y
N. P. VAN DEN BERG, L.L.D .• H.C.,
PaJlllIDBNT or TJIB JA'U lS,(N ,H.'tAV • VI 'ltB IVU OY 'I'BB BATAVU.
OaAHBlfu, OP COKMEMB .~'P'fD Il<nV"I!k::-;;-r."~~~_,
AB lNTRODUCTORY CHAPTE:J;l.
ON TlIE PllJIIQtNT STATE OF THE OUlUli!NCY IN HOLLAND AND JAVA, lIY :r'HE Wil! AUTB;O
1
j
•
r rHE
SILVER QUESTION,
BY
J . P. VAN DEN BERG, L.1.D .. H.C"
PR1~Sll)EST O~' TIIE JA'\".\ BAS}>, B.U.\YlA, VICE-PUESIDENT OF TUE BATA"IA Cn.Ullllm OF COMlllmCp. .. \sn l:\ïl{;~Tn\·.
[Tnm,lnter{ Ir01ll tlle Dfltcl~ Tal at tilt Literpool Corll1tlate 10'-the Ntthtrltmdl.]
WITll
AN INTRODUCTORY
ON THE PRESEN'lC STATE OF THE CURRENCY IN HOLLAND AND .TAVA, BY THE ~AM}~ AUTHOR.
LIVERPOOL,
JA:\lES \YOOLL.-\lW, !i-I. C ... STr.E S1'Rt::E'I'.
1879.
\
LIVERPOOL;
1.1.11: 4!fD NIOBTrNU,U,)!, Pall'lTIlRl.
..
TllE PRESENT STATE OF THE CURRENCY QUESTION IN HOLLAND AND JAVA.
As a rule, people out of Holland, have got but very scauty informntion about the mensures, taken by the Dutch Govern- ment in regard to ourreney matt.ers in Holland aud Java. In tbe valuable Report 11'0111. tne Select C01mm'Uee on tne lJepreciatio1J of Silver, ordered by tbe House of Commons to be printed, 5tb July, 1876, it is statad (p. xlvi) tbat "As to Holland, tbe
"Committee have to regret, that thoy have been 10ft almoet
It without nuy information, which is thc more ta be regretted,
I j as her trado with her Eastern possessiolls, where thorc is an
j I exclusi'To Silvor curreney, ronders her position peculiarly
j I iutol'oating, as being, in many respects, analogouB to that of
11 thc United Kingdom,"-and it is not, thoroforo, ta be wondered at, that in tbc copiaus appendix of tbe HO'lldbook 01' Gold and Silver, by an I .. dian Official, published in 1878, by Longmans, Green and Co., London, readers are told H that nothitJg has 11 been done with regard to N etherland India,"
while, BS early as in 1873, tbe coinage of Silver money on behslf of tbe Dutch ERst Indies was stopped, and Gold had been made tbe regulator of tbe Indiau currency in tbe /irst hslf.year of 1877.
Consequently, tbe following memorandum may be of some use to the students of tbe monetary question, to whom tbe official doeument. published in H?lland are not available.
4
Seven years ago, in October, 1872, the Dlltch GOVOl'ument,
fuIly aWRl'O of the difficulties with which Holland might have to contend, by reason of the monetary }'eform in Germany, appointed a Special COIDmittee, ta consider tllO subject and ta advisc about tbo mensuros, ta be taken with regnrd ta the interests of tho country.
,
In ft most valuable Roport, duted December 28th, 18i2,- a document of great interest for the study ~f the monetury quostion in EUl'ope,-the Commissionel's pomted out, tbat it would bo impossible for Holland, ta retnin the Silvel' standOl'd estabJished by the Act, dated November 26th, 184i, were all its neighbours, ta adapt Gold as their standard of value.
According ta thcir views, the most desirabIe solution of tbe question for Europo, in general, would be the adoption by tbe leading monetary powers on the Continent, of tbe double standard, admitting both Gold and Silver as legal tender at tho same û..".d ratio of value. A great stability of value for both
metnIs ",'ould bo the result of the eompensative netion of that ,\
system, if introduced through the whole of Europe. But Holland alone, would be powerless to force dl'cumstnnces and the RepOl·t, therefore decided, that it would be unavoidable for the country, to .dopt the single Gold standard, shouJd Germany decide upon that lino of actioD.
The hope however romaining, that it would still Ilo found advisable in Germany, not to ."cJude BiJ ver altogether as legal tonder, the Committee nnaUy recommended fol' Holland, the p1'ovisional adoptioll of a double stnudard, with- out abrogating the luw of 1847, it being thougbt suflicient, under existing circumstances, that tbe furthel' coinage of Silver should be at once restric.1ed, or stopped altogethel'.
To this end measures were taken immediately by Govern- ment, a Bill being passed, empowering tho Executive to Buspend the cornage of Silvol' for privnte persons, but tho pl'incipnl question l'emnined in statlt quo, it gradunUy becoming more evident, that Germany was determined upon the intro-
)
5
ductiou of a UnifOl1ll Gold carrency throughout tho whole of the now Empire, Silvo!" ta be admitted anIy as token currency for a. limited nmount and not to exceed 10marks por hond of the population.
Taking into cOllsidel'atioD, the altol'ed state of affairs, au ndditional Roport, dated June 26th, 1873, was issued by tho Dutch Ourroney Commissioll, in which tho necessity was proved, of taking a fUl'thel' decided step, towards a Gold stanclal'd fOl' Holland. Govol'ument agreeing witn tbe rooo- mendation of its Commissioners, 11. Bill was submitted, pl'oposing the introduction of 11. logsl tender currency of ten and !ivo f1.orin-pieces in Gold and tbo withdrawalof tho Silver stnndard eains, issued by tbe Mint, Und9l' tho working of tho currency regulations of 1847. This measure however, did not meet with tho .pproval of the States-Genoral, the majority of tho Second Chamber deeming it premature, the greater part of its members being moreover of opinion, tbat no thorough roform of tho carroney in Holland, could be undertnken, without providing, at the same time, for the currency of its Enstern possessions, whero tbc monetary system of the mother country, had been intl'oduced since the lat of May, 1854.
