International Monetary Conference, 1881



My Lord,

The Procès-Verbaux of the International Monetary Conference held in Paris last year, and adjourned until the 12th April 1882, which we attended under your Lordship’s instructions of 4th May last, as delegates of British India, having been made public and presented to Parliament, we desire to submit to your Lordship the following observations on its proceedings.

As your Lordship is aware, the Conference of 1881 is the third which has been convoked in Paris within a comparatively short space of time, in the hope of arriving at some international agreement on the question of establishing a uniform monetary system founded upon a common standard of value.

The first Conference, which had also for its object the creation of a uniform system of coinage, was held in 1867, and arrived at an almost unanimous conclusion (there being only two dissentients out of 20 States represented) that a basis of future international uniformity should be sought in a single gold standard supplemented temporarily with silver, as occasion might require.

This conclusion soon produced an important effect on the monetary legislation of the world.

Germany, in 1871, adopted a single gold standard and demonetized silver.  The Scandinavian States followed.  The United States in 1873 suppressed their silver standard, and, though it has been since restored, free coinage has not been resumed.  The States of the Latin Union closed their mints to silver, partially at first and finally altogether.  The Netherlands, after several temporary suspensions of its silver coinage, finally suspended such coinage for an indefinite period, and introduced a gold standard with free coinage of gold in 1875.  Thus, at the present time, gold alone is admitted to unlimited coinage either in Europe or in the United States of America.  During the period of this change in monetary legislation a change has taken place in the relative value of gold and silver, which has been made the subject of inquiry, in England by a Parliamentary Committee, and in the United States of America by a Commission of Congress, the latter of which did not confine itself to an examination of the causes of this change, but reported in favour of the adoption of a double standard of value, a uniform proportion of weight between gold and silver coins being established by international convention.

It was to give effect to this recommendation that the Conference of 1878 was convoked at the instance of the United States of America.  Germany was not represented at this Conference.  The English delegates who, on this occasion, represented also the Government of India, only attended on a distinct understanding that, while accepting a free discussion on the subject, England could in no way depart from the policy in respect to currency which she had pursued for the last 60 years; and France was not prepared to adhere to the American proposals.

In these circumstances, it soon became apparent, on the meeting of the Conference, that it would lead to no definite result, and that it could only serve for the exchange and expression of opinions and the collection of information.

Nevertheless, although no formal vote was taken on the propositions submitted by the United States delegates, the Conference, before separating, passed the following resolution by a large majority of its members, the minority consisting of the representatives of the United States and Italy only :

«The delegates of the European States represented in the Conference, desire to express their sincere thanks to the Government of the United States 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 United States, they recognize :

I.  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 the two metals, or of both simultaneously, should be governed by the special position of each State, or group of States.

II.  That the question of the restriction of the coinage of silver should equally be left to the discretion of each State or group of States, according to the particular circumstances in which they may find themselves placed; and the more so, in that the disturbance produced during the recent years in the silver market has variously affected the monetary situation of the several countries.

III.  That the differences of opinion which have appeared, and the fact that even some of the States which have the double standard find it impossible to enter into a mutual engagement with regard to the free coinage of silver, exclude the discussion of the adoption of a common ratio between the two metals.»

The second Conference, therefore, was attended with this remarkable result, that by a unanimous expression of opinion (for on this point the minority and majority were agreed), it absolutely reversed the almost unanimous vote of the Conference of 1867 in favour of a single gold standard, by affirming the necessity of maintaining in the world the monetary functions of silver as well as those of gold.

As has been already stated, at the time when these resolutions were adopted, none of the European States nor the United States of America allowed the free coinage of silver.  The United Kingdom, Germany, the Netherlands, the Scandinavian Union, Portugal, and Greece possessed the single gold standard.  In the Latin Union and in Spain, although the double standard was still so far maintained as to allow the use of both gold and silver coin as legal tender for unlimited amounts, the coinage of silver had been also altogether suspended; while in Italy, a member of the Union, as well as in Russia and Austro-Hungary (in which two last, however, the standard was silver), there was a forced paper currency.

The United States of America were about to resume specie payments nominally on the double standard, but with restrictions on the coinage of silver, which can only be struck by the Government within limits prescribed by law.

It is, therefore, to be presumed that the idea which found its expression in the resolution of the Conference, as to the necessity of maintaining in the world the monetary functions of silver, was that States which had retained the double standard, although restricting the coinage of silver, might refrain from closing their mints altogether to that metal or be led to relax those restrictions, or that States with a forced currency might resume on silver, or at least on both metals.

If this was the hope which inspired the resolution, the events of the three years which followed the Conference have in no way encouraged the prospect of its fulfilment.

In none of the European States have the restrictions on the coinage of silver been in any degree relaxed; in none has the coinage of silver money of full value been again allowed; while Italy, the only country with a forced paper currency which is preparing for resumption, has commenced by a considerable loan in gold.

Meanwhile, the relation of supply to demand, as regards both gold and silver, has undergone a marked change.

A glance at the history of the last 10 years will show how completely the conditions of the problem have been altered since the first Conference in 1867 pronounced in favour of the single gold standard.

The stock of gold in European countries, available for purposes of currency in the year 1871 has been estimated at £ 520,000,000 [1], distributed in the follow proportions :

(a)      State with a gold standard        £  138,000,000

(b)      States with a silver standard          77,000,000

(c)      States with a double standard       305,000,000

In 1871 the population of the States under the gold standard in Europe was about 36 millions, and the value of their foreign trade rather more than 625 millions sterling.

Since that year Germany and the three States forming the Scandinavian Union have formally adopted the single gold standard, and have demonetized their silver; while France, Belgium, and Switzerland, by closing their mints to the coinage of silver, have, for all practical purposes, done the same.  So far as international trade is concerned, silver is no more available, for purposes of currency, than any other commodity held in those countries.

In all the important States of Europe gold is, therefore, now the only standard of value.  The total population of these States amounts to more than 140 millions; and the foreign trade, which is now conducted solely on a gold basis, is about £ 1,850,000,000.  In other words, the population of gold-using States in Europe alone has been increased by more than 100 millions of people in the last 10 years, and the value of their foreign trade is threefold what it was.

Nor is this all.  Since the resumption of specie payments in the United States, that country has become a most formidable competitor in the gold markets of the world.  Its population now amounts to about 50 millions, and its foreign trade has grown from £ 172,000,000 in 1870, to £ 317,000,000 last year.  Its stock of gold, which was estimated be slightly over £ 29,000,000 in 1873, was in November 1881 £ 117,000,000, and of this increase no less than £ 75,000,000 is due to the last four years alone.

