Copy of the Report of the Hon. C.W. Fremantle, C.B., the Delegate appointed to represent Her Majesty’s Government at the International Monetary Conference held in Paris, 1881

 

Royal Mint, 2 December 1881

 

My Lord

I have already had the honour to report that the International Monetary Conference, which assembled in Paris in April last, was adjourned on the 8th July until the 12th April 1882.

The second volume of the Procès-Verbaux, setting forth the proceedings of the Conference during its session in June-July, having now been published, it would appear desirable that I should briefly recapitulate the circumstances under which the Conference met, and should show what was the position assumed by the Delegates of the Governments represented, and the result of their deliberations.

The circumstances which led to the meeting of the present Conference are succinctly stated in the opening address delivered by its President, M. Magnin, French Minister of Finance, at its first sitting, on the 19th April.

Two International Monetary Conferences had already been held in Paris, the first in 1867 and the second in 1878.  The object of the Conference of 1867 was the establishment of monetary uniformity, by substituting for the various types of existing monetary systems a coinage struck on a uniform principle, and the fundamental question for decision was that of the metallic standard to be recommended for universal adoption.  The result, in the language of M. de Parieu, Vice-President of the Conference, was that, although in two only out of twenty States represented, was the single gold standard in force, that standard was adopted by the Conference with a unanimity as remarkable as it was unexpected.

The system thus recommended was, in 1871, established by law throughout the German Empire, and the example of Germany was followed by the Scandinavian States.  A large amount of silver money having thus been withdrawn from circulation and sold, and the price of silver having materially fallen, the States forming the Latin Monetary Union, and Holland, closed their Mints against the free coinage of that metal.

In 1876 a Committee of the House of Commons was appointed «to consider and report upon the causes of the depreciation of the price of silver, and the effects of such depreciation upon the exchange between India and England»; and in 1877 a Commission nominated by Congress of the United States reported that the fall in the price of silver relatively to gold was entirely due to legislative action in European countries, and that the true remedy for the evils of the existing state of things was to be found in the establishment, by international agreement, of a uniform relative value between coins of the two metals.

By Act of Congress the gold dollar had, in 1873, been declared to be the unit of value in the United States, but in February 1878 a Bill was passed by both Houses, over the veto of the President of the United States, restoring to the silver dollar its position as a standard coin, and directing that three Commissioners should be appointed to confer with European Powers, with the view of «establishing internationally the use of bi-metallic money and securing fixity of relative value» between gold and silver in coinage.  In compliance with the provisions of this Act, the Government of the United States proposed a second Conference, which was held in August 1878.

In reply to the invitation of the United States to the Conference, Her Majesty’s Government caused it to be intimated that, as gold had been for more than sixty years the standard of value in the United Kingdom, and the system of the single standard had approved itself both to successive Governments and to the people by long experience, the question was not an open one, and that it would hardly be consistent with the respect due to a friendly Government if this country were to enter the Conference on the conditions proposed.  As, however, the Secretary of State for India in Council subsequently expressed a wish that, considering the important hearing of the question upon the interests of India, the Government should consent to take part in the Conference, it was decided that Great Britain should be represented, provided that the subject of the standards of currency used in various countries, and the relations between them, should be freely discussed; and the Government of the United States having accepted these conditions, Mr. Goschen, Mr. Gibbs, late Governor of the Bank of England, and Sir Thomas Seccombe, Financial Secretary of the India Office, were appointed to represent Her Majesty’s Government at the Conference.

The result of the Conference of 1878 may be shown in a few words.

The following propositions were in the first instance put forward, after some hesitation by the United States Commissioners :

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 :

a)  By equalising them at a relation to be fixed by international agreement.

b) By granting to each metal, at the relation fixed, equal terms of coinage, making no discrimination between them.

In answer to these propositions the following resolutions were drawn up by the French and English Delegates, and presented to the Conference by the President, M. Léon Say :

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.

