Report of the Commissioners appointed to represent Her Majesty’s Government

at the Monetary Conference held in Paris in August 1878

 

Presented to both Houses of Parliament by Command of Her Majesty

 

To the Lords Commissioners of Her Majesty’s Treasury

 

May it please your Lordships,

We have the honour to forward herewith the Procès-Verbaux of the International Monetary Conference, held in Paris under the presidency of M. Léon Say, which we were requested to attend by your Lordships Minute of the 5th August last.

The Conference met at the instance of the Government of the United States, in accordance with the second section of the Act passed by Congress early in the present year, «to authorise the coinage of the standard silver dollar, and to restore its legal tender character.»  The words of this section are as follows :

«Immediately after the passage of this Act, the President shall invite the Governments of the countries composing the Latin Union so called, and of such other European nations as he may deem advisable, to join the United States in a Conference to adopt a common ratio as between gold and silver for the purpose of establishing internationally the use of bi-metallic money, and securing fixity of the relative value between these metals.»

In the letter which your Lordships caused to be addressed to the Foreign Office on the 20th May last, in answer to the invitation of the United States, it was stated that «the United Kingdom has, since 1816, or for a period of more than 60 years, confined itself to a single standard of value, viz., gold.  The policy of a single standard has been accepted by Governments of all parties and by the people.  It has never in fact been seriously attacked, and without entering on a theoretical discussion, my Lords consider themselves justified in asserting that both Government and people are satisfied with a system which has approved itself to them by long experience, and that there has been and is no expression of public opinion in favour of an endeavour to establish a common ratio between two metals which vary continually, and not simultaneously, in value.  The question, therefore, to be submitted to the Conference is not an open question so far as the United Kingdom is concerned.»

Your Lordships, therefore, considered that, as there was no ground for concerted action between the Government of Her Majesty and that of the United States, it would hardly be consistent with the respect due to a friendly Government if Her Majesty’s Government were to enter the Conference on the conditions laid down in the Act, which involved, not the discussion, but the adoption of the principle of bi-metallic money.

Your Lordships, however, subsequently received a communication from the Secretary of State for India in Council, in which it was stated that, considering the important bearing of this question on the interests of India, his Lordship would be glad to learn that Her Majesty’s Government had decided to take part in the proposed Conference; and your Lordships, therefore, consented that this country should be represented, provided that the terms of the invitation were so far modified as to allow the free discussion in all its bearings of the subject of the standards of currency used in various countries and the relations which exist or can be established between them, it being clearly understood that England could in no way depart from the policy in respect to currency questions which she has pursued for the last 60 years.

The Government of the United States having accepted the representation of Her Majesty’s Government upon these terms, your Lordships were pleased to request  us to proceed to Paris in order to represent Her Majesty’s Government at the International Conference on Bi-metallic Currency which met in August last.  The understanding with regard to our taking no part in any vote which would place in question the maintenance of a single gold standard in England was of course embodied in our instructions.

The distinct limitation thus imposed on our proceedings at the Conference did not, however, preclude us from taking an active part in its deliberations.  For, in the first place, our position with regard to the Indian Empire, where the silver standard prevails, and with regard to which we were not bound as we were in the case of England, gave us a most important locus standi, and the deepest interest in any discussions involving the future of silver; and in the next place, we found that the representatives of several other Governments were, similarly with ourselves, distinctly precluded from voting on any proposition which would involve changes in the currency laws of the countries which they represented.

While, therefore, the United States had called the Conference together with a view to common action being taken, it was clear, at the very commencement of our proceedings, that, with few exceptions, the countries of Europe were convinced, even before our sittings were opened, either of the inexpediency or of the impossibility of the course which was recommended by the United States.  Declarations were accordingly soon made by the representatives of various Governments making it at once apparent that the Conference would have no practical result.

Dr. Broch (Norway) was the first to declare that the Governments of Sweden and Norway, who were committed to the single gold standard, had accepted the invitation of the United States on the same terms as those on which Her Majesty’s Government consented to nominate your Commissioners.

M. Pirmez (Belgium) and M. Feer-Herzog (Switzerland), representing countries included in the Latin Union where the double standard still exists in a modified form, had received the most stringent instructions not to commit themselves in any way to the ultimate maintenance of silver as a standard in their respective countries.

Other Governments, such as that of Austria, had instructed their representatives to state that they intended to maintain an expectant attitude, and when France, the leading country in Europe amongst those where the silver currency has not been demonetised, also declared in favour of an expectant attitude, it was perfectly clear that all prospect of any common action for the rehabilitation of silver, such as was desired by the United States, was out of the question even among a limited group of nations.

