past year. The former was predicted at the Brussels Monetary Conference, by Baron Alfred de Rothschild, in these memorable words:

Gentlemen, I need hardly remind you that the stock of silver in the world is estimated at some thousands of millions, and if this Conference breaks up without arriving at definite results there may be a depreciation in the value of that commodity frightful to contemplate, and out of which a monetary panic might ensue, the far-spreading effect of which it is impossible to foretell.

Within six months every bank, but one, in Australia had closed its doors, while one-third of the railway mileage in America had passed into the hands of receivers. In the summer of 1894 it was my privilege to be much with the late Professor Francis Walker of Yale, whose formative influence in economics may perhaps outrank even Mill; he, too, referred the cataclysm of the previous year to the great fall in silver; the facts, he held, did not admit of argument. He said of the disaster: 'It has dislocated the effective demand of eight hundred million people for our goods, and it uproots Western industries to replant them in the East.' This distinguished economist, whose books, translated into seven languages, are now classics in our schools, concluded a short speech, at an informal dinner given by Sir William Houldsworth, with these words:

I regard this problem of silver as far more than any mere problem of finance ; I believe that with its right settlement is bound up the very progress of civilisation for the Western nations.

And in spite of our dumb professors the question of silver must presently invade our schools, for it is the Yellow Peril itself. In a recent letter to the writer Senator Teller stated the novel conditions of industrial competition in the smallest compass:

Five gold dollars (or one sovereign) used to purchase three taels only, and three taels then paid the wages for one day to twenty-five Chinese mill-hands; while to-day five gold dollars buy eight taels, and eight taels pay a day's wage to not twenty-five but sixty Chinese mill-hands: such is the nature of the protest against cheapened silver which sums up our silver philosophy.

There is no industry safe if, with gold prices and wages rising fast, we are to continue to sell silver to China at two shillings an ounce. Said Mr. Kopsch, of Shanghai :

Silver-paid Chinese labour has driven every European sailor and fireman fron the decks and stokeholds of foreign vessels plying on the coast of China, and the premium paid by gold countries to silver labour will as certainly crush the efforts of the machinist to reap the profit of his toil in the East, just as it has vanquished the seaman.

Briefly the position is this. The immense production of gold from the mines is depreciating our Western currencies. To discover any such rise of prices as occurred between 1896 and 1907 we should have to revert to the reign of James the First. In 1896 sixty-one

sovereigns would purchase as much as eighty purchased in 1907,* and it is quite certain that the conditions of gold supply are such that we have scarcely crossed the threshold of the new era of rising prices. In the second quarter of the seventeenth century, because of the inflation of our currencies by the treasure trove of the mines of Bolivia and Peru, the value of an average acre of English land rose from 51. to 251., wages rose from half a crown to twelve shillings a week, wheat from eight shillings per quarter to over thirty. Adam Smith writes in his Wealth of Nations of this great fall in the value of our legal-tender money :

The discovery of the abundant mines of America seems to have been the sole cause of the diminution in the value of silver in proportion to that of corn. It is accounted for, accordingly, in the same manner by everybody, and there never has been any dispute either about the fact or about the cause of it.

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It is almost inevitable that there is in waiting for the next generation a rise of prices hardly less sensational, because of the excessive abundance of the new gold. It seems but the other day that writers on currency were balancing their budget with a yearly product of only eighteen millions; this year the production will be quite ninety millions. The yield of the mines doubled between 1886 and 1896, and again doubled between 1896 and 1906; and from the uttermost parts of the earth come fresh announcements of important discoveries, and of chemical and mechanical inventions, which secure profitable results from lower and lower grades of ore. But in the case of the white metal the position is quite different. The production of silver shows no considerable increase; alternately starved and surfeited by the vacillating policies of successive Finance Ministers, the managed,' and terribly mismanaged, currency of India, which was formerly the conduit through which silver flowed into China and the Malay States, disallows any real advance of silver prices in China. Every authority agrees that, except in a few cities and in treaty ports, the purchasing power of the tael, now at twelve to the sovereign, is still what it was when it exchanged at five to the sovereign. What, then, will happen if our gold prices double during the next fifty years and silver prices remain comparatively immobile? Clearly Oriental exports, magnetised by our great rise of prices, will be thrown upon us in greater and greater volume, and will more and more displace white labour in the West. In 1898 the Shanghai Chamber of Commerce passed the following resolution :

