Relative Production of Gold and Silver

Among the many plausible pleas of the monometallists, the most plausible,
perhaps, is the plea that the great divergence between the metals since
1873 has been due entirely to the increased production of silver. A very
brief examination, I think, will show its falsity, and that it is equally
false in fact and fallacious in logic; for, first, there has been no great
"depreciation" in silver, that metal having almost the same power to
command commodities, excepting gold, that it had in 1873; and, second, the
claim that the increased production of ten or twenty years would alone
greatly cheapen silver is flatly contradicted by all previous experience.
Of many statements of the fallacy, I take a recent one from the New York
_Times_ as the most terse and catchy for popular reading, and likewise
most ludicrously absurd:

"=Why Silver is Cheap.=

"In 1873 the total product of silver in the world was 61,100,000
ounces, and the silver in a dollar was worth $1.04 in gold.

"Last year the world's product of silver was 165,000,000 ounces,
and the silver in a dollar was worth only 50.7 cents.

"In 1894 the potato crop of the United States was, in round
numbers, 170,000,000 bushels, and the average price 53c.

"In 1895 the estimated potato crop was 400,000,000 bushels, and
the average price was 26c.

"The fall in both cases was due to the same cause."

Observe the assumptions: 1. That the output of one year determined the
value of silver as the crop of potatoes does their price for that year!
The schoolboy who does not know better deserves the rattan. If the theory
were correct, gold in 1856 should have been worth but a fourth what it was
in 1848, whereas the largest estimate of its decline in value puts it at
25 per cent.

2. That the increased silver production of twenty-two years would reduce
its value in the exact mathematical proportions of the increase. This
theory ignores the two most important facts determining the value of
money: that the silver or gold mined in any one year is added to the
existing stock, to which it is but a minute increase; and that wealth,
population, and production are also increasing rapidly, relative to which
the increase of silver is but a trifle indeed. The yield of the Monte Real
a thousand years ago may have cost five times as much labor per ounce, and
that of Laurium ten or even twenty times as much; but all of both which is
not lost goes with the last ounce mined into the general stock, which is
now about $4,000,000,000 in coin alone. The greatest annual production has
in but a very few cases added so much as 3 per cent. to the stock on hand,
and about half of it is consumed in the arts. If the increase of the
annual production of silver by 2-3/4 to 1 in twenty-two years reduced its
value one-half, will the _Times_ tell us what should have been the
reduction in the value of gold when this product increased by fivefold in
eight years? It should further be noted that the discovery of a "Big
Bonanza" is an event so rare that it has not happened, on an average, more
than once in three centuries since the dawn of history, and that since
1873 the growth in the world's production and trade has been, relative to
former times, even greater than the increase in the production of silver.

Consider the following facts, which I have condensed from Mulhall: In 1800
the total yearly international commerce of the world was estimated at
$1,510,000,000. Forty years later it had only increased 90 per cent.,
amounting in 1840 to $2,865,000,000, and in that year there were in all
the world but 4,315 miles of railroad and no electric telegraph. The total
horse-power of all the steamships of the world was but 330,000, and the
carrying power of all the shipping but 10,482,000 tons. To-day the
international commerce of the world is almost $20,000,000,000, and
increasing at the rate of $1,000,000,000 per year; there are in the world
over 400,000 miles of railway and a very much greater mileage of magnetic
telegraph, including 14 intercontinental cables; the ocean tonnage of
Great Britain alone is very much greater than was that of the whole world
in 1840; and tremendous as this increase of international trade has been,
it is the merest trifle compared with the increase of the internal trade
in several of the greater nations.

What then has caused the "great depreciation"? Nothing has caused it.
There has been but a trifling depreciation indeed. It is as clearly proved
as anything unseen can be that if the nations had left silver and gold as
they were in 1870, both would have gained materially in value, that is, in
the power to command commodities, because of the vastly greater relative
increase of the latter; but by demonetization all the increase has been
concentrated in gold, leaving silver almost exactly as it was. At present,
however, I devote myself to the question whether there has been such an
increase in the production as would normally cheapen it. On this point we
have evidence to convince any unbiased mind, for the relative production
of silver and gold has in former ages varied very much more than in the
last twenty-three years, and the variation has extended over much longer
periods, without causing more than the most trifling divergences in value.
And the explanation is simple: the two metals received equal recognition
at the mint and in legal tender laws; the greatly increased use of the
cheaper maintained its value in coinage, while disuse of the dearer tended
equally to check its appreciation. In this sense government can "create
value" by creating a use.

