Extracts.

Lyttelton Times, Volume XII, Issue 707, 17 August 1859, Page 2

Extracts.

THE PROBABLE FALL IN THE VALUE ' OF GOLD.* , (From the ' Saturday Review.') 'The title of M. Chevalier's treatise is alone sufficient to create or,revive deep and general alarm. The value of^gold is but another term for the amount of all fixed claims and obligations, and of "ail customarypayments. 'For the scientific economist, it is sufficient to remember that the price of , all commodities varies inversely as the value of the standard metal. The.-dependence of almost all social relations on the fixity or fluctuation in the .■supply of gold follows with inexorable necessity from this simple definition, It is scarcely too much to say that Parliamentary Refornv is a trifle, and a.continental, war but a .superficial'disturbance/ in comparison with the revolution which may even; now -be takingits rise in- California, in Australia; and in Siberia. The magnitude of the impending change is imperfectly measured by the. statement thatthe annual import orprodnction of gold in the civilized world already equals one-tenth of the total amount received ,ftom America between the first voyage of .Columbus and the California!* discovery. 'Ftom lM&M'lß4B, it is supposed that.the supply Reached « total of four hnndred millions sterling^ The gold fields; induding the Russian mines, are now rpi^tlMhgJcbnsldeira'Wy nwre than.fqrty millions a-year. MJ €h«vaHer,'in %is discussion of tie probable consequences of the ihcreasM production; asstimes, for,the,purpoßes of his argument, the diminution in' value at fifty pet cent, and Mr. Cobden properly .cautions his readers against the error, of mistaking an arbitrary "hypothesis for a calculation or a pi«phec^; but it would seemihat the author really anticipates a: depreciation -to at; least an equal amount. As Mr. - Gobden observes, " Had such an increase occurred > in; the sugply of any article, such as corn, sug^r, or cottpjn, of which! the whole annual1 produce' ik - consumed within a couple of years, it would have probably caused a depreciation to the extent of ./nine-tenths- of its; value;" l^e. large ,iiti)^c Of gold previously existing in the world,' has,-in the present instance, j retarded the process of depreciation, but every sue-: cessive addition will: bring>the jjeservoir nearer to; the point, at which it must overflow. ' The change in ..the relative value of gold and" silver is in_ England, a ..matter.of.. secondary consideration, and the investigation is complicated by the accidental circumstance that, while,gold .has been flowing; into Europe, silver has been exported in large quantities to flfldia, and China. .In the bul-lion-market of ..Paris, the premium on-silver in exchange for-.gold has recently varied from two to four per cent.,"while it-is notorious that within six; or seven years there was^a<eonstant ;premium upon i gold. M. Chevalier stows-that the relative change '■ of price cannot range much further, until the silver. coinage is either drained out ofJPrance or; retained by, means of a .legislative act,-which he earnestly recommends, it is the principal object of his work • to procure the abolition of the 3aw .which makes I; gold as well as silver a legal tender, and although' the currency of England rests on an entirely differentbasis, it.. may be doubted whether Mr. r Cobden has exercised a sound discretion in omitting: the greater part of his author's appeal to the' French Government and "Legislature. 'From the statements which-remain'itl is scarcely clear whether the maintenance of a standard is an actual breach of faith, althaugh.it is a; glaring economical absurdity. The law, which dates .from the.time of the Consulate, while it declares that the silver franc is the monetary unit, at the same.time. fixes; the relative value of the precious metals-in the ratio of 1 ■ to 15|. Debtors have for fifty .'years exercised; the right of .paying .in silver .when gold-was at a 1 premium; and the same class will>probablycon-l tinue to profit by:the choice which, legislation.has \ allowed themy although the. balance <may <benaore \ seriously deranged in the opposite direction., M.' Chevalier and abstract justice maybe on the side of ■ the creditor, but the Government owes three hundred /and fifty millions, and the landowners who support it owe double the arnaunt. -The Emperor, the railway .companies, and the encumbered peasant; proprietors will be more than a match for the holders of'funds and debentures ; >and all French : Christendom will naturally combine to plunder, if possible, the unpopular Jew. mortgagees. The money-dealing'tribe is fortunately acute enough to; anticipate thechange'in time to or^tb alU> viate its own threatened >ruin: A mortgage debt • which -is ■ likely to diminish -in -value is • still v.more likely to he- called in at some .moment when the ■ owner of land is'least prepared to struggle against • the imposition of fresh terms ;by -the lender. The ; small Government annuitants who swarm "in s?aris;' and in every little capital of a department will; probably .bear tlie^whole -weight of the loss when ■', half their little handful of napoleons turns, as, in . -an Eastern tale, into worthless leaves. : ; • "

