Part 2

_Third_: The divisibility of gold at the mint into convenient pieces for trade and commerce is all that can be desired.

_Fourth_: It has, practically speaking, perfect durability. It will not corrode, or waste away, except by wear, and waste by wear is now largely obviated by the use of some representative, such as our gold certificate.

_Fifth_: Gold possesses homogeneity or perfect uniformity of structure and material.

_Sixth_: Gold possesses cognizability, or can be readily known or recognized.

It was undoubtedly all these inherent qualities, these prerequisites that led to those legislative enactments which have during the last hundred years singled out this yellow metal as the most fit arbiter of the world's trade.

The first legislative act that seemed to lead to this ultimate decision of the world was passed by the House of Commons in 1774, but not until 1816 was the law passed that definitely settled the question of the standard of value for Great Britain. The very same law passed in that year, now nearly one hundred years ago, remains in force to this day.

In 1853, the United States followed Great Britain in an attempt to establish the gold standard. We reduced the weight of our silver coins, smaller than one dollar, and made them legal tender for only five dollars in amount. The silver dollar was not considered in this legislation of 1853, and not until February 12, 1873, did the gold dollar become the unit of value, when the gold standard was unequivocally established. The silver dollar was at that time worth about two cents more than a gold dollar, and therefore it was omitted from the coinage. This was the famous crime of '73, about which the men now wearing gray hair, or no hair, heard so much in the '80's and early '90's. Yes, we were hearing this as late as 1896, when it was the Battle Cry of the Presidential Campaign.

It may be stated that practically the whole civilized world, with the single exception of Great Britain, has come to the single gold standard, since 1873.

The only country now remaining upon the silver basis, or that has not taken steps to place itself upon a gold basis, is, according to the report of the Director of the Mint, the Central American States, which are of comparatively no commercial importance whatever.

MR. MERCHANT: How much gold is there in the world today?

MR. LAWYER: It was estimated in 1890 that the amount of gold accumulated was approximately $4,000,000,000 (four thousand million dollars).

The amount of gold produced during the last twenty-two years, or since 1890, by all the countries of the world approximates $6,500,000,000 (six thousand five hundred million dollars). Of course a deduction, or allowance, must be made for what has been used outside of monetary purposes, or in industrial consumption, approximately $1,500,000,000 (one thousand five hundred million dollars). A deduction should also be made for what has been absorbed by India, about $700,000,000 (seven hundred million dollars), and also by Egypt, about $200,000,000 (two hundred million dollars), or nearly $1,000,000,000 (one thousand million dollars), by these two countries.

The Director of the Mint in his report, Page 53, says:

"In statistics of the precious metals India is the most important country of Asia, and has long been one of the most important in the world. The Government of India has advised this bureau that the uncoined gold imported into that country might be considered to be used for ornaments and in manufactures. This amounted in 1910 to $47,026,698.

"The movement to India deserves to be treated in a class by itself. A large part of the gold and silver that goes there sinks out of sight, and whether it is made into ornaments or buried in the ground, is withdrawn at least in large part from the monetary stock of the world. Some of it may be brought out in periods of emergency, such as times of famine, and reconverted into money, but in the past a steady stream of the precious metals has moved into India and disappeared as a factor in the commercial world. Sir James Wilson, K.C.S.I., for many years in the Government service in India, in a comprehensive address delivered before the East India Association of London, on June 14, 1911, reported the net imports of gold by India since 1840 at about $1,200,000,000, or one-tenth of the world's production in that time.

"It may be questioned whether the economists who are expressing fears as to the effects that may result from the production of gold at the present rate are aware of the amount of that metal taken by India since the gold standard was definitely established, and the Government began to pay out sovereigns freely. That occurred in 1900. For the ten-year period, 1890-1899, the net imports plus the country's own production were $135,800,000; for the eleven years, 1900-1910, they aggregated $433,800,000. For the British fiscal years ended March 31, 1911, they amounted to $90,487,000, or about one-quarter of the world's production after the industrial consumption was provided for.

"_If this ability on the part of India to take and pay for gold proves to be permanent, it is apparent that there will be no over supply to trouble the rest of the world._"

The finance department of the Government of India, in its report for the fiscal year ended March 31, 1911, commenting upon these figures, says:

"'The gold figures are striking, but it is equally remarkable that the increase in gold has not been at the expense of silver; the country, in other words, continues to take practically the same amount of silver, but it prefers that the addition to the imports of treasure which it has been able to claim should be in the form of gold.'"

Sir James Wilson, in the address alluded to, sums up his explanation by saying:

"'As for India, her prosperity is steadily advancing. Great numbers of her people prefer to spend their savings on gold rather than on other commodities. The probability is that altogether apart from questions of currency India will continue to absorb gold in ever increasing quantities.'

