John W. Bookwalter - If Not Silver, What?

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IF NOT SILVER, WHAT?

by

JOHN W. BOOKWALTER

SPRINGFIELD, OHIO

1896

"If you will show me a system which gives absolute permanence, I
will take it in preference to any other. But of all conceivable
systems of currency, that system is assuredly the worst which
gives you a standard steadily, continuously, indefinitely
appreciating, and which, by that very fact, throws a burden upon
every man of enterprise, upon every man who desires to promote the
agricultural or the industrial resources of the country, and
benefits no human being whatever but the owner of fixed debts in
gold."--_Speech of the RIGHT HON. A. J. BALFOUR, at Manchester,
England, October 27, 1892._

As a manufacturer and somewhat extensive land owner I have a great
personal interest in the money question. As a traveller I have studied the
situation in other nations, and thus, I may modestly say, have enjoyed the
great advantage of getting a view in no wise disturbed by partisan
politics. As one whose prosperity depends almost entirely upon that of the
farmers, I have naturally thought most of the effect monometallism has
had, and will continue to have, upon them. I have, in a sense, been
compelled to think much on this great issue. These facts are my apology,
if any apology is needed, for giving my thoughts to the public. But is any
apology needed? Providence has granted to a few the leisure and the
opportunity to study these economic problems, on the correct solution of
which the welfare of millions, whose toil leaves them little leisure for
study, depends. Is it not the supreme moral duty of those few to give
their conclusions to the public? I have always thought so, and in that
spirit I present this little work, and ask the laboring producers to give
a candid consideration to the views herein presented. It may be that some
of these views will be successfully controverted, but the duty remains the
same. If they should aid in arriving at a correct solution of the great
problem, though the solution be different from that I have indicated, I
shall be many times repaid for my labor.

JOHN W. BOOKWALTER.

SPRINGFIELD, OHIO, August 5, 1896.

CONTENTS.

OBJECTIONS TO SILVER, AND COMMENTS THEREON

DEMONETIZATION OF GOLD

RELATIVE PRODUCTION OF GOLD AND SILVER

IS BIMETALLISM PRACTICABLE?

BIMETALLISM ABROAD

THE "DUMP" OF SILVER

ASIA'S DEMAND FOR THE PRECIOUS METALS

IF NOT SILVER, WHAT?

OBJECTIONS TO SILVER, AND COMMENTS THEREON.

=Silver is too bulky for use in large sums.=

That objection is obsolete. We do not now carry coin; we carry its paper
representatives, those issued by government being absolutely secured. This
combines all the advantage of coin, bank paper, and the proposed fiat
money. A silver certificate for $500 weighs less than a gold dollar. In
that denomination the Jay Gould estate could be carried by one man.

=But silver certificates would not remain at par.=

At par with what? Everything in the universe is at par with itself. The
volume of certificates issued by the government would be exactly the
amount of the metal deposited, and that amount could never be suddenly
increased or diminished, for the product of the mines in any one year is
very seldom more than three per cent. of the stock already on hand, and
half of that is used in the arts. It is self-evident, therefore, that such
certificates would be many times more stable in value than any form of
bank paper yet devised.

=Gold would go out of circulation.=

It has already gone out. Under the present policy of the government we
have all the disadvantages of both systems and the advantages of neither,
with the added element of chronic uncertainty and an artificial scare
gotten up for political purposes.

=And that very scare shows an important fact which you silverites ought
to heed--that nearly all the bankers and heavy moneyed men are opposed to
free coinage.=

Nearly all the slaveholders were opposed to emancipation. All the
landlords in Great Britain were opposed to the abolition of the Corn Laws,
and all the silversmiths of Ephesus were violently opposed to the
"agitation" started by St. Paul. And what of it? The silversmiths were
honest enough to admit the cause of their opposition (Acts xix. 24, 28),
but these fellows are not. The Ephesians got up a riot; these fellows get
up panics. "Have ye not read that when the devil goeth out of a man then
it teareth him?"