The question then arises, what additional amount of gold will be required to meet the wants of a population and a trade, which have increased in these proportions, if a single gold standard is to be adopted and silver to be demonetized ?

Two pounds per head of population would probably be a very moderate estimate.  This is almost the exact amount which has been coined in Germany, since the introduction of a gold standard.  The amount actually in circulation in the United Kingdom stated to be £ 4 per head.  In France it has hitherto been rather more; while in the United States, where the metallic currency is economized to the last degree, it is about £ 2 10s.  But, putting it as low as 30s. per head, the addition required to the stock of the European States alone, in the last 10 years, would be nearly £ 160,000,000.

Now the total production of the gold mines of the world during that period was not much more than £ 200,000,000, and has of late years been decreasing; the annual average having fallen from about £ 20,016,000 in the first five years to about £ 18,980,000 in the second; while the amount consumed in the industrial arts and for purposes other than coinage cannot, on the lowest estimate, have fallen short of £ 10,000,000 per annum, and some authorities place it at £ 14,000,000, or even £ 16,000,000 per annum.

The total production during the 10 years which remains available for currency is therefore reduced to £ 100,000,000.

On the other hand we have had the following demands upon this stock :

1.   The requirements of the European States, which, as has been shown above, alone amounted to nearly £ 160,000,000.

2.   The quantity actually absorbed in America, between 80 and 90 millions sterling.

3.   The amount required for the ordinary wear, tear, and waste of existing stocks, for which £ 5,000,000 per annum, or 1 per cent., would probably not be an excessive estimate; and

4.   The requirements of other important countries, such as our Australasian Colonies and India, in which latter country alone the average annual consumption, even in the last 10 years, has been £ 1,500,000 or £ 15,000,000, and in 1880-81, more than £ 3,500,000.

After making every allowance for over-estimates under all these heads, it cannot be said that the account will present a very satisfactory appearance, when the balance comes to be struck.

Or the question may be put in another form :

We have seen that since 1871 the legislation of Germany, the Scandinavian Union, the Netherlands, and the United States has led to the absorption in their currencies of a large stock of gold.  Is there any reason to suppose that, if this new and additional demand for gold had not arisen, there would have been any redundancy in the supply of those countries previously using gold in their currencies, and, if not, must it not be probable that the diminished supply, which has been available to them, must have been insufficient for their requirements, and must have contributed powerfully to the appreciation of gold ?

The estimates framed by different authorities as to the extent of the requirements of the leading commercial countries are so various, depending, as they must, on the relative weight given to the several factors of the problem presented – such as the course of the monetary policy in those countries in the immediate future, the degree to which the use of gold in currency may be economized, even with a monometallic gold standard, the demand for gold in the industrial arts, and the degree to which gold heretofore hoarded, but forming a part of the total stock, may be presented for coinage – that no useful purpose can be served on this occasion by a detailed examination of them.  This question, therefore, is not one on which any general consensus of opinion can be expected.  But it seems probable that, if there is to be a progressive increase of population and trade, the adoption of a single gold standard, even by the whole of Europe and by the United States of America, might cause such a contraction of the metallic currency, on which the vast superstructure of credit in all its forms can alone safely rest, as would be attended with the greatest inconvenience, and possible disaster.

These considerations appear to have led the Governments of France and of the United States of America at the beginning of last year to think that the time had come when a third attempt should be made to arrive at some international agreement on this important subject, with a view of remedying existing disorder and averting future danger.

As has been already said, the object of the preceding Conferences had been to promote uniformity in the monetary systems of the world.  The first had recorded its opinion that a basis of international uniformity should be sought in a single gold standard.  The second had affirmed the necessity of maintaining the monetary functions of silver, but proposed that the choice of gold or silver, or both, as the standard of value, should be left to the independent discretion of each separate State; expressing no opinion as to whether a stable ratio could be virtually attained without concerted action, or whether the absence of such a ratio was a less evil than a uniform gold standard.  But, however this may have been, the question which had led to the convocation of both Conferences remained still unsettled; for after nearly three years, nothing had been done, and no prospect was presented of anything being done by the independent action of the Powers to restore the former value of silver or to establish a sufficiently stable relation between the value of the two metals to ensure a practical uniformity.

The function of a standard of value is that it shall serve as a common measure in the exchange of commodities and of services.

To enable such standard to serve this function effectually, two qualities are requisite, uniformity and stability.

If the supply of one metal were sufficient to satisfy the requirements of the world for currency, these two elements would co-exist in a monometallic standard of value; and there cannot be a doubt that, as a matter of history, it was the impression produced by the gold discoveries of California and Australia which led to the adoption of the recent policy of gold monometallism.

But the production of the precious metals during recent years, and the prospect of their future production, point to the improbability of any supply of gold which can be adequate to the demands which may be made upon it, if it is to serve as the sole metallic currency of the world.  And, independently of this consideration, while the production of either gold or silver, taken separately, is subject to much uctuation, that of the two metals together is comparatively steady.

Opinions may differ as to the comparative evils of an appreciating and a depreciating currency, but it cannot be denied that both defeat the object of a standard of value, and impair its efficiency.

It is essential to stability that the supply of the metal, which serves as the basis of its currency, should keep pace with the demands upon it.  But if one metal is insufficient, or otherwise unsuitable, for this purpose, it cannot efficiently serve as a standard of value, for it must be wanting in one or both of its two indispensable attributes.

If, therefore, to ensure stability, both metals must be retained as part of the metallic currency of the world, how can this be done without losing in uniformity what is gained in stability, and thus equally defeating the object of a standard of value ?  It is thus, that while uniformity had been the chief preoccupation of the first, and stability of the second Conference, an international standard of value possessing both requisites was still unattained.

The Governments of the United States and of France seem, therefore, to have thought that, if any system of concerted action could be devised which would on the one hand establish uniformity of standard, and on the other obviate the evils of a contracting currency, by maintaining the monetary functions of both metals, the objects of the two Conferences might be reconciled.

Such concerted action could, however, only take one of two forms.  The one, an agreement by which a repartition of the standards should be made between the nations, or between certain groups of nations which might restore and sustain some possible equilibrium.  The other, an agreement to make one money of the two metals – in other word, to adopt «bimetallism». [2]

Placed between these two alternatives, the Governments of France and of the United States decided on the second, as offering in their opinion more hope of success, and a very much more complete solution of the problem.

