essay3 [12]
of silver. If the quantity of ounces be considered there are 30 millions of silver and 1 million of gold, and therefore if the quantity of the two metals decided the ratio it would be as 1 to 30, but that is impossible. The ratio in the neighbouring countries is 1 to 10, and it would therefore cost only 10 million ounces of silver with a trifle for the cost of carriage to bring back to the state 1 million ounces of gold in exchange for 10 million ounces of silver. To judge then of the ratio between gold and silver the market price is alone decisive: the number of those who need one metal in exchange for the other, and of those who are willing to make such an exchange, determines the ratio. It often depends on the humour of men: the bargaining is done roughly and not geometrically. Still I do not think that one can imagine any rule but this to arrive at it. At least we know that in practice it is the one which decides, as in the price and value of everything else. Foreign markets affect the price of gold and silver more than they do the price of any other goods or merchandise because nothing is transported with greater ease and less injury. If there were a free and regular trade between England and Japan, if a number of ships were regularly employed in this trade and the balance of trade were in all respects equal, i.e. if as much merchandise were always sent from England to Japan, having regard to price and value, as was imported from Japan, it would end in drawing at last all the gold from Japan in exchange for silver, and the ratio between gold and silver in Japan would be made the same as it is in England, subject only to the risks of navigation; for in our hypothesis the costs of the voyage would be supported by the trade in merchandise. Taking the ratio at 1 to 15 in England and 1 to 8 in Japan there would be more than 87 per cent to gain by carrying silver from England to Japan and bringing back gold. But this difference is not enough in the ordinary course to pay the costs of so long and difficult a voyage. It pays better to bring back merchandise from Japan rather than gold in exchange for silver. It is only the costs and risks of the transport of gold and silver which can leave a difference in the ratio between these metals in different states: in the nearest state the ratio will differ very little, there will be a difference from one state to another of 1, 2 or 3 per cent and from England to Japan the total of all these differences of ratio will amount to more than 87 per cent. It is the market price which decides the ratio of the value of gold to that of silver. The market price is the base of this proportion in the value assigned to coins of gold and silver. If the market price varies considerably, that of the coinage must be reformed to follow the market rate. If this be not done confusion and disorder set in in the circulation, and coins of one or the other metal will be taken above the Mint value. There are an infinity of examples of this in antiquity. There is a quite recent one in England under the regulations made at the London Mint. The ounce of silver, eleven twelfths fine, is worth there 5s 2d sterling. Since the ratio of gold to silver (which had been fixed at 1 to 16 in imitation of Spain) has fallen to 1 to 15 and 1 to 14? the ounce of silver sold at 5s 6d sterling, while the gold guinea continued to circulate at 2 1s 6d sterling, which caused the export from England of all the silver crowns, shillings and sixpences which were not worn by circulation, silver money became so scarce in 1728 (though only the most worn pieces remained) that people had to change a guinea at a loss of nearly 5 per cent. The trouble and confusion thus produced in trade and circulation obliged the Treasury to request the celebrated Sir Isaac Newton, Master, of the Tower Mint, to make a Report on the measures he thought most suitable to remedy this disorder. There was nothing easier. It was only necessary to follow the market price of silver in coining silver at the Tower. And whereas the ratio of