For the moment therefore, Holland ho.d l'eally no standard of vRIne. Gold was of no use aDd the Mint beiDg closed fol' tbe coinnge of Silver, the offer of Foreign Bills, eould not bo counter-balanced, by the import of this mot.!. A heavy fall in tho exchanges, was tbo natural consequence of this abnormal state of affairs, the balaDee of trado being at tho momont I.rg.ly in fnvour of Holland. Ratas gradually dacfuled irom twelvo /lorins per.el to fl1.65 @f11.60, nnd tho uncertainty of the course of the Exchange rendered ever)'
~l;;;;~;~tioi.~!.~th foreign countries, in which Gold was the basis of tbc m'>n"ta?j..ty"tem, in the highest degree flangerous.
Naturally, commercial community, did not remain 'luiet. The pri.neiip~l.,Çl"alnb1)rs of Oommerce, th. Notherlnnd&
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Bank alld other private banking institutions, sent in their complaints to Government and finally, the Minister of Financo presented a BilI, dated Aprill8th, 1875, to tho Second Ob amber
of the States-Genel'aJ, witb tbe view of adopting Gold as ..
standru'd ooin, in order to check the fall of foreign exchanges, and to facilitate tbe importation of Gold, for tbe balance, which tbe neigbbouring countries owed to Holland.
Fortunately, for the interest of the country, ths now pro ..
posal, l'eceived tho sanction of tho Legislntm'o (law of Juna 6, 1875), and, from tbe Ist of July, 1875, the Mint wa. opened to tbe public, for tbe coining of Golden ten-guilder pieces of 9/10 fine, to be leg.l tender concurrently with the Silver flol'ins, at the ratio of 1 to 15.625, bcing the relativa value of Gold to Silver, by a quolation of 60.35d. per ounce of standard Silver.
A risa in the exchange to the ordinary par of about twelve florillS per ane r, storling was the immediato l'osult of tbe
mensw'o. But it soon became evident, that another circumstance, -..I.
required tbc most cnreful cOllsideratioD. The DOW law had put a ,top to tbe jaU of the rates of exchange, but there was no limit agaillst a mrthel' ,dIe. Gold, beiug undervalued with regard to the market pl'ice of Silver, was of course kept back by the public and tbe Bank, and no Gold thorefore being available for export, in case of a turn in the balance of trade with foreign countries, rates in cOllsequence might go up to the parity of bar sUvel' in the London market, which, of course, would inevitably cause a serious loss to tbe grenter part of ths oommunity.
In order to proteet the generaJ interest. of the country, against ths serious dangors eV9ntunlly to result from "Deh an unscttled state of affairs, Government, in confonnity Vl;D...1d!-e_
general opinion of aH the authorities in the matt~r~ thought it advisable, to ulldertake the complete reorgeruzation of tbe existillg monelary system. On the 91b of May, 1876, a Bill was presented to the States-General, prol)Ssing tbo introduction
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7
of the exolu&ve Gold sta.ndard and the withd.rawal or con- veraion luto smnll money of the larger silver coin.!;, with authorization to the Minister of Finance, to melt down into bars and to seU, a portion of the existing Silver coinage, in order to proeuro Iho Gold, wanlod for tho purposos of Iho Gold coinage.
This proposal howev8r, met with serious opposition on Iho pari of Ihe Second Chamber. Accol'rung to Ihoir Pre- liminary Roport, of July 13th 1876, they cOllsidel'ed il uuadvisablo, to abandon the expectant attitude ndopted in Juno 1875, 80 long as thora was any chance left, oI coming to aD international understauding, with regard to the genera!
edoplion ol Iho double standerd, by Iho leading roonetary Statas. Thc Government, admitting that sineo tho Bill WRa
brought forward, tho increased movement in tho United Statoe of North Amoriea in favour of ths Silv8r stnndard, had greatly nltered tho general state of affairs, willingly entered into the views, laid down in the above~mentioned Report nnd declnred, in the Reply of the Minister of Finance, dated October 6th, 1876, its willingness, to postpone for the present, the fina! rogulation of tho monetary systom, provided that monsw'es woro I1dopted, fOl' gunrding tho country, ngainst the dangors, to whiOO it was exposed, by ruainlaining Ihe ,tat" quo. An Amended Bil!
aeeordingly was Bubmilled 10 Ibe Second Charober, in wbieh Ihe paragraph, declaring Gold 10 be boneolorth the only standard of tbo cUl'rency, was Buppressed nnd ft now paragraph was introduced, by wmeh the existillg Silvor cWTency, was mnintnincu liS tilnudard money of tbe renlm, concurrontly with the Gold coins, issued in vutue of thc provisional arrangement of June, 1875. But, in order to counteract tbe depreciation of the cUlTency, t·.~" the rise of the l'stes of exchange with other countries, above tbo point wbieb. would allow of the exportation of the Gold coinage, thc Minister thougbt it indispensable, to insert iuto the nmencled Bill, the clause of the origillal Bill, by which authority was vestcd in tbe Executive, not only to coin
l
8
Gold, but also to withdraw Silver from cireulatioJl nnd to sell it in sueb. a manner and ta sllch au extent, as might bo deemed necessary.
Aftel' a prolonged debate, tbe new Bill was carl'ied through the Lower Housa, by a vote of 37 to 25, but WhOll it came on for discussIon in thc First Ohambel', it was l'ejocted, tbe majority of tho UppOl' House, strongly objecting, ta au oventual demonetisation ancl sula of Silvcl' and deeming it the proper course, not ta ontor into auy fl'esh legislatiou on tbo subject, but simply to prolong tho provisional monetary law passed in Juno, 1875, whicb, if not ronowed, was ta expho at tbo end of 1876.
Under these circumstances, na athor alternativo wasleftto Goyernment, but to follow the advice of tbe First Ohnmber nnd a short Bil! to tbat effect, was aceordingly laid before the Legislature, proposing the renowal, for a..furthcr twelve months, of tbe Law of June 1875, wbich was at onee nlr·eed to by both Ohambera, and it became law, on the lat of J anuary, 1877, tbe Government giving tbe Ohnmbera to understnnd, that in the course of that further twelve montha, a fresh attempt would be made by Government, to bring in ll. Bill with a view, to the fin.1 settlement of tbe question.