After considerable opposition on the part of the Italian Delegates, who were anxious to place upon record their opinions in favour of the double standard, and of the adoption of an international ratio between gold and silver, these resolutions were agreed to by a large majority, and at the same time Mr. Goschen made a declaration 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.»

The Latin Monetary Convention of 1865, which would have expired at the end of 1879, was renewed on the 5th November 1878, and under its provisions, as renewed, the coinage of silver 5-franc pieces was entirely suspended throughout the contracting States.  In 1879 further coinage of silver on private account was prohibited in Austria-Hungary.  In the United States, where, as already shown, the coinage of the silver dollar was resumed in 1878, those coins can only he struck on account of the Government, and to a limited amount.  India, therefore, is now the only country in which the coinage of silver remains free and unrestricted.

On the 26th February 1881, the Governments of France and the United States addressed a note to Her Majesty’s Government, stating that they had exchanged views upon the subject of a Conference between the Powers principally interested in the question of establishing internationally the use of gold and silver as bi-metallic money, and securing fixity of relative value between those metals, and inviting the appointment of Delegates from this country to a Conference to be held in Paris on the 19th April, to consider and adopt for presentation to the Governments represented, for their acceptance, a plan and system for the establishment, by International Convention, of the use of gold and silver as bi-metallic money at a fixed relative value between those two metals.

To this invitation Her Majesty’s Government replied in terms substantially the same as those used in 1878, pointing out that the policy of the single gold standard, adopted more than 60 years ago, and accepted by the nation, had in this country never been seriously attacked, whereas the very words of the invitation appeared to pledge the Government beforehand to the principle of a double standard, and that there would thus appear to be no place for a Representative of the United Kingdom at the approaching Conference.  The Minister of the United States in London having, however, received instructions from his Government to declare that, in the opinion of the Governments of France and the United States, the Powers to be represented at the Conference reserved entire liberty of action after the discussion, Her Majesty’s Government determined to send a Delegate to the Conference as a mark of their interest in an inquiry to which the inviting Governments attach so much importance.  It was at the same time intimated that the Delegate sent, while affording any information which the Conference might require, would merely act as a medium of communication with his own Government, and would not have the power of voting on any propositions which might be submitted for discussion.  Upon these conditions I was, on the 26th April, appointed to attend the Conference as Delegate of Great Britain.  It was decided that India should be represented by Sir Louis Mallet, Under Secretary of State, and Lord Reay, and Canada by Sir Alexander Galt, High Commissioner for the Dominion in this country.

In his opening address the President of the Conference stated that in his opinion the difficulties of the actual monetary situation could only be met by the conclusion of a bi-metallic and International Convention.  His Excellency expressed the hope of his own Government and that of the United States that, although some of the Powers represented had entered the Conference under certain reservations, its deliberations would show international bi-metallism to be, both theoretically and practically, the only system which could restore regularity to the monetary transactions of the world, and he added that the business of the Conference would not be to debate the conditions of a Treaty by which one contracting party would be a gainer and the other a loser, but simply to adopt resolutions equally favourable to all.

At its second sitting, which was attended by Representatives of all the Powers, the Conference adopted the Report of a Commission which had been appointed to prepare a scheme of debate, and resolved that a general discussion should precede the discussion of this scheme, paragraph by paragraph.  It also decided that before the opening of the debates the Delegates who had declarations to make on behalf of their Governments should be given the opportunity of presenting them.  Of the 18 Governments represented, reservations were made by the Delegates from 12, namely : Germany, Great Britain, British India, Canada, Denmark, Portugal, Russia, Greece, Austria-Hungary, Sweden, Norway and Switzerland.