That in due course the products of Asiatic cheap labour will prove far more injurious to the interests of the wage-earners in gold-standard countries than the presence of Chinese coolies, and that unless silver is remonetised, protective measures will have to be adopted to exclude from gold-standard countries not Oriental labourers only, but all those manufactures also which are subsidised by premiums (premiums on gold in Asiatic currencies).

'Sauerbeck's Index Number, 1896, 61; 1907, 80.

5 1874, 18,150,000%.

The fall in the gold price of silver is merely another expression for a rise in the gold premium in every country which has a silver currency. The embarrassment of our traders in exporting to South America and Russia, countries with paper currencies where the premium on gold fluctuates from day to day, is told on every bourse. The exchange difficulty in the case of Asia is not less, but is much greater, and the result has been, beyond words, disastrous to white men.

Of such a nature is the economic crisis through which the West is passing. What wonder that we are agnostic or infidel! What wonder that free exchange has gone overboard with wrecked exchanges, and that the 'open door' in Asia is a door that more and more opens only outwards!

II

The great silver issue has slumbered now for fifteen years, and had it been possible to maintain a steady level of gold prices in the face of the floods of new gold, it need never have returned from dreamland to plague the new century. But 1933 may find gold prices again shrinking, and with China equipped with railways and with a respectable currency system, her wages and prices, as also those in British India, may be rapidly advancing; thus the racial danger of the present competition, fostered by rising gold prices and falling silver exchanges, may have been averted. There is also the prospect of an immense and most beneficent absorption of silver by Africa, as to which I will refer later.

The method of supporting and raising Eastern exchange might be as follows:-In 1888, after sitting for two years, a Royal Commission on the Currency issued its report. The evidence, read to-day, is of extreme value and interest. Of the witnesses examined few now survive; they were for the most part merchants and bankers who, already men of affairs and experience in 1873, knew the extraordinary convenience of that accidental fixed exchange with which they had pursued their trades. The Royal Commission split up, as we should expect, into two camps. The monometallists signed Part II., the bimetallists Part III. Part II., paragraph 137, reads as follows:

We think that the best suggestion in relief of the tension of the existing situation is to be found in the issue of small notes based on silver. These might become the substitutes for the half-sovereign, and if they came into general use they would afford a remedy for those difficulties in relation to that coin to which public attention has been prominently called.

Twenty-shilling silver notes might also be issued. If these were put into circulation they would probably pass largely into use without any alteration of the law of legal tender. The Government might issue these upon condition of retaining silver capable of being coined into an equal number of shillings. The market thus opened for silver might check the decline in price of the metal, besides producing an economy in the use of gold. (Signed: Herschell, C. W. Fremantle, T. H. Farrer, Leonard H. Courtney.)

In Part III., paragraph 36, the Bimetallists say:

We have indicated what appears to us to be the only permanent solution of the difficulties arising from the recent changes in the relative value of the precious metals, and the only solution which will protect this and other countries against the risks of the future. At the same time we approve the recommendation of our colleagues in 137. (Signed: Louis Mallet, Arthur James Balfour, Henry Chaplin, D. Barbour, W. H. Houldsworth, Samuel Montagu.)

In 1891 Mr. Goschen, at that time Chancellor of the Exchequer, went to Leeds, and he made an impassioned appeal, if such an adjective applies to one by nature so cautious and critical; he displayed, however, a really desperate anxiety as to the state of our gold reserve. He said:

I have also considered the question of the issue of ten-shilling notes against silver. That is a measure which has been recommended by a part of the Royal Commission," and there are no economic objections to such a course. The halfsovereign is a very expensive coin, and half-sovereigns are circulated in enormous masses. I am told that in the payment of wages notes for ten shillings would be extremely agreeable, as avoiding a great deal of carriage and a great deal of counting (Times, the 29th of January, 1891).