:Hut no striking events occurring in tbe money mnrket, Goverument gradually changed it. policy. Throughout tbe whole of 1877, ratos of exchange fluctuated but little and • fin.l arrangement of the monetary system therefore not being considered urgent, it was thought sufficient for tho moment, to prolong tbc suspension of the cornage of Bilver, not for anather year howev?r, but until otherwise determined upon by Iaw.
A Bil! to that effect, was adopted without any opposition, by botb Ohambers (Iaw of December 9, 1877), and sinee tben, the matter remained in the same position, in which it had been hrought, by the measure of 1875, th. introduction of Gold as 8tandard coin of tbe realm., COlljOintly with tbe Silver coins, issued before the La,. of June 1875 had been passed.
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9
Tbus the system ol the .. ótaloll boiteux," has been working iu Holland, for these four yaars, aud it cnnnot be denied that, as .lL rule, it has done wonderfully weIl, as it has in Franco. But the danger romains for both countries, that thoy may suddenly havo ta face au unoxpected aud a most serious risa in ths exchange, 50 long as the reform
or
their cunoDey, is not carried through; and the final illtl'oduction, of the exclusive Gold standal'd cau therefore only bo a question of time, for the Dutch legislators.In the meantimo. another question called for the most serious considol'ation, ou thc part of the Government. Like England, Holland has a vast Iucliau Empire, where SiJval' has near]y nlways béen the only standard of vaIuo, (not to mention tbe sad copper and paper period thl'Ougb which Netherlands India passed, befare the introduction by law of May I, 1854, of thc same mouetar.)' tiylltem, adoptcd by tbc moLher country in 1847.) Having na Mint of its own howevel', Netherlands India, has been supplied with thc money, requil'ed for circula- tion, by specie imporia from Holland-a system which, during thc twenty-five years of its existence, has fully answered thc l'equiremonts of the country. It united tho cil'culatiou of Java aud thc other islands of thc Archipelago, witlt thc cil'culation in tho mothol' country j and experience has fully
ShOWD, that tbc establishment of a Mint in Jnvfl, whioh some years ago (in 1862 and 1863) was strongly advocated, by tb.
commercial community, would have boen of DO usa whatever, sa long as the main souree for the supply of tbe material to be COillOd, 1',e., Silver, wns to be found in EUl'Ope.
'fhus a very nanow link, united the cunancy of Java and the other Duteh possessions, in this part of the world, with tbe currency of Holland; and, from tbe moment it was thought necessary, to take into consideration ft. reform of tbe latter, the question nrose, what was to be done with tho former. No hesitation however, prevailed in Holland, about tbe answer to bo given. Already, in tbe fust Report of December, 1873,
10
the Dutch Gurreney Committee stated, that the single Silver standal'd, ought to remain in forco in the Eaetel'u llossessions of tha kingdam, it being a faet that India prererred Silver ta Gold oud that only Silver was abla ta provide far !ha rea!
wants of the poople thera. /1 Thc anuual exports of SUvar
H standard eoine to our Eastern possessions," tho Committee remarked, H represent a value of several milliaDs, and will, to
1I a groat extent, Rssist Holland in getting rid of part of its
" Silver currency, towards the time, when tho demonetisation of
If tho Silver eoine (still remaining in Holland) must be decided
11 upon."
In tha subsaquent Raport of June, 1873, the Caromittee expressed their olünion still more strongly, regarding tho futura of tha curraney of Natherlands India. Thay again stated, "that Silver wa.s to remain the only legal tender in tbe East, whatevol' reform might ba introduced, in the monetary system of the mother coüutry j" aud, according to those views, a draft Bill was submitted by the Caromittea to !he cau- sideration of Goverument, directiug that the Dutch guilder, the twa-and-a-half guilder, and tho half-guilder pioea, wera ta remain legal tender in Java, even after their demonetisation in Holland. As a temporary measure, it was recommended, to stop the coiuage of Silver for private account, even ou behalf of the East, until tho withdl'awal of tho standard SUver money, circulating in Holland, had been completed.
According to the views therefol'e, of the Governmeut Committee, the lndian cunency was to remaiu unaltered and it may be deemed certain, that the opinions expressed in their Reports, were shared by the large majority of thoso, who had made a studyof the BuLject in Holland. Ths idea., of intro·
ducing Gold as ft legal tender in the Eastem possessions of the kingdam, was thaught almast absurd. It was stated, that no sane Government, could think of iutroducing snch a measure, and cansequently tha Govarnmont Bill of Octabar, 1873, which, in confol'mity with the views of the Comw.esioners,
• .
\1
proposed tbat Gold should be adopted, as the excIusive standard in Holland, and Silver should be used for small change on1y, stipulated. at the same time, that no alteration should be mnde in the monetary syoom of Netherlands India.
As stated abovo, thc BUl just mentioned, was rejected by tbe Second Chamber, in Mareh, 1874, but the result of the clebate, would doubtless have been different, had the Govern- ment been able to inform Parliament more exactly, about their intentiolls, with regard ta the ultimata regulation, of tbc Indien cu.rrency questioll.
Though generaIly accepted in Holland, the concIusion of the Governmont Committeo, with regard to that quostion, met with serious opposition in J aVRo It was shown that, in tbc faco of CL continuous fall in the value of Silver, the difficult and threatening situation created, by thc existence in Holland, of
aD exclusive Silvar currency, would be felt in exacUy tbe same mawler in Java, wben no provision was taken by the Govern- ment, to keep tho currency at the standard value. Tbe Indian press, was almost unanimous, in deprecating tbe nc1option of the mensuroa, pl'oposod by the Committoe, so long as a:ffairs in India remained unaltel'ed, it being evident, that India would not be able to defend itself Bingly, against the IIuctuation. in the value of Silver, wbich must inevitably follow the abandonment of Silver as standard of value, by tbe lending monetary powers in Europe; and it may be taken for gl'anted, that the expression of public opinion in Java, had ft most decided influence, on thc vote of tbe Lower House, by which tbe Bill of October, 1873, wa. rejected.
