This post not for the casual precious
metals window shopper. This extensive report for committed
sound money sleuths only! This teaser excerpt is from the 4th Edition published in 1898.
"Money Makes the World Go Round"..... but,
only if it 'klinks', 'jingles', and 'clanks'.
Anything less and the
world will not 'go round' as we know it.
Laughlin, J. Laurence (1850-1933)
of the U. of Chicago Economics Department,
founder of the Graduate School of Business there, and founder of the Journal of Political
Economy, J. Laurence Laughlin
brought his interest in monetary systems and the practical workings of free markets to general academic attention in
the United States.
II, Chapter XIII
Continued Fall in the
Value of Silver since
1: The events affecting
the relative values of gold and silver since 1855 are so striking and so unprecedented in the whole previous history of the precious metals that we are practically
face to face with a new problem.
In the previous editions
of this book issued to
1885, the decline in the value of silver relatively to gold from about 1:15½ in 1870
to about 1:20 in 1885 seemed
momentous enough to require the most serious investigation; and this
change of value had stirred
the liveliest discussion among
students of money. But the problem
presented by the changes since
1885 are far and away so much more phenomenal that our attention is forcibly arrested.
By reference to Chart XV, it
is seen that the really revolutionary action in the downward
movement of silver has
come since 1890. From a ratio of about 1:20 we have to
discuss a change to a level of 1:34. In the short period
between September, 1890,
and March, 1894, the price of silver
fell to one-half its value on the former date (the average
monthly ratio for September,
1890, being 1:17.26, and for March, 1894, 1:34.36).
No such change has ever before been recorded in the history of gold and silver.
Neither the famous output
of silver from the South
American mines in the sixteenth century
(see Chart V), nor
the greater production of silver
in Mexico about 1761-1820 (see Chart VI), had
anything like such an effect. To what causes can this last and greatest change
in the relative values of gold and silver be attributed? This, without doubt, is the most absorbing
and interesting part of our
whole inquiry. In order to address ourselves properly to this question, we shall first recount the recent events which, in Europe, have had an
important bearing upon it.
2. In order to gain a more complete
conspectus of the intentions of European
countries regarding gold and silver,
brief mention should be made of the action of Holland. In
1816, September 28, a legal double standard was established at a ratio of
1:15.87 between the silver
guldens (9.61 grains fine) and the ten-gulden gold pieces (6.056 grains fine gold). This legal
rate did not conform to
the market rate, especially
before 1821, and as gold bought
more coined silver than silver bullion,
gold went to the mints,
and silver, except clipped coins, was withdrawn from circulation. To
correct this difficulty
the ratio was changed,
March 22,1839, to 1:15.60, without success.
After long debates
in the Chambers on the question of a double
standard, the single silver standard was established, November 26, 1847, on the basis of the silver gulden (10.945 grains fine) as a unit.
action of Germany in 1873 led
Holland to suspend the coinage of silver (provisionally) on May
21, 1873 (and definitively December
3, 1873). The curious state of affairs
was presented of a
country stopping the free coinage
of silver, when not allowing the coinage of gold.
By a limitation of the silver coins, which yet retained
their function of legal payment to the state and between individuals, they were saved
from depreciation. This, however, was not a sound position, and June, 1875,
the Dutch mint was opened to the coinage of gold (the relation to the over-valued silver guldens being 1:12 5/8), while the coinage of silver (except for subsidiary purposes) remained suspended. As is the case with the silver thaler in
Germany, the Dutch silver
gulden remains, an unlimited
legal tender; but silver
coins are not immediately redeemable
Holland, therefore, although
a small country, has felt the influence of the events
which are leading all European commercial countries to the gold standard. See Complete TABLE OF CONTENTS