Germany was not represented at the Conference.  Her abstention (to which we shall have to refer hereafter) naturally increased the difficulty of arriving at any understanding.  The representatives of the United States were most loath to recognize this position.  To the very close of the Conference, supported by Italy alone, they pleaded on behalf of common action as if it were an open question, and when compelled to acknowledge that action was impossible, urged at least a common theoretical declaration in favour of such action, though the instructions of the majority clearly precluded such a course.  But in view of the circumstances which we have detailed, most of the members of the Conference perceived at once that no definite result could be obtained, and that it only remained to exchange opinions, and to collect all possible information as to the intentions and policy of the Governments represented with regard to the monetary circumstances of their respective countries as affected by the fall of silver.

We have great satisfaction in stating that in this respect the most perfect frankness prevailed, all members of the Conference vying with each other in contributing materials of common interest, and in stating, without reserve, how their Governments viewed the position.

We had the advantage not only of obtaining information during the debates of the Conference, but also of exchanging private communications with the Delegates from the different countries.  We trust that the information thus collected, especially as to the probable future policy of various states with regard to the Silver question, may not be without some interest.

The present position of most European countries with reference to a metallic currency is well known to your Lordships.  Besides the United Kingdom, Germany and the Scandinavian Union, comprising Sweden, Norway and Denmark, have completely adopted the single gold standard.

Holland is in a transition state.  By a law passed in 1875, a new monetary system was legalized on the principle of a double standard.  Gold was valued in relation to silver at 15.625 to 1.  Her object was to provide gold for Europe and silver for her Eastern possessions, keeping the same currency in both divisions; as, however, the depreciation of silver made rapid progress, Holland has, since 1875, suspended the coinage of silver, while nominally retaining the double standard.

In the Latin Union, which comprises France, Belgium, Switzerland, Italy and Greece, the double standard still prevails, gold and silver coins being legal tender for unlimited amounts, though the coinage of silver bullion into coin has been for the present suspended, and Italy, it should be added, having still a forced paper currency, though a member of the Union.

Austria and Russia have also a forced paper currency, but the unit of value is nominally a silver coin.

Accordingly, at the present moment there is an important group of nations with a single gold standard, an important group of nations with a double standard, and a third group of nations which originally had a silver standard but now have a forced paper currency.

No European country represented at the Conference has a metallic currency with a single silver standard at present, but both the United Kingdom and Holland have Eastern possessions in which a silver currency alone exists.

The United States of America are in a transition state, about to resume specie payments, and to resume them on the footing of a double standard, but with limitations as to the amount of silver which is to be coined.

Such are the actual circumstances of the various nations [1].

We proceed to describe the attitude which they appear to have assumed in regard to the silver question.

The countries which have adopted a single gold standard, and have no Eastern possessions, have clearly made up their minds.   Germany, it was understood, declined even to attend the Conference lest her attendance should be interpreted as a sign of wavering as to the policy to which she had committed herself.  In the Scandinavian Union any deviation from the course adopted in 1873 seems equally out of the question.

In Hollandthe position is far more complicated.  Her Government are feeling the difficulty caused by the currency of her Eastern provinces most acutely, and are apparently watching the course of the English Government in relation to India, with a view to examine whether it may afford a practical solution for their own adoption under analogous circumstances.  Holland is therefore inclined to maintain an expectant attitude, but according to the opinion expressed by her representatives she has become convinced that a single gold standard is most suitable to her as a European nation, although a single silver standard may be right or necessary in her Eastern possessions.  Her proximity to Germany, and her intimate commercial relations with that gold-using country, have brought this conviction forcibly home to her.

The attitude of the countries comprising the Latin Union is particularly interesting.  Though bound together by existing conventions they are at present actuated by the most divergent opinions.