The Representatives of Germany and Great Britain, with those of Denmark, Portugal and Greece, were instructed to declare at the outset that their Governments had definitively adopted the single gold standard, and must not be understood to contemplate any fundamental change in their monetary system.  The Delegates of Russia and Austria-Hungary, with those of Sweden, Norway and Switzerland, and the Representatives of British India and Canada, concurred in disclaiming any responsibility beyond that of reporting to then Governments the decisions of the Conference.  The Austro-Hungarian and Indian Governments declared themselves anxious that means should be found to re-establish the value of silver, while that of Switzerland pronounced itself satisfied with the Latin Monetary Convention of 1879, under which, as already shown, the coinage of standard silver pieces was entirely suspended throughout the Union, and the course of the debates showed that the Governments of Sweden and Norway are averse to the re-establishment of silver as a measure of value.  The Delegates of Belgium made no formal declaration on behalf of their Government, but the subsequent speeches of M. Pirmez leave no doubt as to the adherence of the Belgian Government to the principle of the single gold standard.

The countries, therefore, which unreservedly announced themselves as favourable to the universal establishment of a double standard of gold and silver were France, the United States, Italy, Spain and the Netherlands.

In concluding this summary of the position taken by the different Delegates it only remains for me to record the important declaration made by Baron de Thielmann on behalf of the German Government.  The Representatives of the German Empire were instructed to state to the Conference that, while the Imperial Government looked upon the German monetary system introduced in 1871 as firmly established, it in no way underrated the importance of the fall in the price of silver which has since taken place, and that if it were though possible to re-establish the position of silver by permitting the free coinage of that metal in a certain number of populous States exclusive of Germany, the latter would be prepared to adopt certain measures which would guarantee those States against an undue influx of silver from Germany.  With this object Baron de Thielmann announced the Imperial Government would be prepared to suspend the sales of silver entirely during a certain fixed period, and to restrict them within moderate limits during a further definite period.  If an international arrangement of this kind were adopted the Government might further undertake to withdraw from circulation all gold 5-mark pieces (27,750,000 marks) and all Imperial notes of the same value (40,000,000 marks), so as to give more ample scope for the use of silver in the monetary system of the Empire, and might also withdraw all the 5-mark and 2-mark pieces in silver (71,000,000 and 101,000,000 marks respectively), and recoin them at the ratio of 15 ½ to 1 of gold, which would be adopted by a bi-metallic union of States.  The importance of these concessions will be evident.

The reading of these declarations was immediately followed by the general discussion proposed by the Commission, which was continued during the six subsequent sittings.  On the 19th May, after the last of these sittings, the general discussion having been brought to a close, the Conference adjourned till the 30th June.  The motion to this effect, which was made by the Delegate of Spain and carried unanimously, was as follows :

«After having heard a general discussion, and having examined the monetary situation from an international point of view, having regard to the declaration which have been made in the name of a certain number of Governments, and considering that several Delegates have expressed a wish that the sittings may be suspended for a time, in order that they may be able to take instructions from their Governments, and that the latter may be in a position to pronounce an opinion upon the propositions which have been made at the Conference, and the steps which they could take to co-operate in the re-establishment of the position of silver, the Conference decides to suspend its sittings from the 19th May to the 30th June next.»

The Conference met again, as arranged, on the 30th June, and on the 2nd July entered upon the discussion of the Questionnaire, or scheme of debate which, as already mentioned, had been prepared by a Commission of it members.  This scheme proposed the five following questions :

1.   Have recent changes in the value of silver been injurious to the general prosperity and is it desirable that the relative value of silver and gold should be free from fluctuations ?

2.   Have the above-mentioned changes in the price of silver been due to increase of production or to legislative measures ?

3.   Is it probable that, if an important group of States were to permit the free and unlimited coinage of standard pieces of both metals, having full legal-tender power, and containing a proportion of gold or silver uniform with that contained in the monetary unit of each metal, practical stability would be obtained in the relative value of the two metals ?

4.   If the preceding question be answered in the affirmative, what steps should be taken to minimise the fluctuations in the relative value of the two metals ?

5.   In adopting bi-metallism, what should be the proportion between the weight of pure gold, and that of pure silver in the monetary units ?

The discussion of these questions was continued during two sittings of the Conference, but they were not made the subject of any vote, and it only remains for me, therefore, to note the declarations made during these and the two remaining sittings by the Delegates of several Governments, and to record the terms of the motion for adjournment upon which the Conference separated.

