of both metals, as many writers have inconsiderately declared. Prices only depend upon the course of the metal which happens to have sunk in value below the legal ratio of 15 to 1. Now, if in the accompanying figure we represent by the line A the variation of the value of gold as estimated in terms of some third commodity, say copper, and by the line B the corresponding variations of the value of silver; then, superposing these curves, the line C would be the curve expressing the extreme fluctuations of both metals. Now the standard of value always follows the metal which falls in value; hence the curve D really shows the course of variation of the standard of value. This line undergoes more frequent undulations than either of the curves of gold or silver, but the fluctuations do not proceed to so great an extent, a point of much greater importance.

A

B

Де र्ज

Compensatory Action.

Nor is this the whole error of the English writers. A little reflection must show that MM. Wolowski and Courcelle-Seneuil are quite correct in urging that a compensatory or, as I should prefer to call it, equilibratory action, goes on under the French currency law, and tends to maintain both gold and silver more steady in value than they would otherwise be. If silver becomes more valuable than in the ratio of 1 to 15 compared with gold, there arises at once a tendency to import gold into any country possessing the double standard, so that it may be coined there, and exchanged for a legally equivalent weight of silver coin, to be exported again. This is no matter of theory only, the process having gone on in France until the principal currency, which was mainly composed of silver in 1849, was in 1860 almost wholly of gold. France absorbed the cheapened metal in vast quantities and emitted the dearer metal, which must have had the effect of preventing gold from falling and silver from rising so much in value as they would otherwise have done. It is obvious that, if gold rose in value compared with silver, the action would be reversed; gold would be absorbed and silver liberated. At any moment the standard of value is doubtless one metal or the other, and not both; yet the fact that there is an alternation tends to make each vary much less than it would otherwise do. It cannot prevent both metals from falling or rising in value. compared with other commodities, but it can throw

variations of supply and demand over a larger area, instead of leaving each metal to be affected merely by its own accidents.

Imagine two reservoirs of water, each subject to independent variations of supply and demand. In the absence of any connecting pipe the level of the water in each reservoir will be subject to its own fluctuations only. But if we open a connection, the water in both will assume a certain mean level, and the effects of any excessive supply or demand will be distributed over the whole area of both reservoirs. The mass of the metals, gold and silver, circulating in Western Europe in late years, is exactly represented by the water in these reservoirs, and the connecting pipe is the law of the 7th Germinal, an XI, which enables one metal to take the place of the other as an unlimited legal tender.

The Demonetization of Silver.

M. Wolowski has earnestly warned Europe against the danger of abrogating the law of the double standard, and demonetizing silver. Germany, in adopting a gold standard, is causing a considerable demand for gold, and at the same time throwing many millions of silver coins upon the market. Austria, Denmark, Sweden, and Norway are likely to follow her example. If other countries. were to insist upon suddenly having a gold money, it is evident that gold would tend to rise in value compared with silver, which might be largely depreciated. If France, Italy, Belgium, and other countries now

possessing theoretically the double standard, were to allow the free action of their monetary laws, the depreciated silver would flow in and replace the appreciated gold, so that the change of values would be moderated. M. Wolowski asserts that if this compensatory action be suspended, and the demonetization of silver be extended, there must ensue a disastrous rise in the value of gold, thus rendered the sole standard of value. All debts private and public will be legally due in this metal, and all burdens will be greatly increased.

Within the last year or two the predictions of M. Wolowski may seem to have been verified in some degree. The price of standard silver, which was at one time 623d. per ounce, has already fallen as low as 57 d. while the demonetization of silver in Germany is only partially accomplished. The whole effect of the great discoveries of gold was only to raise the price from about 59 d. to a maximum of 621d., while the double standard system freely worked; but since its action has been, as we shall see, suspended, the minting operations of a single government can affect the price in a greater degree.

Agreeing that M. Wolowski is entirely correct in an abstract point of view, and is justified to some extent by the course of events, I must adhere to the opinion which I expressed at his request in 1868, and which was partially published in his volume, "L'Or et l'Argent" (p. 62).

The question seems to be entirely one of degree, and in the absence of precise information is quite indeterminate. If all the nations of the globe were suddenly

and simultaneously to demonetize silver, and require gold money, a revolution in the value of gold would be inevitable. But M. Wolowski seems to forget that the nations of Europe constitute only a small part of the population of the world. The hundreds of millions who inhabit India and China, and other parts of the eastern and tropical regions, employ a silver currency, and there is not the least fear that they will make any sudden change in their habits. The English government has repeatedly tried to introduce a gold currency into our Indian possessions, but has always failed, and the gold coins now circulating there are supposed not to exceed one tenth part of the metallic currency. Although the pouring out of forty or fifty millions sterling of silver from Germany may for some years depress the price of the metal, it can be gradually absorbed without difficulty by the eastern nations, which have for two or three thousand years received a continual stream of the precious metals from Europe. If other nations should one after another demonetize silver, yet the East may be found quite able to absorb all that is thrust upon it, provided that this be not done too rapidly.

As regards the gold required to replace silver, it does not seem to be evident that there will be any scarcity. The adoption of the gold standard does not necessarily involve the coining of much gold, for some countries may, like Norway, or Italy, or Scotland, have a principal currency almost entirely composed of paper. In other countries, such as France and Germany, the cheque and clearing system, which we shall shortly consider, may