BAD TRADE, AND ITS CAUSE.

I.

THE DISCREDITING OF SILVER.

NGLAND has now entered upon the sixth year of commercial ENGL and manufacturing distress and decadence. There is as yet not a single ray of light shooting up through the dark mercantile horizon. A crisis without parallel in the experience of the present generation not only rests upon us, but intensifies as time rolls on. When a condition of affairs baffling all experience acquired in previous times of prostration exists, it is surely our paramount duty to investigate and to inquire whether this prolonged distress may not be traced in large measure to some special or peculiar cause.

My object in writing this paper is to call attention to the serious injury inflicted on our commerce by the discrediting of silver; and my contention is, that the practical cutting off of silver from the world's money has been at the root of much of our distress during late years, and is now one of the chief hindrances to the return of prosperity. Undoubtedly, our declension in 1873, 1874, and part of 1875, was the natural revulsion from undue extension, and from the unduly high prices paid for labour, and the products of our industry. Since 1875 these causes, however, have ceased to operate. It is undoubtedly true that hostile tariffs and the competition of several nations (particularly the United States) have greatly curtailed the demand for our manufactured goods which previously existed within their borders; but we have a large and open field almost to ourselves in many quarters of the globe; and the lamentable fact is, that in these regions, peculiarly our own, trade continues to languish as it does elsewhere, and the demand for our goods is greatly restricted and diminished.

It will not be questioned that the large increase of the world's money, due to the Australian and Californian gold discoveries, led to

a great extension of the world's commerce. The interchange of commodities was marvellously stimulated; labour had for many years a greatly augmented recompense; the material comfort and welfare of mankind were greatly promoted; real and personal property increased enormously in value all over the civilized world; the foreign commerce of England alone rose from £250,000,000 in 1852 to £650,000,000 in 1875; the foreign commerce of many other nations rose in like proportion. From the surplus gains of our commerce in those years we invested many hundreds of millions of pounds sterling in State and Corporation bonds, railways, and industrial enterprizes, and in property and mortgages in foreign countries-leaving us immeasurably wealthier as a nation, notwithstanding many foolish investments, such as Turkish, Peruvian, and Paraguayan bonds. It is difficult to believe that so great prosperity and increase of national wealth had proceeded from a cause apparently so inadequate to produce results so fabulous. Such, however, was in large measure the result of the enlarged reservoir of the world's money created by the accession of gold from the Australian and Californian mines. It acted as a stream of warm blood impelled through all the arteries of the world's commerce, vitally and powerfully stimulating the vast organisms of trade and industry.

We have in this, our late national experience, a direct contradiction to the theories of some political economists who assert that, after all, international commerce is only barter, and that money has little or nothing to do with its extent or volume. The very small measure of truth underlying this assertion has led many intelligent minds astray. It is because the largely increased supply of money had guaranteed to men and nations the payment of large international balances that the volume of the world's trade, prior to 1874, had augmented with such marvellous rapidity. And now it is in great measure because the world has of late greatly restricted and diminished the capacity of its money reservoir that distress and calamity augment and intensify around us. A large portion of the life-blood of commerce has been artificially congealed. The whole organism has felt the shock; but the financial intellect has become so beclouded and benumbed as not to have fully realized, even yet, the cause of the deadening paralysis which has overtaken it.

Let us present for consideration the diagnosis :-The world, of late years, traded on an effective metallic capital estimated at £1,400,000,000. Of this, we have good evidence for believing that about

Now, we assert that the world, of late, has been committing the suicidal act of discarding, discrediting, and cutting off from performing its wonted functions one of the two agents or solvents for the liquidation of balances of international indebtedness. In other words, the world, acting under the legal injunctions of the leading monetary

Powers, has divorced from its monetary system that silver which, from time immemorial, has, conjointly with gold, formed its "money." Widespread suffering has been the inevitable result of its folly.

