It was the opinion of Adam Smith, from a comparison of the average prices of wheat in England through a series of years, that, in the course of about a century and a half before the discovery of America, the precious metals had doubled in value; or, in other words, that the average price of wheat had fallen in that time from four ounces of silver a quarter to two ounces. This last price, he says, continued unchanged until about the year 1570, from which he infers that the mines of America seem not to have had any very sensible effect upon prices in England till after that year; but that in the course of the 70 years succeeding—that is, from 1570 to about 1640, or even 1636, there was a gradual depreciation of gold and silver to a third or fourth of their former value. From that period to the time he wrote1775-he considered that the value of those metals had been nearly stationary; or if not, that the value of silver had somewhat risen in the course of the eighteenth century. If these views of Dr. Smith are well-founded, we should be warranted in inferring that there would be no depreciation of the precious metals in Europe and America until the quantity now existing there shall have received an accession correspondent to that which had been made to the quantity previously existing in Europe before any depreciation took place. As Dr. Smith's language seems to admit that there might have been some slight depreciation before 1570, let us strike off ten years, and suppose that it begun in 1560. What addition has then been made to the quantity in Europe in 1492, when America was discovered? From 1492 to 1500 the amount received from America was $2,000,000 135,000,000 From 1545 to 1560 the average deduced from Humboldt's estimate was $8,000,000 a year............. 120,000,000 257,000,000 Deduct for wear and loss beyond the supply afforded by the mines of Europe, at about half of 1 per cent.... Exported to the East, suppose $1,000,000* a year.. 26,000,000 94,000,000 $163,000,000 The whole accession from the American mines in 1560... which is somewhat more than 54 per cent on the amount believed to be in Europe in 1492; consequently, we ought not to expect any depreciation whatever until the quantity now in Europe and America had received a similar accession of 54 per cent equal to $2,528,000,000—which would require a net annual addition of $50,000,000 in 50 years, or $100,000,000 in 25 years. But these views of Dr. Smith must be received with considerable qualification. We now find, by the aid of lights which that eminent man did not possess, that his conclusions are not only irreconcilable to the estimates made by Baron Humboldt, but are inconsistent with one another, as may be thus shown. The quantity of gold and silver in Europe, according to our estimate, increased between 1492 and 1560 from $300,000,000 to $463,000,000. From 1560 to 1640 the increase had been as follows: * This trade, except a small portion overland, was then carried on exclusively by the Portuguese. It was only about the last of the sixteenth century (in 1595) that the Dutch, their first rivals, made a voyage to India by the way of the Cape of Good Hope. Received from America between 1560 and 1600, $605,000,000, minus $120,000,000.... Received between 1600 and 1640, according to Humboldt's averages, $13,800,000 a year, for 40 years... Total....... 485,000,000 552,000,000 $1,037,000,000 From this amount a large deduction should be made for the extra loss by wear, &c., beyond the product of the mines of Europe, and for what had been sent to the East-probably from $250,000,000 to $300,000,000. Let it, however, be reckoned at only $200,000,000, leaving the whole amount to be $807,000,000, and the increase from 1560 to 1640 will then have been from $463,000,000 to $837,000,000+$463,000,000-$1,300,000,000, or 280 per cent, instead of 300 or 400 per cent, as the depreciation is supposed to have been by Dr. Smith. Besides, a part of the increased supply of the precious metals went no doubt to meet the increased demand for them, in consequence of the admitted increase of population and wealth, and such part would have no effect on depreciation. So large a part of the gold and silver received from America has been absorbed in this way, that though the quantity in Europe and America is believed to have increased fifteen-fold in three centuries and a half, the depreciation is never estimated at over onefourth. But whatever was the depreciation between 1560 and 1640, inasmuch as it was caused by an increase of the precious metals of 280 per cent, we must suppose that some depreciation would have also been caused by the increase from 1492 to 1540 of 54 per cent-that is to say, if 280 per cent produced so much effect, 54 per cent would not have been inoperative. It is true that Dr. Smith supposes, on grounds apparently good, that before the discovery of America the supply of the precious metals was less than the demand, and that they were therefore rising in value; and he rightly considers that such part of the products of the American mines as supplied the deficiency would have no effect in producing depreciation. But no indication that we have of that deficiency, and of the consequent rise of gold and silver, can lead us to estimate it at as much as 54 per cent in 68 years. We must, therefore, infer, that while a part of what was drawn from America met the increasing den and for the precious metals and arrested their rise in price, a part also contributed to their depreciation. But again: Dr. Smith, always regarding the price of wheat as the standard of value, considers that there was no depreciation of the precious metals in Europe from 1640 to the time he wrote, or rather to 1784, when he published his last edition. In that period of 144 years, however, gold and silver had very greatly increased, and were, as we have seen, as