The only formal announcement made by the German Delegates was to the effect that they had nothing to add to the declarations to be found in the records of the first sittings of the Conference, to the purport of which I have already called special attention.

At the sitting of the 4th July, M. Pierson, Delegate of the Netherlands, read a declaration to the effect that, while advocating the universal adoption of the double standard, his Government would, nevertheless, be willing seriously to consider a project for the adoption of that system over an area comprising only a certain number of large States in Europe and America; and at the following sitting the Delegates of Italy put forward a statement of certain conditions under which the Government of that country would be disposed to enter into a treaty for the limited coinage of silver.

At the same sitting I was able to lay before the Conference, in accordance with my instructions, the text of a reply from the Court of Directors of the Bank of England to a question, addressed to them by Her Majesty’s Government in consequence of diplomatic action in London.  This question had reference to the power given to the Bank by the Bank Charter Act of 1844 (7 & 8 Vict. cap. 32, secs. 2 & 3) to issue notes against silver bullion, and the reply of the Directors was to the following effect :

«The Bank Charter Act permits the issue of notes upon silver, but limits that issue to one-fourth of the gold held by the Bank in the Issue Department.

The purchase of gold bullion is obligatory and unlimited; the purchase of silver bullion is discretional and limited, the distinction being enforced by the necessity of paying all notes in gold on demand.

The reappearance of silver bullion as an asset in the Issue Department of the Bank of England would, as is understood by the Foreign Office letter, depend entirely on the return of the mints of other countries to such rules as would insure the certainty of conversion of gold into silver, and silver into gold.  The rules need not be identical with those formerly in force; the ratio between silver and gold, and the charge for mintage, may both or either of them be varied, and yet leave unimpaired the facility of exchange which would be indispensable to the resumption of silver purchases by a bank of issue whose responsibilities are contracted in gold.

Subject to these considerations, the Bank Court are satisfied that the issue of their notes against silver within the letter of the Act would not involve a risk of infringing that principle of it which imposes a positive obligation on the Bank to receive gold in exchange for notes, and to pay notes in gold on demand.

The Bank Court see no reason why an assurance should not be conveyed to the Monetary Conference at Paris, if their Lordships think it desirable, that the Bank of England, agreeably with the Act of 1844, will be always open to the purchase of silver under the conditions above described.»

The proceedings at the thirteenth and last sitting of the Conference, on the 8th July, may be briefly described.  At its outset Mr. Evarts, first Delegate of the United States, read the following declaration on the part of the French and American Delegates :

«The Delegates of France and of the United States, in the name of their respective Governments, make the following declarations :

1.   The depreciations and great fluctuations in the value of silver relatively to gold which of late years have shown themselves, and which continue to exist, have been and are injurious to commerce and to the general prosperity, and the establishment and maintenance of a fixed relation of value between silver and gold would produce most important benefits in the commerce of the world.

2.   A Convention entered into by an important group of States by which they should agree to open their mints to free and unlimited coinage of both silver and gold at a fixed proportion of weight between the gold and silver contained in the monetary unit of each metal, and with full legal-tender faculty to the money thus issued, would cause and maintain a stability in the relative value of the two metals suitable to the interests and the requirements of the commerce of the world.

3.   Any ratio, now or of late in use by any commercial nation, if adopted by such important group of States, could be maintained, but the adoption of the ratio of 15 ½ to 1 would accomplish the principal object with less disturbance in the monetary systems to be affected by it than any other ratio.

4.   Without considering the effect which might be produced towards the desired object by a lesser combination of States, a Convention which should include England, France, Germany and the United States, with the concurrence of other States both in Europe and on the American continent which this combination would insure, would be adequate to produce and maintain throughout the commercial world the relation between the two metals that such Convention should adopt.»