"The Egyptian situation is somewhat like that of India. The country is on a gold basis, and for thirty years has been steadily taking gold in the settlement of its trade balances. The high price of cotton in recent years, and the increasing production of the country explains the trade balances, but there is some mystery about the way the gold disappears from view. It does not enter into bank stocks, and it is difficult to understand how a country of its size and population, and in which the masses of the people are so poor, can absorb so much gold coin. In the first period under review the customs records show net imports by $58,670,000, and in the second period, $146,660,000. For the year 1910 they were $30,000,000.

"Some light is shed upon the situation by the following statement in an address by Lord Cromer, made in London, in 1907:

"'A little while ago I heard of an Egyptian gentleman who died leaving a fortune of £80,000 [$400,000], the whole of which was in gold coin in his cellars. Then, again, I heard of a substantial yeoman who bought property for £25,000 ($125,000). Half an hour after the contract was signed he appeared with a train of donkeys bearing on their backs the money, which had been buried in his garden. I hear that on the occasion of a fire in a provincial town no less than £5,000 ($25,000) was found hidden in earthen pots. I could multiply instances of this sort. There can be no doubt that the practice of hoarding is carried on to an excessive degree.'"

In round figures the approximate amount of gold remaining for commercial or banking purposes is approximately $4,000,000,000 (four thousand million dollars), in addition to what we had in 1890, making a total of $8,000,000,000 (eight thousand million dollars).

Of this total amount the United States has $1,800,000,000 (one thousand eight hundred million dollars), or nearly one-quarter of the monetary gold supply of the world.

However, if we had our proper proportion of the world's monetary gold, considered from the standpoint of our bank resources, we should have upwards of $3,000,000,000 (three thousand million dollars).

MR. BANKER: How do you make that out?

MR. LAWYER: The banking resources of the entire world are now about $55,000,000,000, while those of the United States are about $25,000,000,000, or two-fifths of the bank resources of the world, and therefore we are entitled to two-fifths of the eight billion of monetary gold of the world. This would give us $3,200,000,000.

While, as I have just said, it is true that there have been no discoveries of new fields since 1890, with the exception of the Klondike, a most important event occurred in the discovery of the Cyanide process, which was, with the circumstances attending it, well described by the Mining World and Engineering Record of London, which said:

"The discovery of the Cyanide process must be regarded as one of the greatest achievements of modern time. And there can be no doubt that Cyaniding will be held by the coming generation for its importance, not so much to the mineral industries directly, as for its bearing upon world economies in rendering possibly a greatly increased output of gold and silver year after year. In a comparatively brief twenty-year interval since 1890, when Messrs. McArthur and Forrest brought the modern perfected Cyanide process prominently before the mining world, the output of gold has amounted to 284,081,289 fine ounces. This is a most astonishing showing, especially when compared with a total output of 401,311,148 fine ounces for the entire 397 years previous from 1493 to 1890, a period lacking just three years of being four centuries.

"For the great expansion in the world's output, particularly noticeable in the past fifteen years, the spread of the Cyanide process is directly responsible. Nor, if we except the Klondike, has this record production been boomed by the development of new fields. The cream of the world's gold fields had already been skimmed in previous years in California, Australia, South Africa, Siberia, India, and elsewhere. It is mainly on the cast-off leavings of the old field that the Cyanide process has achieved a record production of the yellow metal. And among those leavings, we must not forget the innumerable low-grade properties whose exploitation has been rendered fundamentally possible only by the Cyanide process. It is these latter which now furnish the bulk of the world's supply of gold, and upon which the world must depend very largely for its future requirements."

MR. BANKER: Those figures are startling. We must be getting more gold than we need for banking purposes.

MR. LAWYER: On the contrary, our banking resources are increasing faster than our gold supply. In 1890 the banking resources of the world were estimated at $16,000,000,000, less than one-third of what they are today. That is, the banking resources have trebled since 1890, and the gold supply for reserve or monetary purposes has only doubled.

MR. BANKER: What about the gold supply for the future?

MR. LAWYER: The production during the past four years has been about stationary, averaging $450,000,000 each year. You must remember there have been no gold discoveries of any consequence during the past ten years, and it is very probable that the production will remain almost stationary for a few years to come. At present it looks as though the gold supply, and the demand for gold for monetary purposes, would run along about equal. Of course the more intimate the business relations of the nations of the earth become, the more efficient will the reserve of gold become, because the reserves of the world will become more and more mobilized, and therefore more efficient in the conduct of the world's business.

MR. MERCHANT: From what you have said, and as a result of my own study, I am convinced that the adoption of the Gold Standard was a natural selection. It was the survival of the fittest.

Thousands of books have been written upon this subject, and libraries literally filled with them.