M.Chevalier shows that.-tfe anomalous law of currency which he denounces has hitherto, at: 4he expense of his owe oountry, postponed the revolution which Impends'over the rest of the world. In his-own expressive 'words, ""France serves temporarily as a 'parachute io retard the fell'of -gold-;'* for as long, as a debtof twenfy'fra-nes can be discharged by. the : • tender of a napoleon, holders of silver-coin will be ready, to exchange it, on receipt of a small premium, for the legal/equivalent in gold. The ..enormous Extent of the >aemand which has been thus created is shown by the progress of the French gold ooinage, which in less than -nine years hasreached the amount of a hundred and twenty millions sterling. During the same period the coinage of silver has, by great exertions on the part of <ie Government, been brought up to ; thirteen millions. ""If the directors of the mints had been left to themselves, they would oot perhaps have struck a single five-franc piece since 1853." an annual import into Europe of gold bullion to the amount of forty millions, it is impossible not to foresee that the parachute which "bears up nominal values will soon be hopelessly overweighted. .. In England, as there is no question of fraud or of a double standard, the change in the relative value of gold and silver has derived its principal importance from the diversion of the sudden influx into the mint 'of France. The approaching fall in the absolute value of money may well cause graver anxiety. There is no reason to suppose that when France is. once' sufficiently supplied with the new coinage, there will be any great additional demand to counteract the effect of an unprecedented supply. M. Chevalier, after a detailed examination of the different outlets which have been suggested, shows that they -are all either imaginary or insignificant. ..; The. use of gilding in ornament might possibly became more common if the metal were considerably cheaper -^^hub the wonderful ductility of gold is such a» to reduce within a trifling compass all the material which could be required for the purpose. A sovereign would furnish gilding for a thread six hundred miles in length, and according to M. Chevalier every house in France might be furnished with gilt ceilings for two or three hundred thousand pounds. Ornaments of solid gold might possibly become somewhat less uncommon 5 but the fashion might, on the other hand, decline as the display became less difficult of attainment; and while the materials were cheaper, the workmanship would be, to a certain extent, more expensive. In commercial transactions coin is every day becoming less neces-

• "On the Probable Fall in the Value of Gold." By Michel :[ Chevalier, Member of the Ihetituto, &o. Translated from the French, with Preface, by Richard Cobaen. lisa Loudon i Smith und Sou. ' H

aary, as tha art of balancing accounts is m Or fully developed. The gold of England amounting in round,numbers;to ibrty million' -is aided by, JabUit '■ .thirtyf; millions m bank notes, wliik' it© r'circuiaoori; v ,,of^ bills and o f similar comiperciji uequrrlies/w^estimated ;at tw hundred njilUqniJ, At], JtKfl;|l^jondon Clearing House, payments of several-- millions are daily effected withbtttxtbe use of & five-pound note sovereign, or a shilling. The probable increase' of the retail demand for money will at most only counterbalance the growing disuse of coin in wholesale commerce.

