency history in the nineteenth century is to be attributed to the absence of a bimetallic system; to its despite rather than its presence and influence. To instance only by France for the moment.

FRANCE: COURSE OF THE RATIO

The course of the actual or market ratio has been already stated in the table (supra, pp. 157-59). In the graphic representation of this (opposite) the legal ratio of 15 1⁄2 is represented by the fixed line x.y., the actual ratio by the fluctuating black line z. At no point do these lines coincide. After three years of fluctuations, 1803-06, now above and now below, the ratio sinks persistently below for seven years, 1807-13, touching the lowest point (a ratio of 16.24) in 1813. For the succeeding five or six years, 1813-19, the ratio was as consistently above the legal rate, though with less violence and width of divergence. From the latter year, 1819, up to 1850, its course was undeviatingly below 15 1⁄2, then from 1851-67—the period, i.e., of the great gold outputs of Australia and America—as undeviatingly above. From the last-named date until the close of the bimetallic system in France, and, indeed, up to our own days, the course of the commercial ratio has been again unbrokenly below the 15 1⁄2 ratio, and, as is too well known, with an ever-increasing enormity of divergence.

So much for the claim that the French law has dowered the world with a steady ratio.

Secondly, what has been the influence of this divergence of the commercial from the legal ratio upon France's store of precious metals? It has been exactly similar in effect and force with that wielded by similar trains of event and circumstance, in the monetary history of France during the four preceding centuries. The exact official figures of the import and export of gold and silver are not obtainable before 1822, and in a continuous stream not before 1830 (separably for the two metals, that is to say).[15]

FRANCE: BIMETALLIC EXPERIENCE, 1803-75

From the latter date, however, the testimony of the figures is as explicit as it is forceful. From 1830 to 1850, while the ratio remained continually below the legal 15 1⁄2, there was a profit on the import of silver, and a persistent and heavy import took place. In 1830 the (balance of the) silver imported amounted to a matter of 6 millions sterling, in 1831 to 7 1⁄4 millions, in 1834 to 4 millions, in 1837 to over 5 1⁄2 millions, in 1838 to nearly 5 millions, in 1841 to nearly 5 millions, in 1843 over 4 millions, in 1848 to over 8 1⁄2 millions, and in 1849 to nearly 10 millions. There was not a single year that was not accompanied by this import, and over the whole twenty-two years the total of importations reached the enormous figure of, approximately, 92 millions sterling. It must be clearly understood that this sum represents not the gross but the net importation or balance of imports over exports, and that the money passed into the currency of the country, taking its place as such and displacing gold pari passu. The movement of gold in the same time is represented by the red line in the accompanying diagram. Within the limits of very considerable exceptions, the correspondence of its fluctuations with those of gold is clearly perceptible. The silver, on whose coinage a profit or premium was offered by the existing French law to individuals, could only be bought or paid for by the export of gold or services and goods. During these years, 1830-50, it was quite apparently by the latter method, namely, by remittance of goods, as on the whole period there is a slight gain of gold, nearly 3 millions, contrary to what bimetallic law would have led to expect. The correspondence, however—a simultaneity—of the two movements, of import of silver and export of gold, is strongly marked in the years 1834-39 and 1841-48, and the failure of correspondence of the totals is to be explained by the statistics of French foreign trade balances during the years named.

With the year 1852, the decisive change in the ratio sets in with the new gold influx. The ratio rises above the 15.5 of the French law, and the profit on the importation and coining of silver vanishes. Its place is taken by a corresponding profit on the importation and coinage of gold. The fourteen years during which the ratio remained above the legal 15 1⁄2 witnessed the importation into France of a total net (or balance) of gold to the amount of 135 millions sterling, and a total net or balance of exportation of silver of 66 2⁄3 millions sterling. The coincidence of actual fluctuation will best be seen by the graphic representation of it in the table. With 1865 the final and, so far as the nineteenth century is concerned, the fatal change of the commercial ratio sets in. It sinks persistently and increasingly below the legal 15 1⁄2, in face and spite of the united mintings of the Latin Union, and at once the premium on the importation and coinage of gold changes into one on silver. From 1865 to 1875, one year before the abandonment of the coinage of the 5-franc piece and the consequent relinquishment by France of the bimetallic system, her net imports of silver amounted to 56 millions sterling.

As far as these figures of import and export are concerned, they show only the final results of the action of bimetallic law. The metal on whose importation and minting a premium was obtainable was imported, and in large quantities. That is the single fact standing out in large. The reciprocal fact—of a corresponding export of the metal over whose head the premium offered—does not emerge so distinctly, simply by reason of the complication of the subject of exports of metals with the wider general movement of trade balances. It also is, however, distinctly perceptible and demonstrable. But this is to speak only in large and of final results. What the intermediate course of events—of see-saw and flux, was, can only be adequately grasped from the records of the mintings, conjoined with the records of net import or export of the two metals.

TABLE OF THE NET IMPORTS OR EXPORTS OF GOLD IN FRANCE UNDER THE BIMETALLIC LAW, 1822-75.

Year. Net Import (Francs). Net Export (Francs).Year. Net Import (Francs). Net Export (Francs).

1822 4,000,000 ... 1852 17,000,000 ...

1823 ... 19,000,000 1853 289,000,000 ...

1824 37,000,000 ... 1854 416,000,000 ...

1830 10,000,000 ... 1855 218,000,000 ...

1831 10,000,000 ... 1856 375,000,000 ...

1832 ... 39,000,000 1857 446,000,000 ...

1833 24,000,000 ... 1858 488,000,000 ...

1834 ... 7,000,000 1859 539,000,000 ...

1835 ... 20,000,000 1860 311,000,000 ...

1836 ... 14,000,000 1861 ... 24,000,000

1837 ... 6,000,000 1862 165,000,000 ...

1838 ... 4,000,000 1863 12,000,000 ...

1839 24,000,000 ... 1864 125,000,000 ...

1840 49,000,000 ... 1865 150,000,000 ...

1841 ... 5,000,000 1866 465,000,000 ...

1842 ... 12,000,000 1867 409,000,000 ...

1843 ... 41,000,000 1868 212,000,000 ...

1844 ... 6,000,000 1869 275,000,000 ...

1845 ... 14,000,000 1870 119,000,000 ...

1846 ... 9,000,000 1871 ... 214,000,000

1847 ... 13,000,000 1872 ... 53,000,000

1848 38,000,000 ... 1873 ... 108,000,000

1849 6,000,000 ... 1874 431,000,000 ...

