Popular Science Monthly/Volume 76/March 1910/International Coinage
IT is quite impossible to discuss the subject of coinage without touching that of money. But the reference to the latter will be brief, and will consist mainly of a statement of certain fundamentals that are now practically accepted by all.
The long and bitter controversy between monometalism and bimetalism has ended in an understanding that there is no such thing as "intrinsic value" in money. When gold monometalism became universal, silver took at once the status of a commodity, became subject to fluctuations in price according to the law of supply and demand, like all other commodities, and declined markedly in value as one of its former uses was curtailed by law. If the civilized world should agree that only certain kinds of clothing could be made of cotton, and that all others must be manufactured of wool; or that cane sugar must be the only kind employed for food, similar effects would take place in the prices of cotton and beet sugar. Again, as silver declined in price, silver mining became less profitable, and silver miners gradually forsook the business and turned their attention to gold. Immediately the production of the latter began to increase until at the present time its annual output is about double in value that of the combined product of silver and gold a generation ago. As this increase occurred, the value of gold declined, establishing the quantitative theory of the value of money. For, though by law an ounce of gold was still and is now, legally transformable at the mints of all modern nations into coin of a face or money value of about twenty dollars, yet the coins so produced and put into circulation have been capable of buying each year less and less of all other commodities; or, to put it differently, sellers of all commodities have each year demanded more money for their wares, that is, prices have steadily risen since the flood of gold began. Thus the commercial world is faced to-day with the same problem that was up for solution thirty years ago in the matter of silver, viz., how to render more stable the purchasing power of the money unit, in view of the enormous and rapidly increasing output of the world's gold mines.
Here a word as to the two metallic schools may not be out of place. Monometalism was (and is) based upon the theory that either one of the precious metals (but gold surely) is so rare in nature, so hard to win, and exists in such really limited quantities as compared with the demand for coins, that if made by law the basis of money, it could be depended upon to exhibit permanent stability of value. Bimetalism, on the other hand, was founded upon the idea that in the development of the resources of the globe by man the discoveries of new sources of the two metals had, in the past, occurred in a roughly alternate sequence, would continue to occur so in the future, and that if both were admitted freely to unlimited coinage at an agreed ratio, based upon the proportionate tonnage output in the past, as far as records went, in the long run, through any considerable term of years, this tonnage ratio would be maintained. If so, the value ratio would be justified, and the two would float side by side. It was also held that the world needed both, because neither could be produced in sufficient quantity to meet the demand for coin. There was much in the way of historic fact to support these views. Considering only the era since the discovery of the new world, which is as far back as statistics on the subject are at all reliable, there was first the great output of gold from the Brazils, Venezuela and Colombia, which was followed by the silver flood from Mexico, Bolivia and Peru. Later came the almost simultaneous discovery of the Australian and Californian gold mines, after which occurred the vast silver output from the Nevada, Utah and Colorado silver deposits. But during the height of each of these metallic waves it became a strain on commerce to maintain the theoretical parity as based upon the average output, and because united international cooperation towards that end could not be secured, the effort was finally abandoned.
Since the civilized world became welded together by commercial ties as well as by railroad and steamship lines, the post office, the telegraph and cable, and now finally the telephone; as banks of deposit, discount and issue multiplied, and exchanges for produce as well as for stocks and bonds became fixities in all the great financial centers, the use of paper in the way of warehouse receipts, bills of exchange, checks, drafts, bank and government legal tender notes, has enormously expanded, so that among the wealthy and well-to-do the use of coin for money has already decreased almost to the vanishing point, and there is a positive dislike to a silver coin larger than an inch in diameter, and a decided preference to leave all gold coins in the custody of the banks, and use in place their notes and bills, or those issued by the governments. This is a perfectly natural evolution, and one that is bound to continue until the average citizen above the class of wage earner will carry only enough visible money to meet the spot cash necessities of the day, and will transact all the balance of his business with a check book. The process is already so far advanced that few people besides travelers and sports now-a-days carry upon their persons or in their homes the equivalent of more than five to ten dollars in money. What is to be the outcome? Will all coinage ultimately degenerate to a mere matter of tokens? Will all other kinds of money disappear between the covers of a check book? Will bank vaults become in the end the only place where one can get a sight of one hundred dollars in coin at a time?
