VARIATIONS IN THE PROPORTION BETWEEN THE
RESPECTIVE VALUES OF GOLD AND SILVER
Before the discovery of the mines of America, the value of
fine gold to fine silver was regulated in the different mints of
Europe between the proportions of one to ten and one to twelve;
that is, an ounce of fine gold was supposed to be worth from ten
to twelve ounces of fine silver. About the middle of the last
century it came to be regulated, between the proportions of one
to fourteen and one to fifteen; that is, an ounce of fine gold
came to be supposed to be worth between fourteen and fifteen
ounces of fine silver. Gold rose in its nominal value, or in the
quantity of silver which was given for it. Both metals sunk in
their real value, or in the quantity of labour which they could
purchase; but silver sunk more than gold. Though both the gold
and silver mines of America exceeded in fertility all those which
had ever been known before, the fertility of the silver mines
had, it seems, been proportionably still greater than that of the
gold ones.
The great quantities of silver carried annually from Europe
to India have, in some of the English settlements, gradually
reduced the value of that metal in proportion to gold. In the
mint of Calcutta an ounce of fine gold is supposed to be worth
fifteen ounces of fine silver, in the same manner as in Europe.
It is in the mint perhaps rated too high for the value which it
bears in the market of Bengal. In China, the proportion of gold
to silver still continues as one to ten, or one to twelve. In
Japan it is said to be as one to eight.
The proportion between the quantities of gold and silver
annually imported into Europe, according to Mr. Meggens's
account, is as one to twenty-two nearly; that is, for one ounce
of gold there are imported a little more than twenty-two ounces
of silver. The great quantity of silver sent annually to the East
Indies reduces, he supposes, the quantities of those metals which
remain in Europe to the proportion of one to fourteen or fifteen,
the proportion of their values. The proportion between their
values, he seems to think, must necessarily be the same as that
between their quantities, and would therefore be as one to
twenty-two, were it not for this greater exportation of silver.
But the ordinary proportion between the respective values of
two commodities is not necessarily the same as that between the
quantities of them which are commonly in the market. The price of
an ox, reckoned at ten guineas, is about threescore times the
price of a lamb, reckoned at 3s. 6d. It would be absurd, however,
to infer from thence that there are commonly in the market
threescore lambs for one ox: and it would be just as absurd to
infer, because an ounce of gold will commonly purchase from
fourteen to fifteen ounces of silver, that there are commonly in
the market only fourteen or fifteen ounces of silver for one
ounce of gold.
The quantity of silver commonly in the market, it is
probable is much greater in proportion to that of gold than the
value of a certain quantity of gold is to that of an equal
quantity of silver. The whole quantity of a cheap commodity
brought to market is commonly not only greater, but of greater
value, than the whole quantity of a dear one. The whole quantity
of bread annually brought to market is not only greater, but of
greater value than the whole quantity of butcher's meat; the
whole quantity of butcher's meat, than the whole quantity of
poultry; and the whole quantity of wild fowl. There are so many
more purchasers for the cheap than for the dear commodity that
not only a greater quantity of it, but a greater value, can
commonly be disposed of. The whole quantity, therefore, of the
cheap commodity must commonly be greater in proportion to the
whole quantity of the dear one than the value of a certain
quantity of the dear one is to the value of an equal quantity of
the cheap one. When we compare the precious metals with one
another, silver is a cheap and gold a dear commodity. We ought
naturally to expect, therefore, that there should always be in
the market not only a greater quantity, but a greater value of
silver than of gold. Let any man who has a little of both compare
his own silver with his gold plate, and he will probably find
that, not only the quantity, but the value of the former greatly
exceeds that of the latter. Many people, besides, have a good
deal of silver who have no gold plate, which, even with those who
have it, is generally confined to watchcases, snuff-boxes, and
such like trinkets, of which the whole amount is seldom of great
value. In the British coin, indeed, the value of the gold
preponderates greatly, but it is not so in that of all countries.
In the coin of some countries the value of the two metals is
nearly equal. In the Scotch coin, before the union with England,
the gold preponderated very little, though it did somewhat, as it
appears by the accounts of the mint. In the coin of many
countries the silver preponderates. In France, the largest sums
are commonly paid in that metal, and it is there difficult to get
more gold than what is necessary to carry about in your pocket.
The superior value, however, of the silver plate above that of
the gold, which takes place in all countries, will much more than
compensate the preponderancy of the gold coin above the silver,
which takes place only in some countries.
Though, in one sense of the word, silver always has been,
and probably always will be, much cheaper than gold; yet in
another sense gold may, perhaps, in the present state of the
Spanish market, be said to be somewhat cheaper than silver. A
commodity may be said to be dear or cheap, not only according to
the absolute greatness or smallness of its usual price, but
according as that price is more or less above the lowest for
which it is possible to bring it to market for any considerable
time together. This lowest price is that which barely replaces,
with a moderate profit, the stock which must be employed in
bringing the commodity thither. It is the price which affords
nothing to the landlord, of which rent makes not any component
part, but which resolves itself altogether into wages and profit.