1850 17,000,000 ... 1875 454,000,000 ...

1851 85,000,000 ... ... ...

TABLE OF THE MOVEMENT OF SILVER DURING THE SAME PERIOD.

Year. Net Import (Francs). Net Export (Francs).Year. Net Import (Francs). Net Export (Francs).

1822 125,000,000 ... 1852 ... 3,000,000

1823 114,000,000 ... 1853 ... 117,000,000

1824 124,000,000 ... 1854 ... 164,000,000

1830 151,000,000 ... 1855 ... 197,000,000

1831 181,000,000 ... 1856 ... 284,000,000

1832 60,000,000 ... 1857 ... 360,000,000

1833 75,000,000 ... 1858 ... 15,000,000

1834 101,000,000 ... 1859 ... 171,000,000

1835 74,000,000 ... 1860 ... 157,000,000

1836 27,000,000 ... 1861 ... 62,000,000

1837 144,000,000 ... 1862 ... 86,000,000

1838 120,000,000 ... 1863 ... 68,000,000

1839 75,000,000 ... 1864 ... 42,000,000

1840 96,000,000 ... 1865 72,000,000 ...

1841 117,000,000 ... 1866 45,000,000 ...

1842 92,000,000 ... 1867 189,000,000 ...

1843 103,000,000 ... 1868 109,000,000 ...

1844 82,000,000 ... 1869 112,000,000 ...

1845 90,000,000 ... 1870 35,000,000 ...

1846 47,000,000 ... 1871 15,000,000 ...

1847 53,000,000 ... 1872 102,000,000 ...

1848 214,000,000 ... 1873 181,000,000 ...

1849 244,000,000 ... 1874 360,000,000 ...

1850 73,000,000 ... 1875 194,000,000 ...

1851 78,000,000 ...

TABLE OF THE COINAGE OF GOLD IN FRANCE, 1803-75, DURING THE BIMETALLIC RÉGIME.

Year.Gold (Francs).Silver (Francs).Year.Gold (Francs).Silver (Francs).

1803 10,209,840 23,171,988 1810 46,070,600 57,170,216

1804 38,463,980 47,517,195 1811 132,135,740 256,399,040

1805 20,474,500 46,385,909 1812 97,717,880 160,786,409

1806 38,533,760 25,241,651 1813 62,659,680 134,900,313

1807 18,019,920 5,008,903 1814 64,544,720 61,244,121

1808 32,311,260 67,833,922 1815 55,379,840 37,673,806

1809 15,206,440 44,296,494 1816 15,151,280 34,917,526

TABLE OF THE COINAGE OF GOLD IN FRANCE, 1803-75, DURING THE BIMETALLIC RÉGIME—

continued

.

Year.Gold (Francs).Silver (Francs).Year.Gold (Francs).Silver (Francs).

1817 52,197,080 37,143,579 1847 7,706,020 78,285,157

1818 95,410,460 12,406,076 1848 39,697,740 119,731,095

1819 52,410,660 21,235,077 1849 27,109,560 206,548,663

1820 28,781,080 18,436,620 1850 85,192,390 86,458,485

1821 404,140 67,533,866 1851 269,709,570 59,327,308

1822 4,718,100 100,679,137 1852 27,028,270 71,918,445

1823 408,180 82,911,680 1853 312,964,020 20,099,488

1824 7,071,700 114,476,007 1854 526,528,200 2,123,887

1825 45,616,360 75,203,291 1855 447,427,820 25,500,305

1826 925,540 90,835,623 1856 508,281,995 54,422,214

1827 3,160,940 153,868,978 1857 572,561,225 3,809,611

1828 8,025,740 161,466,133 1858 488,689,635 8,663,568

1829 1,118,180 102,642,617 1859 702,697,790 8,401,813

1830 23,516,640 120,187,089 1860 428,452,425 8,034,198

1831 49,641,380 205,223,764 1861 98,216,400 2,518,049

1832 2,046,260 141,353,915 1862 214,241,990 2,519,397

1833 16,799,780 157,482,863 1863 210,230,640 329,610

1834 30,231,200 218,288,304 1864 273,843,765 7,296,609

1835 4,550,060 99,966,149 1865 161,886,835 9,222,394

1836 5,097,040 43,242,399 1866 365,082,925 44,821,409

1837 2,026,740 111,858,697 1867 198,579,510 113,758,539

1838 4,940,140 88,489,324 1868 340,076,685 129,445,268

1839 20,670,000 73,637,742 1869 34,186,190 68,175,897

1840 40,998,240 63,795,527 1870 55,394,800 69,051,256

1841 12,375,060 77,517,941 1871 50,169,880 23,878,499

1842 1,852,720 68,391,170 1872 — 26,838,369

1843 2,826,600 74,148,998 1873 — 156,270,160

1844 2,742,260 69,134,980 1874 24,319,700 60,609,988

1845 119,140 89,967,609 1875 234,912,000 75,000,000

1846 2,086,420 47,886,145

During the years 1820-50, when the ratio remained below the legal 15 1⁄2 and there was a profit on the import of silver, the total silver coinage of the French Mint amounted to £127,458,322, while that of gold reached only £19,333,854. In the succeeding period, 1850-66, when the ratio changed and remained for fifteen or sixteen years in favour of gold, the total gold coinage reached £292,416,951, while the total silver coinage was scarcely more than 1 1⁄4 millions (£1,315,532).

At the beginning of this second period, 1851, the Bank of France held in its reserves approximately only 3 1⁄2 millions sterling of gold, whereas its silver amounted to more than 19 millions. At the close of the period indicated, 1866, the bank was holding 23 millions sterling of gold against nearly 5 1⁄2 millions of silver. In the former case the proportion of silver formed 85 per cent. of the total, in the latter only 19 per cent.

TABLE OF THE RESERVES OF THE BANK OF FRANCE, 1851-76.

Year. Gold (Million Francs). Silver (Million Francs). Percent of Silver to Total.Year. Gold (Million Francs). Silver (Million Francs). Percent of Silver to Total.