As will appear in the following pages, tbe author of the present memoranda, has endeavoured, from ilie moment the question W88 hrought forward, to convillce bis countrymen that, equally with the people of Holland, tbe lndian subjects of tbe Ring of the Netherlands, are entitled to proteetion, from the ruin and disftster, in which tbe action of a dOI)reciating currency, must necessarily involve them. Af ter mature con-
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12
sideration, tho Illdiau authorities, also entered inta tbs same. views, and the Home Government finally agreeing with thc proposals, l'eceived from the Governor-General of Netherlanda India, a BiU was presented on the Ist of Jnne, 1876, to the Second Ohamber, far tll8 t~ntroduction oj Gold al standard mOtley
,in End-ia, concurrently with the existing Silver cW'rency, f'urther coining of Silver money being susponded at ~o aame time, whilst the Governor-General was ta be authorised, if necessary, to causa sitve,. coinB ta he sold, af ter withdrawing them from circulation.
'I'he Bill passed, aftel' a very short debate, by a voto of 59 to 1, though not until au amendment had been oarried by 47 to 14 against the Government, to leave out the clauBo authorising the Governor-General to demonetise and sell Silver eoin. But in eonsequenee of the rejectio~ by the First Chamber of the Monetory BiU for the N etherlands, mentioned ahovo, the specia! BiU, for the regulation of the monetory system in the East Indies, was not proceeded with, ns same of its clauses, drawn in contemplation of tho Monetary BiU for tho mother country becoming law, containod a direct reference to eertain clauses of the latter.
Tho subject however, was not abandoned by Govornment, aud, in the beginning of 1877, an amended Bill for the regu- lation of the Indian ourreney, was ro-introduced by the Ministry. It wafi areproduction (with only the necessary verba! alterations) of the aId Bil!, in the farm in whieh it had been passed, by tbe Second Ohamber, in November, 1876, its principal features, being the establishment, in the Dutch East Indies, of tbe double standard, on the same basis as in Holland, i.e., with the forma! suspension of fumer coinage of Silver. Without a division, the Bill was adopted by both Chambers, and it became law on the 28th of Mareh, 1877.
An exact translation of the document, as it has boon promul- gated in Java on the 7th of June, 1877, wiIl b. fOUl\d b.lo ....
The adoption of the measures propos.d, for regulating
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13
tho monetnry sJstem of Netherlands India, cannat
be
toa highly estimnt",l by tbe Indian oommtmity. The new BilI, is the unequivocnl acknowledgment of thc principle, that fixityof value, is the indispensable charactenstic of n. monetary standard in India, as well as in Holland, and tbnt it ls one of the first duties of every Government, that has irnposed CLstandard uI)on its subjecte, to take any l'oasollable precCLution in ita power, to provent tb at stnndard fluctuating. Certaiuly, tho abnndonment by N othol'landslndia, of tho single Silvol'standard, Wh1011 for years has always admirably answerod thc purpose, is, fol' variaue reaBons, sincerely to be deplored,-but thc most important is the most pressing; lookiug at tho stato of affairs in adjacent countries, it is quite evident, thnt n metal, thc vnlue of which is subject to slieh violent fluetliations, as ha.s been the case with Silver during the last five Ol' six years, ean be of no further use, 8S a standm'd measure of value. As long as Silver is proseribed by tbe leading monetary State. in Europe, Gold alone offors the necessary gunrantee, of great fL"'Ó.ty of value, a monetary standard ought to possess, and it thOl'efore does credit to the Dutch Government, that, instcad of leaving the Indian cmrolley to its OWll fate, as prOI)Osed by thc Cw'reney Conuuittee, and of imitating tbo 11 mastj)rly inactivity" of the rulers of British India, it has made Gold the l'egulatol' alao, of the clUTency in tho Eastern posscssions of tb. renlm.
The present lark of Gold, is of na conscquenee, BO long as tho circulating Silver money, fetcJl€S tbc full vnlue of Gold, fol' payments in Holland. During tho last years, J RVa. has l'epeatedly bad to face an unfavourable balane. of trade, whieh made the export of specie unavoidnble, but tho rates of exchange, never exceeded the bullion point of Gold, beeRuse Silver could nlways be used, as a remittance to Holland, in order to effect payments there, or to purchaso sterliug u~ in Amsterdam for payments in England.
In eonsequence, rntes of exchange have shown a most
l
remarkable steadiness, thUB offering a marked contrast with rate. in Briti.h India, as wiJl appear at once, by a look at tbe annexed diagram.
The fact, must not however, be lost sight of, tbat notwith- standing the present aatisfactory state of affairs, the whole structure must inevitably collapse, so BOon as Holland is forced by circumsronces, to complete its monetary reform. by tbe demonetisation of the Silver money still i;n circulation. A little sooner or later it must come to this, and then Java must follow, for no country, either in the West or in the Bast, ean possibly prosper, whos~ stan<}ard of valu~, I""ks the principal quality it ought to possess-a great relative fuity of value.
It is not at all impossible therefore, that at no remote period, even tbe Bastern Axchlpelago, may appear in the IDarket, for the s.le of Silver and tbe purchase of Gol</, unIes. it may still be practicabl~, to n.rrive at an international understanding, about tbe rehabilitation of Silvar, in the manner proposed lately, by the Liverpool Ohamber of GOJllmerce, and recom- mended in the following pages.
N. P. VAN DEN BERG.
BATAVU, Ju,ns 24th, 1879.
,.
16
Aat for th. R.g .. tation of th. Mon,tary Sy,t'lIl i .. tk IJuteh Rad Inil,' •.
WE, WILLfAM III., by the Graee of God, ICiDg of the Netherlands, &0.) &c.
\Vberoas we have oonsidered it necesslU'y, to ftu,thar modify the Law of the Ist of May, 1854, lor tho rogulation of the monetary system in Netherlands India, which was already modified by the Laws of 20th April, 1855, 24th December, 1857, 22nd June, 1862, 26th December, 1863,
15th September, 1866, and 27th November, 1873;
Therefore, after having consulted the COUllcil of State, nnd, in common aecord with the States-General, 'Va have seen fit to order, and We order as follows:-
ARTICLE 1.
The Firot Artiele of tbe Law of the Ist of May, IR54, is modified as follows :
"The unit of account of the monetary system in Netherlands India is t.he flol'in, clivided iuto 100 cents.
" The legal coins of the State in N ethedaDds India, are Gold and Silver standal'd coins, SUvBr aud Capper fractiousl coins, aud Gold commercial coins."
ARTIOLE 2.
The SecoDd Article of that Law is modified as follows :
11 The Gold stalldard coin, is tbe teu-fiorin piece, 8S
described in the Law of ths 6th Juno, 1875, (weighing 6.720 grammes, with a standard fine- ness of 0.900).