Your Lordships are aware that in 1873, in view of the depreciation of silver which then first threatened to deprive the countries forming the Latin Union, whose currency was based on a double standard, of the gold which had for many years been the chief metal in use, the Swiss Government invited the other Powers to join in a Conference.  The meetings held in 1874, 1875 and 1876, resulted in a limitation of the coinage of five-franc pieces, which in the latter year was restricted to 120 millions of francs, allotted in various proportions to the five States composing the Union.  In 1877, on the proposal of France, it was arranged by correspondence that this quantity should be reduced by one half, and in 1878 the coinage of silver money of full value was entirely stopped, except that Italy was permitted to recoin the demonetised silver of the petty States to the amount of 9 millions of francs.  But though these measures have been taken by common accord, the views of the intimate solution held by the various members of the Union differ most materially.  The French Government appears to believe, and evidently hopes, that after a lapse of time silver may so far recover its value and assume a steady relation to gold, that France may be able to return to the normal action of a double standard, which is at present interrupted by the suspension of the free coinage of silver five-franc pieces.  But as it is obvious that it is impossible to allow the free coinage of silver at the ratio of 15 ½ to 1 without the certainty of losing all the gold in the country, the present policy of the French Government is to maintain the status quo.  It will he observed that the Minister of Finance, at the third meeting of the Conference, stated that while unable to accept the proposals of the representatives of the United States, he would be unwilling positively to reject them, and this statement fairly represents the present attitude of France, and is in accordance with the statements made by M. Dumas, who presided over the meetings of the Latin Union in 1876.

At that Conference Switzerland had already advocated the adoption of the single gold standard; Belgium appears to be strongly disposed in the same direction; and it is likely that these countries will take advantage of the first favourable opportunity to legislate in that direction.  The Latin Convention continues in force until the 1st January 1880, and is terminable then, and at intervals of 15 years, at one year’s notice.  Conferences have however been in progress among the members of the Union since we left Paris, which appear likely to result in some temporary prolongation of existing arrangements, the suspension of the coinage of silver five franc pieces being continued.  It is not probable that Belgium or Switzerland will be able to carry out their wish for a single gold standard for some time to come.

The Greek Government had directed their Chargé d’Affaires to attend the Conference, and to state that Greece was not prepared to depart from the present expectant policy of the Latin Union.

The remaining nation which forms part of that Union, viz., Italy, has a forced paper currency.  Her opinion appears to be that it would probably be easier to resume specie payments upon the basis of a double standard than upon the basis of gold alone, and upon that ground she is not disinclined to the principles submitted by the United States.  The representatives of Italy were indeed the only members of the Conference who gave an eager support to the proposals of the American delegates, and your Lordships will observe that they alone declined to accept the resolutions framed in answer thereto, and that they placed upon record their opinions in favour of the double standard, and of the adoption of an international ratio between gold and silver.  It may be worth observing that a large amount of Italian subsidiary silver is said to be hold in the Bank of France, and as this token coinage must be redeemed by the issuing country, it will be seen that France possesses a powerful means of exercising influence over Italy in matters of currency.

Austria, though, like Italy, having a forced issue of paper money, appeared to be more inclined to follow an expectant attitude and less disposed to cast in her vote at once with the Bi-metallists.  The consideration that it would be obviously cheaper and easier to resume specie payments in silver, which is now at a very small premium as compared with paper, has evidently great weight with her.  On the other hand the proximity of Germany, with whom Austria transacts four fifths of her commerce, points to the advantage of the adoption of a monetary system based upon gold alone.  Such a transition could not, however, be effected without cost, and the Government appears to be favourably inclined to the use of both metals.

One other country which has no metallic circulation was represented at the Conference, viz., Russia.  Her monetary system, like that of Austria, is nominally based upon silver, but the opinions expressed by her representative were decidedly opposed to a bi-metallic system.

Your Lordships will, therefore, perceive that while Germany and the Scandinavian Union adhere to the principles which they have so recently adopted, Holland, Belgium and Switzerland appear also to be decidedly in favour of the single gold standard; that France appears to be in favour of a double standard, but is not prepared, under the present circumstances, to resume the free coinage of silver; that Greece maintains a similar attitude; and that, of the countries having a forced paper currency, Austria and Italy appear to be inclined towards the employment of the two metals as being more likely to lead to the resumption of specie payments, while Russia remains faithful to the principle of a single standard.

Such, broadly speaking, was the situation at the time when the Conference met, and it will be seen at once that it was not propitious to the policy which the United States Delegates had been sent to Europe to advocate.  These gentlemen did not in the first instance seem inclined to submit any distinct proposals.  Alleging their reluctance to appear intrusive, they deprecated being pressed to put any programme before the Conference.  But it was pointed out to them that, having issued the invitation to the Governments to send delegates to Paris, it was clearly their part to open the discussion.  On this, not without some further apologies, they placed the following broad propositions before the Conference :

1.   It is the opinion of this assembly that it is not to be desired that silver should be excluded from free coinage in Europe and the United States of America.  On the contrary, the assembly believes that it is desirable that the unrestricted coinage of silver, and its use as money of unlimited legal tender, should be retained where they exist, and, as far as practicable, restored where they have ceased to exist.