This proposition was, however, one which had been almost unanimously rejected by the Conference of 1878, but the change which had taken place in the views of the Governments of two of the leading powers, France and Germany, had greatly modified the situation.  The first had abandoned the attitude of expectancy, and the second that of abstention, which they had respectively maintained in 1878.  And while France was prepared to associate herself with the United States in the invitation, Germany was prepared to respond to it, so far as to take a part, which afterwards proved to be an important part, in the discussion of the question.

The monetary position of these two great Powers supplied a sufficient explanation of this change    of attitude.  In January 1878, the bullion reserve of the Bank of France consisted of £ 44,200,000 gold, and   £ 34,800,000 silver.  In December 1880, the proportions had changed to £ 21,800,000 gold and £ 49,000,000 silver, and the large accumulation of the latter in the face of an arrested coinage indicated in no mistakable manner the difficulty of long maintaining a bimetallic standard and a double currency, while it exposed the Bank to a serious danger in retaining so large a stock of the depreciated metal.

In Germany, the obstacle interposed to the transformation of its currency from silver to gold, and the losses involved in the process, had become matters of serious consideration.

England alone of the three leading European Powers remained in the same position in 1881 as in 1878, and had not given the slightest encouragement to the hope that she could submit her monetary system to international regulation.  If, therefore, her co-operation had been thought essential to the success of a renewed attempt to form a bimetallic union, it is greatly to be regretted that no steps were taken, before the convocation of the Conference, to elicit the frank and unqualified statement of policy which was unequivocally given on the receipt of the invitation.  There is, however, reason to think that the interest undoubtedly possessed by the Government of India in the restoration of the value of silver had led to the belief that England also might be induced to modify the attitude taken up at the Conference of 1878, and to lend a more favourable ear to proposals which had this end in view.

In 1878, the United States had, indeed, found no difficulty in obtaining the supplies of gold required for the purposes of resumption which took place in 1879, and had coined very large annual sums of this metal (no less than £ 27,700,000 in the three years 1877-79, the total stock being now £ 117,000,000), but large as this supply has been, it has been found insufficient for their metallic currency, and under the operation of the «Bland bill», which authorised the coinage of silver at the rate of at least $ 2,000,000 a month, silver has been coined to the amount of $ 102,000,000, a process which is being still continued.

It is evident that, if this progressive addition to the stock of silver in circulation is not arrested, a time may arrive when the Government of the United States will be confronted with the difficulty already encountered by France in maintaining the double standard, and may be compelled either to close its mint altogether to the coinage of silver, or (should a change in the course of trade lead to the export of gold) to revert to a silver standard.

This contingency has since become so manifest, that both the Director of the United States Mint, Mr. Burchard, and the Secretary to the Treasury, Mr. Folger, in their recent reports, have made formal recommendations that the coinage of silver should be at once suspended.

The view taken at that time by the United States Government on this subject is summed up in the inaugural address of President Garfield of the 4th March 1881, in the following words : «By the experience of commercial nations in all ages, it has been found that gold and silver afford the only safe foundation for a monetary system.  Confusion has recently been created by variations in the relative value of the two metals, but I confidently believe that arrangements can be made between the leading commercial nations which will secure the general use of both metals.  Congress should provide that the compulsory coinage of silver, now required by law, may not disturb our monetary system by driving either metal out of circulation.  If possible, such an adjustment should be made that the purchasing power of every coined dollar will be exactly equal to its debt-paying power in all the markets of the world.»

We think that enough has been said to explain the reasons which appear to have led the Governments of France and of the United States of America to issue an invitation in the form of a Note, which was communicated to Her Majesty’s Government by the French Ambassador and the United States Minister at London, on the 26th February 1881, in the following terms :

«The Governments of the French Republic and of the United States, having exchanged views on the subject of a Conference between the powers principally interested in establishing a system of gold and silver international bimetallic money, and securing fixity in the relative value of the two metals, and having come to an agreement regarding the usefulness and importance of such a Conference, as well as on the date and locality thereof, have the honour to request that the Government of Her Britannic Majesty will take part in a Conference composed of such delegates as may be named by each Government.

The Conference will meet at Paris on Tuesday, the 19th April next, with the view of examining and adopting, for submission to the Governments represented at the Conference, a scheme and system for the establishment, by means of an international convention, of the use of gold and silver as bimetallic money, with a fixed relative value between the two metals.»

The form of this invitation appeared, both to the Lords of the Treasury and to the Secretary of State for India, to render further explanations necessary, before the consent of Her Majesty’s Government was given to the representation either of Great Britain or India at the Conference, but after some correspondence it was agreed (the Governments of France and of the United States having given a full assurance that by so doing Her Majesty’s Government would in no way commit itself to the principles of their proposal, and would retain absolute liberty of action) that delegates should attend on the part both of the British Government and of the Government of India, but that, instead of forming one delegation, as on the occasion of the Conference of 1878, the Governments of Great Britain and India should be separately represented, under instructions from the Lords of the Treasury and the Secretary of State for India respectively.

Such separate representation was considered necessary in view of the very different position of the two Governments in relation to this question.

In England the single gold standard had been maintained for more than 60 years, and was apparently still approved by public opinion; while in India, which had possessed the single silver standard for nearly as long a period, so much inconvenience and latterly so much loss had been caused by the uctuations of exchange, that a change of system had been a frequent subject of discussion, and the future relation of silver to gold was a matter of deep interest and anxiety.

Great differences of opinion have prevailed as to the effects upon India of the recent disturbance in the ratio of gold to silver.

It is not surprising that when this disturbance first became apparent in the early part of 1875, its causes were not fully understood, nor its consequences foreseen.  Among other things it was confidently predicted that there would be a large additional exportation of silver to the East, and especially to India, where the mints were freely open to its coinage.

This anticipation rested on the assumption that the disturbance was due mainly to a depreciation of silver, in relation not only to gold but to commodities; on which assumption it was natural to suppose, as the disturbance had taken place out of India, that the new level of value between silver and commodities would be reached both by increased exportation of goods from India and also by an increased export of silver to India.

But the experience of the last six years proves, we think, that this assumption did not rest on sufficient grounds.

The importation of silver into India, and what is even more significant, the coinage of silver in India during those years, have no doubt been much larger than in the five years which preceded them, but latterly they have again fallen off [3].  In 1880-81 the net imports of silver were only £ 3,892,574, and the amount coined £ 4,153,174, and in the first eight months of 1881-82 only £ 1,781,180 and £ 651,931 respectively, and taking a longer period for the comparison, it will be found that in the last decade [4] both the imports and the coinage have been considerably less than in that which preceded it, having been arrested by the large growth of Council bills [5].

It is difficult to suppose in the face of these figures that there can have been any general rise in prices in India due to a fall in the value of silver.