From 1660 to 1700, for instance, the production of silver averaged in
value much more than twice that of gold, and in quantity some thirty-three
times as much; yet all those years, the highest mint ratio was 15.20 to 1
and the lowest 14.81--a variation in money value of but .39 or 2.6 per
cent. From 1701 to 1760 inclusive, the proportion of gold produced
gradually rose from a little over a third to 40 per cent. in values, yet
the money ratio remained remarkably constant, the highest being 15.52 of
silver to 1 of gold and the lowest 14.14. In other words, for sixty years
there were produced on an average about 28 ounces of silver to 1 of gold,
yet the widest variation of their money values in all those years was less
than 9 per cent. In the face of such facts as these, we are asked to
believe that while an average of over 30 ounces to 1 created an average
variation of less than 6 per cent., and a greatest variation of less than
9 per cent., a production of some 20 ounces to 1 since 1882 has created a
variation of 100 per cent. And that the variation began nine years before
the value production of silver exceeded that of gold! It is an affront to
our common sense.

[Illustration: The above diagram shows the relative annual production of
gold and silver from 1493 to 1870, and also average ratio of values of the
two metals.]

I should say, at this point, that my figures are taken from the latest,
and in my opinion the most scholarly work in favor of monometallism, "The
History of Currency," by Prof. W. A. Shaw, Fellow of the Royal Historical
and Royal Statistical Societies. As the ratio between silver and gold
varied considerably in the different marts of Europe, I follow his plan
(which is Soetbeer's) of taking it as it stood at any particular time in
the city which might then be called the greatest commercial centre,
whether Venice, Hamburg, Antwerp, or London. His history comprises the
entire period from 1252 to 1894. It is only fair that I should also give
his explanation of the stability of the metals, which is extremely

He begins his second chapter with the statement that the discovery of
America was "the monetary salvation and resurrection of the Old World";
that it was a time of unexampled increase in the precious metals and
equally unexampled rise of prices, but there was also "feverish
instability and want of equilibrium in the monetary systems of Europe." He
shows how the first great import was of gold, which began to affect prices
in 1520; how this was followed by a very much greater increase in silver,
and how, while prices were rising so rapidly as to stimulate trade and
incidentally do damage by causing great fluctuations, yet there must have
been some great regulator preventing the evil which we should _a priori_
have expected. He finds it in the fact that Antwerp had taken the place of
Venice and Florence, and conducted a great trade with the far East. His
language is: "The centre of European exchanges--Antwerp in the sixteenth
century as London to-day--has always performed one supremest function,
that of regulating the flow of metals from the New World by means of
exporting the overplus to the East. The drain of silver to the East,
discernible from the very birth of European commerce, has been the
salvation of Europe, and in providing for it Antwerp acted as the
safety-valve of the sixteenth century system as London has done since. The
importance of the change of the centre of gravity and exchange from Venice
to Antwerp, therefore, lies in this fact. Under the old system of overland
and limited trade, Venice could only provide for such puny exchange and
flow as the mediŠval system of Europe demanded; she would have been unable
to cope with such a flood of inflowing metal as the sixteenth century
witnessed, and Europe would have been overwhelmed."

Professor Shaw argues that without the Eastern safety-valve Europe would
have been ruined by an excess of the precious metals, that India furnished
the needed reservoir--did she not take gold as well as silver?--and that
Venice was so far limited to an overland trade that she could not have
performed the function Antwerp did. Later he sets forth the current
monometallist position that the nations are now as one in trade and the
interchange of the precious metals, and therefore even the partial
equilibrium of the sixteenth and seventeenth centuries could not be
maintained. Let us, then, bring the figures down to the present, and it
will be found, I think, that the farther down we come the weaker does the
monometallist contention appear.

The improved, more extended, and more intimate intercourse of the nations
brought about by the introduction of steam, electricity, and other
agencies tends to minimize the fluctuations of the two metals, and
indicates that the divergences of the metals in mediŠval times was due
rather to the want of speedy, easy, and certain intercourse and
communication of the nations than to an innate commercial tendency of the
two metals to diverge. Had the same intimate and speedy commercial
relation existed between the nations of the world in those times as now
exists, the equalizing tendencies of trade would evidently have prevented
not only the ratio of divergence to which the metals attained at different
periods, but would have prevented a difference of ratio existing between
the different nations at the same period of time.