2.   The use of both gold and silver as unlimited legal tender money may be safely adopted :

First, by equalising them at a relation to be fixed by international agreement.

Secondly, by granting to each metal, at the relation fixed, equal terms of coinage, making no discrimination between them.

Mr. Groesbeck was the spokesman who introduced these resolutions.  The speech which he delivered on the occasion was not directed to making good the propositions contained in the resolutions.  Mr. Groesbeck did not deal with the question as to the possibility, either scientific or practical, of establishing an international agreement by which the use of both gold and silver as unlimited legal tender may be safely adopted.  He confined himself mainly to an explanation of the position and attitude of the United States Government, and, anticipating the objections, firstly, that that Government might be supposed to be influenced by their interest in the newly discovered silver mines in Nevada, and secondly, that it might be thought somewhat remarkable that whereas gold had been made the standard by a law passed in 1873, the double standard was now introduced in 1878, he deprecated in strong terms the idea that, because the United States were a silver-producing country, they had, as a State, any interest special to themselves in the monetary question.  He pointed to the fact that gold as well as silver was produced in large quantities in the United States, and indicated reasons for his belief that the yield of the Nevada Mines would fall off at an early date.  «The remonetisation of silver was accordingly not an operation undertaken by the United States from selfish motives, in view of a profit which might be special to themselves, nor did it involve the introduction of a new practice.  From the epoch of their foundation they had used the two metals.  They had lived and prospered under that system.  Since 1792 up to the day when, in 1873, by a kind of inadvertence the silver standard was suppressed, it would be impossible to quote any merchant, banker, manufacturer, establishment, or indeed any interest whatever, as having at any time raised an objection against the simultaneous employment of the two metals.  Bi-metallism accordingly is not only, as regards the United States, a legislative tradition, but has entered deeply into the habits of the people.»

As regards the object of the Conference, Mr. Groesbeck stated it to be to restore to silver its original position (son rôle primitif), and «to create a situation of equality for gold and silver, when coined, in a ratio to be fixed by common accord.»

He also insisted on the firm and unshakeable determination of his country to place itself in the position of a specie-paying State, and on its power to perform its part in any arrangement which might be come to.

Mr. Groesbeck glided very gently over one important feature in the Act of 1878, the strict limitation of the amount of silver to be coined in each month.  This Act, as your Lordships are aware, while re-establishing the double standard, does not legalise the free coinage of silver.  The reason of this limitation was explained simply to be, that a similar course had been taken by the Latin Union.

Your Lordships will, from these observations, be able to gather the general drift of Mr. Groesbeck’s speech.  Without the explanations which he gave, it would not have been unreasonable to infer that the locus standi of the United States as regards the silver question was affected by the circumstance that, in 1873, the silver standard was discontinued; that since then the Nevada Mines have become immensely productive, with the result of a most serious fall in the price of silver; that a resumption on the basis of silver, as well as gold, thus offered the double inducement of a cheaper mode, and of a boon to a most important native interest; and that accordingly the policy of 1873 was reversed.  However, the statements and explanations of Mr. Groesbeck did not pass unchallenged.  M. Feer-Herzog questioned the predilection of the public in the United States for the use of silver, and Mr. Goschen and others pressed Mr. Groesbeck on the remarkable allegation that silver could have been discontinued as a legal standard «by inadvertence».

 The reply given was to the effect that the general public had been unaware what was passing between the Government and the Legislature; that public attention had not been called to the question, so that the Act was passed by inadvertence, at least on the part of the public.

Mr. Goschen also questioned the United States Commissioners with regard to the stock of bullion in hand, held by the United States Treasury, with a view to resumption, and on the proportion of gold and silver respectively comprised in that bullion.

Mr. Fenton stated, in reply, that the Treasury held, according to the latest reports, $ 167,000,000 in gold and $ 13,000,000 in silver, of which less than $ 60,000,000 were hypothecated, leaving over $ 120,000,000 as a reserve against the greenbacks in circulation, which amount to less than $ 350,000,000.