The inference appears to be irresistible, that the disturbance in the relative value of gold and silver must be sought rather in the appreciation of gold than in the depreciation of silver as a standard of value.

With an appreciation of the gold standard and a consequent fall in gold prices, any profit which would be derived from sending silver to India to be coined, when the gold price of the rupee is 1s. 8d., would disappear in a corresponding loss on the gold price of the goods sent to Europe in return.

Accordingly we find that over a series of years no sustained impulse has been given either to the exportation of silver to India or to the exportation of goods from India, and that the course of trade has been rather in the opposite direction.

We have already seen that there has been a marked decline in the importation of silver into India during the last decade.  A similar relative decline has taken place in the excess export of goods from India, as will be seen from the following figures :

Imports of merchandise
1861 to 1870
1871 to 1880
£  297,980,000
Increase, 29 %    
Exports of merchandise
1861 to 1870
1871 to 1880
£  536,924,000
Increase, 15 %    

The causes which have been at work will become more apparent if gold (which in India is only merchandise) is included in the above statement.

The account will then stand thus :

Imports of merchandise (including gold)
1861 to 1870
1871 to 1880
£  358,233,000
Increase, 13 %    
Exports of merchandise (including gold)
1861 to 1870
1871 to 1880
£  539,196,000
Increase, 15 %    

It will be seen from these figures that the imports of merchandise (including gold) have increased in the second decade somewhat less than the exports, while in the case of goods (excluding gold) the increase of the imports in the same period has been considerably greater than that of the exports.

But if the following table, which shows the Indian imports and exports of gold alone in each of the years of both decades, be examined, it will be seen that this relative change is mainly due, not to an increased exportation but to a diminished importation of that metal, the latter having fallen from £ 60,252,685 in the first decade to £ 21,987,713 in the second, while the exportation has only increased from £ 2,271,970 in the first £ 5,883,694 in the second.




1866-67 (11 months)




£  60,252,685

£  2,271,970





£  21,987,713

£  5,883,694

This fact appears to us to support the view that the recent disturbance in the relative value of gold and silver is mainly due to an appreciation of gold.

A depreciation of silver in Europe would, it may be supposed, have led to a continuously increased exportation of that metal to India, and a continuously increased exportation from India both of gold and of goods; while an appreciation of gold and consequent fall of prices in Europe would by itself have rather tended to check the exportation of goods from India, but would have naturally diminished the exports of gold from Europe to India, and stimulated those from India to Europe, until the price of both had been equalized.

But, whatever may have been the effects of the recent disturbance upon this branch of trade, we cannot too strongly insist on the point that it is not the particular ratio of gold to silver, whether it be 18 or 15 ½ to 1; it is not whether the gold value of the rupee is 1s. 10Sd. or 1s. 8d., which is of permanent importance to the commerce of India.  What is important, and, as the trade of India with England and Europe increases, more and more important, is that whatever that ratio, it should be steady, and not uctuating from year to year, or even, as it has been, from month to month and day to day.

This importance arises from the fact that two thirds of the foreign trade of India it carried on with England and countries using a gold currency.  This portion of its trade is carried on under what is really a form of barter, infinitely preferable, no doubt, to that of primitive barter, without the intermediary of any metallic standard of value at all, but still in a less degree open to the same objection so long as the currency of India is merely merchandise in the gold using countries, and their currency merely merchandise in India.

In principle, a uniform standard of value is as important in international as in national trade.  The uctuations of exchange will still remain which are caused by the cost of transport and mintage, and other differences in the monetary systems of different countries, but the greater the natural difficulties which restrict and impede commercial intercourse, the greater the reason for removing or diminishing all artificial and unnecessary obstacles.

If it be said that an international trade is comparatively so small in amount that a uniform international standard of value is of small importance, it may be replied that it would be of no importance at all if there were no international trade, and that, in proportion to its magnitude, the evils of its absence are precisely the same whether it be small or great.

The same fallacious distinction between national and international trade is often made in connection with the question of protection.

Protective tariffs against foreign trade are still defended in countries such as the United States of America, France, and Germany which have long recognized the necessity of perfect freedom of trade between their respective States and departments.

It can hardly be doubted that the uctuations which have taken place in the relative value of gold and silver during recent years, have been a cause of injury to India by impeding her foreign trade as well as by rendering that which has taken place more speculative than it otherwise would have been, and that these evils must be more and more felt as her international transactions increase.  So much for the commercial aspect of the question.

From what has been said it will be seen that, so far as the internal economy of India is concerned, we doubt whether any appreciable effect has been produced through the perturbance of the ratio between gold and silver, either in diminishing the burden of existing taxes to the taxpayer on the one hand, or the charge for the silver debt to the Government on the other, both being fixed, and thus not affected by any change in the price of commodities; or, as has been asserted in some quarters, whether the recent increase in the opium revenue is attributable to this cause.

But, whatever the effect on Indian trade, the loss caused to the Government of India cannot be disputed.  We will state it in their own words :

«The Government of India has had in recent years to pay in London annually in gold about 15 millions sterling [6].  The greater part of this yearly charge is unavoidable and permanent.  The interest, for instance, on the sterling debt of India and on the capital of the guaranteed railway and irrigation companies (amounting altogether to about 7 millions sterling); the pensions and annuities to retired officers of the Government, both civil and military, and their families (about 2W millions sterling); that portion of the military expenditure which consists of pay and allowances, and most of the disbursements from the Home Treasury are all fixed by contract or honourable obligation, and cannot be reduced at discretion.  Any divergence of the normal relative values of gold and silver must therefore have a most important bearing on the finances of the Indian Empire; and should such divergence be prolonged for any considerable length of time, it would be incumbent on the Government either to raise its revenue, or to reduce its expenditure, or to resort to both these expedients, in order to restore financial equilibrium.

In common with the Government, its chief civil and military Officers, who, being of British birth, are under the necessity of remitting some considerable part of their earnings to their native land, must suffer heavily, their official incomes being fixed in silver, for a given quantity of which they will get a less quantity of gold.  Moreover, all persons of the same nationality who have placed their savings in the securities of the Government of India, or have invested capital in local industries, lie under a similar obligation to transmit a large portion of their profits to Great Britain, and are exposed to the same substantial loss.  The Government cannot be indifferent to the interests of these classes.»

The only set-off against these losses on the Government remittances is the diminished cost of the stores purchased in England, consequent upon any fall which may have taken place in gold prices.

These considerations are of serious importance, but they do not represent the full measure of the embarrassment and injury caused to the Government of India by the uncertainty which prevails under the present system as to the future relative value of and silver.

