Silver and Wheat.

Star (Christchurch), Issue 5279, 8 June 1895, Page 8

Silver and Wheat.

(Lyttelton Times.)

Some persons have been puzzled by tbe bi-metallist contention that the fall in tbe price of silver has acted aa a bounty on Indian exports, or, at any rate, profess to find considerable difficulty in making the connection between cause and effect. The matter is really very simple. It is generally conceded that Indian wheat can be sold in London at a price which is equivalent to Bos_ of silver per quarter — that is, 20 rupees, the standard Indian coin. This is not alleged to leave a large margin of profit to the Indian grower, but sufficient to maintain him in what is, judged by our standard, a meagre scale of subsistence. His wants are few ; a little cotton material for clothing and a little rice f orf ood, a primitive kind of plough for cultivation, and such other incidentals as are absolutely essential for living and farming in the simplest and crudest fashion. That ia to say, that with wheat selling at 40s and silver at ss, the profit on Indian wheat would be sufficient to keep the grower alive and allow the merchant a narrow commission and no more.

India began to export wheat to England about 1870, when the market price was about 455, and silver ruled at 5s per ounce. The gross returns then amounted to about 9|oz of silver per quarter, or say 24 rupees. During the next few years wheat ranged considerably higher, and thia gave the trade a good start, with the usual result that competition between sellers became more keen, and presently the price began to be forced down. By 1883 it had dropped to about 40s, and since then it has steadily fallen lower and lower. It is clear that had circumstances affecting Indian wheat production remained unchanged during the interval, tbe year 1883 would have practically Been the end of competition from that quarter. But in the meantime, silver had been demonetised, and its value measured in English gold had fallen to about 43 per ounce, though the rupee was still the standard coin, and its purchasing power was unaffected, in India. Thus it came about that the speculator gelling a quarter of wheat in England for 40s was enabled to purchase lOoz of silver — half an ounce more than the same quantity of wheat realised in 1870— -and this, when converted into Indian coin, represented an actual gain, as compared with the earlier year, of one rupee per quarter. Evidently the fall in wheat had not prejudiced the Indian grower, because he had been more than recouped by tbo coincident fall in silver. While producers in gold-standard countries suffered a heavy decline in their returns, tbe producer in tbe silver country had actually increased his profit;

Thiß is what is meant by the statement that the fall in Bilver has acted as a bounty on Indian wheat, a bounty -which was available so long and in proportion, aa eight bushels realised a price which exceeded the current gold value of Boz of silver or 20 rupees. It mattered not how low wheat might fall if silver fell lower. Wheat at 2Qs per quarter wonld mean starvation to the English or colonial farmer, but with silver at 2s 3d per ounce the ryot would be rolling in wealth. Taxes might be increased to provide interest on English loans, and the prices of imported goods night rise through adverse exchange; bnt these things would not trouble bim to any appreciable extent. Russia, with her bi-metallic system, and Argentina with her paper currency, were in much the same position as India, and these countries have, as was inevitable, monopolised the market to the exclusion of their less favoured gold-standard competitors. In 1893 the Indian mints were closed, the importation of silver was checked, and an attempt was made to force up the gold value of the rupee. This practically amounted to a withdrawal of the bounty on exports, and the trade which had been virtually created and kept alive by it suffered a rapid shrinkage, as statistics show. Export merchants being no longer able to dispose of imported silver at the mint, had to abandon this profitable branch of business; for, be it noted, the profit all along had actually been made on silver, the wheat acting as a convenient medium in the transaction. Russia, has also imposed restrictions on her silver coinage, which has no doubt prejudiced her wheat export. The adoption of international bi-metallism with free coinage of both metajs at a fixed ratio, would put an end to the gambling on exchanges, which is the only fit term to apply to the methods obtaining in Indian foreign trade during the last twenty years. At the present time there is no common medium of exchange between gold-standard and silver-standard countries. To each the money of the other is a mere commodity, to be bought and sold like bo much iron or coal. Bi-metallism seeks to establish a basis of exchange between the two, to put producers of all nationalities on a fair and equitable footing and to reduce the dislocation which is at present afflicting international trade. The depreciated paper currency of Argentina is, and promises to be, a disturbing factor in prices of wheat and certain other commodities, but the time will surely come when Argentina will have to abandon her present insecure Bystem and put herself on a common basis with other nations.