follows: From 1640 to 1700, $1,600,000,000, minus $552,000,000,000...... From 1750 to 1784, according to Humboldt's averages, $33,000,000 In all.... $1,048,000,000 1,125,000,000 1,122,000,000 $3,295,000,000 Although from this enormous amount we must deduct largely for wear and loss, and for the trade to the East, which had been steadily increasing; yet if we make that deduction as much as one-half, the residue, $1,647,500,000 -being an increase from $1,300,000,000 of more than 126 per cent-would lead us to the opinion that, while the larger part of the $1,647,500,000 might have answered the demands of increasing numbers and wealth, a part also would have caused depreciation. Taking Baron Humboldt, then, as our guide in what before he wrote was a labyrinth of uncertainty and conjecture, we must believe that Dr. Smith has underrated the depreciation in the first and the last of the three periods on which he speculates, and has overrated it in the second period. These objections to Dr. Smith's inferences are confirmed by some facts recorded in that valuable repository, Anderson's History of Commerce, to which we may briefly advert. He cites passages from an act of Parliament passed in 1534, which afford satisfactory evidence that even then gold and silver had fallen in value, though the fact seemed not to have been suspected by the legislature. It states that "a good sheep, that used to be sold for two shillings and four pence, or three shillings at most, is now sold for six shillings, or five shillings, or four shillings at least; and a stone of wool, which used to be sold for one shilling and six pence, or even one shilling and eight pence, is now sold for four shillings, or three shillings and four pence at least." The act attributes the rise of price to the inordinately large flocks which many persons then kept, by which they secured to themselves a sort of monopoly, and by way of remedy strangely enacted that no one should keep, except on his own land, more than 2,400 sheep. 66 In 1670 Sir Josiah Child notices the increase of money in England within the preceding twenty years, which is after the point of time when Smith supposed that depreciation had ceased. He says we give generally now onethird more money with apprentices than we did 20 years before. "The course of trade," he remarks, "from the increase of our money, is strangely altered within these 20 years; most payments from merchants and shopkeepers being now made with ready money," instead of a credit as formerly of 3, 6, 9, and 18 months. In 1681 Puffendorf states the revenue of the king of France to be 150,000,000 livres, "whereas," he observes, "in the last age it did not amount to above 9,000,000 or 10,000,000; in Henry IV.'s time to 16,000,000, and in the year 1639 to 77,000,000;" "which vast difference," says Anderson, "is in part to be ascribed to the different value of money since those times, and partly also to the great taxes paid by his subjects." According to D'Avenant, the general rental of England in 1600 was £6,000,000, at 12 years' purchase, worth £72,000,000; but in 1688 the rental was £14,000,000, and worth, at 18 years' purchase, £252,000,000. But the increase of coin was yet greater. According to the same author, the coin in England in 1600 did not exceed £4,000,000, and in the beginning of the next century it was £12,000,000. Anderson, after referring to a proclamation by Charles I. in 1633, to fix the prices of poultry, butter, game, &c., remarks :-"From the above rates, it appears that most of the usual eatables for the middling or lower ranks of people were near one-third cheaper than in our days; and he concludes that the rate of living then, compared with the rate in 1762 was as about 2 to 3. If we suppose, as is generally done, that at the time Anderson wrote the depreciation of silver since the discovery of America had been to onefourth as 12 to 3; and he was right in estimating it between 1633 and 1762 as 3 to 2, or as one-third; then, by deducting one-third of the whole depreciation, it appears that the remainder-that which took place before 1633-was as 8 to 3: and this was only three years before Adam Smith supposed it had been 3 or 4 for 1. In truth, the standard adopted by Dr. Smith, though better than any other, cannot be implicitly relied on. As the demand for wheat, when it constitutes the bread of a community, is more steady than that of almost any other article, its price rises more in scarce years, and falls more in years of plenty. There being less variation in the demand, there must be a greater variation in the price. Thus we find in Dr. Smith's tables that in the sixteenth century the price of wheat ranged from 8s. the quarter to £4 2s. The improvements of husbandry tend to lessen this irregularity; but, in the seventeenth century, the price ranged from 28s. to 85s.; and in the eighteenth century from 26s. to 76s. 6d. An unusual number of good or bad seasons, as occasionally occur, may greatly affect the average, and thus give us false views of the value of the articles with which wheat has been compared. Besides, if the population of a country increases faster than its improvements in husbandry, the money-price of wheat will rise without any depreciation. While, then, we must infer that the depreciation of the precious metals began sooner and continued much longer than Dr. Smith supposed-probably to the early part of this century-we must see, after making ample allowance for these errors, that the precious metals, taken together, are not likely to undergo any sensible depreciation until their increase has made a near approach to 50 per cent of their present amount, or near one-half of $4,663,000,000; nor to experience the same decline in value as was caused by the discovery of America, whatever that depreciation may be, until the quantity now in existence has also been multiplied fifteen-fold—that is, until it has reached the unsupposable sum of $70,000,000,000! We have hitherto considered gold and silver together, because they were not distinguished in Humboldt's annual averages, and have been generally blended by those who have speculated on their depreciation, and because, moreover, it is possible that the increase of silver may be somewhat correspondent to that of gold. But since California has as yet produced only gold, and the extraordinary richness and extent of its deposits of this metal are now beyond dispute, let us suppose that the product of silver will remain stationary, or at least that its increase will not be greater than will meet the growing demand for an increase of population and wealth, and inquire into the probable effects of so large an addition to the gold of the world.