The element of doubt is inevitably large in every Indian Budget; but this inconvenience is formidably aggravated by the speculative character imparted by an unstable rate of exchange to every operation affected by it.  There is no question connected with Indian loans and remittances, which form a material part of the current business of Indian government, in the consideration of which the absence of a uniform standard of value between England and India is not a source of the greatest embarrassment, and often of loss.

Shall new loans be contracted, or existing stocks be consolidated in gold or in silver ?  Shall loans, contracted in one metal, be discharged in that metal or in the other ?  Shall remittances from India be made with a heavy loss on exchange ?  Or shall they be suspended on the chance of improvement, but at the risk of heavier loss hereafter ?

These, among other similar questions, are constantly recurring in the transaction of the business of the Government of India and of the India Office, and constitute a chronic cause of administrative inefficiency.

It is not, therefore, surprising that the Government of India should view with the greatest interest the prospect of any measures on the part of other Governments, whether by isolated or concerted action, which might not only have the effect of restoring the value of silver, but of providing for the future a more stable relation between silver and gold.

A common standard of value, at least between India and England, appears to be the only complete and permanent remedy for the inconveniences caused to India by the present state of things.  The adoption of a silver standard being impossible, this, in theory, can only be attained by the introduction of the gold standard in India.  The practical objections to this course are of a very serious kind, but it is worthy of remark that they derive their force rather from the interests of England and other gold using countries, than from those of India itself.

The foregoing statements of Indian trade show that hitherto, in spite of the disturbance in the ratio of gold and silver during the last six years, no apparent increase has taken place in the volume of India currency, in relation to commodities and transactions, with respect to which there seems reason to suppose that the rupee in India still retains its former value; and with a balance of trade [7] always so largely in her favour as almost to preclude the probability of her being obliged to export specie, there is every reason to think that, if she were to pursue the policy of the United States on resuming specie payments, or of the Netherlands in 1875, by adopting a gold standard, and restricting or suspending the coinage of silver, she could in a few years obtain a supply of gold sufficient for all purposes of her currency as a standard of value.  This has been estimated at £ 60,000,000, but whatever it might be, a very much smaller amount per head than in any European country would suffice.

Such a policy would, however, aggravate appreciably the present scarcity of gold, and is, on this account, greatly to be deprecated, so long as it is not indispensable to the vital interests of India.

Thus, although your Lordship in Council was not prepared to authorize us to vote on any proposal in favour of bimetallism, or to hold out any hope of a fundamental change in the monetary system of British India, we were empowered so far to co-operate in promoting the success of the Conference as to engage that, in the event of an international agreement on the part of a certain number of the principal States of the world to maintain the free coinage of silver with full legal tender faculty during a term of years in the ratio of 15 ½ to 1, the Indian Government will engage to maintain the free coinage of silver with such faculty throughout the Indian Empire.

At the opening sitting on the 12th April, the President, M. Magnin, after tracing the history of the question which we were invited to discuss, described the object of the Conference as follows : «In order to restore to silver its former value, it is indispensable that it should be, as formerly, freely coined by the side of gold, and as no one state can or will adopt such free coinage alone, a bimetallic international agreement appeared the only remedy.  The French and American Governments had, therefore, proposed the Conference, and fifteen States had accepted the invitation.»

On this occasion, the several delegates communicated to the Conference the declarations which they were instructed to make in the name of their respective Governments.

These were to the following effect :

M. de Thielmann, on the part of Germany, was authorised to recognise without reserve that the rehabilitation of silver was desirable; that it could be accomplished by the restoration of the free coinage of silver in a certain number of the most populous States represented at the Conference on the basis of a fixed ratio between gold and silver, but that, in the advanced stage which had been reached in her recent monetary reforms, his Government was not prepared to adopt so great a change as that involved in this proposition.  Nevertheless, the Imperial Government was fully disposed to co-operate towards this end, and was ready to make propositions which may be thus summed up :

1.   To arrest the sale of silver during a period of four years, and to limit it for a further period.

2.   To replace 5-mark notes by silver.

3.   To withdraw 5-mark gold pieces, and substitute silver.

4.   To melt and re-coin silver money coined in the ratio of 1 to 13.95, and replace it by silver money coined in the ratio of 1 to 15 ½.

Mr. Fremantle, the Delegate of Great Britain, stated the inability of his Government to enter the Conference as supporters of the principle of the double standard, and explained that he had only been sent on the understanding that the Powers represented reserved entire liberty of action.  His instructions only authorised him to give and receive information, and did not permit him to vote on the questions under discussion.

Lord Reay, on the part of the Government of India, without adopting the principle of bimetallism, stated that the Secretary of State for India in Council was ready to take into consideration any measures which might be suggested for introduction into India, with a view to the re-establishment of the value of silver.

Sir A. Galt, the Delegate of Canada, although authorised to vote, reserved full liberty of action to his Government on any question submitted to the Conference.

M. Levy (Denmark) announced the decision of his Government to maintain the single gold standard, and that his instructions precluded him from all discussion of the manner in which a bimetallic system could be regulated.

The Count de San Miguel (Portugal) stated that the monetary system of his country would not permit it to join a bimetallic union, and reserved full liberty of action for his Government.  Any opinions which he might express would be purely personal.

M. de Thörner (Russia) said that the object of his Government in sending a delegate was to obtain full information of the views of the several Powers, so as to enable them to consider any resolution which might be adopted.  He also reserved full liberty of action for his Government.

M. Braïlas (Greece, which had adopted monometallism), was in the same position as the Delegates of Denmark and Portugal.

Count Küfstein (Austria-Hungary) described the attitude of his Government as one of «favourable reserve».  Although accepting conditionally the result of the deliberations, Austria could make no engagement whatever.

Dr. Forssell (Sweden) claimed entire liberty of action for his Government as regards their monetary system.

Dr. Broch (Norway) made a similar declaration.

M. Burckhardt-Bischoff expressed the indisposition of the Swiss Government to depart from the arrangements made by the Latin Monetary Convention of 1878, for seven years, and would ask for new instructions from his Government before taking up any position, or coming to a decision as regards any proposals submitted to the Conference.

The Delegates of Belgium, the Netherlands, Italy, and Spain made no declarations, but it was understood that, while the first of these Powers was opposed, the other three were favourable to the objects of the Conference.

In these circumstances it became apparent that the practical interest of the Conference centred in the action of Germany.

It is true that M. Cernuschi, who opened the general discussion which then commenced, in commenting on the declarations, lost no time in expressing the opinion that, without the accession of either England or Germany, the experiment of a bimetallic union could not be made; but we found a strong opinion entertained in other quarters that even without the absolute adhesion of Germany, practical guarantees might be obtained from her, which might be sufficient to ensure its success : at any rate that the question was one which deserved careful inquiry.