From 1761 to 1800, inclusive, the relative production of gold decreased
steadily, until it was but 23.4 per cent. of the total value, to 76.6 per
cent. of silver. In other words, there were for many of the later years
over 50 ounces of silver produced to 1 of gold, and yet the ratio stood
long at 15.68 to 1. This is almost exactly the ratio fixed by Hamilton and
Jefferson, fixed because of its long-continued maintenance in European
markets. During these forty years the production of silver in proportion
to gold was never for even one year as low as the highest proportion of
any year since 1873, and yet the money value only varied from 14.42 to
15.72, or a fraction over 8 per cent. In the face of such figures as
these, the change in relative production since 1873 seems too trifling to
be taken into account, especially since in that year and some time after
the value production of gold at 16 to 1 was much the greater, nor was it
till 1883 that the world's silver product exceeded that of gold.

In 1800-10 the annual production of gold was $12,069,000 and of silver
almost exactly $39,000,000, or some 50 ounces to 1; yet the highest ratio
was 16.08, and the lowest 15.26. This relative production changed very
slowly, and in 1831-40 of the total in values produced 34.5 per cent. was
gold and 65.5 per cent. silver.

That is, there were, for ten years, about thirty times as many ounces of
silver mined as of gold, and during these years the change in the ratio
was so minute that it can only be calculated in small fractions of 1 per
cent. In 1841-50, for the first time since the middle of the sixteenth
century, we find the production of gold the greater, that metal being 52.1
per cent. of the total product, and silver but 47.9 per cent. During the
decade the lowest value ratio of silver to gold was 15.70, and the highest
15.93, a variation of only 1.4 per cent. Then California and Australia
poured out their wonderful golden flood, and all the world was changed. In
1851-55 the gold yield was 77.6 per cent. of the total, and the silver
yield 22.4, and for the next five years the change was but .2 of 1 per
cent. In other words, during those ten years the average annual yield of
silver was less than 5 ounces to 1 of gold; so if the "overproduction
theory" laid down by the _Times_ were correct, gold should have
lost--well, at least 70 per cent. of its value in silver. The actual
variation was from a ratio of 15.98 to one of 15.46, or a relative
depreciation of gold of considerably less than 3 per cent. Now, it is
alleged by many who have made a study of prices during that period, that
in actual value gold depreciated 25 per cent.; so it is plain that it
carried down silver with it, and the only logical explanation is that the
mints were equally open to both.

We have seen that in all the century and a half when the mines were
pouring forth silver at the rate of from 20 ounces to 1 of gold up to 55
ounces to 1, the greatest variation in their value was less than 9 per
cent., and in the twenty years when the silver production was to that of
gold as less than 5 ounces to 1, the value of gold produced being more
than three times that of silver, their money value varied less than 3 per
cent., and yet we are coolly asked to believe that since 1873 silver is to
be rated among variable commodities like potatoes, the size of the crop
each year determining the value. Monometallists have had much to say about
the relative cheapness of gold during those years, and have laid much
stress upon the fact that it was an era of great prosperity and rapid
development, with rise of wages and the prices of farm produce. In this
argument they admit three things: that we have a moral and constitutional
right to use the cheaper metal at any time; that we did use gold for all
those years simply because it was easier to pay debts with it, that is, it
was cheaper, and that the use of the cheaper metal aided greatly in making
prosperity. That is all that any bimetallist claims. As the entire burden
was not then thrown upon silver, we claim that it should not now be thrown
upon gold, doubling or trebling the rate of its advancing value; and as
the privilege to use the cheaper metal then checked the advance of the
dearer and enhanced prosperity, we insist that the system of that time
shall be restored.

The subsequent figures are equally convincing. In 1861-65 the gold
products were 72.1 per cent. of the total, the silver 27.9 per cent., the
variation in ratio from 15.26 to 15.44. In 1866-70 the production stood
69.4 to 30.6, the variation in ratio 15.43 to 15.60. In 1871-75 production
was still 58.5 to 41.5, but the variation in coin value was from 15.57 to
16.62. That something had happened quite aside in its effects from
relative production was evident, but the people did not find out what it
was till late in 1875. At the time the demonetization act was passed, the
ratio was still 15.55 to 1, and one of the reasons given for the act of
February 12,1873, was that the silver dollar was worth $1.03 in gold; yet
before the close of that year, and before it was known that there was to
be any great increase in the product of silver, its relative value ran
down till it was below that of gold. Can any one doubt the cause? Surely
not if he observes the additional fact that the relative decline of silver
continued despite the greater value production of gold, and that 1882, ten
years after demonetization, was actually the first year since 1849 in
which the world's production of silver exceeded that of gold. What one
hundred and ninety years of continuous and often enormous relative
overproduction of silver had not done, ten years of demonetization had
accomplished, and that while the relative gold supply was still the
greater. Is it possible to miss the real cause? Is there in Euclid a
demonstration more conclusive?

