Different treatment of Gold and Silver – March 1878
RogerB
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This excerpt might be of interest to those investigating the gold vs bimetallic standards of the 19th century.
“Notes of Conference between the Committee on Coinage, Weights, and Measures and the Secretary of the Treasury and the Director of the Mint. March11, 1878.
Silver Coinage (excerpt page 3)
Mr. BREWER: This new silver-law requires the issuing of certificates on coin? ·
Secretary SHERMAN: Yes, sir; but we can now issue certificates for gold bullion.
Mr. MULDROW: What would be the objection to issuing certificates on gold or silver bars, or on gold or silver in any other shape than that of coin?.
Secretary SHERMAN: The objection is that silver bullion is governed by its market value. The law makes a distinction between gold and silver in that respect, gold bullion being coined free of charge.
We know precisely how much coin a certain amount of gold bullion would represent; but it is not so with silver bullion, because silver bullion is bought and sold at its market value. Every 412-1/2 grains of standard silver, when coined, represents a dollar, for all purposes, but it would now require more grains of silver than that to be equivalent to a dollar in market value, therefore we cannot very well issue certificates on silver bullion for more than its market value.
Mr. MULDROW: Is not that difference cause by legislation?
Secretary SHERMAN: No; it is caused by the difference in market value.”
Comments
"Yes Minister," said Sir Humphrey.
This discussion presented the arguments that should have been before Congress passed the Sherman Silver Purchase Act in 1890. That disastrous piece of legislation required the Federal Government to purchase 4.5 million ounces of silver every month, which was paid for with notes that could be redeemed in gold or silver. Since there was an instant profit to be made from redeeming those notes in gold, there was a run on the Federal Government’s gold supply.
The net result threatened to undermine the United States monetary system as the government’s gold inventory fell to alarmingly low levels. The resulting threatened instability was a contributing factor to the Panic of 1893 (along with some industrial bankruptcies caused by excessive debt) which was a comparatively short, by the usual standards, nasty economic recession.
Bottom line – Bimetallism doesn’t work and never would or will work because there is no magic ratio between the values of gold and silver.
This burned the Japanese in the 1850s. When they had established a domestic 1:5 ratio, the rest of the world was closer to 1:15, which led to a huge amount of gold leaving Japan.
Keeper of the VAM Catalog • Professional Coin Imaging • Prime Number Set • World Coins in Early America • British Trade Dollars • Variety Attribution
In the conference meeting, Sherman explained the concepts Bill mentions multiple times to several Committee members. Much of the discussion indicated that the members did not understand much about market value or legal standard value.
In reading the entire 13-page report, it's amazing that Sherman didn't end by saying "You are all a bunch of idiots" or something equally generous.
Thanks for the excerpt Roger... and yes, for some reason, certain business concepts are incomprehensible to non business individuals (particularly politicians). It was always a challenge to explain margins to people. Cheers, RickO
Yeah. I've sometimes had trouble explaining "verges" to anyone.