From this point of view the Spanish Delegate, M. Moret y Prendergast, proceeded before the close of the sitting to propose an early adjournment to enable the respective Governments to study and examine the propositions of the German Delegates in connexion with the declarations of England, India, and Canada; but the Conference decided to continue the general discussion before putting to a vote the proposal for adjournment.

The Procès-Verbaux which accompany this Report contain a full account of the debate which then ensued.  We must, however, observe that the discussions were necessarily, from their nature, of a mixed character, that is to say, that they were partly practical and partly theoretic.  So far as any result could be expected from the Conference in the shape of a formal resolution, this might have been obtained in one sitting, or even without any Conference at all, for each Delegate brought with him distinct instructions as to the course which he was to take on questions submitted to the vote.

It is obvious, therefore, that the object of the Powers convoking the Conference was something more than this; that it was intended that the propositions of France and the United States of America should be the subject of discussion in all their aspects, and that it was useless to enter upon any such discussion without inquiring whether those propositions had any scientific warrant.  Except upon the assumption that it is in the power of a combination of States to fix and maintain a ratio between gold and silver coins, or in the belief that this was an open question which it might be useful to discuss, the Conference could have had no meaning.

But, although the scientific soundness or unsoundness of the theory of bimetallism was a necessary element in the discussion, no expression of opinion on this question by individual delegates, or even by the Conference as a whole, if this had been possible, could have had any direct connection with its practical result, which must, in any case, have remained to be determined by considerations of a very different order on the part of the Governments represented.

It was thus that in the course of the debates every shade of opinion was in turn elicited.  Doubts were expressed by some, both as to the alleged causes and consequences of the recent monetary disturbances, and also as to the efficiency of the remedy proposed; others admitted the evil, but suggested other remedies; while even among those who agreed both as to the gravity of the disorder and the sufficiency of the remedy, much difference of opinion prevailed in estimating the nature and extent of the concerted action which would be necessary, short of universal agreement, to give it practical effect by bringing about and maintaining a fixed ratio between gold and silver money.

Our position, as Delegates of the Government of India, was a peculiar one.  We represented a Government which, while on the one hand excluded (as it was understood) during the abstention of England from any bimetallic union which might be the result of the Conference, and, therefore, from this point of view, scarcely entitled to take an active part in its deliberations, was on the other hand, not only deeply interested in the objects of the Conference, but also, as the only country whose mints were still absolutely free to the coinage of silver, able and ready to offer a substantial contribution to measures of international concert and a solid guarantee of their success.

At this stage of the proceedings, therefore, it appeared to be necessary to direct the attention of the Conference very clearly to the point of view from which the Government of India regarded it.  Sir L. Mallet accordingly, after adverting to the exceptional position of the Indian Delegates, claimed for the Government of India the right to represent to the Conference the losses which they had sustained from causes, which were, in a great measure, due to the isolated action of particular States or groups of States, and to express their sympathy with the objects of the inviting Powers in endeavouring to bring about, by international concert, arrangements, which might prevent the operation of similar causes in the future.

To this object India was prepared to contribute by conditional engagements, which were important, not only as affording strength and security to any combination which might be formed, but also as an act of international co-operation.

There was nothing before the Conference to show that the situation had changed in any essential respect since the invitations had been issued in February.  The difficulties of Germany must have been foreseen, and had not prevented her from offering important practical support to concerted action; the abstention of England was a matter of notoriety, and it was impossible without inconsistency to insist, on the one hand, that India should maintain its silver monometallism, in order to counterbalance the gold monometallism of England, and on the other, that this counterbalance would be of no effect, and that, therefore, the abstention of England and India was incompatible with the practical success of any bimetallic agreement which might be made between other countries.

Lord Reay laid stress on the necessity of establishing an international agreement which should take into account the different systems adopted by different Governments, instead of making a vain attempt to conclude a universal bimetallic union.  He observed that, if it was desired to promote the adoption of bimetallism in England, nothing would contribute to this result so much as the proof of its success in other countries.  The reluctance of Her Majesty’s Government to join a bimetallic union was not due to egotism, or to indifference to the interests of other nations.  England had not waited for the co-operation of other States to apply to the commerce of all the world the principles of free trade, in which she believed, and would be the first, if any results were obtained giving greater facilities to international trade, duly to recognise them.

At the close of the general discussion, M. Moret y Prendergast again presented his motion of adjournment, which after some remarks by other delegates, was put to the vote, and carried unanimously, subject to certain reservations on the part of some of the members.

On the re-assembling of the Conference on the 30th June, it was evident that the prospect of any immediate practical result had not improved.

Mr. Thurman, one of the United States Delegates, took an early occasion to address the Conference, and stated with marked emphasis that, in his opinion, his Government would not be a party to any bimetallic union which did not include England or Germany, and that, while admitting the importance of both of the English and German propositions, they were not sufficient, and would not be considered acceptable.

Mr. Pierson made the following declaration on the part of the Netherlands :

«The Government of the Netherlands is of opinion, like several members of this Conference, that the fall of silver and its great oscillations of value are a great evil.

It also thinks that the simultaneous and unreserved adoption of the double standard by all the great States of Europe and America would be the true means of remedying that evil.

It would scarcely hesitate, therefore, to propose to the States-General the re-establishment of the unlimited coinage of silver, at present prohibited, both for our country and for all its colonies, as soon as the double standard system should have been adopted over an area as vast as that which we have just indicated.

But our Government would not engage to act thus, if that system be established over a more restricted area.  As long as it is ignorant what guarantee would be given for fixing, as far as possible, the ratio of value between the two metals, what States would adopt the bimetallic system, and what concessions would be made by the other States for facilitating its success, it is impossible to judge of the advantages and inconveniences there would be for the Netherlands and its colonies in re-establishing the unlimited coinage of silver, and maintaining the legal ratio between that metal and gold, which is now not 15 ½ but 15S.

While, however, reserving its entire liberty, the Government of the Netherlands does not peremptorily reject any project of establishing the double-standard system in an area comprising only several great States of Europe and America.  Such a project, if proposed at the Conference, would doubtless be taken into very serious consideration by the Netherlands.»

Mr. Seismit Doda, on the part of Italy, said :

«The Italian Government would be disposed to enter into a league of various States to agree on the limited coinage of silver on the following conditions :

1.   The Government of the German Empire should engage to suspend the sale of its silver for a term of at least five years, and to replace by silver money the gold 5-mark pieces and its Imperial treasury notes, and it should also admit for silver coins, or at least for those of 5 and 2 marks, the ratio of 1 to 15 ½, conferring on the silver thus coined the full paying power at present possessed by the thalers.