We call attention to the very small proportion of silver comprised in this stock.  Should the United States resume specie payments on the basis of a double standard, and maintain a portion of their reserve bullion in silver, it is clear that they would have to purchase silver very largely.  It may further be presumed that, on the resumption of specie payments, a large stock of bullion will be for a long time held by the Government and by banks, without being paid out, and it is possible that a large proportion of silver might be thus held without being circulated amongst the public, provided always that the American Commissioners are right in alleging the fixed determination of the United States to abide by a double standard.

Other points in the statements of the United States Representative were vigorously dealt with by other members of the Conference, but the discussion turned almost at once from the arguments put forward by Mr. Groesbeck to the resolutions which he proposed, and to the considerations which could be adduced for and against them.  However, as we have already stated, it was palpable at once that the instructions of the members of the Conference, and the intentions of the Governments which they represented, precluded those resolutions from finding much support, and therefore the main question arose as to the wisest attitude to assume with regard to them.

M. Feer-Herzog (Switzerland), M. Pirmez (Belgium) and Dr. Broch (Norway) proceeded at once to expose the economic fallacies and practical impossibilities involved in the United States proposals, and argued strongly in favour of a single gold standard.  We ourselves considered that the impossibilities of establishing a bi-metallic system by common agreement for all the world were so obvious that it was scarcely worth while to argue on the matter, while we declined, as also unnecessary, any discussion of the general merits of a single or a double standard.  Those who were advocates at the Conference of a single gold standard, and opponents of bi-metallism in any form, were indeed so vigorous and capable that any further development of this aspect of the question seemed scarcely needed.  On the contrary, we were unanimously of opinion that it was wise to place before the Conference some considerations which, in our judgment, might be adduced against what may be called a propaganda in favour of a single gold standard in countries where it has not yet been introduced.  There appeared to us to be some danger lest the natural opposition which the proposals of the United States called forth should be carried to the extent of an argument or a declaration, still further impugning the position of silver as a factor of currency.  We considered that, while a universal double standard was a utopian impossibility, a single gold standard throughout the world would be a false utopia, and that further steps in that direction might tend to produce incalculable disasters to the commerce of the world.

We thought, too, that if the propositions of the American delegates should be simply rejected, that rejection might be erroneously interpreted by the public, who might see in such a declaration a verdict given against the use of silver as money.  The future situation of silver might thus be further compromised, and an impression produced which would not be in accord with the opinions of the great majority of the Conference.

It was clear that in the American text there was one declaration for which nearly all the Delegates might vote, and to which we ourselves were prepared to subscribe; that is to say, that it was not desirable that silver should cease to be one of the monetary metals.  The American proposals exaggerated the position which it was either desirable or possible to secure for silver, but it appeared to be expedient that this error in their proposals should not induce the other members of the Conference to pronounce a condemnation of silver which would not be within their thoughts.  While putting aside entirely the question of the double standard, there was another question which appeared to be practical and useful to put, viz., assuming that the general double standard proposed by the United States could not be adopted, what would be the future of silver; what would be the policy to be pursued; towards what aim ought the various States to direct their efforts ?  This aim we considered to be to keep silver in the position which it occupies at present as the partner or natural ally of gold in all parts of the world, where it might be possible to do so.  We considered that a campaign undertaken against silver would be exceedingly dangerous, even for the countries who have given a position as legal tender only to gold.

We did not feel that we were precluded from taking up this ground by the fact that the English Government, not less than the English public, are perfectly determined to abide by a gold standard in the United Kingdom.  The enormous interests of England in India gave us as good a locus standi, as regards the question, as that of the representatives of any other country, and we were able to point out to the Conference that the English came with the cleanest possible hands before the Conference in this respect.  It could not be urged against us that we were arguing against the abandonment of silver in other countries, and had at the same time taken steps ourselves to limit the use of silver in our dependencies where a silver currency existed.  We were able to point out that while the Latin Union and Holland had restricted the free coinage of silver, in India no steps against silver had as yet been taken.  What would have been the position of silver, we were able to ask, if the metal had been demonetised in India as it had been demonetised elsewhere ?