Immediately after the reading of this declaration the President announced that, since the last sitting, a considerable number of Delegates had expressed to him the wish that the Conference should suspend its labours and adjourn, and that, should the Conference be disposed to entertain such a proposal, the Delegates of France and the United States would submit a motion suspending the meetings of the Conference for a period to be determined.  This course having been agreed upon, the following resolution was drawn up, and submitted to the Conference by the President :

«Considering that in the course of its two sessions, speeches, declarations and observations have been made by the Delegates from the under-mentioned States, viz., Germany, Austria-Hungary, Belgium, Denmark, Spain, the United States, France, Great Britain, British India, Canada, Greece, Italy, the Netherlands, Portugal, Russia, Sweden, Norway and Switzerland; and considering that many of the declarations of Delegates have been made in the name of their Governments; that those declarations all admit the expediency of agreeing to take certain concerted measures, while reserving entire liberty of action to the different Governments; that there is reason to believe that an agreement could be arrived at between the States which have taken part in the Conference, but that it would be desirable to suspend the meetings of the Delegates; that the monetary situation might, in the case of some States, render intervention on the part of their Governments desirable, and that, for the present, scope might be given for diplomatic action; the Conference adjourns till Wednesday the 12th April 1882.»

This motion was supported in an able speech by M. Denormandie, Governor of the Bank of France, who brought under review all the declarations made by different Delegates, which, in his opinion, indicated a general desire on the part of the nations of the world to arrive at some agreement on the monetary question.  After setting forth the work done, and the results which appeared to him to have been already obtained by the Conference, M. Denormandie insisted upon the advantages to be gained by an adjournment, which would give the Governments interested an opportunity of exchanging views on a subject of such vital importance.  The adjournment was, after some debate, unanimously voted, M. Forssell, Delegate of Sweden, not wishing to press the views which he had at first expressed in favour of bringing the Conference to an end.

The above statement of facts shows how far the assembling of the Conference can be said to have as yet produced any practical result.  Your Lordship will perceive that, while the discussions were conducted with much ability, and gave rise to some practical suggestions, the representatives of powers favourable to the adoption of bi-metallism did not apparently feel that they were in a position to embody their views in the shape of a formal proposal.  It is right to add, on the other hand, that the position assumed by England, if not approved by Delegates from countries favourable to the double standard, was generally understood and appreciated,  it could hardly indeed have been otherwise.  This country was able to come into the Conference with the experience of a monetary system which has been in full vigour, and has undergone no change, for a period of sixty-five years.  Almost all the other countries represented have during that period, on the contrary, made radical changes of standard, of coinage arrangements, and of general monetary policy.  In some States a complete change of standard has been even more than once introduced.  It has been the policy of this country to emancipate commercial transactions as far as possible from legal control, and to impose no unnecessary restrictions upon the interchange of commodities.  To fix the relative value of gold and silver by law would be to enter upon a course directly at variance with this principle, and would be regarded as an arbitrary interference with a natural law, not justified by any pressing necessity.  It may confidently be asserted, therefore, that England would not herself take the initiative in making changes which would have the effect of disturbing a monetary system under which she has enjoyed much prosperity, and which has generally commended itself to public men of all parties.  Her position is one of quiescence, from which she would not be likely to be moved by influences within the pale of her own political or commercial sphere.  In these circumstances it would seem only reasonable that, before being called upon to abandon her present monetary policy, she should be put in possession of the views deliberately adopted by a consensus of important states, and should be able to consider them in the light of her own experience and interests.  To such a statement of views Her Majesty’s Government have more than once expressed their willingness to give respectful attention, and, as regards details, they have already given practical proof of their readiness to consider measures which have been suggested as likely to have a beneficial effect upon the price of silver.

No formal proposal, however, of a change of monetary system generally acceptable to other nations has as yet been put forward for acceptance or rejection by this country.  Her Majesty’s Government have frankly intimated to the Conference the position which England must necessarily maintain in reference to this important question, and it is for them to consider whether it would be advisable that, until such a proposal is made to them, they should take any further part in an international discussion of the subject.

 

C. W. Fremantle

 

 

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