§ 2. Gold and Silver, why fitted for those purposes.

By a tacit concurrence, almost all nations, at a very early period, fixed upon certain metals, and especially gold and silver, to serve this purpose. No other substances unite the necessary qualities in so great a degree, with so many subordinate advantages. These were the things which it most pleased every one to possess, and which there was most certainty of finding others willing to receive in exchange for any kind of produce. They were among the most imperishable of all substances. They were also portable, and, containing great value in small bulk, were easily hid; a consideration of much importance in an age of insecurity. Jewels are inferior to gold and silver in the quality of divisibility; and are of very various qualities, not to be accurately discriminated without great trouble. Gold and silver are eminently divisible, and, when pure, always of the same quality; and their purity may be ascertained and certified by a public authority.

Jevons226has more fully stated the requisites for a perfect money as—

[pg 291]

Accordingly, though furs have been employed as money in some countries, cattle in others, in Chinese Tartary cubes of tea closely pressed together, the shells called cowries on the coast of Western Africa, and in Abyssinia at this day blocks of rock-salt, gold and silver have been generally preferred by nations which were able to obtain them, either by industry, commerce, or conquest. To the qualities which originally recommended them, another came to be added, the importance of which only unfolded itself by degrees. Of all commodities, they are among the least influenced by any of the causes which produce fluctuations of value. No commodity is quite free from such fluctuations. Gold and silver have sustained, since the beginning of history, one great permanent alteration of value, from the discovery of the American mines.

In the present age the opening of new sources of supply, so abundant as the Ural Mountains, California, and Australia, may be the commencement of another period of decline, on the limits of which it would be useless at present to speculate. But, on the whole, no commodities are so little exposed to causes of variation. They fluctuate less than almost any other things in their cost of production. And, from their durability, the total quantity in existence is at all times so great in proportion to the annual supply, that the effect on value even of a change in the cost of production is not sudden: a very long time being required to diminish materially the quantity in existence, and even to increase it very greatly not being a rapid process. Gold and silver, therefore, are more fit than any other commodity to be the subject of engagements for receiving or paying a given quantity at some distant period.

Since Mr. Mill wrote, two great changes in the production of the precious metals have occurred. The discoveries of gold, briefly referred to by him, have led to an enormous increase of the existing fund of gold (see chart No. IX, Chap. VI), and a fall in the value of gold within twenty years after the discoveries, according to Mr. Jevons's celebrated study,227of from nine [pg 292] to fifteen per cent. Another change took place, a change in the value, of silver, in 1876, which has resulted in a permanent fall of its value since that time (see chart No. X, Chap. VII). Before that date, silver sold at about 60d. per ounce in the central market of the world, London; and now it remains about 52d. per ounce, although it once fell to 47d., in July, 1876. In spite of Mr. Mill's expressions of confidence in their stability of value—although certainly more stable than other commodities—the events of the last thirty-five years have fully shown that neither gold nor silver—silver far less than gold—can successfully serve as a perfect “standard of value” for any considerable length of time.

When gold and silver had become virtually a medium of exchange, by becoming the things for which people generally sold, and with which they generally bought, whatever they had to sell or to buy, the contrivance of coining obviously suggested itself. By this process the metal was divided into convenient portions, of any degree of smallness, and bearing a recognized proportion to one another; and the trouble was saved of weighing and assaying at every change of possessors—an inconvenience which, on the occasion of small purchases, would soon have become insupportable. Governments found it their interest to take the operation into their own hands, and to interdict all coining by private persons.