[Illustration: The above diagram shows the relative annual production of
gold and silver from 1870 to 1893, and ratio of values.]

Monometallists have exhausted the resources of verbal gymnastics to make
these figures fit their theories. Determined not to admit that
demonetization was the cause, they have given so many explanations that,
expressed in the briefest words, they would cover many pages like this.
The first was that the opening of the "Big Bonanza" on the Comstock lode
had given notice that silver was coming in a flood; but that was only for
popular use in this country. Scientific men knew that to be a rare find
indeed, not likely to occur again for centuries. The next explanation was
that China and India, so long the reservoir into which the surplus flowed,
had ceased to absorb it; and the next, demonetization of silver by Germany
and her throwing her old silver on the market. And with this the people
began to get at the true reason--the general demonetization by so many

The following table gives the annual production of gold and silver from
the discovery of America to and including the year 1892; and the highest
and lowest ratio of silver to gold from 1681 to and including the year in
which silver ceased to be in this country primary money:


1493-1520........ $3,855,000 $1,953,000
1521-1544........ 4,759,000 3,749,000
1545-1560........ 5,657,000 12,950,000
1561-1580........ 4,546,000 12,447,000
1581-1600........ 4,905,000 17,409,000
1601-1620........ 5,662,000 17,538,000
1621-1640........ 5,516,000 16,358,000
1641-1660........ 5,829,000 15,223,000
1661-1680........ 6,154,000 14,006,000
1681-1700........ 7,154,000 14,209,000 14.81-15.20
1701-1720........ 8,520,000 14,779,000 15.04-15.52
1721-1740........ 12,681,000 17,921,000 14.81-15.41
1741-1760........ 16,356,000 22,158,000 14.14-15.26
1761-1780........ 13,761,000 27,128,000 14.52-15.27
1781-1800........ 11,823,000 36,534,000 14.42-15.74
1801-1810........ 11,815,000 37,161,000 15.26-16.08
1811-1820........ 7,606,000 22,474,000 15.04-16.25
1821-1830........ 9,448,000 19,141,000 15.70-15.95
1831-1840........ 13,484,000 24,788,000 15.62-15.93
1841-1850........ 36,393,000 32,434,000 15.70-15.93
1851-1855........ 131,268,000 36,827,000 15.33-15.59
1856-1860........ 136,946,000 37,611,000 15.19-15.38
1861-1865........ 131,728,000 45,764,000 15.26-15.44
1866-1870........ 127,537,000 55,652,000 15.43-15.60
1871-1872........ 113,431,000 81,849,000 15.57-15.65
1873............. 96,200,000 81,800,000
1874............. 90,750,000 71,500,000
1875............. 97,500,000 80,500,000
1876............. 103,700,000 87,600,000
1877............. 114,000,000 81,000,000
1878............. 119,000,000 95,000,000
1879............. 109,000,000 96,000,000
1880............. 106,500,000 96,700,000
1881............. 103,000,000 102,000,000
1882............. 102,000,000 111,800,000
1883............. 95,400,000 115,300,000
1884............. 101,700,000 105,500,000
1885............. 108,400,000 118,500,000
1886............. 106,000,000 120,600,000
1887............. 105,000,000 124,366,000
1888............. 109,900,000 142,107,000
1889............. 118,800,000 162,690,000
1890............. 118,848,700 172,234,500
1891............. 126,183,500 186,446,880
1892............. 138,861,000 196,458,800