We Silver men were much disturbed by this speech, and the Chancellor received our deputation at the Treasury a few days later, introduced, if I remember rightly, by Sir William Houldsworth, member for Manchester. I have the notes of the objections I raised, which pointed out that if, as he proposed, he brought in and impounded the halfsovereign, a full legal-tender coin, buying it with a non-legal-tender four-half-crown note, he would contract the volume of our standard money by some 30 per cent., and induce, as was indeed his purpose, a further fall of prices; because it is the legal-tender money, the money which can be drawn abroad through the action of the exchanges, which supports prices, and not the non-meltable pocket-money. Under cover of this fall of prices he would have turned the exchanges in our favour, would have protected in its cradle stage his second gold reserve, the impounded half-sovereign, while the better exchanges were bringing us also gold from abroad. It was a very clever, perhaps even a sound proposal, but we thought that the farmer and merchant were being sacrificed in that year of semi-panic to better secure the banks. I have since come to see that there are crises-and such was the crisis of 1890-when finance must be nursed to protect trade. As a rule it is the other way; sound trade secures safety to exchange, and thus to finance. It was quite evident that the vehement opposition we offered had impressed the Chancellor of the Exchequer; and hard on our heels, as I have only lately learned, came yet another deputation, small, but very important, which included Sir Robert Giffen. The protest of this deputation as to his silver-secured token notes was not Only Sir John Lubbock and Mr. Birch dissented.

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less emphatic than ours. Mr. Goschen himself-I may say it with all respect-knew more about currency and exchange than Sir Robert and all our deputation rolled into one, and he should, I think, have persevered; but with many fine, rather superfine, qualities he did not possess much decision. In any case, less than twelve months later," in addressing the London Chamber of Commerce he withdrew the small note proposal in these words:

You will observe that I have made no allusion to the ten-shilling notes. (Hear, hear.) I took such pains as I could to ascertain whether ten-shilling notes would be acceptable to the community, and the result I arrived at was this-that they would be extremely unpopular in most parts of the country, but that in Lancashire . . . they would value the ten-shilling notes not entirely on account of the note itself, but because of it being some recognition of the principle of silver performing a larger part in the currency.

The Chancellor in this matter had strayed into a zone swept by two fires. These note issues, by raising the Eastern exchanges, and thus securing the prosperity for the time being of Lancashire, would have disbanded the Bimetallic League. We at that time were full of confidence and hope; not until two years later were we to find our Waterloo, and again at Brussels. But, more important still, Mr. Goschen was under the guns of the business man'! Another Chancellor, a greater mind still, had learned that lesson. years earlier Mr. Robert Lowe wrote:

Twelve

It seems strange to say so, but it is nevertheless true that there is nowhere so much difficulty in obtaining a fair hearing as in matters of finance a little out of the usual course. The parson, as is natural, prefers his old mumpsimus to your new sumpsimus. The lawyer often listens with impatience to the notions of an account more enlightened than that in which his code was framed ; but for thorough, unreasoning, and dogged obstruction commend me to a thriving and highly respected man of business, especially if the business be inherited. By that single fact he becomes an oracle. Why should he waste his time in thinking when the balance at his bankers testifies for him that he is entirely master of the mysteries of his profession? Why tire his eyes with reading when he is already master of all that has and all that can be said on the subject? To try to impart to such a person a new idea is a sort of insult; for it implies that there is something left for him to learn, which, as the mathematicians say, is absurd. If it be difficult to argue with the master of twenty legions, it is equally vain to argue with the master of twenty clerks. If you doubt this, look at the reception which the currency question received from persons who are engaged in actual business. They professed they did not understand it, which was, no doubt, perfectly true; but, not understanding it, they were equally sure it was wrong. The proposal was no novelty; it was only a novelty to them.

Thus, then, there was put to sleep in the willing arms of London's Chamber the almost unanimous proposal of a Royal Commission, of which proposal the greatest authority on exchange finance of our time said, there are no economic objections.' The man had come but not the time. The question of the gold reserve both in London and New * 2nd of December, 1891. Fortnightly, July 1879.

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