3
is
11 'rhe Silver standard coios, are thc followiug :-'l'he floriu, thc rix-dollar Or pieces of 'bir"o-and-a-half flol'ins, th~ half Horin, as they were defilled by the Law of 26th November, 1847." (Weight of the Silvel' florin 10 grammcs, with a stalldnl'd finenes8 of 0.945.)
JUTLOLE 3.
Th. Fifth Articlo of tbe Law of Ist May, 1854. is modified
RB follows:
"'1.'he commercial coins are the Gold ducat, anel tlie double dueat, as they were defiued by th. Law of 26th November, 1847." (Weight ol the dueat 3.494 grammes, with a stand.rd fin.ness of 0.983.)
ARTICLE 4.
Th. Twelfth Artiele of tbe Law of Ist May, 1854, modifiecl by tbe Law of 27th November, 1873, is lurther mo,lified as follows:
" Foreign Gold and Silvel' Coius, the CUITellt vn1ue of whieh .hall have been fixecl by the Governor- General, shall be aocepted at sueh public TreasUl'Y Offices as may be deBignated by him."
Order and command, &c., &c.
Done at tbe Regue, 28th March, 1877, WILLIAM.
The Minister of Colonies,
F. ALTlNG MEES.
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1031 /"
... .. ... r
...rl.n.
flI I\ I
I I I - ' - -I
(
OHAPTER J.
La question monétaire fatigue évidemment l'OpiniOD, ccpendant on
DO peut pM l'abandonner !Kms danger pour l'Întérêt gén6rale qui en reclame de plus on plus impérieulloment la solution .
• <4 Tbat planters and exponcrs in British India, Ceylon, Straits, and
China havo been greatly benefitted by tbo course of tbc rawa of exchange in their favour cannot he denied; but attention Bhould also bo pAid 10 the oonaidorations on thc reverse lido of tbc question, though tbc bounty on export-a is atimulating tbem, yot it cannot he taken for graated that the atimulua is a hea1thy ono. In 1876, when there ware groot periurbatioD.8 in tbe price of silver, tbc export tnde was much affected by a spirit of gambling or not over sde speculation. There ware oontrftct8 with banks fot tbc forward dclivory of Bills, in which one party spoculated (or a greater and the ether for 11 slighter fall, or far ao improvemcnt, in the price of silver, 80 that the exporters had chequered forlull08-some gaining largei)", others losing."-".d HU1uióOf;N 01' Gola ancl Ó'itl'ft'. og a,.
I"dian O.ffieial." London, 1878. P. Hi9T
r
ti
1
18
how b .. nking and credit institutions are thereby c .. used to suiter, and their operations, of ten to degenerate, into a 1'85h game of hazard j and how in some countries, tbe finanees and tbe State credit, becomo seriously afFected and undermined by it. Fal' installce, it cannat be disputed, that merely in consequence of thc diminution of the value of Silver and tbe COUl'se of tho l'ates of exchange, combined therewith, tbc Dl'itish India Troasury, at the end of tbe present year, 1879/1880, will ho.vo sufTorod aloss, Bineo tho yaar 1873/1874, oÎ mOl'O than 130 milliaDs of rupees. Every ono is convineed, that this state of things oannot be prolonged, or .. st.te bankruptoy of India must ouaue j it is, therefore not to be wondered at, that anxiety increases nnd complaints. about tbe ap.thy of tbe Bl'itish India Governmont, and its obstinate adhesion to tbe belief, " that
It matters will right themselves, by being left to tIteir natural
ft course," are getting louder nnd louder, ns conviction gains ground, that it has been a great mista1.:o, to delude oneself, with the sanguine expectation, that thc demand for Silver in the extensive Indion Empire, would alwnys keep the prioo of that metal, at its normal value.
Those, who take any interest in the question, wUl na doubt weU l'emember, how in our country, Mr. S. van Houten, barrister-at-law and member of the Second Ohamber of the StatoB Goneral, who forroed the same expeotations, attnoked the views of the Government Oommittee on the Netherland coinage, as set forth in their Report to the Ring, dated 28th Dooember, 1872. He considered the fears of the Committeo, for the decline in tho value of Silver, quite chimerical, aud cruefly based his argument on the coDsideratioD, that thc iDtended demonetisation of Sil.er in Germany, would Ilot affect the extensivo Bilver market in India; maintaining rus conclusion, that 11 there is na danger for Bueh a fall in thc price of Silver, as ft would necessitate a change, in our coinage stalldard,"-(p. 23 of Mr. van Houten's pamphlet on the Ooinage Question).
19
In a lectUl'e, delivered on the 16th June, 1873, on the Re!ormatioll of the Coinage in the Netherlands, aud its COll-
sequences for thc N etherland-India, and wruch has since been published, I took leave to protest against Mr. van Houten's views, defonding with !)owerful arguments tbe opinion, that India could not possibly absorb all Silvar, for which thore would be no longer illlmediate uso in Europa, aud that, thol'oforo the Asiatic Silver market, would by no menna be able to socuro to Silver, that relativa firmness of vMue, which it ought to passass, to serve as a permanent standard mas8ure in Europa or India.
Aooording to my views at that time, circumslantially explained, the apinion tbat India would Boon require more SilTer than had been the case during the last years (previou.
to 1873) did not seem justified, e.pecially 80, becau.e the problem, as far 8S I cOllsidered, was mainly ruled, by tbe proportion, b.tween the value. of the import. and export. of India.; and na circumstances ware known to me, on account of which, au early incréase of exports, entailing larger imports of precious metals, could be expected.
11 No," replicd Mr. N. G. Pierson (Director of thc Bank of the Netherlands, and since Pl'ofessor of Political Economy at the University at Amsterdam), "what mainly rules the problem,
" i5 not ths proportion between the values of importa and
" exports of India, but quite a diffel'cllt thlng, yiz., 'tbe relative
t i I value of Silver in Asin. and Europa.'" "To know" (thus ho
wrote on p. 7 of hls "Two Essays about Coinage") t i whether,
H a.nd, if BO, to what extent Silver wilt flow to Asia, one need
"not consult the statistica of importa and exports, because
t i these statistics describe a condition of things in which tbe
" decrease in the price of Silver in Europe will causo a great
11 change."