* Before the discovery of America the quantity of gold annually drawn from the mines was supposed to be to that of silver as about 60 to 1; and their proportionate values were as 10 or 12 to 1. After several subsequent fluctuations in the relative quantities and values of the two metals, the proportion of gold to silver, in weight, annually drawn from the mines, has been for about a century as 1 to 40 or 41; and such also has been the proportion in Europe, before the mines of the Oural mountains were extensively worked. The proportion of gold has been greatly augmented by those mines, and is likely to experience a far greater increase by the mines of California. The present value of gold compared to that of silver is 15 or 16 to 1. It has It is true that the annual product of silver has recently very much increased. Spain is now estimated to produce $10,000,000 a year; the Mexican mines bid fair to yield more than they ever did; and mines of that metal as well as of gold, of extraordinary richness, are known to exist in the Mexican province of Sonora ; but it seems not at all probable that, from all the sources together, the present yearly product can be more than double; and this addition, being scarcely 1 per cent on the quantity now existing in Europe and America, will not have, according to our past experience, a perceptible effect on depreciation. The increase of silver, whatever it may be, will indeed lessen or retard the comparative depreciation of gold; but while its rate of increase is so much slower, it cannot prevent that depreciation. been rising to its present price from about 14 to 1 for the last 50 or 60 years; but the extraordinary productiveness of the Siberian and Californian mines, which, it deserves to be remarked, are on directly opposite sides of the same hemisphere, are about to make its price vary in the opposite direction. It is generally supposed that, of the precious metals in Europe and America, about one-third part in value was gold, which, on the computation we have made, would be $1,554,000,000. For three or four years the Siberian mountains have yielded from $18,000,000 to $20,000,000 a year, which is believed to exceed the yearly product of all the rest of the world. The mines of California, though scarcely known to the world more than two years, appear to have produced from $12,000,000 to $14,000,000 last year; and from present indications the quantity this year will be much more than doubled. There have been already received at the mint of the United States $11,352,000, and large amounts have also been sent to England, China, Valparaiso, and other places. In January last the number of persons at the mines, chiefly seekers for gold, were computed to be 40,000; and the average product of a laborer who is steady, is estimated there at $1,000 a month. Let us suppose that only one-half of the 40,000 are working in the mines; that they work only six months in the year--though many also work in the winter (in the dry diggings); and that their whole product for the year is but $2,000, or one-third the supposed average the whole amount they would then produce would be $40,000,000; making the extraordinary accession of gold from the Russian and Californian mines for the year $60,000,000; which is nearly 4 per cent on the supposed amount of that metal in Europe and America, and 3 per cent, if we raise that amount, as some do, to $1,800,000,000. Now the average annual product of the American mines between 1560 and 1640-the period when Adam Smith supposes that nearly the whole depreciation took place-was less than $13,000,000, (12.9,000,000) and consequently less than 3 per cent, or $454,000,000, the whole supposed amount in Europe in 1560, the commencement of that period. But the quantity yielded by the California mines will continue to increase, if they make any tolerable approach to the confident representations given of their fertility and extent. They will be wrought by greater numbers, and to greater advantage. They will attract immigrants from every part of the United States, and even from other countries; and time only can show to what degree their products will be multiplied. Should they reach $100,000,000 a year-and they may pass greatly beyond that amountthe annual addition would be 63 per cent on $1,800,000,000, which more than doubles the past contributions of the American mines in their greatest productiveness. What are to be the effects of this enormous and unprecedented increase of gold? 1. One of the most obvious and necessary results will be to alter the proportion between the value of silver and gold. Whatever may be the depreciation of gold, it will be shown by this alteration, if the value of silver be stationary. We have seen that gold compared with silver rose in the course of three centuries and a half from 10 or 12 to 1 up to 15 or 16 to 1. We have even seen it rise, in little more than half a century, 6 or 7 per cent; and the alterations which thus took place in the comparative facility of pro * On the 17th of June, 1850. |