=But are not bankers and other men who handle money as a business better
qualified than other people to judge of the proper metal?=

Certainly not. On the contrary, they are for many reasons much less
competent, as experience has repeatedly shown. All students of social
science know, indeed all close observers know, that those who do the
routine work in any vocation seldom form comprehensive views of it, and
those who manage the details of a business are very rarely indeed able to
master the higher philosophy thereof. This is a general truth applicable
to all vocations except those, like law, in which a mastery of the science
is a necessity for conducting the details. Experts in details often make
the worst blunders in general management. Nearly all the inventions of
perpetual motion come from practical mechanics. Nearly all the crazy
designs in motors come from engineers. The educational schemes of truly
colossal absurdity come mostly from teachers; all the quack nostrums and
elixirs to "restore lost manhood" are invented by doctors, and nearly all
the crazy religions are started by preachers.

On the other hand, three-fourths of the great inventions have been by men
who did not work at the business they improved. The world's great
financiers have not been bankers. Alexander Hamilton was not a banker.
Neither was Albert Gallatin, nor Robert J. Walker, nor James Guthrie, nor
Salmon P. Chase. William Patterson, who founded the Bank of England, was a
sailor and trader; and of the British Chancellors of the Exchequer whose
names shine in history, scarcely one was a banker. One of Christ's
disciples was a banker, and the end of his scientific financiering is
reported in Acts i. 18. John Law also, whose very name is a synonym for
foolish financial schemes, was a banker, and a very successful one. Where
was there ever a crazier scheme than the so-called "Baltimore Plan,"
exclusively the work of bankers?

=But as the bankers and great capitalists have no faith in it, the free
coinage of silver would certainly precipitate a panic.=

The gold basis has already precipitated several panics. Even in so
conservative a country as England they have, since adopting monometallism,
had a severe currency panic every four years, and a great industrial
depression on an average once in seven years. The only reason we have not
done worse is that the rapid development of the natural resources of the
country saves us from the consequences of our folly. We draw on the
future, and in no long time it honors our drafts. Nevertheless, in the
twenty-three years since silver was demonetized we have had two grand
panics, several minor currency panics, hundreds of thousands of
bankruptcies with liabilities of billions, and five labor wars in which
900 persons were killed and $230,000,000 worth of property destroyed.
Could a silver basis do worse?

=You admit, then, that the immediate adoption of free coinage would, for
a while at least, drive gold abroad?=

And what then? Why do the gold men always stop with that statement and so
carefully avoid inquiry into what would follow? Let us look into it. We
may have in this country $500,000,000 in gold, though no one can tell
where it is. Assuming that free coinage would send it all abroad, the
inevitable result would be a gold inflation in Europe, which would cause a
rise in prices. I observe that of late the gold organs have been denying
this--denying, in fact, the quantitative principle in finance, something
never denied before this discussion arose. It is too true, as some
philosopher has said, that if a property interest depended on it, there
would soon be plenty of able men to deny the law of gravitation. But as
the men who deny it in one breath admit it in the next by assuring us that
we shall soon have a great increase in the production of gold, and that
prices will therefore rise, we may with confidence adhere to the
established truth of political economy.

Sending our gold to Europe, then, would raise prices there, which would
raise the price of our staple exports, such as wheat, meat, and cotton;
the great rise in the price of these would, of course, stimulate exports,
and thus aid us in maintaining a favorable balance, would restore to the
farmers that income which they have lost by the decline of prices, would
thus put into their hands the power to buy manufactured goods and to pay
our annual interest debt to Europe by commodities instead of gold. In
short, if the gold went abroad, it would necessarily be but a short time
till much of it would come back to pay for our agricultural exports, and
at the same time our farmers would get the benefit of higher prices by
both operations. If any man doubts that an increased gold supply in Europe
would increase the selling price of our farm surplus, I ask him to examine
the figures for the twelve years following the discovery of gold in
California, or the history of prices in the century following the
discovery of America--an era described by all economists as one of
inflation. Is there any reason why a like cause should not now produce
like effects?