2.   Her Britannic Majesty’s Government should enter into an engagement with the other States to increase the paying power of its silver crowns.

If these conditions were accepted by Germany and England, Italy might agree with the other States of the Latin Union and with the United States of America in resuming the limited coinage of silver for a term, which should not exceed that fixed for the suspension of the sale of silver by the German Empire.

The quota of each State in the coinage of silver should be based on a proportion to be established relatively to the population of the States.  This quota would be binding upon each State as a minimum, and each State might exceed it on fixing the rules and special guarantees for a limited mintage, to which individuals and banks of issue should be admitted.

Italy could in no case enter on the path of the free and unlimited coinage of silver, if Germany and England, or one of them, did not unreservedly adhere to it.»

Mr. Fremantle was authorised to make the following communication, which had been made to Her Majesty’s Government by the Bank of England in reply to a question which had been addressed to them :

«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 ensure 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 the 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, would be always open to the purchase of silver, under the conditions above described.»

Mr. Evarts then read the following Declarations by the Delegates of France and of the United States, in the name of their respective Governments :

«The depreciation and great uctuation 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 more important benefits to the commerce of the world.

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 requirements of the commerce of the world.

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.

Without considering the effect which might be produced toward 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 assure, would be adequate to produce and maintain throughout the commercial world the relation between the two metals that such convention should adopt.»

None of these declarations having led to any new point of departure for further debate, and there being a general feeling that no useful purpose could be served by a prolongation of the Conference, the only question which remained was, whether it should be dissolved without any result, or adjourned, for a year in order to give time to the different Governments to exchange their views, and possibly to arrive at some understanding which might aid in the solution of the problem on which it had been engaged.  The opinion of the Conference having been invited on this question, the proposition to adjourn was opposed by M. Forssell, the Delegate for Sweden, who expressed the opinion that the Conference in closing its labours should adhere to the opinions adopted by the Conference of 1878, as to the necessity of maintaining the monetary function of silver.

This view was, however, strongly contested by M. Denormandie, on the part of the French Delegates, on the ground that it was in no way warranted by the tenor of the opinions which had been expressed, and the declarations made during the sittings of the Conference, which, on the contrary, fully justified the hope that, by allowing time for diplomatic communications between the Governments and for the full consideration of the important materials for a better understanding of the question which were contained in their proceedings, the Conference might reassemble another year with a prospect of definite results.

We felt it to be our duty, as Delegates of India, strongly to support the latter Course.  Lord Reay expressed the opinion that the important declarations which had been made were sufficient to prove that the monetary question appertained to the sphere of international action, and afforded full justification of an adjournment to enable the various Governments to exchange their views.  He entertained the hope that at its next meeting the delegates of France and the United States might be able to agree in offering the Conference a programme which would give to its labours a practical direction, rather with a view to discover a basis for an international agreement than to enforce the application of an economic thesis.

The motion for adjournment was ultimately adopted unanimously in the following terms :

«The Conference, considering that in the course of its two sessions it has heard the speeches, declarations, and observations of the delegates of the States hereafter enumerated :

The United States
Great Britain
British India
The Netherlands

Considering that the declarations made by several of the delegates have been in the name of their Governments;

That these declarations all admit the expediency of taking various measures in concert, under reservation of the entire freedom of action of the different Governments;

That there is ground for believing that an understanding may be established between the States which have taken part in the Conference;

But that it is expedient to suspend its meetings;

That, in fact, the monetary situation may, as to some States, call for the intervention of governmental action, and that there is reason for giving an opportunity, at present for diplomatic negotiations;

Adjourns until Wednesday the 12th of April 1882.»

It may be thought premature, before the final stage of its proceedings have been reached, to speak of the results of the Conference of 1881, but it seems at all events desirable to bring into relief, and to record the progress towards international agreement on this important subject since the dissolution of the Conference of 1878.

On that occasion, of the 15 Governments represented, those of the United States of America and Italy alone supported the principle of a bimetallic standard of value, as the basis of an international agreement.

Germany declined all part in the discussion, and the Governments of England and of India, while admitting the inconvenience which had been caused by the disturbances in the relative value of gold and silver, expressed a strong opinion as to the impracticability of establishing a fixed ratio between gold and silver, and were opposed to a system of currency based on a double standard, thus not only refusing to join in any international agreement for such an object, but discouraging it on the part of others; and all the other Powers, with the exception of Austria-Hungary, practically admitted the impossibility of an arrangement on the bimetallic principle, side by side with their declaration that it was necessary to maintain the monetary functions of silver.

In 1881 the position of the 19 Powers represented at the opening of the Conference may be thus summed up.

Of the four great metallic powers of the world, France, the United States of America, Germany, and Great Britain, the two first had already come to an understanding in favour of a bimetallic union.  Germany, which took no part in the Conference of 1878, although unable in her present circumstances to join such a union, nevertheless admitted the importance of the object, as well as the possibility on the bimetallic principle of obtaining it by international agreement, and was prepared to promote it by important practical measures.

Great Britain, while refusing as in 1878 to accept as a basis for discussion the question of the adoption of a double standard, maintained on this occasion an attitude of neutrality rather than of direct hostility to its adoption by other Powers.

British India, which was separately represented at the Conference of 1881, although her adhesion to a bimetallic union was not sought during the abstention of Great Britain, was prepared without recognising its principle, to co-operate in its promotion by the offer of important practical assistance.

Italy, Spain, and the Netherlands were favourable to the proposals.  Belgium and Switzerland were unfavourable, but, as members of the Latin Union, would probably reconsider their position in the event of an ultimate agreement among the leading Powers.

The Scandinavian Union, Portugal, and Greece were still absolutely opposed to the double standard.

Russia and Austria-Hungary still having an inconvertible paper currency, were unprepared for immediate resumption of specie payments.

Scarcely less important than the altered attitude of some of the Governments represented, as regards the principles of a bimetallic union, was the formal acceptance by the delegates of the United States, in the declarations made at the last sitting, of the European ratio of 15 ½ to 1 instead of the American ratio of 16 to 1, for the purpose of an international agreement.

After this declaration on the part of the United States delegates, and the recognition of the same ratio by the Government of India in the conditional engagement which they made to the Conference, it may be hoped that a difficulty which might have proved serious has been removed from the course of future negotiations.