1851 83 478 85 1864 273 94 27

1852 69 442 86 1865 238 208 44

1853 102 214 67 1866 576 136 19

1854 301 193 39 1867 697 318 31

1855 72 147 66 1868 662 474 42

1856 94 104 53 1869 461 798 63

1857 110 126 52 1870 429 69 14

1858 294 260 47 1871 554 80 13

1859 250 329 56 1872 656 134 17

1860 144 272 65 1873 611 148 19

1861 225 100 30 1874 1013 314 24

1862 187 108 36 1875 1168 504 30

1863 119 72 37 1876 1349 540 28 1⁄2

The statistics of the Latin Union, up to the suspension of the bimetallic system will be separately dealt with.

Speaking only of the experience of France during these years of bimetallic régime, the ebbing and flowing experience which has throughout been instanced as the chief characteristic of such régime is most strongly marked. The legal ratio did not give the market ratio, and so far was it from giving France a stable currency, it was the one thing which unsettled it and made a stable currency impossible. The exposé des motifs of the law of 1876, which will be referred to in another connection below, puts the matter with official brevity. "The variations of the commercial from legal 15 1⁄2 ratio remained normal during the years 1824-67. All the same they sufficed to modify greatly the composition of the French circulation. After the predominance of silver, which became marked in 1847, the ratio from 1847-67 introduced gold in a large proportion, and measures had to be taken to retain in France the smaller silver coinage. Our silver monnaie d'appoint of .835 fine was created for this purpose."

To regard this question from a theoretic and international point of view, to the exclusion of any regard for the separate national interests of France, is a sheer absurdity. It mattered little or nothing to France that by unloading the stores of silver she happened to possess at the time of the gold discoveries of the Fifties she helped to steady the ratio for the world at large. It did however matter, and very much, that this process of exchange from the one metal to the other was attended with public loss, balanced only by illicit private gain, and with a disturbance of trade in every town of France through the disappearance of the smaller silver specie. Whether or not France or any other country is called upon to sacrifice herself thus—not once but every time the ratio fluctuates from below to above the legal ratio or vice versa—for the sake of an ideal, bimetallic, regulating, function, let common sense decide.

The French monetary commission of 1867 speaks thus of the situation—

"It is well known by all that this ratio [of 1803] by the simple reason of its being fixed could not remain correct. There was quickly a premium on gold, and silver remained almost alone in circulation until near 1850. The discovery of the mines of California and Australia suddenly changed this situation by throwing into the European market a very considerable quantity of gold. By the side of this force, which tended to create a divergence from the legal ratio by lowering gold, there was another which occasioned a rise of silver. Under the influence of various circumstances, too long to enumerate, the needs of the extreme East had grown in unusual proportions, and as silver is alone in favour there, it was exported in enormous masses. There was a premium on silver to the extent of 8 per mille, and it disappeared almost completely from circulation, yielding place to gold.

"Preoccupied by the situation the Government charged a commission to study the measures to be taken. Its labours are summed up in the report of M. de Bosredon (1857). After examining the system tending to preserve silver money intact by lowering the value of gold money, and conversely the system tending to the adoption of the gold standard by reducing the silver money to the state of billon, the commission did not decide between them. It confined itself, in fact, to counselling the Government to a transitory step—the raising of the export duties on silver.... The exportation of silver, therefore, continued; and if the disappearance of 5-franc pieces was not remarked, because they were replaced by gold, it was not the same with the scarcity of pieces of a smaller value employed in petty payments.

"Being informed of the obstruction to retail commerce by complaints carried before the Senate, and instructed by the example of Switzerland, which had in 1860 reduced the standard of its divisional money, the Minister of Finance appointed a commission, 1861, to study the remedy to be applied to the evil. This commission counselled the reduction of the standard of pieces of less than 5-francs to .834 fine. It did this in complete knowledge of the cause, fully recognising that in so doing the monetary unity of silver, characteristic of our system, would be thereby broken, at anyrate for its circulating form; for while the franc no longer existed in law, the 5-franc was disappearing in fact, so that the change was equivalent to the establishment of a gold standard."

This advice of the commission was however, by the law of 1864, applied only to pieces of 50 or 20 centimes.

The next step in the process was the formation of the Latin Union in the year following. The above-quoted commission speaks of the intentional aspect of this Union in these words: "This convention places in the front rank gold money, and reduces the pieces of silver of 2 francs and less to the rôle of token money. It therefore definitely determines [consacre] the ascendency of the gold francs, and solves practical difficulties arising from the double standard."

This was written in 1867, less than two years after the formation of the Latin Union. It is not the view which prevails among bimetallists to-day as to the purpose and intentional bearing of that Union; but it is the historic truth none the less, and it was only the complete revolution in the conditions of production of the precious metals which made itself felt from 1871, which has given the Latin Union the aspect of a theoretic concert for the maintenance of, rather than as a defence against, a bimetallic system. If silver had not fallen in 1871 the Latin Union would still be the bulwark of defence of bimetallic France against the action of bimetallic law.

THE LATIN UNION

The formation of the Latin Union, therefore, was a measure of defence against the action of the bimetallic system in those countries which had adopted the monetary system of France, and lay exposed to all its disastrous fluctuations. The first and moving factor in its formation was Belgium. So far as related to silver, Belgium had adopted the French system by her monetary law of 5th June 1832. By the first article of this law the monetary unit was fixed at the silver franc of 5 grms. weight, and 9 fineness. For years Belgium endeavoured to maintain this law in its integrity. Public opinion, however, demanded the admission of French gold at its normal value, and this was conceded and decreed by the law of 4th June 1861. From that moment she felt all the oscillating movement which France was experiencing. The declaration of Article 1. of the law of 1832 became a dead letter; the gold standard took the place of the silver standard, and equally with France, Italy, and Switzerland, Belgium had to witness the disappearance of her small silver coins. To the previous abundance there succeeded a penury of small change, although the drain was not so immediately felt because of large reserve of silver 5-franc pieces (amounting to 48 millions of francs) held by the National Bank. In slightly over a year, 1st June 1861 to 8th November 1862, this stock of 48,645,000 francs had sunk to 14,629,000 francs, and in alarm the National Bank ceased, on the latter date, all payments in 5-franc pieces. Concurrently with this drain of the 5-franc pieces, the reserve of silver coins of less value began to be seriously affected by the sapping influence. During the two following years, 1861-63, there was little commerce in the precious metals owing to the American war. But in 1863 the movement of drain recommenced. The reserve of 5-franc pieces and the stock of divisional coins of lower denomination fell rapidly, to so low a point indeed as to become quite insufficient for the ordinary trade and small change demanded of the country. After a slight recovery in September 1865, the same downward course continued. The smaller coins, of 1-franc piece, and 50 centimes became so scarce that the bank could not supply the demands of manufacturers for the payment of wages, and the Government had to have resort to the coinage of nickel for small divisional money. The simultaneous experience of Switzerland and Italy is not so capable of statement and exact expression. But it was similar in kind. Previous to 1865 a net balance of over 12 millions sterling (consisting almost if not entirely of silver) had left Italy, and it was known to be the danger of entirely losing her silver which led Italy to the suspension of cash payments on 30th April 1866, and to her acquiescence in the Latin Union. It was not, however, Italy, but Belgium who first raised the note of alarm. Conscious that her monetary community with France made any independent efforts quite futile, the Belgium Government proposed to France a monetary union for all the countries which had adopted the franc as the basis of their currency. Taking up the proposition France invited Italy and Switzerland, together with Belgium, to send delegates to a monetary conference at Paris. At this conference Belgium proposed the adoption of the single gold standard—the silver pieces including the 5-franc pieces to be lowered by an agio, and made divisional money. Italy and Switzerland were of the same opinion, but their scheme failed before the opposition of France, and the final outcome of the conference was the establishment of the convention of 23rd December 1865.