--The reßuiy| )S t^afche4jaund4jiion is -approaching and that the dykes are alreatTy overwhelmed. Soind able writer* have (already re&nimended the 'estab. lishment "of a'silye'r standard%/the future, but «H existing obji^ according to tEe,termsr«f .the.bargain. The State owes to its. creditors neither,corn nor cattle, but two hundred'inillioii dunces 'of^a'certain substance ! which might be tenderedjJß-diacharge of the debt although it had become as cheap and common as iron. The fundholder of a^thottsand a-year may have believed himself Wcat c in the enjoyment of a liberal competence, yJetlHeGbyernment guaranteed him neither luxury; nor,,comfort, but. merely the ; right to an annual payment of about two hundred and seventy ounces ;6r .ipetal; 'If the commodity which f6rm«'i4he- LbWii 1/6f'-'''th'e^-;transaction had become scarcer, the burden,onf-'the taxpayer would* have proportionately increased, and it is'certain/that) he, will itake the-utmost advantage of the; change,which- is likely to relieve him of a large .portiontof his: liability.. i The ruin of families, as they sink; by thousands .into a lower class of society, willibe a melancholy, but unavoidable result of a; bargain .which,:can scarcely be called improvident. Lendereof^gpldtwere as little able to foresee the discqvery,,pf the gold-fields as postpostmasters.; and innfee^pers^'oii , the | great North ioad to anticipate theflffitfod^Btibn' |of railways. The injurjr'to.thtf creditoi^ ivill, '-'of'course, bear a Qirect proportion' to ■ the "duration'of the contract. Eundholders,as perpetual annuitants, will, in their ownipeisons 6r in;,thoßeof;their:transferees, bear the entire losaof the ultimate decline :in the value of .gold; andthe hardshipwill pcessmoet severely on the numerous possessors of temporary interests in stock which, as regardsithe principal,is wested,in trustees. The deep-rooted affection^ of tie Gourt-of Qiancerj for Three;pfer cent.'Consols.:will^pr»vemore)ruinous to the objeets,ofits.care..thanif.the, Suitore? Fund had been invested in steamboats -and in railways, Widowß and orphans, and annuit»nts,/even if they have studied ;M. v Chev:alier ; and (blv, Cobden, will be utterly unable to profit by .their-knowledge or to get rid of which is -decaying in their hands. Independent fundholders,-unless they can discover some erroiviri,'tbe^ecqnomical argument, have as yet the r^edys-in-.their own*hands, with the aid of the'nearest broker. alarm becomes general, the sudden crash of .public credit will act to a certain extent, ac a drawback on >the large profit which must.necessarily!accrue to Ihe State. Policies of Assurance on-Kves stand next in order as ■undesn'ablei l-secunfies .-'in ' 'theMprospect of a . declining-standard <of valuer r ■ iln<this-case. atao the contract ¥6lds v.gop^ in Jorm^and,in law,.but a worm may be eating out all ithe anterior-substance. la consideration ofoei tain,premiums, Assurance ComSanies wfil hereafter, beicalled upon to pay a hunred or a itltousand ounces of the produce of Aug. tralia and Galifomiia. The \ receipts have hitherto borne the rvalue, which was' Contemplated by both parties to sfche bargain, but ithe future payment may possibly be reduced in value tto the amount of onehalf or of three-quarters. :!Notes of a bank which has stoppedjpayment, and coins of a metal which has become worthless, produce jpreeisely similar I results to the unfortunate holder, it.is irue tthafc a pound will alwayifreiain a;certain rvalue,;but few persons can;lose the half of thair substance-without practical ruin; If statesmen in the present day were accessible to bribes, they would .perhaps repudiate Pope's congratulation on^the use, of a portable currency for'purposes of corruption:—

How would this news a- statesman* slumbers fpoiL! " Sir, Spain ban vent a'thousand jars of oil;; " A hundred oxen at your levee roar; '.'■■ ' Huge bale* of British doth blockade.the floor." The oil, and cattle,=and* the <jldth -might mdiswittstanding the inconvenience' of publieit j^ejpreTerred by the venal placeman to. .worthless towns,- or to their equivalent in Equally depreciateil^aper. The community, "as a whole, will 'lose "nothing by the change, although it may prdbably&e injurious]/ affected by the general; disturbance *of^social relations. Producers, and lespeoißlly {producers of raw material, \wijl prdfitrto =the greatest mtent by the misfortune jof their- .helpless iaeighbaars. Landowners, theyjare 'hampered fey long leases, will find ?their property'increased, at the same time that their*taxes,ijointures, and mortgages are largely reduced. :Farmers> -traders, an 3. manufacturers will all benefit >by the-redaction 'of-the.NationaLDebt, and they/-will alLppDaKly'mtercepia.portion^df the influx of ;money-ijefore they are-compelled to adjust the rate tsf wages to the changing standard of value. The ruin of a large .portion of ihe upper.and middle classes, at tKe same time that the working classes suffer: temporary,-idistress, iwill not:.directly'impoverish Jfehe coun-try,;bat it m&y perhaps,produce a .social and political revolution.;- ; : ,} ,-,,: ;; :- >; ..; It wilH>e difficult iso attribute 4he blame of any evils which may .occur topwant of imprudence on the part of legislators. Gold. had, for many years fulfilled, better- than any other substance, the requisites of a fixed standard of value, and it is by a mere,, accident; that the countries which preferred the use of-silver are.a'tpresent exempt from similar alarms. The difficulty which impends over statesmen, resembles the confusion which might have fallen on navigation if. the magnetic needle had suddenly, ceased to, point to the pole: and in that case^although compasses would have suddenly become useless, it would follow that ship-owners had been to blame for fitting up their vessels with binnacles. It is true a change in a natural law is impossible or inconceivable, "whilst the establishment" of a gold standard was based on human conjectures which in this particular instance have proved erroneous'; but-it was heccessary to makes choice, and it was right to be guided by experience and by proved convenience. A silver, standard would have been, equally .deranged, by the discovery of a score,of Potosis; and a corn standard such as that which regulates the tithe averages, may p«" haps be as much, modified by the cultivation of the prairies of Illinois as the value of gold by the diggings of California. The bestL course zander tlw circumstances is to look the difficulties in the fi«f> and M. Chevalier and Mr. Cobden deserve publio gratitude for calling general attention to a subject of transeendant importance.-. „:.,' ,