THE SILVER STANDARD AND THE DISLOCATION OF ITS PARITY 407
The facts thus presented led to two conclusions. The first is that the supposed enormous increase in the relative production of silver was an assumption which had no foundation in reality. On the contrary, a glance at the figures for relative production discloses the curious fact that since the beginning of the eighteenth century silver, instead of rising, has been falling in proportion. With the exception of the first quarter of the nineteenth century, silver had formed, throughout the two centuries covered by the table, a diminishing proportion as compared with gold.* Indeed, never was the proportion of silver so low as it was in the latter half of the nineteenth century, and even when after 1873 it began to grow it did not reach half the magnitude it had reached in the beginning of the eighteenth century. The second conclusion which these facts were claimed to sustain was that the value of silver in terms of gold did not move in sympathy with its supply relative to that of gold. According to theory, the value of silver should have been rising because the relative volume of its production had been diminishing. On the other hand, a closer examination of the figures of relative values and relative productions, as given in the foregoing table, instead of showing any close correlation ( see Chart III) between them, pointed to the contrary. Instead of supply and value being inverse in proportion, it showed that as its supply was falling there was also a fall in its value. Such being the facts of history, it was contended that they gave no support to those who rested their case on over-supply rather than on demonetization as a sufficient explanation for the depreciation of silver.
Apart from such minor points, the issue was considerably narrowed by the peculiarity of the events of the twenty years preceding and following the year 1873.† Compare, it was said, the period commencing with 1848 and ending with the year 1870 with the period following 1870, and there emerges the arresting fact that these two periods, though they have been the opposite
- In view of this, it is a matter of some surprise that such an eminent economist as Prof. W. Lexis should have ceased to be bimetallist on the ground that the enormous increase of silver militated against the establishment of a permanently high ratio with gold. Cf. his essay on “ The Present Monetary Situation,” in the Economic Studies of the American Economic Association, 1896, Vol. I, No. 4, pp.
273-77. The habit of measuring the production of silver in terms of value is no doubt largely responsible for this quite unfounded notion.
† Cf. H. S. Foxwell, “Bimetallism : Its Meaning and Aims,” in The ( Oxford ) Economic Review (1893), Vol. III, p. 302.