This convention, which instituted the Latin Union, came into force on the 17th of August 1869; and under it one slight change was made in the internal currency system of France. The hitherto full-valued silver coinage from 2 francs downwards was changed into token money (being reduced to .835 fine), the 5-franc piece remaining as full legal tender.

The union was to last for fifteen years. It established an identity in the monetary system of the four powers, as far as weight and standard were concerned, and prescribed free coinage for any individuals bringing metals to the Mints—of gold into any form, and of silver into 5-franc pieces; and reciprocal acceptance of those pieces in any of the States of the union. Finally the minting of each State for national or currency purposes was limited to 6 francs per head.

This limitation, together with the regulation adopted, that the divisional coins should be issued at a rate inferior to that of the monetary standard, must be regarded as a measure of mutual defence against the sapping of the small coinage which had previously been experienced. According to this clause the maximum of mintings for national or currency purposes was presented thus—

Francs.

For Belgium32,000,000

France239,000,000

Italy141,000,000

Switzerland17,000,000

For a time everything bloomed, the minting went merrily on, and private individuals (foreigners) reaped a profit at the expense of France. With the heavy fall in the ratio which made itself marked in 1873, however, events became too strong even for the Union, and Belgium took the initiative by passing a law enabling her Government to suspend or limit the coinage of the 5-franc piece. This principle was subsequently adopted by all the states of the Latin Union. During the years, 1874-76, three annual conferences of the Union were held at Paris, with the result that the limitation of the coinage of the 5-franc piece was fixed thus—

1874.1875.1876.

Belgium12,000,00015,000,00010,800,000

France60,000,00075,000,00054,000,000

Italy60,000,00050,000,00036,000,000

Switzerland8,000,00010,000,0007,200,000

Greece (which had acceded to the Union in 1868)12,000,000

Of these states Switzerland alone did not coin up to her total, and at the conference in February 1876 her delegates pressed strongly for the entire cessation of the coinage of the 5-franc piece, and for the adoption of a gold standard. In this she was strongly opposed by Italy. The latter state, on account of the disappearance of her metallic currency before the inconvertible paper, had no interest in the limitation of the mintings of the Union. In the conference of 1874 she even sought and was authorised to coin beyond the quota accorded her, by a sum of not less than £800,000 in 5-franc pieces, on condition that such amount should be deposited as a metallic reserve of the Bank of Italy.

The force of circumstances, however, soon broke down even this policy of limitation. In the course of 1876 the fall of silver became more disastrously pronounced. In addition, it was no secret that the amounts accorded by the conferences of 1874-75-76 for the mintings of each state, had been assigned as maximum, not minimum limits, under the Latin Union.[16]

The next Mint convention of November 1878 would determine the Latin Union on the 31st December 1885, if not prolonged by further treaty. As the time approached the smaller states, such as Belgium, which had committed themselves to a large minting and thereby to the liability of having to liquidate or take back its own mintings—such 5-franc pieces as happened to be beyond its frontiers—at full value, in the face of a greatly fallen silver market, shrank from the responsibility, and sought and obtained a prolongation of the status quo until the end of 1891, and thenceforward by yearly agreement.

Finding that individuals treated the agreed amounts of mintings as a minimum limit, the French Government resolved to suspend the minting of the 5-franc pieces entirely. Accordingly, on the 21st March 1876, M. Léon Say, Minister of Finance, submitted to the Senate a Bill to that effect. It was followed, eight days later, by a proposition of a law suspending the emission of "bons" for the coining of silver money 9⁄10 fine. The exposé des motifs of this Act is most remarkable:—

"The events which have happened for some time past in the relations of the precious metals have brought to a head the monetary question amongst us, although from 1815 Great Britain has laid down principles which have attracted round her an ever-increasing circle of nations.

"The theory of the double standard, on which our monetary law of the year XI. reposes, has been called in question ever since its origin.

"It is, to our conception, less a theory than the result of the primitive inability of the legislators to combine together the two precious metals otherwise than by way of an unlimited concurrence—metals, both of which are destined to enter into the monetary system, but which recent legislators have learned to co-ordinate by leaving the unlimited function to gold alone and reducing silver to the rôle of divisional money. From 1857 the French Government has studied the question, and it may be stated that since that date the principle of the gold standard has won increasing favour through our several administrations."

Then follows an account of the monetary history of France during the period, as in brief résumé already given. "If," the preamble continues, "from 1874, certain precautions had not been taken to arrest the effects of that grave perturbation in the ratio, France and her monetary allies would have seen their monetary circulation invaded by silver and correspondingly drained of gold." Hence the conventions of 1874-75-76, limiting the mintings of the members of the Latin Union, although, "according to us, the fall of silver in 1875 prescribed a complete cessation even for that year rather than a simple limitation."

Germany.

Until the unification of Germany in our own days, and the adoption of the present imperial currency system, German monetary history reproduces perpetually all the elements of that mediæval system, bimetallic in fact though not theoretically so conceived, which England flung away in 1816, and from the toils of which France has not as yet completely emerged.