In 1896, when the Presidential campaign was fought out on this question, my investigation led me into an extended historical review of the use of metals as money. I found that it had been in use by the Babylonians, the Egyptians, the Greeks, the Romans, the Chinese, the Europeans during the middle ages, and that the struggle between gold and silver during the last two hundred years had resulted to the advantage of the people, to the commerce of every nation and to the whole world. This last struggle was not whether gold or silver should be the standard of value, but whether both should or could be used as the standard of value. That is, could we have a double standard. The decision has been unequivocal and universally in favor of a single standard of value, and that standard gold.

But the double or bi-metallic standard had been a troublesome question long before that. Professor Ridgeway says that from the first to the last the Greek communities were engaged in an endless quest after bi-metallism * * *, but while the gold unit never varies in any part of Hellas, until a late epoch, the silver coins exhibit differences not merely between one district and another, but even between one period and another in the same city or state. There is incontrovertible evidence to prove that the same trouble was caused by the fluctuation in the relative value of gold and silver, as arises in modern times. DelMar also states that gold Greek coins remained constant while the silver ones varied, and had to be adjusted.

At present, it may be stated as a general truth, that all other things throughout the commercial world are now measured by gold, or very soon will be, as all the commercial nations of the earth, with a single exception, have taken steps looking to the adoption of the Gold Standard.

The Gold Standard is the evolution of the ages.

SECOND NIGHT

WHAT IS MONEY?

UNCLE SAM: At our talk last Wednesday evening we all agreed upon two facts, and these were fundamental to the consideration of a financial and banking system for me.

The first fact was this: that Gold is the Standard of Value all the world over, as well as our standard.

The second fact: that a Standard of Value was something by which the value of all other things is measured.

It must necessarily follow then, and be perfectly clear to all of us that everything we produce, and everything that we buy and sell is measured by Gold. In other words _that Gold is our money and that our money is Gold_.

MR. LAWYER: Uncle Sam, you say "Gold is our Money." Now, it seems to me as though there must be something done to gold to make it money, even though all our money is gold.

MR. BANKER: Yes, something is done to gold to make it money, and to circulate it as money. Just three things are done to gold to make it possible to circulate it as money.

_First_, we have established a degree of fineness. The gold coin we circulate as money is nine-tenths pure gold, or nine-tenths fine, and one-tenth of cheaper metal. This is added to give it an increased hardness so that the loss by rubbing the gold against other things will not be so great. This loss is called the abrasion of gold.

_Second_, we have established a unit of value in gold which is one dollar, composed of twenty-five and eight-tenths grains of gold, nine-tenths pure, or fine.

_Third_, Uncle Sam here cuts up the gold into pieces as follows: he makes a two dollar and a half piece, which contains two and a half times as much gold as our unit of value and stamps each piece two and a half dollars. It is known as a quarter eagle, being one-quarter of the ten dollar piece which is called the eagle. He makes a five dollar piece which contains five times as much gold as our unit of value and stamps each piece five dollars. It is also known as a half eagle. He makes a piece which contains ten times as much gold as our unit of value and he stamps it ten dollars. It is also known as the eagle. He makes a piece which contains twenty times as much gold as our unit of value and stamps it twenty dollars. It is also known as the double eagle. This is called making coins, or coining money.

These four gold coins constitute all the money there is in the United States, for Uncle Sam does not make pieces containing twenty-five and eight-tenths grains of gold, nine-tenths pure, or fine any more, and stamp them one dollar because this piece of gold was so small as to be inconvenient, indeed an actual nuisance. Uncle Sam stopped making these coins in 1890.

UNCLE SAM: That is right, and I don't make any more gold pieces now containing fifty times as much gold as my unit of value for the same reason that I don't make any of the dollar pieces. A fifty dollar piece was found to be inconvenient and in a way an actual nuisance.

MR. LABORINGMAN: Well, Uncle Sam, I would like to have a few of such nuisances, and if any of you fellows have any of these two nuisances, even the one dollar pieces about your persons, I wish you would allow me to relieve you of all you have of either kind. When it comes to getting rid of that kind of a nuisance, you don't seem to be in a hurry about it. However, just remember that I stand ready at all times to remove a nuisance of that kind, if it happens to be bothering any of you.

MR. MERCHANT: We will remember that and give you the first chance.

MR. LABORINGMAN: Well, you might as well forget it, for I'll never get the chance.

MR. MANUFACTURER: Mr. Banker, did I understand you to say that the four gold coins you have mentioned, the two and a half, the five dollar, ten dollar and twenty dollar gold pieces constitute all the money that there is in the United States?

MR. BANKER: That is precisely what I said, and I stand ready to prove it. Yes, to demonstrate it absolutely, and if I don't convince everyone of you that I am right, I'll eat all the other stuff you call money that you can bring me.