We further showed that in the controversy in favour of a single gold standard the question as to the mode in which existing stocks of silver were to be disposed of had been insufficiently considered.  It was assumed that States would endeavour to rid themselves of their silver currency at the earliest possible date, but if this policy were followed by many Governments, what buyers would there be for the silver to be disposed of ?  How could it be assumed that silver would be bought, if simultaneous steps were taken everywhere for its disuse as an active agent in the currency ?  Consequently, the further prosecution of the policy in favour of as universal a gold standard as possible would be likely to cause a further depreciation of silver, the proportions of which it was impossible to foresee.  The monetary and commercial disturbances which would be produced by such a fall could be readily imagined, nor could the actual loss which would fall on various States be left out of account.  The position of France, with an amount of silver in circulation, or in the hands of the banks, amounting to from £ 80,000,000 to 100,000,000, is well known; but few countries would be able to congratulate themselves upon exemption from the common misfortune of a further fall in silver.  The case of Belgium was quoted at the Conference with special reference to the somewhat extreme views held by the Belgian Government with regard to the adoption of a single gold standard for the countries included in the Latin Union.  Little silver is now circulated in Belgium itself, but Belgian coins to the extent of from £ 12,000,000 to 15,000,000 are in circulation in France, or in the hands of the Bank of France.  According to the terms of the Convention these coins would be demonetised in France by the dissolution of the Latin Union.  They would then be returned to Belgium where they naturally are a legal tender, and either the Belgian Government or the Belgian public would have to bear the loss of the depreciation.  The loss which would be incurred in the Eastern dependencies of the British Empire and of Holland was of course patent to all.  Nothing surely would create greater disorders in the economic situation and produce a more disastrous crisis than a general effort on the part of all States to rid themselves of their silver at the same time.

A further point would be whether, if there should be a further considerable disuse of silver, and especially if the countries which have now a forced paper currency should ultimately adopt a gold circulation, the demand for gold would not be so great as to render it difficult for the existing supplies to bear the strain, and whether the additional demand for gold might not cause formidable convulsions in trade and finance ?

We wereunanimously and emphatically of opinion that it was better that the currency of the world should continue to rest upon the two metals than that any efforts should be made to displace silver from its share in performing the work of the currency at large.

We think we may fairly state that the considerations thus put forward did not fail to produce some effect, even upon the representatives of States who had hitherto been most active in the propaganda for the adoption of a single gold standard, and the feeling was general that it would be wiser not to give a simple negative to the proposals of the United States Commissioners, but to make a declaration in reply, which, while it should distinctly exclude any misapprehension with regard to the possibility of the adoption of a common relation between gold and silver by a universal international agreement, should also embody an opinion that silver should continue to share the work of currency with gold.  Accordingly, the following answer was drawn up :

The Conference wish to express their sincere thanks to the Government of the United States of America for having procured an international exchange of opinion upon a subject of so much importance as the monetary question.

Having maturely considered the proposals of the Delegates of the United States, the Conference recognises :

1.  That it is necessary to maintain in the world the monetary functions of silver, as well as those of gold, but that the selection for use of one or the other of these two metals, or of both simultaneously, should be governed by the special situation of each State or group of States.

2.  That the question of the restriction of the mintage of silver should equally be left to the discretion of each State or group of States, according to the particular position in which they may be placed; and the more, in that the disturbance which in recent years has been produced in the silver market has variously affected the monetary situation of the several countries.

3.  That the differences of opinion which have appeared, and the fact that even the States in which the double standard exists find it impossible to enter into any engagement with regard to the unlimited coinage of silver, preclude the discussion of the question of establishing an international relation of value between the two metals.

These resolutions were agreed to by all the representatives, except those from Italy and the United States, and were presented to the Conference by M. Léon Say.  The Italian Delegates had offered a strenuous opposition to the text of these declarations, being, as we have elsewhere stated, exceedingly urgent that the various States of Europe should remain perfectly free with regard to the adoption of the double standard.  M. Rusconi, on behalf of himself and M. Baralis, ultimately submitted the following reservations in the form of a distinct motion :

1.  That in adopting the proposed formula, the conference gives no reply to the question before it, and that, in deliberately avoiding any statement as to the possibility or impossibility of establishing a fixed ratio between gold and silver by means of an international convention, it leaves its task incomplete.

2.  That, since the French law established such a relation, none but unimportant oscillations have occurred in the value of the two metals, whatever may have been the variations in the product of the mines.

3.  That, consequently, if the French law has been able to obtain by itself this result, a fortiori, such a relation should be established on a base so firm that it would remain unshaken, from the date on which such States as France, England and the United States of America agreed to fix mutually, by an international law, the value of the two coined metals.