As safeguards against the evils of that system which she had felt with such bitter experience, and which had culminated in the crisis closing the Thirty Years' War, Germany could only feebly employ the mechanism of ineffectual Mint conventions. For a century she persevered in the effort to establish a common standard and Mint system, but in vain. The attempt had to be abandoned, and the reeling system left to its own process of disintegration; and when at last the events of 1871 came to give her unity in her coinage, as well as political life, there were not less than nine distinct and independent coinage systems in existence.

Hardly had the crisis of the Thirty Years' War passed out of mind before again the currency system had begun to work its baneful effects.

GERMANY: THE ZINNAISCHE STANDARD

In 1665 complaints were loudly made of the corrupt and debased state of the coin, due to export and culling. There is, indeed, quite a literature of these same complaints. The language of the Reichstattisches conclusum (Ratisbon, 12th September 1666) expressly attributes this export to the higher value set upon the gold in foreign countries, especially Venice. And the statement of the warden of the Mint of the three corresponding circles—Franconia, Bavaria, and Swabia—delivered in his Gutachten of the preceding May, was that the place of these good German ducats had been taken by very depreciated coins of Italy, France, England, and Holland. The three higher circles, accordingly—Franconia, Bavaria, and Swabia—met in conference and determined on a thorough investigation. The advice submitted to them was to raise the thaler from 90 to 96-kreutzer (see account of German coinage, Appendix V.), implying a lowering of the ratio from 15 to 14 1⁄8. This proposed scheme was accepted, in comitia, in 1667, the fifth article of the resolution specially mentioning the infliction of numerous intruding base foreign divisional money. From this scheme Brandenburg and Saxony held off, maintaining that the ratio had not been sufficiently lowered, considering the condition of the production of gold; and, in the same year, by a Mint treaty between Frederick William of Brandenburg and the Elector of Saxony, the so-called Zinnaische standard was adopted for those two states. According to this standard, the Reichs thaler was raised to 105-kreutzer (1 florin 45 kreutzers) and a ratio of 13 5⁄9 was established.

The result of this action of Saxony and Brandenburg was to strip the three higher circles of their silver, and in two years (1669) they anxiously met again to consider the question, not only of the foreign base coin everywhere prevalent, but also of the damaging exchange "and ceaseless melting down and exchange of proper coin from the circles."

By a strenuous effort the three circles carried through the Reichstag of 1680 their resolution to reduce the Reichs thaler to 90 kreutzer (ratio 15 1⁄4). From this decision the Emperor stood apart, with Bavaria and Salzburg, in putting the Reichs thaler at 96 kreutzer.

In view of such contrariety the impossibility of any general régime for the empire became apparent, and further attempts at it were practically abandoned. It was the perception by the mercantile community, as well as by the various Governments, of the consequences of such disorder, that led to the establishment of the so-called Leipzig standard in 1690. This standard was promoted by John George III. of Saxony, and established by treaty between Saxony, Brandenburg, and Brunswick-Luneburg. According to it the Reichs thaler was raised to 120 kreutzers, or 2 florins, the mark being minted into 12 thalers or 18 guldens.

The result of the introduction of this standard was that in a few years the raising of the Reichs thaler to 120 kreutzers prevailed all over the empire. Sweden accepted it in the same year, 1690, and three years later the three upper circles acquiesced. At the same time the gold gulden was advanced to 2 florins 56 kreutzers. The previous ratio of 15 was thereby advanced to 15.1 (15 128⁄1278).

In 1738 the Reichstag determined on the adoption of the Leipzig standard for the whole empire; no alteration was made in the Reichs thaler, which was still retained at 2 florins and minted at 12 to the mark fine; but a graduated scale of agio was adopted for the divisional coins, which were minted at an equivalence of from 12 3⁄8 to 13 2⁄3 thalers to the mark fine. The difference (varying from 3⁄8 to 1 2⁄3 thalers) represented the agio.

GERMANY: THE CONVENTION STANDARD

From the first, however, the Leipzig standard had no more real success than any of its predecessors. Although theoretically accepted by all North Germany, and adopted in the Reichstag in 1738, it could obtain no actual general adoption through the empire. Even from the moment of the inception of the system in 1690, the process of competitively raising the course of the coinage had still continued, and pieces of 30, 20, 15, and 10-kreutzers were struck on a basis of from 20 to 21 1⁄3 gulden to the mark. The result was to put upon the carolus, which from 1730 onwards was minted in great quantities in South-West Germany, an agio of 10 per cent., a differentiation which was much increased by the disorders of the war of the Austrian succession. Such an agio swiftly drove the larger, full-valued specie out of currency, and during the continuance of that war the currency of Austria and South Germany was almost entirely reduced to depreciated fractional pieces, while the exchangers reaped untold advantage. It was on the close of this war, in 1748, that, with characteristic Austrian selfishness, though also with a boldness none of his predecessors had approached, the Emperor, Francis I., determined on the erection of the 20-gulden standard as a separate Austrian independent system, minting the mark of fine silver into 13 1⁄2 Reichs thalers, or 20 guldens. This latter system, after the accession to it of Bavaria, obtained the name of the Convention Standard, and the 2-gulden pieces minted under it are styled the Species or Convention Thaler. The convention system remained in force in Austria until the Vienna Coinage Convention of 1857, a period during which the Convention Thaler found wide circulation through South Germany.

The currency was eked out by the Austrian gold ducats and by vast quantities of foreign silver, French 6-livre thalers (current for 2 florins 48 kreutzers) and the crown or Brabant thaler (current for 2 florins 42 kreutzers). From 1807 onwards this latter coin was imitated by the South German States, Bavaria especially, in their crown thaler, minted on a fresh basis of 24 1⁄2 guldens to the mark of fine silver.

The selfish initiative of Austria was followed by Prussia and the South German States. The latter, the Rhenish and South German States, adopted in 1761-65 the 24-gulden; subsequently changed into the 24 1⁄2-gulden standard (see Appendix VI.). The overvaluation of the Kronthaler, which led to that latest development from a 24 to a 24 1⁄2-gulden standard, was the result of the immense circulation of French 6-livre pieces (known in Germany as Laubthalers) in South-West Germany. Graumann quite discredits the theory that the overswimming of South Germany by these French pieces, with all the confusion in the currency which resulted, was due to the wars and the progress of French arms, and directly attributes it to the depreciation of the French specie, and to their quite deliberate departure from the standard of French coinage as fixed in 1726.