But even with the banks the same process is in progress. Vaults are steadily becoming smaller, and are being used more for the paper evidences of property than for coin, or even bills. In large cities the bulk of the money is kept at the clearing house. In countries that possess central national banks it is stored in their cellars or kept at the government treasury. Money, as money, is undoubtedly disappearing rapidly from view, and in its place is arising a system of credits and credit transfer agencies, capable of being used not only by the people of each nationality, but between the nations themselves. How far the process can go remains yet to be seen, but a realization of the advance to date will show the road along which the financial world is traveling, and give some idea as to the goal that may be ahead.
But as yet only a very small part of the inhabited world has become really civilized. The United States and Canada on our side of the Atlantic, northwestern Europe on the other side, Australia, New Zealand and parts of Japan, a little patch of South Africa, a few spots in Latin America, and small areas in eastern Europe and India. The balance of the inhabitants of the globe may be considered financial barbarians. In numbers they will outbalance us nearly ten to one. With them money (where it has advanced beyond the idea of shells, hides or cattle) is still coin. For bills they have yet no use. There are living nearly fifteen hundred millions of such people that are capable of earning an average daily wage of as much as twenty-five cents or more. If all could be set to work the weekly pay roll would be about two and a quarter billion dollars. Assuming a month as the time required for coins among this class to make the trip from earner around through the hands of merchants and banks back to employers, it would take ten billion dollars' worth of silver money to permit of the steady employment of this army of laborers. Of course between sixty and seventy per cent, of this mass of individuals would not be earners (the women, children, old and decrepit), but, on the other hand, the actual laborers would be paid from fifty cents to a dollar a day, according to capacity. Here then is a large field for the use of the metal that the civilized world is rapidly discarding. For silver only could be used, gold representing too much value. At its present market value of say $15,000 per ton, it would take nearly seven hundred thousand tons of the white metal to produce the above mentioned stock of coin. The present annual production of the world is a little less than 7,000 tons. Hence it would require the entire product at the present rate for the next one hundred years to supply the demand. In view of the large use the western world yet has for small coin, and for silver in the arts, it will probably be safe to say that if the progress of civilization is not stayed, if it advances only at the rate that has obtained during the nineteenth century, there could be created a demand for the metal to the extent of the full output of the mines of the world at the present time, for probably the next two hundred years.
The question is, how to inaugurate and encourage this demand, how to introduce among the black and yellow men the coin of the white man, and interest them in its acquisition. Each in its way, the great commercial nations of the day are unconsciously engaged in the task. The English shilling is working northward from the Cape of Good Hope, has already come in touch with the German Mark and the Portuguese peseta which have been introduced on both the east and west sides of the continent, and will in due time meet the French franc and Italian lira coming south from the shores of the Mediterranean. In Asia, the Indian rupee, the Russian rouble, the Japanese yen and the American-Philippine coins are already competing for the patronage of the Malay and the Chinaman. In South America neither American nor European coins have any foothold, the Latin-American nations being well supplied by systems of their own, all related more or less closely to the coinage of Mexico or Portugal. Thus the plainly evolutionary task of pushing civilization into the uneducated parts of the world through commerce is as badly hampered by the different coins offered to the barbarian, as are the efforts of the evangelists to introduce Christianity by the existence of the various denominations and creeds. The church is beginning to appreciate the wastage in its efforts, and is trying to minimize it by combinations among the denominations having for their object to standardize Christianity, so to speak, by reducing tenet and dogma to the lowest possible terms. Commerce must do the same. The white man's coins must be standardized and simplified. If this can be accomplished, not only will the western nations be able to push their commercial influence much faster than now, but a new and immense field will be opened to the producers of silver, which should not only stay the decline in values, but restore it for a century or two to the position it held fifty years ago. This achievement in its turn should have the effect of checking the present flood of gold, which is already a menace to commerce, and which in another decade will certainly culminate in disaster to the world's financial system. For if silver mining should become as profitable as of old, by reason of a return of value to $1.30 per ounce, many who are now reluctantly engaged in the extra-hazardous business of gold mining will abandon it in favor of the much less hazardous one of silver production.