It only remains to consider whether there is any prospect of such a change in the attitude of the respective Powers, due either to diplomatic action on the part of the Governments or to any other cause, as will enable the Conference to reassemble in April 1882, with any reasonable hope of a practical result.

To obtain information on this question your Lordship instructed Lord Reay to make confidential inquiries at Paris, Vienna, and Rome as to the steps, if any, which might have been taken by the French, the Austro-Hungarian, and the Italian Governments to secure that, at the next meeting of the Conference, definite proposals should be brought before it.  It appears from these inquiries that negotiations are going on, and, although it would be premature to enter into further details while they are pending, it is not unlikely that such negotiations will lead to proposals aiming at the restoration of silver, if not on the footing of free coinage, still on a limited scale, the Governments represented at the Conference being each invited to take their share of an increased coinage of silver.

In conclusion, we are of opinion that, as the adoption of bimetallism by England or India appears at present to be out of the question, it is unnecessary for us on this occasion to express any opinion on its abstract principle; and that the immediate question for consideration in the most urgent interests of British India is to what extent and in what manner Her Majesty’s Government may be prepared to aid in the promotion of any measures proposed by the other Powers, which, although falling short of the conditions attached to the proposal we were authorised to make to the Conference by your Lordship in Council, are nevertheless of a kind to ensure the increased use of silver as money.

That an international agreement with regard to what has been termed a system of «silver contingents» would produce this result, and that it would be deserving of your Lordship’s support and co-operation, we cannot doubt.  Whether it would ultimately lead to a complete reopening of the various mints to the free coinage of silver is a matter which need not be affirmed or denied.

It seems sufficient for the present to admit that such a measure would materially improve the value of silver, and that it would exclude the immediate adoption of a universal gold standard, repudiated by the Conference of 1878, certainly not favoured by the proceedings of that of 1881, and not desirable in the general interests of the world.

Louis Mallet.

14th February 1882.

Appendix A

Statement of bimetallic theory


1. If the only demand for any two commodities which are required for the same purposes, and serve the same function, is subject to the condition that they shall exchange in a fixed ratio, one to the other, so long as the supply of both continues, they must exchange in that ratio, or not at all.

2. Bimetallism is the application of this principle to gold and silver when used as standard coins of the realm.

3. Such gold and silver coins are only in demand for the purposes of exchange, e.g., the purchase of other commodities, the payment of labour, or the liberation of debt.  Both gold and silver coins equally serve for any of these functions, and they are only available for such purposes because Governments give them currency as legal tender, and affix to them a stamp, which is accepted as a guarantee of their being of a certain weight and fineness.

4. If, therefore, all Governments agree to establish and enforce a fixed ratio between gold and silver in the form of coined money, such gold and silver coins, if they exchange at all, must exchange in that ratio.

5. For if, with 15 ½ or any other number of ounces of silver coins, the same exchanges can be made, or the same debts discharged, as with 1 ounce of gold coins, or vice versa, that metal will inevitably be preferred which can be obtained at the least cost.  If, therefore, the relative value of the two metals varies from that ratio, a double process will be set in motion.  On the one hand any addition to the metallic currency will be made in the metal which can be obtained at the least cost; and on the other the coins of the dearer metal already in circulation will be melted down, until the price of the bullion has reached the same level as the coin.

6. This process could only terminate in one of two ways : either the increased demand for the cheaper, and the lessened demand for the dearer metal, would proceed until the latter has been driven and kept out of circulation, thus escaping altogether from the control of Governments, or the value of the first will rise and that of the latter fall, until the equilibrium is restored, i.e., until (in the case supposed) 15 ½ oz. of silver coin will exchange again, by the adjustment of supply and demand, exactly for one ounce in gold coin.

7. The first is an extravagant hypothesis, for such a result could only be brought about by the subversion of all the conditions which have hitherto governed the production of the precious metals, or by the adoption of a ratio, such, for instance, as 1 to 1, which would entirely defeat the purpose of a double standard, and could therefore never be proposed by its advocates; but, even if admitted as a conceivable possibility, it could not be urged by monometallists as an objection to the adoption of bimetallism, as it would then directly lead to the universal use of a monometallic standard in the monetary system of the world.

8. For it must be borne in mind that, under a system of free vintage, the market price of gold and silver bullion must always be the same as their mint price, plus or minus the cost of coinage.  So long, therefore, as both gold and silver coins are in circulation and therefore, ex hypothesi, necessarily exchangeable in the ratio of 15 ½ to 1, so long must the relative value of the gold and silver bullion be also in the ratio of 15 ½ to 1.

9. But the latter alternative is the only one, it is urged, which deserves practical consideration, and, if so, it appears to follow that the only possible divergence from the fixed ratio in the value of the two metals, so long as they are used as coin, would be within the narrow limits of the cost of coinage and melting, as well as of the charges of transport from one market to another.

10. In reply to the objection that this theory rests upon an inadmissible assumption, viz., a universal agreement among nations, it is urged that, if universal agreement is impossible, it is also unnecessary.  All that is needed for the success of the policy is that a union shall be maintained on a sufficiently large scale to neutralize the operation of the so-called «Gresham law», and ensure the constant and certain presence of both gold and silver in the currency, so that there could be no cheaper or dearer metal.

11. It can hardly be doubted that a union of the four great States, England, France, including the Latin Union, Germany, and the United States of America, would more than suffice for such a purpose.  But, if this is questioned, it must, at least, be admitted that, as such a combination would include all the important States with a gold standard, no increase in the supply of silver could drive out the gold coinage (for where could it be driven ?); while, on the other hand, the expulsion of silver by gold could only arise from such an increase in the supply of the latter as would provide the union with a sufficient basis for a single gold standard.  The bimetallic system could, therefore, in this case, only fail from causes which would obviate the main practical evils of monometallism.


Appendix B

Statement showing the Net Imports of Silver into British India, and the Value of Silver coined at the Indian Mints, from the years 1850-51 to 1880-81

Year Net imports of silver Value of silver coined

1866-67 (11 months)

£   2,117,225

£   2,616,417

[1]   See Appendix to Report of the Select Committee on the Depreciation of Silver in 1876, page 8.

[2]   A Note by Sir L. Mallet is appended to this report on The Theory of Bimetallism.

[3]   See Appendix B.


  Net imports of silver Coinage of silver

£  62,300,000

£  66,518,000


Amount of bills drawn on the several Governments in India


£  121,250,000

[6]   Since increased to about 17 millions.

[7]   Since 1835 there has been no year in which there has been a net export of specie from India.  In 1878-79 there was a net ex­port of gold of £ 896,173, and in 1847-48 there was a net export of silver of £ 494,191, but never of both metals.






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