=In the meantime, however, all the other nations would dump their silver
upon us and we should be overloaded with it.=

Where would the silver come from? The best authorities agree that there is
not enough free silver in the world to even fill the place of our gold,
which, you say, would be expelled. And right here is where the advocates
of the gold standard contradict every well-established principle of
political economy, and every lesson of experience, by declaring that the
transfer of all our gold to Europe would not cheapen it there, and that
free coinage would not increase the value of silver. They insist that we
should still have "50-cent dollars." Stripped of all its fine garniture of
rhetoric, their proposition simply amounts to this: The sudden addition of
20 per cent. to Europe's supply of gold would not cheapen it, and making a
market here for all the free silver in the world would not raise its
value; laying the burden of sustaining an enormous mass of credit currency
on one metal instead of two has added nothing to the value of that metal;
a thirty years' war on the other metal was not the cause of its
depreciation in terms of gold, and if the conditions were reversed,
greatly increasing the demand for silver and decreasing the demand for
gold, they would remain in relative values just the same. If those
propositions are true, all political economy is false.

=Government cannot create values, in silver or anything else.=

You have seen it done fifty times if you are as old as I. During the war,
government once raised the price of horses $20 per head in a single day.
On a certain day the land in the Platte Valley, for perhaps one hundred
miles west of Omaha, was worth preemption price; the next day it was worth
much more, and in a year three or four times as much. Government had
authorized the construction of the Union Pacific Railroad, and before a
single spade of earth was turned, millions of dollars in value had been
added to the land. It had created a new use for the land. Value inheres in
use when the thing used can be bought and sold. Whatever creates a use
creates value, and a great increase in use forces an increase in value,
provided that the supply does not increase equally fast; and with silver
that is an impossibility. If you think government cannot add value to a
metal, consider this conundrum: What would be the present value of gold
if all nations should demonetize it? It can be calculated approximately.
There is on hand enough gold to supply the arts for forty years at the
present rate of consumption. What, then, is the present value of a
commodity of which the world has forty years' supply on hand and all
prepared for immediate use?

Take notice, also, that in the decade 1850-60 Germany, Austria, and
Belgium completely demonetized gold, and Holland and Portugal partially
did so, thus depriving it of its legal tender quality among 70,000,000
people, and that this added very greatly to its then depression.

=Free coinage would bring us to a silver basis, and that would take us
out of the list of superior nations, and put us on the grade of the
low-civilization countries.=

That is, I presume, we should become as dirty as the Chinese, and as
unprogressive as the Central Americans, agnostics like the Japanese, and
revolutionary like the Peruvians. And, by a parity of reasoning, the gold
standard will make us as fanatical as the Turks, as superstitious as the
Spaniards, and as hot-tempered and revengeful as the Moors. If not, why
not? They all have the gold standard. You may say that this answer is
foolish, and I don't think much of it myself, but it is strictly according
to Scripture (Proverbs xxv. 5). The retort is on a par with the
proposition, and both are claptrap. The progress of nations and their rank
in civilization depend on causes quite aside from the metal basis of their
money.

We must remember that for many years after the establishment of the Mint
we had in this country little or no coin in circulation except silver, and
were just as much on a silver basis then as Mexico is now. Were our
forefathers, then, inferior to us, or on a par with the Mexicans and
Chinamen of the present day? Even down to 1840 the silver in circulation
greatly exceeded the gold in amount.

By the way, where do you goldites get the figures to justify you in
creating the impression on the public mind that Mexico and the Central and
South American States are overloaded with silver, having a big surplus
which we are in danger of having "dumped" on us? Didn't you know that they
are really suffering from a scarcity of silver? that altogether they have
not a sixth of what we have? One who judged from goldite talk only, would
conclude that silver is a burden in those countries, that they have to
carry it about in hods. Now what are the facts?

In all the Spanish American States there are 60,000,000 people, and they
have a little less than $100,000,000 in silver. Not $2 per capita! This is
a startling statement, I know, but it is official, and you will find it in
the last report of the Director of the Mint (1895). The South American
States have but 83 cents per capita in silver, and Mexico has but $4.50.
With a population nearly twice that of Great Britain, they have much less
silver, and less than half of that of Germany, though having a much larger
population. In fact, to give the Spanish American nations as large a
silver circulation per capita as the average of England, France and
Germany, they must needs have nearly $300,000,000 more, or nearly three
times as much as they now have. It looks very much as if the "dump" would
have to be the other way.