SOUTH GERMAN AND PRUSSIAN SYSTEMS

In Prussia the reform of the coinage system was undertaken by her first King, Frederick I., father of Frederick the Great. In 1750 the latter adopted the 14-thaler or 21-gulden standard, subdividing the thaler into 24 groschens of 12 pfennige each. The measure was undertaken expressly to stop the export of gold which was going on. The adoption of a standard lower than the Convention standard effectually prevented the outflow of Prussian money, and it was not until the beginning of the present century, through the new Mint confusion which arose from the French Revolution, that Prussian money spread into Saxony, Hanover, Hesse, and even into the south-west. The second idea of Frederick's reform was to buy gold cheap, but in this it did not succeed. The intention was to obtain for five Prussian thalers the gold pistoles, which were purchasable for five convention thalers. This rate, however, never prevailed in the market, as from the first the pistole was valued at 5 1⁄4 Prussian thalers. During the Seven Years War, when Frederick was driven to a depreciation of his coinage, his system went to pieces. But an active reform was undertaken upon the conclusion of the peace of Hubertsburg, 1763. The 14-thaler system was re-established, although, as far as the smaller divisional silver coinage was concerned, the depreciation, in which Frederick had been imitated by the pettier states round him, continued into the present century.

In 1821 a minor alteration was made in the Prussian system, by subdividing the thaler into 30 instead of as previously 24 groschen, the former being distinguished from the latter by the title of silver groschen. To this Prussian or 14-thaler system Saxony acceded, as did also, in 1848, Mecklenburg and Oldenburg, with many minor differences of detail,—Saxony, for example, dividing the silver groschen into 10 pfennige; Mecklenburg dividing the thaler into 48 schillings of 12 pfennige each; and Oldenburg dividing it into 72 grotens of 5 schwarens each. The gold coin was supplied by the Prussian and Hanoverian 5 and 10-thaler pieces, the Friedrichs d'or, a favourite trade coin even in South Germany, and by Spanish pistoles circulating at an equivalence of 4 6-livre thalers.

CONFERENCE OF MUNICH, 1837

The confusion of these various German systems was further increased by the uncertainty and difference which had come to prevail in the unit of weight. In Austria alone there were 2 marks in use, the Vienna mark (= 288.644 grs.), and the Cologne mark (= 243.870 grs.). While in North Germany, and subsequently in the south-west, the Prussian mark (= 233.855 grs.) prevailed. It was as the outcome of a desire to remedy at once the evil condition and confusion of the currency, and the uncertainty as to weight standard, which led to the conference of Munich on 25th August 1837. At that conference, Bavaria, Würtemberg, Baden, Hesse, Darmstadt, and the Free State of Frankfort, adopted the 24 1⁄2-gulden standard as the standard for their several states. At the same time the Prussian mark (233.855 grms. = half the Prussian pound), was established as the Mint mark for the contracting members. For the divisional coinage (6 and 3-kreutzer pieces) a standard of 27 guldens to the mark was adopted, the details of the various fractional pieces being left to the different states. To this convention Hesse, Hamburg, and the two Hohenzollerns acceded in the following years.

This movement of South Germany gave a new impetus to the idea of Mint unification, and led to the General Mint Convention of the States of the Zollverein, agreed upon in full assembly of delegates at Dresden, 30th July 1838, and ratified also at Dresden on the 7th January 1839. The Dresden Convention was practically the first renewed attempt at Mint unification which Germany had seen since 1738. The contracting members to this general Mint convention were Prussia, Bavaria, Saxony, Würtemburg, Baden, Hesse, Saxe-Weimar, Eisenach, Saxe-Meiningen, Saxe-Altenburg, Saxe-Coburg and Gotha, Nassau, Schwarzburg-Rudolstadt, Schwarzburg-Sondershausen, Reuss, Reuss-Schleiz, Reuss-Lobenstein, Ebersdorf, and Frankfurt.

Briefly, the articles of the convention were as follow:——

"1. The Mint mark of all these contracting states of the Customs Union shall be the Prussian Mint mark = 233.855 grms.

"2. On this common weight standard the coinages of the contracting states shall be in accordance with the two systems in existence among the said states, viz. by thalers and groschen, according to the 14-thaler (or Prussian) system; or by gulden and kreutzer, according to the 24 1⁄2-gulden (or South German) standard. For the purpose of assimilation or equivalating, the thaler to be reckoned = 1 3⁄4-gulden, and the gulden = 4⁄7-thaler.

"3. The 14-thaler system to be that of Prussian Saxony, Hesse, Saxony, and Saxe-Altenburg, Saxe-Coburg and Gotha (Gotha), Schwarzburg-Rudolstadt (Unterherrschaft), Schwarzburg-Sondershausen, and Reuss; the 24 1⁄2-gulden system to prevail in Bavaria, Würtemberg, Baden, Hesse, Saxe-Meiningen, Saxe-Coburg and Gotha (Coburg), Nassau, Schwarzburg-Rudolstadt (Oberherrschaft), and the Free State of Frankfurt.

"4. Each state will confine its mintings to such pieces as prevail in the system of which it forms part.

"5. In larger specie, and also in divisional coin, each state to bind itself to exercise the greatest care to preserve the standard and weight.

"7. For the purpose of the commerce of the contracting states union or convention coins (vereinsmünze) shall be minted seven to the mark of fine silver, at an equivalence of 2 thalers or 3 1⁄2 guldens, fully tenderable throughout the Union.

"8. Alloy to be .9 silver, .1 copper; so that 6 3⁄10 pieces = 1 Mint mark in weight; remedy = .003.

THE DRESDEN CONVENTION, 1838

"9. From 1st January 1839 to 1842, at least 2,000,000 of these vereinsmünze to be coined, one-third value except part each year, and by the various states pro rata of their population. From 1842 onwards, in case of no new treaty, the rate of minting to be two millions vereinsmünze every four years, pro rata as before; each state to give an account of its mintings.

"10. Also of their separate trials of standard and weight.

"11, 13. None of the contracting states to set its particular internal specie at any different on a three months' notice, and to renew its currency at face value in case of depreciation.

"12. The states bind themselves not to issue divisional coins in excess of such pro rata requirements as above.

"14. For the divisional coinage the standard of the convention of Munich, 1837 (viz. 27 gulden), is adopted.

"18. The treaty to endure till the end of 1858. States intending to retire then to give two years' notice. From that date, if not discarded, the treaty to be periodically renewed (five-yearly)."

This treaty continued in force nominally until the later and still more famous convention of Vienna in 1857, before which date Hanover, Brunswick, and Oldenburg had also given in their adherence to it.