Our unwise legislation of 1816, which made gold sole legal tender in England, has been the underlying cause of all this evil. For years we played upon the currencies of Europe; and often swept away large quantities of silver for transmission to India, where, with an admirable contradiction in our monetary legislation, we have enforced a silver currency. While availing ourselves of the stores of silver belonging to our Continental neighbours, we constantly vaunted about the superiority of our gold currency, and stimulated them to follow our short-sighted example. Even a Liberal Chancellor of the Exchequer (Mr. Lowe) boasted in full Parliament, in the year 1869, that he had made a convert of France. Germany, however, stole a march on France in the insane career which we had pointed out to them as the high road to success, and in 1874 decreed the demonetization of silver and its substitution by gold. France, which had, in conjunction with the States of the Latin Union, provided for the world an equilibrium or par of exchange between the two metals, by means of her free-mintage system and making both metals full legal tender on the ratio of 15 of silver to 1 of gold, thereupon suspended the free coinage of silver. France was driven to this act by the unwise monetary legislation of powerful neighbours. The par of exchange provided betwixt gold and silver money was thereby lost to the world. Silver was dethroned. War to the knife was declared against that metal. Gold now reigns supreme and omnipotent. The results have been disastrous in the extreme. capital of the world has been practically reduced from £1,400,000,000 to £800,000,000, and yet men are at a loss to account for the greatly reduced interchange of commodities, and the greatly reduced prices now paid for property, for goods, and for labour!

The hard money

A large and influential committee of merchants in Liverpool is now investigating this question, and the following are the conclusions they have arrived at in so far as the effects of the discrediting of silver on the world's commerce are concerned :

1st.-"That the recent shrinkage in value of the world's silver money, measured in gold, is very large, and there is every reason to fear that, with the prospect before us, the depreciation will continue to increase.

2nd." That there has been, besides, much diminution in the value of investments of English capital in the public funds, railways, &c., of silver-using countries.

3rd." That we are now compelled to look upon the silver of the world as in large measure cut off from its previous sphere of usefulness as one of the two agents for the liquidation of international indebtedness.

4th.-"That the serious diminution of the world's money, caused by the disuse of silver, may, in the future, lead to frequent panics, through the inadequate supply of gold for the world's wants.

5th.-"That the uncertainty regarding the course of exchanges, in the future,

largely prevents the further investment of English capital in the public funds of silver-using countries, or in railways, industrial enterprises, and commercial credits.

6th." That the friction and harassment now attending business with silverusing countries, as India, China, Java, Austria, Chile, Mexico, and others, naturally lead merchants to curtail their operations in the export of our manufactured goods, and to restrict the employment of English capital in such business, 7th." That this is a most serious question for India, which many believe to be so impoverished as not to be able to bear increased taxation.

8th. That the depreciation of silver seriously affects the power of silverusing States to purchase English manufactures, and leads to increased taxation, thus further curtailing the trade which has hitherto been carried on in English commodities."*

These conclusions by no mears exhaust the category of untoward results. The picture could be greatly heightened in colouring, but they are enough for our purpose, accounting as they do for the greatly diminished demand there now is for our textile fabrics, railway materials, machinery, and other things from vast and populous regions of the globe, whose money is now useless to us, and unsuitable for the discharge of our trade accounts. Merchants are at their wits' end. They are shut up to refuse credits in silver-using countries. They are baffled in all their exchange calculations. They are driven to restrict their operations. The malign and adverse influence acts and reacts. The distress intensifies. Manchester warehouses are filled to repletion with unsaleable stocks. Iron rails go down to a point lower than ever known. Many good opportunities for developing the resources of other countries, and of investing English capital, pass unheeded and unavailed of. inquire what will the silver dollar or the rupee be worth six months or six years hence in the London market; and the deduction from late monetary legislation prompts the reply that there is no bottom to the fall. India may be ruined-our investments may be worthless; and the inevitable conclusion is that we must minimise our risks, restrict our operations, draw in our capital from silver-using countries, and let

Men

*The Special Committee of Inquiry at Liverpool was nominated a few weeks ago by the Chamber of Commerce, but the selection was not confined to members of that body. The Committee numbers seventeen merchants and bankers-men holding positions of the highest influence in the community. Since these pages were written they have investigated the main facts regarding the production of the two precious metals, and they have found that whereas the supply of silver from the mines of the world early this century was in relation to gold as 3 to 1, the relative production was reversed twenty-five years ago, when the yield of gold amounted to £33,000,000 per annum. At the present time the production is reduced to less than £19,000,000 of gold-while silver is also falling off, and may now be taken at about £13,500,000.

Their investigations are not yet concluded, but the Committee have (when this note is being written) passed the following additional Resolutions, which, without attempting to foreshadow their ultimate conclusions, must inevitably point to the necessity for the rehabilitation of silver in the world :

"That the recent great fall in the price of silver is principally to be attributed to the suspension of free-mintage in France and the States of the Latin Union, consequent upon the adverse action of Germany in demonetizing silver.

"That the bi-metallic system of France and the other States of the Latin Union, in conjunction with free-mintage, prior to 1875, tended to provide an equilibrium between the two metals, and to give stability to all exchanges betwixt England and silver-using countries."