According to Mr. Pierson, the d.cline in prioe of Silver would fa.vour thc exportation of produce from Asis, to sueh a uegree, alld, at Lbe 8ame time, 80 obstJ:uct the importatioll of
t
20
European goods, !hat !he balance of trade between Aai" and Europo, would Boon show very different proportions, in com- binntion with which, it would Boon appear, how in tbe ratio, that thc price ol Silver declined in Europe, exporta of Silver to Asin would morenee.
In my pamphlet about the coinage question relative ta India, published in August, 1874, and in a laading arlicle on tbo H Balanee of Trade of India and thc Silver Markot." which appeal'od in the Algemeen ])agblad van Ned,,.land&c}t Indl"
clated 26/29 April, 1876, I explained the rensons, why I could not share Afr. Pierson's opinioDs j nnd what do now the figures show, with regol'd ta the point, 10ft in dispute betweon him nnd me? Did thc exports from India realJy materially incl'easo, and did tllO Ïmports diminish? Has thora been in consequenoe thcreof, a much larger quantity of preciaus metal required than before, to balnuce tbe excess of the exports'l Oue ought to consult thc annexed Tabie, which I have compilod Irom tbc data, mostly official, which have been put at my disposal, and one will perceive at fiTst sight, that neithor tbe one nor the other hus occurl'ed. It cunnot be denied, tbnt emce the year 1872/1873, in which the depreciation of Silver began, the increuse in tbc value of tho exports, has been rather grndual j but, nlmost in the same proportion, hus such been the case with imP01'ts, tbe excess between exports and imports in the said year, having been nearly tbe same as in the year 1877/1878, when tbe clecline in the price of Silver had we.dy exercised its influence during eix years, That, nevcrtheless, the importation of Silver during tbe latter year, has suddenly increased considerably, having reached 146,750,000 rupees, canllot be denied (according to the nloreaaid Tabie) ; but tbis phenomenon, ean parUy be explained, by the cil'cumstance, that the aale ol Oouncil Bills, .howed au amount of about 25,000,000 of rupeos less than the year befol'e, and that, on account of tbe recent famine, the Government had to bol'lVw considerable
SUIDe of money.
«(I
The great influx of SUval; bullion in,
21
11 1877/1878 is doubtless, to a graat extent, elue to HlO ]a:rge
" suma that it bas boen necessary to borrow j tbe same causa
I. will not, it is hoped, be in operation noxt yaar and thora is
11 no reaeon to expect that ths imporls of Silver will be repeated
H upon thoir recent scrue.") -Gazett" of India Extrao-l'dinal'y, Maroh 18th, 1878, p, 41.
Oomplote data of tho movomenls of trado during tho yo,,1' 1878/1879, cau not as yot be oblainecl, but tllO ~tatisties
of Iho Indian Budget for 1879/1880, whieh J,ave boen publishod in the Gazette of India (13th Mareh, 1879, 1" 82,) show nlready, that tho imPOl'ts of Silver, dUl'illg tho fiTst ten months of that year, only amounted to 21,875,000 l'upees, against 131,175,000 rupoes dm'ing tbo fu'st ten months of 1877/1878, and 56,288,000 rupoes dm'ing the fust ten months of 1876/1877, ADel it is cOllsoquently a fact, that, whilo in tho course of 1878}1879, tbe prices of Silver ware gcnornlly considol'ably Jower tban dwing tbe two pl'oceding yenI's, tbe import of Silver, has not yet renched one-fourth, of tbc average figure of the aforceo..id last years.
N either had the decrense in price of Silver, to which nttention has been drawn, any influence on tbe trade in goode in 1878/1879,
Tbe value of exports, during tho fu'st ton months, amountod to 478,234,000 l'upees, against 522,103,000 ru pees in the fh'st ten months of 1877/1878, while the imports, showed ft vulue of 322,894,000 rupecs, ngainst 344,574,000 rupees, during the same period of tho pl'evious year.
It is iudisputoble, that India, during the pf'riod of tho tweho years l}reeeding tbe deeline in the priee of Silver, viz , from 1860/1861 to 18; 1/1872 included, hus been importingSilver, nmoullting to the average vulue of more than 100 millions of rupees per annum, at the average priee of GOT'/û pence, while that importatioll during the following six years, at the nverage price of 57rh pence, ouly amounted to about 67 millioDe of rupees.
22
!
This being just tbo rovorso of Mr. Piorson's prophecy, of a further declino in tho prlco of Siher, (a decline which, in reality, has adopted much larger proportioDs, than '\"fa ever e>:pected in 1874), I con,ider myself perfectly justified in maintaining against his arguments, the views, which I advocated on p. 270 of my pamphlet about "Tho Monoy
ff Question as regards India," viz., that tbe larger or smaller extent of tho Silver shipmont, to India, do not depend on tho pries of Silvar, but upon quite different causes, viz., in thc first pInaa, upon the proportion between tbe value of imporia and export.s of India, and, secondly, upon ths position of tha' accounts botween the Brlti,h Indian Treasury and tbo so-caUed 11 Home Treasury of the Government of India."
None of Mr. Piereon's arguments show, that he haa paid sufficient attention to this lever, and still hi& influanee prepon- derates, for he re~ulates the offer of India CouDcil Bills, which, 8S menna of sen ding remittancos ta India, are preferred to shipments of Silver. It depends, a, I poiDted out before, only on the rate of Exchange, whether preference will be given to remittance in Council Bills or to specie, aDd every one, who is not a totol stranger in matters
o t
finance, knowB how tbe position of the Silver market is now invariably ruledJ by the greater or smaller offer of the aaid Bills. i~Dy consulting tbe ann6xed Statistics one will see that India has received in Gold. Silver, and Council Bms, dnring tbe year,
1860/61-1865/66
. .
, , , , , , , , , ,. .
, 246,000,000 rupees 1866/67-1871/72 , , ,. . .
,.
. , , , , , , 184,000,000"
1872/73-1877/78 ."
. . ..
" " .... 206,000,000"
• IC Tbe Government of India. must bring tbcir money home from
"India, and, therolore, must sell tbeir Bills; wbcreas Silver may go to .. many marketll, and wlI.y 'Lu held wben Hs price falIs. This is the u rcason of the sayiog' the pric8 of Council lSills rples tho l)rice of
11 Silver, not tbe price of Silver toot of Council Bills.'" .Economid, October 7Ul, 1876.
23
on an nnnunl avernge, and that the percentage prop0l'tion is 6S follow8 ; -
In Gold. In Silver. In DiUs.