MR. LAWYER: Here is a gold certificate, isn't that money?

MR. BANKER: Mr. Lawyer, please hand me that certificate. Here is what it says on its face: "_This certifies that there have been deposited in the Treasury of the United States of America Ten Dollars in Gold Coin payable to the bearer on demand_." It is perfectly evident, Mr. Lawyer, that this is nothing but a warehouse receipt for ten dollars, stored in Washington subject to the demand of the holder. There is just the same difference between that and the gold coin as there is between a trunk and a trunk check. You would not hold up a trunk check, and tell me that it was a trunk. This certificate is no more money than a trunk check is a trunk.

MR. LAWYER: You are right, Mr. Banker. There is nothing so absolutely essential in our talk, as illustrated by this incident, as the use of correct, exact language. And I am very glad that you have impressed this fact so indelibly upon our minds at the outset.

MR. FARMER: Did you say, Mr. Banker, that all the money there was in the United States were the gold coins? Then you said that if you didn't convince the rest of us that that was the fact, you would eat all the other stuff that we call money that we would bring you. Now, it seems to me as though that was just one of your smooth, slick tricks of getting what we have got in our pockets, as usual. How does that strike the rest of you boys? Now, I have a few silver slugs here, Mr. Banker, that will keep you busy chewing until you pass over, if you try that game on us.

MR. BANKER: That is all right, Mr. Farmer, but you wait until you hear me out.

Now, let us agree upon one fact, and that is this, that Uncle Sam over there is not making or coining any other pieces of gold than the four pieces I have just described, and that none of the one dollar or fifty dollar pieces are now in circulation. Do you all agree that that is a fair assumption under the circumstances?

UNCLE SAM: Yes, that is a perfectly fair assumption that all of the gold now in circulation consists of the four pieces I am now making, the two and a half, five, ten and twenty dollar pieces. But, if they constitute all the money I have in circulation, I am mightily fooled, and it is high time I was put right.

MR. BANKER: Well, that is what I am going to do. I am going to put you right, for you have not only been fooled yourself, but you've been fooling the people long enough as well.

Three hundred and fifty years B.C., one of the greatest philosophers, and one of the wisest men that ever lived, described the development and evolution of money, and defined what money was better than any man ever has since, I think. That man was Aristotle. Aristotle's account of the origin and definition of money was as follows:

"It is plain that in the first Society (that is in the household) there was no such thing as barter, but that it took place when the community became enlarged: for the former had all things in common, while the latter, being separated, must exchange with each other according to their needs, just as many barbarous tribes now subsist by barter; for these merely exchange one useful thing for another, as, for example, giving and receiving wine for grain and other things in like manner. This kind of trading is not contrary to nature, nor does it resemble a gainful occupation, being merely the complement of one's natural independence. From this, nevertheless, it came about logically that as the machinery for bringing in what was wanted, and of sending out a surplus was inconvenient, the use of money was devised as a matter of necessity. For not all the necessaries of life are easy of carriage; wherefore, to effect their exchanges, men contrived something to give and take among themselves, which being valuable in itself, had the advantage of being easily passed from hand to hand for the needs of life--such as iron, or silver, or something else of that kind, of which they first determined merely the size and weight, but eventually put a stamp on it in order to save the trouble of weighing, for the stamp was placed there as _the sign of its value_."

Wilbur Aldrich says: "Gold, and no other thing, sustains all the functions of money. Gold is money as soon as it is taken from the earth, without smelting, without refining, without minting and without limitation."

Horace White says: "Nobody would give that which has cost him labor in exchange for something which he could obtain without labor."

MR. MERCHANT: Mr. Banker, you quoted a man there, Mr. Aldrich, I think it was, who said that gold alone possessed all the functions of money. Just what do you mean by the "functions of money"?

MR. BANKER: I am glad that you asked that very question, because those functions have determined the place of gold in the world's business, and made it the standard of value of the world, and consequently the money of the world.

Those functions are these:

_First_: Gold is a measure of value; that is, all other things are measured in gold.

_Second_: Gold is divided into units, such as our dollar, the English sovereign, the French franc, the German mark, and so determines prices.

_Third_: Gold is a medium of exchange.

_Fourth_: Gold is a storehouse of value; that is, the people of the world hold it as an absolutely safe form of property, varying less in value than anything else they can possess.

_Fifth_: It is such a permanent form of value that it is made the basis or standard of future or deferred payments: not only at the end of a year, but at the end of twenty-five or fifty years.

MR. MERCHANT: I would like to ask you whether you think there is anything in this claim that gold is cheaper today than twenty years ago? Whether it is falling in value, and as a consequence prices of everything else, which must be compared with gold, are rising?