At the time of the Mint Conference and Convention of Vienna, therefore, there were, broadly speaking, three competing systems in Germany, viz. of Austria, Prussia, and South Germany or Bavaria.

One aspect of this latter conference of 1857, viz. its deliberations with regard to gold coinage, will be referred to separately. As far as relates to its attempted systematisation of these three German currencies the agreement took the following form:—

1. The pound of 500 grammes decimally subdivided, to be used as the basis of the coinage.

2. The competing systems to be assimilated to this basis by the following regulation:—

The thaler (or Prussian) standard of 30 thalers to the pound of silver to take the place of the 14-thaler standard, and to prevail in Prussia, Saxony, Hanover, Hesse, and a string of minor states.

The Austrian standard to be on the basis of 45 guldens out of a pound of fine silver, and to prevail in the Empire of Austria and the principality of Lichtenstein.

The South German standard to be on the basis of 52 1⁄2-gulden to the pound of silver (instead of the 24 1⁄2-florin standard formerly used), and to prevail in Bavaria, Würtemburg, Baden, Hesse, Frankfurt, and a few other places of South Germany.

The equivalence of the systems was to be—

One-thaler convention piece ( 1⁄30 pound) = 1 1⁄2 florins in Austrian currency = 1 3⁄4 florin in South German currency.

All the coins to be of unlimited validity in all the states, divisional coinage to be of a lighter standard than the coinage standard of the country, but lighter only within limits fixed. The tender of these latter to be limited to 20-thaler or 40-gulden.

THE VIENNA CONFERENCE, 1857

The regulations adopted by this Vienna Convention as to the gold coinage are very significant, and deserve special note.

The advance in the gold price of silver, due to the Californian and San Franciscan gold finds, acted on the silver-using countries. As soon as the price of bar silver exceeded 60 7⁄8-pence per standard oz., there resulted a melting down and export of the silver, in the countries which had adopted bimetallism at the 15 1⁄2-ratio.

It was this experience in France, and the allied group of countries, which led to the formation of the Latin Union in 1865. In mere point of date, that union had been preceded by the Vienna Conference and Convention by a matter of eight years. And as far as the regulations of this latter relating to gold coinage are concerned, there is evidence that the bimetallic action of France had driven Germany to her union of 1857, as a mere matter of self-defence, just as it later drove the Latin states to their union of 1865. In both cases the underlying motive was a wish to protect that part of their currency system which was threatened by bimetallic law. The premium on gold, on its minting, i.e. the profit to be made on minting it at 15 1⁄2 in France, while its market value was considerably less in Germany and elsewhere, drew the gold to France. It is a mistake to think that France attracted gold simply from California and Australia. She attracted it by the action of bimetallic law from her neighbour Germany, and replaced it by 5-franc silver mintings. The circulation of French 5-franc pieces was so extensive in South Germany, in the period preceding the Vienna Convention, that the cash reserve of the Frankfort bank was at one moment composed almost entirely of them.

The manner in which the Vienna Convention met the difficulty has the appearance of plausibility, though it proved in the end ineffectual. It determined not to establish a fixed ratio but to follow the market price of gold, apparently in the hope of attracting a natural or market supply.

"For the purpose of further facilitating mutual transactions, and for the promotion of trade with neighbouring countries, the contracting powers may coin convention trade coins in gold, under the names crown, and half-crown.

"1. The crown = 1⁄50 of a pound of fine silver.

"2. The half-crown = 1⁄100.

"The contracting powers may not coin any other gold piece, except Austria, which retains the right of coining ducats of the present value, to the end of 1865.

"The silver value of the convention gold coins in ordinary intercourse is entirely fixed by the relation of the supply to the demand. They must not, therefore, be considered as a medium of payment of the same nature as the legal silver currency of the country, and no one is legally bound to receive them as such.

THE VIENNA CONVENTION, 1857

"Each state is at liberty to permit convention gold coins to be paid into their offices instead of silver, according to a previously settled fixed rate, and to extend this permission either to all transactions and offices, or only to some. Such previous settlement of the rate is, however, never to last more than six months, and must at the expiration of the last month always be renewed for the following official treasury period of exchange. The rate cannot be fixed at a higher value than that given to such coinage by the average of the official commercial rate of exchange during the previous six months. Each government also reserves to itself the right to alter the rate at any time within the period fixed, and to suspend it when it thinks proper.

"A treasury rate of exchange shall henceforth only be fixed for convention gold coins, and not for other kinds of coined gold.

"The widest circulation to be given to the notices by which the official rate of exchange is fixed. They must be published beforehand, even when a change in rate for the next fixed period is not intended, and must contain—

"1. The statement of the average trade exchange at the principal places of exchange, during the six months immediately preceding.

"2. The treasury rate fixed accordingly.

"3. The duration of the value of the same.

"4. The reservation to alter or recall this rate of exchange if necessary, even before the expiration of the term named.

"5. The declaration that such rate of exchange only affects payments to be made into offices of the state.

"In the countries of the contracting powers pay-offices of the State, as well as public institutions, banks, etc., shall not be allowed in future, in payments to be made by them, to make any proviso with regard to the medium of payment in silver or gold, in such a way that for the latter a certain fixed relative value should be expressed beforehand in silver money."

From the point of view of Austria, this convention had been entered upon with the desire of effecting a gradual adoption of gold coinage, together with a concurrent ceasing of the compulsory note circulation. The outcome of the conference was, however, in quite distinct opposition to this desire, as the agreement which was finally arrived at established the maintenance of a pure silver currency. The continuance of the gold crown of 10-grs. fine gold was recognised only as a trade medium. This experiment of a trade gold coin failed completely, though it is none the less interesting intrinsically, as well as for its reflex bearing on the similar schemes which were proposed in the early years of the French Revolution. The premium on the minting of gold drew it to France, in preference to any other place where a simple market price prevailed. And the 20-franc gold pieces of France overflowed, while the German crowns could not struggle into existence.

GERMANY: ATTEMPTS AT REFORM, 1860-70

The attempt which was made by a commercial conference at Hamburg, at the time of the meeting of the Vienna Conference, to secure the introduction by the Hamburg Bank of a gold instead of a silver valuta, remained equally ineffectual.

As far as concerns the establishment of a simple and single monetary system for Germany was concerned, this Vienna Convention, the last great convention which Germany saw previous to the reconstruction of her system in 1871, was as futile as that of Dresden in 1838, or as all the conventions of the seventeenth and eighteenth centuries previously.