In 1860(61-1865(66 ... 28 p.rc.nt .... 51 p.rcent .... 21 pel·c.nt.
" 1866(67-1871(72 ... 24 " ... 40 " ... 36 "
" 1872(73-1877(78 ... 8 " ... 32 " ... 60 "
These figtu'os thUB enHrely confum. my calclllations made in 1874, ns also the conc1usion drawn therefl'om, nnd to those interested, it wiU now be clearor than ever wby I Devor could agl'oe ,vith Mr. Pierson's argument, "that in case of a further
H decline in tbo pl'ice of Silver, Asin will require much more
" of tbat metal, and that ths immense Asiatic Silvor market
tf will prove itsclf powerful ellough to give us a suHicient
" gunrantee agaiust any flUther important decline of Silver."
!
(In Numbers of Thousand Rupees 234,940 = 234,940,000.)
r
Exce.ss VALUE. Nett Average Average
MERCIlANDISE. Tota! Difference COINING OF
Years, of
I
Import India of bet'"een Price of Rat. ofIst April Export Of Imported Of Exported of Council Columns Columns Bilv6r in Exchange in
Import. Export. of Precious BiB •. 8 .nd 9.
G d 10. Gold. Silver. Bars in Calcutta.
to Good •. Gold.
I
Silvel". Gold.
I
Silvel". Metal •. London.31st March. 24d.
=
100.1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.
R •. R •. Rs. R •.
I
R •. R •. R •. R •. Rs. R •.I
R •. R •. Rs.d. d.
1860!61 234,940 329,710 94,770 42,420 64,350 100 11,070 95,610 10 95,620
+
850 650 51,920 61H 25 (l04t)1861{62 223,200 363,170 139,970 51,900 97,620 60 6,650 142,710 11,940 154,650
lt-
14,680 590 70,710 60H 24f (103n)"'
1862{63 236,320 478.600 252,270 68,820 136,270 330 10,i70 193,980 06,-120 260,400
+
8,130 1,310 !J2,510 61.,.. 241". (102i)1863/64 271,460 656,250 384,800 89,250 140,370 270 12,400 216,%0 89,800 306,750
l-
i8,050 540 114,770 61j. 24tt (lOZi)1864{65 281,510 680,270 398,760 98,750 114,880 350 14,100 199,190 67,890 267,080
t
131,680 960 103,580 61t 25i (106i)1865{66 295,990 65-1,910 358,920 I 63,720 ZOI,MO 6,480 15,16U 243,930 69,990 313,920 45,000 180 145,070 61
n..
24H (102i) 1866{67 290,390 418,600. 128,210 -15,810 8R,550 7,390 16,920 108,050 56,140 164,190+
35,980 280 61,190 61t 24tt (102i)1867{68 357,06U 508,740 151,690 47,760 69,990 1,660 14,050 102,030 41,370 143,400
-
8,290 220 43,130 60!, 23i (98i)
1868{69 359,900 530,620 170,720 51,770 99,790 180 13)80 137,600 37,060 174,660
+
3,940 250 42,070 60! 23t (98)1869{70 329,280 524,710 195,430 56,900 82,640 980 9,440 129,120 69,800 198,920
+
3,490 790 74,740 60.,.. 24 (100)1870{71 3H,690 533,360 208,670 27,830 26,620 5,000 17,200 32,2'10 84,440 116,680
-
91,990 40 17,180 60· .... 23t (96})1871/72 320,920 632,090 311,170 35,740 80,000 80 14,670 100,780 103,100 203,880
I
107,290 150 16,900 60t 23! (98)1872{73 318,750 5ii2,500 233,750 26,220 19,340 790 12,] 90 32,480 139,390 171,870 61,880 320 39,810 60 ...
23i
(98i)
1873/74 338,190 549,960 211,770 16,490 41,440 2,660 16,180 38,340 132,860 171,200
-
40,570 150 23,700 59t 22i (95t)1874/75 362,220 563,590 201,370 20,890 60,520 2,160 14,000 65,160 108,420 173,580
-
27,790 140 48,970 5816,- ~2t (94i)
1875/76 388,920 580,910 191,990 18,360 34,640 2,910 19,090 30,980 123,000 154,860
-
37,110 170 25,500 56i 22, (92t)I 876{77 3ï1,410 600,130 235,720 14,430 ~9,920 12,360 2.7,940 74,060 126,960 201,020
-
3·1,700-
62,710 52! 20t (85!)...
1877/78 414,640 652,100 237,460 (nett) 4,680 (nett) 146,740- -
151,420 101,340 252,760t
15,300-
161,800 54i 21;'. (88t)OHAPTER IT.
Tha thaory advancad in our country (Holland) by Mr.
van Houten aud MI', Pierson, on ths influence which the damand for Silvel' in the East, will exol'ciso on the course of tbe prices of that metal, found a tnlented defender abl'oad, in the chief editor of the Economist, tbs promnhuoly deceased Walter Bagehot. In the course of tho yem' 1876, thora was published, in tho above paper, a series of Rl'Heles from his pen on this subject. Aftel' his death, these ul'ticlos were collected in a separate volume, under tho title, " Some Articles Ou tho
"Deprecintion of Bilver aud on topics connected with it.
j ( London, 1877/' all of whioh, directly or inclirectly, tended
to defend the thaory-
Firstly, That tho depreciation of Silvol', must necessarily lead ta a gt'eater damBnd for it, on tho part of those countl'ios, ,,,.here it is used us a principal menns of exchange,
Socondly, rnmt every addition to the stock of Silver in these countl'ies, must necessitate an increase in tha prico of all flrticles, which nre exchallged for Silver nnd this, in its tw'n, will proportiollally increase the ucmalld for Silver.
Thirdly, That every meaeUl'e, tanding to obstruct tJle naturnl demand for Silvar and the gradunl aprending of that metal Ovar the different Silvel'-usÎng countries, wiU only aggravate the evil, we wiah to oombat.
