Bimetallism and Monometallism. The demonetization of silver has been the cause of fierce political controversy. Many people called bimetallists believe that the United States should permit free and unlimited coinage of both gold and silver at a ratio fixed by law. It is contended by the bimetallists: 1. That there is not enough gold produced in the world to supply the requirements of business. 2. That a double standard prevents prices from fluctuating; that when one metal begins to be scarce and its purchasing power begins to rise the other metal will take its place and restore prices to a level. 3. That the low price of silver is due to legislation; that if the free coinage of silver should begin again its price would rise. 4. That under gold monometallism there has been a general fall of prices, and that this fall has imposed unjust burdens upon the debtor classes. The monometallists, or those who believe in the single gold standard, reply: 1. That the supply of gold is increasing fully as rapidly as the demands of trade. 2. That bimetallism is impossible; that even if you coin the two metals, one of them will always be the standard, and that one the cheaper; that Gresham's Law is unalterable. 3. That legislation cannot regulate the price of silver or of any other commodity; that silver is cheap because the supply is large and the demand small. 4. That the fall in prices is due not to the scarcity of money, but to the improvements in methods of production; furthermore, that in making contracts we are bound to incur risks, and that sometimes the debtor class profits by the change in price and sometimes the creditor class profits thereby. International Bimetallism. Many people who believe in the principle of bimetallism do not think it would be wise for the United States to throw its mints open to the free coinage of silver unless the great nations of the world should do likewise. These usually advocate international bimetallism, a scheme under which the principal governments of the earth are to agree to make both metals legal tender at a fixed ratio and allow free coinage of both. The champions of this policy argue that if the law should everywhere recognize so much silver as being worth so much gold it would be possible to keep both metals in circulation, for there would be no inducement either to hoard or send abroad either metal. The further arguments of the international bimetallists are those of the national bimetallists stated in the preceding section. Several monetary conferences consisting of representatives of the leading nations have endeavored to agree upon a plan by which silver may be remonetized and international bimetallism accomplished, but the efforts of these conferences have not been rewarded. The currency law of 1900 while making gold the single standard declares that nothing in the law shall be construed as unfavorable to international bimetallism. QUESTIONS ON THE TEXT 1. What is meant by the term "currency"? Illustrate. 2. State the provisions of the coinage law of 1792. What do you understand by the free coinage of a metal? 3. Explain "Gresham's Law." Illustrate its workings in our monetary history. 4. What led to the depreciation of silver after 1873? What were the 'trade dollars''? 5. What were the provisions of the "Bland-Allison Act''? 6. What were the provisions of the "Sherman Act''? 7. What circumstances led to the repeal of the "Sherman Act''? 8. What is the law at present in respect to coinage? 9. What are the subsidiary coins? silver in a quarter? in a dime? 10. What is meant by bimetallism? against this policy. What is the number of grains of State the arguments for and 11. What is meant by international bimetallism? What are the arguments of those who favor this policy? SUGGESTIVE QUESTIONS AND EXERCISES 1. The law of 1792 quoted in the lesson says: "Every 15 lbs. weight of pure silver shall have equal value in all payments with one lb. of pure gold." Why 15 to 1? Why not 10 to 1, or 20 to 1? 2. If a government should open its mints to the free coinage of silver and copper, what ratio would be established between the two metals? (Use the market quotations found in the newspaper.) 3. If under the bimetallic scheme suggested in 2 the copper-mines should be suddenly exhausted, how would "Gresham's Law 4. What was the "crime of '73''? operate? 5. How many grains of silver in a silver half-dollar? Are two silver half-dollars worth one silver dollar? Do they contain as much silver as a silver dollar? 6. If you are worth your weight in gold how many dollars are you worth? 7. Which do you see more frequently-gold or silver certificates? What was the smallest amount for which you ever saw a gold certificate? the largest amount? What was the smallest amount for which you ever saw a silver certificate? the largest amount? 8. How many grains of gold is the silver in a silver dollar worth? (See market price of silver.) Why is it that a silver dollar readily exchanges for a gold dollar? 9. Is the amount of gold produced annually increasing or decreasing? Does this fact favor the monometallist or the bimetallist? What facts favor the position of the monometallist? What facts favor the position of the bimetallist? 10. Procure, if possible, a gold certificate, a silver certificate and a treasury note of 1890 1 and bring them to class for the purpose of study. According to the language on its face what metal would you get for the gold certificate if you should present it at the treasury for redemption? What metal would you get for the silver certificate? Suppose you knew you could get gold for your treasury note if you asked for gold, would you regard it as good as a gold certificate? Suppose you understood that the government's supply of gold for redemption purposes was running low, what would you be inclined to do with your treasury note? Suppose you should burn your gold certificate, would the government gain or lose? Topics for Special Work.-Bimetallism: 21, 303-313. The Demonetization of Silver: 22, 403-413. 1 Under the currency law of 1900 treasury notes are being withdrawn from circulation and silver certificates are being issued in their place. It may be difficult, therefore, to procure a treasury note. XLII PAPER CURRENCY Bank Notes and Government Notes. In addition to the metallic currency described in the last chapter we have in circulation a large volume of paper currency. This consists of bank notes and United States notes. A bank note is a promissory note, payable on demand, made and issued by a bank and intended to circulate as money. Whether a bank note will circulate as money or not ordinarily depends upon the reputation of the bank and upon its ability to pay the note when presented for payment. If those persons to whom the note is offered have no faith in the bank's promise they will not receive the note, and its circulation is thereby made impossible. A United States note (greenback) is a form of paper money issued by the federal government and based upon the credit and good faith of the country. It is a legal tender for all debts public and private. The United States Banks. The financial plans of Hamilton included the organization of a bank in which the new federal government should have a direct interest. Such a bank, he claimed, would make it easier for the government to obtain loans, would make it more convenient for the individual to pay his taxes to the government, and would furnish a safe depository for the government's funds. But could the federal government, under the Constitution, establish banks? Hamilton contended that it could, claiming authority under the "elastic clause." Madison contended that the scheme for a government bank was con 66 Its demned by the silence of the Constitution; was condemned by the rules of interpretation arising out of the Constitution; was condemned by its tendency to destroy the main characteristics of the Constitution." 1 Jefferson also bitterly opposed the bank scheme, but Hamilton was victorious in Congress and in 1791 the first Bank of the United States was chartered for a period of twenty years. capital was $10,000,000, of which sum the government subscribed $2,000,000, becoming thereby an active partner in the banking business. The notes issued by the bank were receivable in payment for all debts due to the United States. The bank was prosperous, but when its charter expired in 1811 its enemies were too strong for it and it failed to secure a renewal of its charter. The notes (paper money) which the first bank issued amounted to $5,000,000, but when the bank closed they were paid and cancelled and thus passed out of existence. In 1817 Congress, recognizing the assistance which a government bank might give in financing the war debt of 1812, chartered the second Bank of the United States for a term of twenty years, contributing one fifth of the $35,000,000 of capital. Andrew Jackson opposed this bank with all his might and succeeded in preventing a renewal of its charter, which expired in 1837. The notes of this bank, like those of the first, were redeemable in coin and were a legal tender for all debts due to the government. The charter permitted a circulation of $35,000,000 in notes, but the largest amount issued was $25,000,000. The notes of this second bank did not always pass at their face value, but in the end they were all redeemed and removed from circulation. Since 1837 the federal government has not been interested as a partner in any bank. State Banks. The real enemies of the Bank of the United States were the banks which were chartered by State au 1 In 1820 the Supreme Court of the United States decided that the federal government has the right to establish banks. |