No support was given to this motion, but the fact of these reservations having been put forward made us consider it necessary to be still more explicit with reference to the American proposals than we had been before.  Mr. Goschen accordingly, in order to avoid any risk of misapprehension, took the opportunity of stating that he and his colleagues, while not in favour of the universal adoption of a single gold standard, considered that the establishment of a fixed ratio of gold and silver was utterly impracticable, and that they were opposed to a system of currency based upon a double standard.  M. Feer-Herzog, M. de Thoerner and M. Garnier, made similar declarations on behalf of Switzerland, Russia and Belgium; but M. de Kuefstein, for Austro-Hungary, accepted the resolutions only on the ground that they committed the Delegates to no opinion in either direction, and did not assert the impossibility of such an arrangement as had been contemplated by the United States.  Your Lordships will, however, gather that with these exceptions the impossibility of such an arrangement was practically admitted by the whole of the rest of the members, side by side with their declaration of opinion that it was necessary to maintain in the world the monetary functions of silver as well as those of gold.

Though the declaration thus arrived at by a very large majority, that it is necessary to maintain in the world the monetary functions of silver as well as those of gold, may be characterised as a truism to a certain extent, we desire to point out that this expression indicates a distinctly different result from what was arrived at in the year 1867, when the International Monetary Conference met in Paris.  That Conference, as well as the Royal Commission which sat in 1868, definitely recommended the universal adoption of a gold standard; but it must be remembered that both bodies assembled at a period when the discoveries of gold in California and Australia had caused silver to disappear entirely from the countries whose monetary system was based upon the double standard.  That apprehension has now been replaced by the opposite apprehension that silver might be so plentiful that it might be inexpedient to retain it for purposes of legal tender.

If, as the result of the present Conference, the United States Commissioners are able to take back to their country information that the adoption of the universal gold standard commends itself less to the judgment of the nations of Europe than it apparently did in the year 1867, on the other band no statements were made at the Conference which would justify them in claiming any increased adhesion to the doctrine of a double standard in any country, or in assuming that, if they persevere in their attempt, they are likely to find active allies.

We regret that more light was not thrown in the Conference on the probable prospects of the silver market.   Considerable discussion took place as to what causes were most potent in determining the price of silver, M. Feer-Herzog contending that the demand for India was the main determining cause of the rise and fall in the price of silver, and attributing very little weight either to the stock of silver in Germany, or to the suspension of the coinage in the Latin Union, while others argued very strongly that the existence of a large stock in the hands of Germany, who were ready to be sellers at any moment, exercised a predominating influence over the market at the present time, and that the suspension of the coinage of silver in the Latin Union had also contributed in a very large degree to the fall.  Mr. Gibbs pointed out to the Conference what a very different effect would be produced by a stock of silver in the hands of a Government anxious to sell from an equal amount produced from the mines in ordinary course.  M. Feer-Herzog used the argument that, as little silver had been coined in a given time by the nations of the Latin Union prior to the suspension of the coinage, that suspension could not have greatly influenced the market, but we were unable to share that view.  The privilege possessed by silver of being coined into legal tender at any moment, prior to the suspension of free coinage in the Latin Union, gave that metal a value which it has lost.  It was certainly a privilege which would have tended to arrest the fall.  The statement of this fact was on one occasion considered by one of the members of the Conference as an unfavourable criticism on the conduct of the Latin Union, but this was a misapprehension.  They may have been perfectly right in the policy they adopted, while at the same time that policy may have aggravated the existing difficulties.  The Latin Union, too, were free to adopt this course as, through the operation of the double standard, the suspension of the coinage of one metal did not deprive those who might have payments to make of the means of obtaining legal tender.  The situation in this respect was different from the situation of India, where, if the free coinage of silver into rupees had been stopped, the supply of legal tender would have been entirely arrested.  With regard to the stock of silver in Germany, it was estimated at the Conference to range between £ 16,000,000 and 18,000,000.  It has hitherto apparently been impossible to ascertain the intentions of the German Government with reference to the disposal of the remaining surplus, or even to estimate with any certainty the amount of the balance yet unsold.  The Select Committee of 1876 examined very carefully the various estimates which were submitted at that time, and which ranged between £ 8,000,000 and 30,000,000, but they were unable to arrive at any definite opinion.  They reported that Germany has still to dispose of an amount which is certainly not less than £ 8,000,000, with a possibility that it may exceed £ 20,000,000.  M. Feer-Herzog, in a pamphlet recently published, takes the same estimate as the Select Committee of the amount of old coinage in circulation at the close of the year 1871, viz., £ 59,000,000, and he states that nearly £ 20,000,000 of this amount have been used in the new coinage, while over £ 27,000,000 have been converted into bullion.  Of this latter amount rather more than £ 23,000,000 had been sold.  This would leave a balance of about £ 16,000,000 to be disposed of, including bullion and coin still in circulation.  But all such accounts arc necessarily imperfect as sales continue to be made, and notwithstanding the care which has been taken in the framing of these estimates, the result must be considered entirely conjectural.