From these figures it would seem that the trouble, if monometallists are
right in saying there is trouble there, is due not to their having too
much silver, but that they do not have enough. Not having enough, they
have followed the usual course of nations lacking a sufficient coin basis,
and have issued a great volume of irredeemable paper money. By reference
to the authority above cited, you will find that they have in circulation
$560,000,000 in paper money. One fourth of all the uncovered paper in the
world is in those countries, though their total population is less than
that of the United States. Who will say that it will be a calamity to them
to coin $200,000,000 more in silver and retire that much of their
uncovered paper?

=Gold ought to be the standard metal, because, apart from its use as
money, it has a fixed intrinsic value.=

There is no such thing as intrinsic value. Qualities are intrinsic; value
is a relation between exchangeable commodities, and, in the eternal nature
of things, never can be invariable. Value is of the mind; it is the
estimate placed upon a salable article by those able and willing to buy
it. I have seen water sell on the Sahara at two francs a bucketful. Was
that its intrinsic value? If so, what is its intrinsic value on Lake
Superior?

=Well, if what you say be true, there is no intrinsic value in any of the
precious metals, and we cannot have an invariable standard of value at
all.=

No more than an invariable standard of friendship or love. Value is, in
fact, a purely ideal relation. All this talk about an invariable dollar
which shall be like the bushel measure or the yard stick is the merest
claptrap. The fact that gold men stoop to such language goes far to prove
that their contention is wrong. The argument violates the very first
principle of mental philosophy, in that it applies the fixed relations of
space, weight, and time to the operations of the mind. Would you say a
bushel of discontent or eighteen inches of friendship? Men who compare the
dollar to the pound weight or yard stick are talking just that
unscientifically. Invariable value being an impossibility, and an
invariable standard of value a correlative impossibility, all we can do is
to select those commodities which vary the least and use them as a measure
for other things; but you will not find in any economic writer that any
metal is a fixed standard. And this brings me to consider that singular
piece of folly which furnishes the basis of so much monometallist
literature, namely, that gold is less variable in value than silver, and
that one metal as a basis varies less than two. Some of our statesmen have
got themselves into such a condition of mind on this point as to really
believe that, while all other products of human labor are changing in
value, gold alone is gifted with the great attribute of God--immutability.
It is sheer blasphemy. It is conclusively proved, and by many different
lines of reasoning, that silver is many times more stable in value than
gold.

=I never heard such a proposition in my life! How on earth can it be
proved that silver, as things now stand, has not changed in value more
than gold?=

By the simplest of all processes. If we were in a mining country, I could
easily prove it to you by the observed facts of geology, mineralogy, and
metallurgy; but that is perhaps too remote and scientific, so we will take
the range of prices since silver was demonetized. Of course you have seen
the various tables, such as Soetbeer's and Mulhall's. Take their figures,
or, better still, take those of the United States Statistical Abstract,
and you will find the following facts demonstrated:

In February, 1873, a ten-ounce bar of uncoined silver sold in New York
city for $13 in gold, or $14.82 in greenbacks. To-day the ten-ounce bar
sells there for $6.90.

"Awful depreciation," isn't it? "Debased money," and all that sort of
thing. But hold on. Let us see how it is with other things. For prices in
the first half of 1873 we will take the United States Abstract, and for
present prices to-day's issue of the New York _Tribune_. Wheat then was
$1.40 in New York city, so our silver bar would have brought ten and
four-sevenths bushels; to-day wheat is "unsteady" in the near neighborhood
of 64 cents, and our silver bar would buy ten and five-sixths bushels. No.
2 red is the standard in both cases.