But, in the present state of the Spanish market, gold is
certainly somewhat nearer to this lowest price than silver. The
tax of the King of Spain upon gold is only one-twentieth part of
the standard metal, or five per cent; whereas his tax upon silver
amounts to one-tenth part of it, or to ten per cent. In these
taxes too, it has already been observed, consists the whole rent
of the greater part of the gold and silver mines of Spanish
America; and that upon gold is still worse paid than that upon
silver. The profits of the undertakers of gold mines too, as they
more rarely make a fortune, must, in general, be still more
moderate than those of the undertakers of silver mines. The price
of Spanish gold, therefore, as it affords both less rent and less
profit, must, in the Spanish market, be somewhat nearer to the
lowest price for which it is possible to bring it thither than
the price of Spanish silver. When all expenses are computed, the
whole quantity of the one metal, it would seem, cannot, in the
Spanish market, be disposed of so advantageously as the whole
quantity of the other. The tax, indeed, of the King of Portugal
upon the gold of the Brazils is the same with the ancient tax of
the King of Spain upon the silver of Mexico and Peru; or
one-fifth part of the standard metal. It may, therefore, be
uncertain whether to the general market of Europe the whole mass
of American gold comes at a price nearer to the lowest for which
it is possible to bring it thither than the whole mass of
American silver.
The price of diamonds and other precious stones may,
perhaps, be still nearer to the lowest price at which it is
possible to bring them to market than even the price of gold.
Though it is not very probable that any part of a tax, which
is not only imposed upon one of the most proper subjects of
taxation, a mere luxury and superfluity, but which affords so
very important a revenue as the tax upon silver, will ever be
given up as long as it is possible to pay it; yet the same
impossibility of paying it, which in 1736 made it necessary to
reduce it from one-fifth to one-tenth, may in time make it
necessary to reduce it still further; in the same manner as it
made it necessary to reduce the tax upon gold to one-twentieth.
That the silver mines of Spanish America, like all other mines,
become gradually more expensive in the working, on account of the
greater depths at which it is necessary to carry on the works,
and of the greater expense of drawing out the water and of
supplying them with fresh air at those depths, is acknowledged by
everybody who has inquired into the state of those mines.
These causes, which are equivalent to a growing scarcity of
silver (for a commodity may be said to grow scarcer when it
becomes more difficult and expensive to collect a certain
quantity of it) must, in time, produce one or other of the three
following events. The increase of the expense must either, first,
be compensated altogether by a proportionable increase in the
price of the metal; or, secondly, it must be compensated
altogether by a proportionable diminution of the tax upon silver;
or, thirdly, it must be compensated partly by the one, and partly
by the other of those two expedients. This third event is very
possible. As gold rose in its price in proportion to silver,
notwithstanding a great diminution of the tax upon gold, so
silver might rise in its price in proportion to labour and
commodities, notwithstanding an equal diminution of the tax upon
silver.
Such successive reductions of the tax, however, though they
may not prevent altogether, must certainly retard, more or less,
the rise of the value of silver in the European market. In
consequence of such reductions many mines may be wrought which
could not be wrought before, because they could not afford to pay
the old tax; and the quantity of silver annually brought to
market must always be somewhat greater, and, therefore, the value
of any given quantity somewhat less, than it otherwise would have
been. In consequence of the reduction in 1736, the value of
silver in the European market, though it may not at this day be
lower than before that reduction, is, probably, at least ten per
cent lower than it would have been had the Court of Spain
continued to exact the old tax.
That, notwithstanding this reduction, the value of silver
has, during the course of the present century, begun to rise
somewhat in the European market, the facts and arguments which
have been alleged above dispose me to believe, or more properly
to suspect and conjecture; for the best opinion which I can form
upon this subject scarce, perhaps, deserves the name of belief.
The rise, indeed, supposing there has been any, has hitherto been
so very small that after all that has been said it may, perhaps,
appear to many people uncertain, not only whether this event has
actually taken place; but whether the contrary may not have taken
place, or whether the value of the silver may not still continue
to fall in the European market.
It must be observed, however, that whatever may be the
supposed annual importation of gold and silver, there must be a
certain period at which the annual consumption of those metals
will be equal to that annual importation. Their consumption must
increase as their mass increases, or rather in a much greater
proportion. As their mass increases, their value diminishes. They
are more used and less cared for, and their consumption
consequently increases in a greater proportion than their mass.
After a certain period, therefore, the annual consumption of
those metals must, in this manner, become equal to their annual
importation, provided that importation is not continually
increasing; which, in the present times, is not supposed to be
the case.
If, when the annual consumption has become equal to the
annual importation, the annual importation should gradually
diminish, the annual consumption may, for some time, exceed the
annual importation. The mass of those metals may gradually and
insensibly diminish, and their value gradually and insensibly
rise, till the annual importation become again stationary, the
annual consumption will gradually and insensibly accommodate
itself to what that annual importation can maintain.
