Leon Faucher - Remarks on the production of the precious metals

At the same time that the depreciation of gold and silver under any general form becomes less probable, the increasing facility of communication, and the greater mutual dependence of nations in matters of credit, renders any great local difference in the value of money more improbable. Whenever the precious metals become in excess in one country, the surplus quickly reaches its neighbour. Let a sudden scarcity of food, or any other cause, create a drain of specie, the consequently increased value of money will soon draw back that which has been exported. The cost of transport, and the premium of insurance of gold, are the limits of the variations in the rates of exchange; and the charges are being diminished every day, thanks to railroads and steam communications. Before the wonderful progress in the development of industry from the commencement of the nineteenth century, we have seen the changes occurring at different periods, in the relative production of the precious metals, without any corresponding alteration in their relative values. At the close of the fifteenth century, it is true, that America, furnishing nothing but gold, and this metal having accumulated in Spain, Queen Isabella of Castile was forced to alter the relative standard of gold and silver. After the first half of the 16th century, the production of gold having ceased to preponderate, and silver being imported in great abundance, the value of the inferior metal underwent such a depreciation, that the governments of Europe, yielding to the force of circumstances, changed its relative legal value; but with these two exceptions in the monetary laws, one purely local, and the other European, we observe the production of each metal extend and diminish alternately, without any relative alteration in value of sufficient importance to attract public attention.

“From the year 1645 to the commencement of the 18th century,” says M. Michel Chevalier, “silver took the lead in a most remarkable manner. Then occurred the bright days of the mines in Potosi, and the production of silver exceeded that of gold, weight for weight, in the proportion of 60 to 1; after that, and without any diminution in the produce of silver, came the glorious time for the Brazilian gold mines. Simultaneously appeared the auriferous regions of Chico, Antioguia, and Pepayou. The commercial world received from America 1 kilogramme 5 5 A kilogramme is equal to about 2 lbs. 8 oz. 3 dwts. 2 grs., and is worth about £125; 30 kilogrammes would therefore weigh about 80 lbs. 3oz. 20 dwts. 12 grs., and would be worth about £3750. of gold for every 30 kilogrammes of silver. Thus passed the middle of the 17th century. Then the silver mines of Mexico put forth all their splendour, and the proportion increased to 40 to 1. The Brazilian mines began to diminish, whilst those of Mexico continued to increase in production; and, at the beginning of the next century, silver exceeded gold in the proportion of 57 to 1. In 1846 the production of silver still continued to predominate, and we are now at the proportion again of about 40 to 1.”

Humboldt’s calculations differ but little from those of M. Michel Chevalier. This great authority considers that the import of gold until the first years in the 18th century, bore the proportion to silver of 1 to 65. Let either of these suppositions be true, there can be little doubt, that the relative weight of supply of the two metals varied by one half, without any serious alteration in their relative price; which surely proves that gold was essentially required, and that the increase of production did but fill up the gap, which, as far as the 18th century, the progress of civilization and of luxury had created, without an adequate means of supply.

In ancient times, the relative value of the two metals appears to have been almost entirely governed by the quantities produced and brought to market. A pound of gold was worth eight or ten pounds of silver, according as the quantity brought to market varied in the like proportion. The simplicity of commercial interests, in a state of society when neither luxurious arts or industry were thought of, offered no inducements for the collection of gold or silver for their use as money, excepting on account of their relative scarcity; but when fighting ceased to be the principal occupation of mankind, and labour began to be held in some estimation, an end was put to this patriarchal state: if the people lost their primitive simplicity, the relation of supply and demand no longer depended exclusively on the proportionate production of the two metals; other causes affecting a rise and fall began to operate on prices.

When the precious metals were nearly absorbed in the supply of money, their commercial value had no other element to influence an alteration than the requirements of circulation; the monetary value governed the commercial price. But, at the present time the contrary is the case: the greater the degree of civilization, and the greater the increase of a taste for luxuries, the more does the demand for the precious metals for other objects exceed the want of them for coin. Mr. Jacob, whose work on the precious metals appeared in 1831, places a value of 6 6 £5,960,000 149,000,000 francs on the gold and silver annually used for articles of jewellery and plate in Europe and America.

During the last twenty years the progress of luxury amongst the industrious and commercial nations of the world has been enormous. The moveable wealth of France and England has made prodigious accumulations. What family is there so poor as not to have some article of plate? Gilding is no longer confined to the decorations of temples and palaces; it is found in the most humble cottage. To what a length may it not reach if the taste should increase for gilding the dresses of ladies, and for covering the uniforms of our men with gold or silver lace?

On the whole, then, it appears that the demand for gold and silver, as articles of commerce, is likely to exceed the demand for the precious metals solely for use as money. This is a new point; and we must not lose sight of it in endeavouring to appreciate the effect which an increase or diminution in the production of the precious metals may have, both on their price and on their relative value.

Without noting the variations which have occurred from one century to another, in the production and in the importation of gold and silver, in order to recapitulate the quantities of the precious metals which America has poured into the European markets in 318 years, from the discovery of Hispaniola to the revolution in Mexico, M. de Humboldt considers the production of gold to have been 7 7 lbs. 6,381,530=£297,700,000 2,381,600 kilogrammes, and that of silver 8 8 lbs. 295,717,106=£887,151,318 110,362,222 kilogrammes: making a total value of about 9 9 £1,280,000,000 32 “milliards” of francs: the weight of gold imported represents about ¹⁄₄₇th of that of silver. It does not appear probable, that the produce of gold in other parts during these three centuries has materially altered these proportions. Admitting that when first the Mexican revolution retarded the working of their silver mines, the amount of coined money throughout Europe represented a value of 10 10 £320,000,000 8 “milliards” of francs, of which 11 11 £240,000,000 6 “milliards” were in silver, and 12 12 £80,000,000 2 “milliards” in gold, the relative quantity in weight would still have been as 47 to 1; and yet the relative monied value, thirty years since, varied in Europe between 1 to 14½, and 1 to 15¾. Thus, in the value of the precious metals, the difference was three times less than in their weight.

Nothing is more difficult in matters relating to money than to present statistics which may be considered as an approximation to truth. It would appear that as gold and silver are used as the denominators of value, generally, throughout the world, all the phenomena connected with their production and circulation ought to be noted with the greatest precision: they ought to be the points to which the attention of statisticians should be “ par excellence ” directed. What can be more important, in an economical point of view, than to establish a regular scale, indicating the rapidity of every movement connected with the subject, and acting as a gauge of its extent?