We wish to call special attention to the serious disadvantage which the Conference experienced through the absence of a Representative from Germany.

The Conference at its second meeting, which was the first for business purposes, expressed a wish that the German Government might once more be requested (and at this time not in the name of the United States alone, but of the Conference itself) to attend their deliberations.  It was to be distinctly understood that the presence of a representative should in no way be considered to indicate any possibility that the German Government would depart from the policy, which it deliberately adopted in 1870, of a single gold standard; but the fluctuations in the silver market and the general perturbation, which have arisen from the course followed by Germany, had clearly so very important a bearing on the whole question, that the explanations of a German Delegate as to the amount of silver which the German Government might still have to throw upon the market, would have been of the greatest value.

No Government, represented at the Conference, has shown any reticence whatever as to their intentions.  All have acted with the greatest frankness, and have spoken without reserve.  Germany alone has stood aloof.

It may be contended that the statistical information published by Germany is all that can be expected to be obtained from them, but these statistics threw comparatively little light on the future sales likely to be made by Germany, and scarcely tend to remove the great obscurity which exists in that respect.  It may be contended again that, as sellers, it would not be to their interest to disclose either their present situation, or their future plans, but it is perfectly clear that the German Government themselves, as sellers, are suffering from the course which is being pursued.  We are convinced, and we believe that in this we faithfully represent the general opinion, that however large the stock in Germany may still be, the silver market would be relieved of a great pressure if it were known what the extreme limits are within which further sales may be expected, and that nothing could exercise a more depressing influence on the market, than the existing state of perplexity and doubt.

The refusal of the German Government to take part in any common deliberations naturally produced a painful impression.

We scarcely know whether it is within our competence to make a suggestion, but if we may be permitted to do so, we would press upon Her Majesty’s Government the extreme importance of urging on the German Government, through Her Majesty’s Representative in Berlin, how great would be the benefit if Germany, like the other States in Europe, would contribute a frank and complete statement of the situation of silver within the limits of her empire, and of the policy intended to be pursued.  The derangement in mercantile operations due to the position of silver at this moment is so great and so universal that all contributions made in the direction of clearing up the subject would be invaluable, and hailed with satisfaction by all who are interested in the question.

We must, in conclusion, express our regret, that owing to the nature of the circumstances under which the Conference assembled, and the instructions given to most of the representatives who attended it, it has not been in our power to present a more interesting report, or at least one leading to some practical result, and affording some solution of the great difficulties affecting the silver question.  But we cannot but hope that some advantage may have resulted from the exchange of views which has taken place between the representatives of the various countries, and the modifications in the opinions of some of them, which may be traced to the discussions which have taken place.  Your Lordships are aware that, as regards ourselves, it did not lie within our functions or our instructions to initiate any proposals, tending in any way to compromise either the Home Government or the Government of India.  At the same time, as has appeared from the observations we have made, we trust we may be considered to have made some contributions towards arresting what might be a suicidal tendency in several quarters to hasten the disuse of silver as currency.

Your Lordships will also observe that much valuable information is contained in the documents which are annexed to the Procès-Verbaux.  In particular, we would call attention to the very useful tables with reference to the relation which silver has borne to gold at different periods since the sixteenth century, and with regard to the intrinsic value of the existing gold coins; also to the diagram representing the fluctuations of the London silver market during the last six years.  We also trust that the statements presented by the Delegates, relating to the monetary system of the countries which they severally represented, will be valuable to the student of currency questions.  Similar information, in a very carefully prepared form, was appended to the Report of the Royal Commissioners of 1868, but during the last ten years so many changes have taken place, that, although the laws have been duly reported and their effects clearly explained by the Deputy Master of the Mint in his annual reports, we cannot but think that it will be useful for future reference that statements of the currency laws of the different European Powers, as they at present exist, should be gathered together in one volume.

We have the honour to be,

Your Lordships’ most obedient servants,

George J. Goschen

T. L. Seccombe

Henry H. Gibbs

W. B. Gurdon, Secretary to the Commissioners



[1]   Spain and Portugal were not represented at the Conference.  Spain has adopted the currency of the Latin Union though without entering the Convention, and has suspended the free coinage of silver from the 1st May last.  The monetary system of Portugal is based on gold alone.

 

 

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