THE SILVER QUESTION.

Otago Daily Times, Issue 9565, 22 October 1892, Page 6 (Supplement)

THE SILVER QUESTION.

TO TUB EDITOR.

Sir,—The essence of the case wmch the bi metallists present in support of their theory is that through the increasing scarcity of gold, consequent upon its red&ced production, prices have fallen to such an extent as to disorganise commerce, check industrial energy, and inflict hardship on gold debtors under " existing contracts." They say that the admission of silver would remove these objections and difficulties by increasing the proportion of metallic currency to that of commodities, thereby raising money values. It may be conceded that prices would rise as the first effect of the change.' If pricts be simply an expression of the relation between the quantities of gold and commodities, then by the inclusion of silver on a fixed parity with gold it goes without saying that prices would relatively advance in proportion to the increase made on the currency side. The bimetallists will not quarrel with this, because it is their own argument, for they claim that it is through the diminished gold supply that prices have fallen. But in order to promote continued harmony in the relations between the two, the argument presupposes that there should always be a definite addition to each side of the equation to keep it in equilibrium. The volume of commodities is always increasing in some degree or other, and so must currency in the same degree, or there will arise a variation in the proportions which, by the terms of the argument, must be expressed by a variation in prices. Now, in order to repair the losses incurred by the fall in prices since 1873 in the particular case mentioned by your leader writer, there will be required an advance of some 40 per cent, in the money value of the produce sold to meet the loan of LSOO referred to. Leb it be assumed that by the infiltration of silver to the currency there will then be sufficient to sustain that advance for a time just as well as did gold in 1873: then, it may be asked, how are the future variations to be adjusted ? It is not very easily conceivable that the proportions of increase on either side will be progressively equal. Besides the creation of new products, there will always be an increase in the bulk of the old ones, if the world's population is to grow, and these must have their share of the currency division. As the supply of the precious metals is most likely to become more difficult of attainment, and, judging from the past, the production of new forms of wealth more easy, it may be anticipated that in time the volume of the latter would oixtstrip that of the former. What, uuder such circumstances, must then take place ? Necessarily a sliding down of money values just in the same way as we have had diminishing prices since the check in the gold supply commenced some years ago. Up to this point the dreams of the bimetallists would no doubt be fully realised. Trade, in the language of the market, would be brisk, money i abundant, production extended, and a belief that prosperity was to be permanent very general. But • the inevitable consequences of an artificially stimulated industrial and commercial condition would surely follow. In the general rush a great many things would be done that should not have been. Speculation would take the place of the carefully judged operations which the experience of long-continued close margins had imposed on traders. In a word, the future would be discounted in almost every direction, involving, as a matter of course, tile expenditure of much ill-directed effort. All experience of inflated trade cycles xiroves this, and we have only to remember how foolishly some of our easily borrowed millions were spent, and also the case of the Melbourne "boom," to see the effect of rapidly made or easily obtained money. During the period of expansion there would be one class which would reap the chief advantage—that is the owners of capital in a fixed form, more especially those oE a monopolist character, such as laud and mines of one kind and another. The returns from this class of investment would be increased in a degree out of proportion to the increased cost of working. During the coal excitement of 1870 to 1873 enormous incomes wore derived from mines that had long been unworked previous to that period, and when the epoch was at an end, au immense sum had been transferred from the pockets of the general community to those of the owners of these. Notwithstanding the air of general prosperity that seemed to pervade the whole of British industry at that time, there is any amount of evidence that it was not so real as was supposed. The best test whether the people of any country are, on the average, better off under high or low prices is their power to jrarehase necessaries. Without going into minute statistics, returns show that in every year there has been an increase in the consumption of the chief articles—say wheat, meat, sugar, &c.—and at the present time these total much more than in the so-called prosperous period of 1850 to 1873. Again, a good estimate of what the trading community's condition is as regards soundness may be obtained from the bankruptcy returns. Let the advocates of high prices and " plenty doing " mark this: 1870-72 were years of great business activity, while as yet there was no sign of the crisis of 1873. Nevertheless the bankruptcies of those years in England and Wales averaged 604-0 ; whilst in the period 1885-1838, with lower prices s!l round and much less business excitement, they only averaged 1600. It would be quite easy to adduce other statistical evidences in support of the contention which most leading economic authorities endorse—viz , that a high beat of the commercial pulse is not consistent with general welfare, and that the temporary excitement of the time exhausts energy at the expense of future strength and CDmfort. No doubt it is very irritating and wearisome to the man of strong nervous power to be compelled to restrict his operations within the comparatively narrow circle which a steady trade on small margins necessitates. Bub the experience is a wholesome one, aud in the long run it leads to tbe best industrial habits. The introduction of bimetallism, as its advocates admit, means the raising of values, and if there is any true lesson to be read in the history of prices in their relation to the general welfare, it is th?.t they should be allowed to take their natural course in order to ensure the best all-round results. Productive power is always becoming more intense, and is the factor that is now cheapening commodities relatively to gold. Why should there be any artificial interference with the process, unless it can be shown that every class would equally share any advautage to be gained ? There is no doubb under present conditions much difficulty experienced in the ease of Indian business, and that those whose resources depend on the position of the silver market suffer loss through present depreciation ; but their misfortune is nothing compared with what would be inflicted were bimetallism adopted. In conclusion, it may safely be affirmed that all the best practical opinion is against the proposed change, whilst it is also condemned by such eminent writers as Bagehot, Jevons, Giffen, &c, who ridicule the idea that you can obtain any permanent benefit from a mere change in currency values. —I am, &c, October 19. A. Lee Smth.