Doubtless, tbs argument is logica) in itse1f, but, in my opinion, its wenk point is, that it does not sufficiently take into account, tbe lapse of time, necessru'y to restore to Silvel' tba relativa atability of valua which it should pOSS8SS, as a menna of exohange and na a stnndard measure.
26
Nobody will contrawet Bagehot, that "tbe final regulator
" of tho price of Bilvar is the cast, at which it ean be produced
" in the least fartila mine, that can maintain itself in working"
(p. 80 of tbe above volume); but of what us. is thls know- ledge, when the priee of Silver, is subject in tho meanwhile, to more or less Budden fluctuations, by which all contracts that Ilro to be liquidll.ted in Silver, are upset.
It is perfectly true, that the disturbod equilibrium will, Booner or later, be somehow restored. Neverthelcss, it has been elanrly proved, that Ba.gehot was wrong whon, in his Report to the Committee of Inquiry, appoiotecl on the 3rd of Mareh, 1876, by the British Parliament (to inquire into th.
eaus.s of the depreciation of Silver), he decla"od, that "the
" fust immediate effect of tho depreciation of Silver, would be,
" to cause au unfavourable balance of trade with tho Enst,
i j and, in consequence, a great export of Silver to tho Enst."
Q. 1,363.
But, apart from what the course of events has sa clearly taught us, the theory, 11 that the increased demand for au
I j nrticle, causad by a depreciation of t,bat article, must needs
If lead to an incrense in price/' seems to mo, theoretically, much open to dispute. At all events, Bagehot and PiersoD, have applied thi. tbeory rar too absolutely, without taking into account all those pBrticular circumatallces, which exercise sueh a preponderating influellce on the question.
Thls then, doubtless, is one reason why, in thc Report of tbe nbove-mentioned Committee of Inquiry, d.ted J uly Mb, 1876, which report Eagehot himself enlls fI, {I"ery able doeu·
I I ment," (p. 41), his opinions are but cw·sorilymentioned. Eut
still more strikiog is the fact, tbat we find no trace of those opinions, in the proceedings of the Interna.tional Congress, assembIed in Paria, 1878, at the instance of the United Statee of America, The question about tbe probabla consumption of SUvar in the East, was more than Ollee broached, but no one, not even MI'. Göschen, the English delegate nnd President
•
27
of the Committee of Inquiry, .nd .uthor of tJle noove- mentioned Report, appears to have thought, of using Bagehot's theory, respecting the inHuence, which the priee of Silver in Europa, would have in en opposite direction, on tbe trade with Aais, as au available argument, agaiust the idaa of tho Swiss delegate, Feer Herzog, when he said,
"Qua c'est du commerce des ludes que dépend la variabilité
H dos é16ments de compcnsation sm Ie :c::.arch6 des métaux,
11 et qu'il y a dans la variabilité même c1u commerce des
"Iudes uu fu.it dominant, capable de décider ti. lui seul,
"chaque anuée de la situation de l'ru-gent SUl' Ie march{'
14 monétaire."-(Proces verbau:c de la Conférenc6 Monéta,ire Internat,:onal. d. 1878, p. 79.j%
Bagehot'. theory may be fairly said to have been abandoned and OTOry attempt to revive it, must signally fail, since the Economl~1t itself, has lately come forward with Il. plan, in mnny points in direct contradiction with those theories, which only recently, that journal had been advocating, with unabating perseverance. t i Let things take their course"
(EeotlOmist, 4th MarchJ 1876) j u thera is na other policy
11 possiLle, except to leave tbe ardinary ecanomical causea to
fI aperate-to suffer the present evil and to await tbe ultimata
II cure" (EconomistJ u. s"); IJ there is Dothing ta be cloneJ II except to endure the evil far the present, and ta have cau-
11 fidence that the slow action of econamical causes will in the
II end oure it" (Econom1"&t, 11th March, 1876); ffa11 plans
H which impede the ardinary action of trade ta spread SUver
I f through the world, tend to keep Silver in this market, to
H enhanes its depreeiatian here and to prevellt its diffusion,
" which is ths only euro" (Eronovu"&t, 8th July, 1876); II the
• That from the trade with India tbe variations of the olementa of compensation on the metal market are dependent, and tbat in the changeability of tbe Indian trade itaelf tbero ia n predominant motor, capable of firing by itaelf each yoor the situation of Silver on the money markot.
r
I
I
l
28
a reall'emody is to leave the graat natlll'8l forces of trade to
11 operate unrestricted j if we only lea.ve it alone, ft. new demand
II of great magnitude will eventually relieve the Silver market"
(EconomiBt, 16th July, 1876) j H the true remedy is not to
'j
impede Silver going to India, but to permit the lawa of trade" to diffuse Silver through India and Ihrough the world; lhis
If win causa au immense demand for Silver) for the count1'Îes
11 where it is the only currency are still vast and numerOlia "
(Ecotlomist, 5th August, 1876); H experience bas nov, shown(?)
H that there would be a damand for Silver for the Enst, cou-
11 sequent on its cheapness-that this demand would gl'OW
H with its cheapness-and thus an ahnost indefinite quantity,
11 if suppliod, would in time be taken off tl19 market "
(EcollomiBt, 21st September, 1876). Is it PQssible to express moro forcibly tbRn hy tbese literal quotations, the aversion to nny attempt 10 mainlain Silver (be it only tempornrily) at ils price? And what would be tbe feelings 'of Bagehot, who wrote all the nbove quotations, nnd who, moreover, declared in the Econom~'d, of March 4th, ! ( Wo cannot contral the
11 Germnll Government j it will act fOl' its own interest, and it
I/ is best that it should "-what, I aak, would be the feelings of this warm pnrtisan of letting things take thair own course, if he were informed of the plan, which is now advocated, ns a remedy, in his own paper, and of which the main theme is, that the Bank of' England be authorised by Government, 10 purchase, on joint account with the State, one half of the Silver still to be demonetised by Germany, for instanee, at the nverage price of the lnst three yours, Gormany undortaking not to bring to market the remaining half, during the next four or five yaars? But, for the moment, it ia quite immaterial 10 us, whnt Bngehot would have tbought of this plan, whieh i.
warmly recommended in the Ecotlomi&t, of April 12th, of this yeru'. But what is of more immediate importance, is tbe fact, Ihat the inJluelltial City organ, has lowered the flag, whieh formerly waved at its masthead, for it is by no menna