In looking over the field to devise ways and means to secure an international coin, it would seem as if the harvest is almost ripe for the gathering, that much preliminary work has already been done, and that if the cooperation of America, England, France and Germany was arranged, the step would be easily taken. The French franc, under different names but identical in value, is the legal unit in Greece, Italy, Belgium, Switzerland and the French colonies in north Africa. The English have been agitating for fifty years the reform of their currency, appreciating how great a handicap it is in commercial competition, and are only awaiting a plan that can be put into effect without too serious a wrench to the national susceptibilities. The German Mark presents the greatest difficulty, for it is the business unit of sixty millions of intelligent and pushing people. To North Americans the dollar of course seems to be the most satisfactory money unit in existence. Canada and Mexico already have it, the latter, however, at the silver valuation. It differs but a few cents in nominal value from that of the units of most of the Central and South American nations except Brazil. As the dollar was originally a Teutonic coin (known as the Thaler), and the Mark is a unit of comparatively recent origin, it would seem as if the Germans should not object too seriously to take it up again, and they would carry with them the Scandinavians, the Hollanders and the citizens of Austro-Hungary, with whom they have intimate financial and commercial relations.
The franc (and also the Mark) seems too small a unit for these days of great fortunes and huge capital aggregations, and the pound sterling is too large. As the shilling is really the retail unit of the British Empire—except in Canada and India—and has very nearly the value of our quarter, but little difficulty could be experienced by England and her colonies in changing to the dollar and a decimal system. Altogether the way seems very clear to us, but national pride in a coin, and national habits of long standing, are difficult matters to overcome. Perhaps the best argument in favor of the dollar is the rapidly growing financial preponderance of the United States and North America in general in the commercial world. This in time will force the financiers of all nations to think, write and act in terms of dollars as well as of their own coins, if they intend to keep up with the procession of events. Just as the English language, by the spread and increase of English-speaking people, is likely to become in due time the vehicle of communication between business men all over the world, so the dollar, aside from its inherent good qualities as a convenient money unit, promises, by reason of the expanding population, trade and activity of the North American continent, to become each year better known and better appreciated, until its universal adoption becomes natural and inevitable.
Aside, however, from such an argument, which Americans can not press strongly without wounding the national pride of other people, and especially of the Europeans, the international coin will come in a comparatively short time, just as will arrive the international postage stamp, which, by the way, is very badly needed. For the upper classes of all countries, the people who travel, and have to stand the nuisance and loss of changing their money at every frontier, the bankers and international merchants who have to cumber their accounts with the fluctuating item of exchange between commercial centers will insist upon it. All the European nations with the exception of Russia and Turkey are ready for the change, and when these reach the stage of real constitutionalism in their progress upward, they will be compelled to follow, being already deeply in debt to the French, English and Germans. Japan may be counted upon to acquiesce instantly in any unit agreed upon by the rest of the civilized world. That virile and open-minded people will at once perceive the advantage to themselves in their program of the commercial conquest of China. Their present unit, the yen, will not stand in the way, but will rather assist in the change.
Consider the increased force of the commercial assault on continental Asia and Africa and the other untamed areas of the globe of an international coin which the half-civilized and barbarous people of the globe found could be used in trading with any of the nations. Asia is called "the sink of silver." Scores of thousands of tons of the white metal in the guise of Indian rupees, Mexican dollars and other coins have disappeared during the last four hundred years among its teeming millions, and the drain still continues at the rate of about 3,000 tons per annum. It is the result of sheer force of numbers, coupled with patient industry and frugality. When these people awake fully from their sleep of centuries, and begin to produce and consume with something like the vigor of the western world, they will be capable of overwhelming it with their output of raw material. With what can they be paid? The balance of trade has remained steadily in their favor as far back as records go. We can only at first satisfy a small portion of their demand in goods, for their wants will increase slowly. They know of but one kind of money, namely, silver, and require that inflexibly. The western world has silver in abundance. It is a drug on the market. Why not prepare unitedly to let them have what they desire, and what we can so easily furnish, and at the same time put it in the form of a coin, which, when it became their unit, would guide them along the path of increasing consumption of those articles which they can produce, and in the production of which we can never hope to be able to successfully compete?