Thus we see that, for twenty-seven years after the discovery of America,
the gold production was double that of silver; for the next eighty years
the production of silver was considerably more than double that of gold;
for the next one hundred years the production of silver was more than
2-1/2 times that of gold, and for the next century and a half, to wit,
from 1701 to 1850, inclusive, despite the fact of the tremendous gain of
gold in the last few years, the production of silver fell but little short
of twice that of gold. And yet, the variations in coin value were of the
trifling character previously stated. When taken by shorter periods, the
argument is still more startling. Thus in 1801-20 the production was
almost exactly 4 of silver to 1 of gold; for the next twenty years a
minute fraction less than 2 of silver to 1 of gold; for the next twenty
2-1/2 of gold for 1 of silver; and for the next twenty nearly 2 of gold
for 1 of silver, while during these awful years since 1873, in which there
has been so much said about the "flood of silver," its production has
never once been twice that of gold, and for the entire period has exceeded
it by the merest trifle. Is it any wonder that Dr. Eduard Suess, the great
German authority on the metals, and Professor of Geology at the University
of Vienna, concluded his recent work with these strong statements:

"Present legislative institutions are at variance with the
conditions established by nature. Even now agriculture and in part
industry in Europe are sorely at a disadvantage against silver
countries such as India and Mexico. The advantage of this
situation accrues in England to the holders of interest-bearing
notes, the productive value of which increases with the growing
scarcity of gold.... As soon as the figure 23.75 shall have been
reached, all gold obligations will have increased in value
one-half; but nothing prevents that figure from rising to 31. [It
has since risen even above that.] ... You say a regulation cannot
be international, but you overlook how long the ratio of 1 to
15-1/2 was upheld and worked beneficently. We wish, say the London
bankers, to receive our interest in gold and not in depreciated
silver; but silver would not be depreciated the moment an
agreement went into effect. Why, you ask, shall we cast such
profit into the hands of the owners of silver mines? Remember that
you are now casting the same profit into the hands of the owners
of gold mines and washings. No man would lose by rehabilitation,
and the whole world would be richer.... Europe is laboring under a
grave delusion. The economy of the world cannot be arbitrarily
carried on in the hope that somewhere a new California, and at the
same time a new Australia, will be found whose alluvial lands will
give relief for a decade. ... The question is no longer whether
silver will again become a full value coinage metal over the whole
earth, but what are to be the trials through which Europe is to
reach that point."

At this point it seems to me well to present the figures of relative
production for the last century in a more compact shape, with a view to
bringing out the contrast:

Silver produced 1792-1850............ $1,690,217,000
Gold produced........................ 848,186,000
Excess of silver production.......... 842,031,000

Gold produced 1850-73................ $2,724,825,000
Silver produced...................... 1,150,025,000
Excess of gold....................... 1,574,800,000

Gold produced 1873-92, inclusive..... $2,060,897,000
Silver produced...................... 2,264,419,000
Excess of silver..................... 203,522,000

Gold produced 1850-92, inclusive..... $4,785,722,000
Silver produced...................... 3,414,444,000
Excess of gold....................... 1,371,278,000

Gold produced 1792-1892, inclusive... $5,633,908,000
Silver produced...................... 5,104,961,000
Excess of gold....................... 528,947,000

Thus are we confronted with the truly startling paradox that during all
the century and a half when the production of silver was nearly twice that
of gold, and the two centuries back of that when it was more than twice,
the variation in coinage value never rose to 9 per cent., and for many
years at a time corresponded with the ratio set by the mint; but at the
end of a century during which the gold production was half a billion
greater than that of silver, and at the end of half a century when it was
nearly a billion and a half greater, the really scarcer metal has declined
in terms of the other nearly one-half! And all this, the monometallist
tells us, because there has been an excess of silver produced amounting to
less than a quarter of a billion in twenty-three years. Belief in such a
proposition would indeed be a triumph of faith over figures. And to add to
the trial of our faith, we find, on bringing the figures down to the close
of the year 1895--and we cannot bring them later on account of official
slowness--the amounts of silver and gold in the world, as presented in
values at our ratio, are almost exactly equal, the greatest divergence
claimed by the most extreme monometallist being 16-3/10 ounces of silver
to one of gold!

I do not indulge the hope that the figures herein presented will affect
the opinion of any pronounced monometallist. There seems to be a
mysterious power in gold which blinds the eyes to deductions from
statistics and experience; the internal conviction of the monometallist
that gold stands still while everything else changes in value resists all
logic. In this country, that is. In England, where it has not become a
political question, and no one is interested in denying the facts,
monometallists almost universally concede the appreciation of gold and
defend monometallism on that ground. It is to the laboring producers of
the United States, still open to conviction, that I present these figures, which to me seem absolutely conclusive.

Copyright © 2014