The consciousness of the need of such simplification and unification, however, became thereby only the more apparent. Four years later the first German Handelstag, which met in May 1861 at Heidelberg, turned its first and special attention to the erection of some common currency system. The recommendation which it finally concluded upon was the adoption of the Drittelthaler as the unit mark, with a decimal subdivision. Four years later the third Handelstag, which met at Frankfort (September 1865), confirmed the resolution, with the additional proposition of the minting of a gold piece identical with the 20-franc piece, the value of which should be regulated from time to time; the scheme being, therefore, as before, that of a silver standard, with gold as trade money. The fourth Handelstag met at Berlin in October 1868, and again the matter was most seriously discussed. With the single exception of the Berlin members, all the deputies declared for the adoption of the gold standard. As, in the preceding year, Austria had withdrawn from the German Monetary Union of 1857, she no longer stood in the way of this proposition, and the erection of the North German Union distinctly favoured the project.

In June 1870 the Bundesrath of the North German Union resolved upon a reform and unification of the paper money, as preparatory to a complete currency reform, and in the same month the Chancellor of the North German Union had decided to call a Mint Convention. The outbreak of the Franco-German War immediately afterwards put a short stop to the proposal.

A long train of preparation had thus been laid, and there can be little doubt as to what the ultimate direction of German monetary legislation would have been, even without the war, and the consequent erection of the Empire. That the latter event, however, enormously facilitated the process cannot for a moment be questioned.

GERMANY: NEW IMPERIAL SYSTEM, 1871

When the subject was taken up after the Franco-German War, the determination to adopt a gold coinage was only gradually arrived at. In the original plan, as drafted soon after the conclusion of peace, the new gold coinage proposed was intended not to be tenderable, for the meantime, in private commerce. Such a provision roused all the opposition of the mercantile community, and in consequence of the agitation the scheme, as finally submitted to the Reichstag, was for a gold monometallic system. The law passed on the 4th December 1871, and the great operation of recoinage and conversion was immediately entered upon. It was greatly favoured by the ratio existing at the moment, and by the metallic condition of the world. The ratio taken as the basis of the computation was the French 15.5, accepted because of its long and present wide employment.

The previous silver standard thalers were taken as equivalent to 3 marks.

30 thaler = 90 mark = 1 pound fine silver. 90 × 15.5 = 1395 marks.

The gold piece of 10 marks was therefore coined at a tale of 139 1⁄2 to the pound of fine gold.

Propositions were made to the Reichstag that the 20-franc piece should be made equivalent to the English sovereign, or to the 25-franc piece, giving respectively a ratio of 15.17 or 15.31, but at the moment the price of silver in the London market ruled between 60 7⁄8 and 60 3⁄4 pence per ounce, i.e. at a mercantile ratio of 15.49-15.52. It was this fact which decided the adoption of the French ratio.

The chief Acts which have accomplished the reform are of dates 5th December 1871 and 9th July 1873, the first declaring the monetary system and the latter the law of tender.

The unit of the system is the mark, which is the 1⁄1255.5 part of a pound of gold of 500 grammes at 9⁄10 fine, and is coined into pieces of 20 and 10 marks. The gold crown is a 10-mark piece, is 9⁄10 fine, and struck at a tale of 139 1⁄2 pieces to the German pound; charge for coinage, 3 marks per pound of fine gold.

The pound of fine silver is struck into 100 marks, 9⁄10 fine. The total amount of silver coin not to exceed 10 marks per head of population. No individual need accept more than 20 marks of imperial silver coin in payments. They are accepted in any amount by the Empire and by the Federal States.

All other German coins are no longer legal tender, and have been withdrawn, with the single exception of the thaler pieces. Whatever pieces of this kind still exist are legal tender to any amount, like the imperial gold coins, each being equal to 3 marks. An Act of 20th April 1870 provides that Vereinsthalers coined in Austria before 1867 should also be full legal tender. An Act of 6th January 1876 has authorised the Bundesrath to put the thaler pieces and the Austrian Vereinsthalers on the same footing as imperial silver coins, i.e. to make them legal tender only up to 20 marks, the thaler being still reckoned at 3 marks. Since the suspension of silver sales and of the withdrawal of the silver thalers (May 1879) there is no likelihood that the Bundesrath will make use of this authority conferred upon it.

In briefest résumé, the course of the silver coinage during the preceding century may be presented thus:—

GERMANY—COURSE OF THE 1-THALER PIECES.

Thalers.

Total minted during 1750-181664,380,936

Withdrawn by the Government of the States27,788,956

Withdrawn under the new Imperial System,1871-35,652,999

""18746,319,170

""18752,900,202

""18762,582,123

""18771,465,424

""1878864,253

47,573,127

Leaving a balance not accounted for of16,807,809

Thalers.

Total minted during 1817-2224,261,735

Withdrawn under the new Imperial System, 1871-33,623,511

""18745,147,970

""18752,580,580

""18762,373,496

""18771,421,719

""1878766,908

15,914,184

Leaving a balance not accounted for of8,347,551

Thalers.

Total minted during 1823-185691,031,741

Withdrawn under the new Imperial System, 187440,000

""1875566,677

""187611,250,277

""18775,753,269

""18784,640,068

22,250,291

Leaving a balance not accounted for of68,781,450

Thalers.

Total minted during 1857-71215,863,120

Withdrawn by the Government of the States2,538

Withdrawn under the new Imperial System,18753,000

""187625,958

""187764,806,347

""187818,915,167

109,635,938

Leaving a balance not accounted for of106,177,182

Thalers.

On the whole period, 1750-1871, the total minted 1-thaler pieces amounted to395,537,532

Total withdrawn195,423,540

Leaving a balance not accounted for of200,113,992

Allowing 83,062,882 thalers as a rough equivalent for the loss by attrition, there is still a deficit of 117,051,000 thalers, or about £17,557,650 sterling to be accounted for (and laid to the account of remintings and loss by arbitrage).

ACCOUNT OF THE MINTING OF THE RECONSTRUCTED GERMAN EMPIRE—GOLD—FROM 1872 TO DEC. 1878

Origin of the Bullion supplied to the Mint. Supplied for the Empire. Supplied for Private Accounts.

Pounds Weight Fine Gold. Pounds Weight Fine Gold.

German gold coin of the old type 64,092.3 11.4