Going through a long list in the same manner, we find that the ten-ounce
bar of uncoined silver would buy in '73, in New York city, twenty-three
and a half bushels of corn, to-day twenty-four bushels; of cotton then
eighty pounds, to-day eighty-six pounds--and there is "a great speculative
boom in cotton," and has been for some time, but on the average price of
this year silver would buy much more. Of rye, then about fifteen bushels
(grading not well settled), to-day thirteen bushels; of bar iron then 310
pounds, to-day 460 pounds, and so on through the market. In the Central
West in 1873 it would have taken ten such silver bars to buy a standard
farm horse, Clydesdale or Percheron-Norman.

Will it take anymore bars to-day at $6.90 each?

There is another way to calculate the decline, and that is by taking the
average farm value instead of the export or New York city price, and
including all roots and garden products not exported, and this makes the
showing far more favorable to silver. The Agricultural Department at
Washington has recently issued a pamphlet showing the crops of every year
since 1870, and the average home or farm price, together with the total
for which the whole crop was sold. Send for it and contrast the prices
given in it with those known to you to-day, and you will find that in rye,
barley, oats, potatoes, and many other things the decline has been very
much greater than is given above. In short, it takes more farm produce to
buy an ounce of silver than it did in 1873, and twice as much to buy an
ounce of gold. Of Ohio medium scoured wool, for instance--and that is the
standard wool of the market--it would have taken in 1873 two and a half
pounds to have bought an ounce of silver, while to-day it will take
considerably over three pounds. The monometallists habitually talk, and
have talked it so long that they believe it themselves, as if silver had
become so cheap that the farmer ought to rank it with tin, lead, or
spelter; but if the farmer will try the experiment he will find that it
takes a good deal more of his product to buy a given amount of silver than
it did in 1873.

The plain truth of the matter is that the time has come for both gold and
silver to increase in purchasing power; but by reason of demonetization
almost the entire increase has been concentrated in gold, leaving silver
almost stationary as to commodities in general, but somewhat enhanced as
to farm products. In the name of common, honesty, is it not a high-handed
outrage to make the old debts of that period payable in the rapidly
appreciating metal, instead of one that has merely retained its value? and
is it not hypocrisy to speak of such a system as "honest money," and
affect to deplore the dishonesty of those who insist upon their right to
pay in the least variable metal, which was constitutional and the unit of
our money from the very start?

=We certainly do want to pay our debts in honest money.=

Gospel truth! And there is but one kind of perfectly honest money--that
which will give the creditor an equivalent in commodities for what he
could have bought with the money he loaned. Surely no honest man will
pretend that gold to-day does that. At this point we must admit the
painful truth that, in that sense, there is no perfectly honest money,
that is, no money that does not change somewhat in purchasing power; and
how to remedy this has been the great problem with the greatest minds
among financiers--with all financiers, in fact, who are more anxious for
justice than greedy of gain. But surely there should not be added to an
innate variability that much greater variability due to the mischievous
interference of interested parties, through the power of the government.
And herein is made manifest the reckless folly of the gold men in fighting
against the soundest conclusions of science and honesty, in striving for a
standard of one metal allowing the greatest variation, instead of two
which by varying in different directions might counteract each other.

Gold alone has varied in production in this century from $15,000,000 to
$150,000,000 per year, or tenfold; but gold and silver combined have never
varied more than sixfold. It is self evident, therefore, that the two
combined form a much more stable mass than gold alone, and it cannot be
too often repeated that the great desideratum in money, the one quality
more important than all others, is stability in value, to the end that a
dollar or pound or franc may command as nearly as possible the same amount
of commodities when a contract is completed as when it is made. Economists
dispute about almost everything else, but they are unanimous in this: That
a money which changes rapidly in purchasing power is destructive of all
stability and even of commercial morality. Will anybody pretend that gold
has not changed rapidly in purchasing power within the last twenty years?
Has not the universal experience shown that the variation has been very
much greater in one metal than it ever was when the two metals were
treated equally at the mint? The very least that could be asked on the
score of honesty would be free coinage of both, with a proviso that debts
should be paid with one-half of each. Back of all that, however, comes in
the great principle of compensatory action, the variation of one metal
counteracting that of the other; and from the standpoint of pure science
and honesty it is greatly to be regretted that, instead of two precious
metals, we have not at least five.

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