CHEVALIER ON THE FALL IN THE VALUE OF GOLD.*
THIS treatise, greatly enlarged from a paper which originally ap- peared in the _Revue des deux itiondes, will scarcely extend the
reputation of its distinguished author. It exhibits indeed the distinctness of arrangement, clearness of expression, and felicity of illustration, which characterize Michel Chevalier, in common
with all eminent French writers. Great industry in collecting his statistics and skill in using them, so as to enforce without overlaying his position, will also be found in The Probable Fall in the Value of Gold; and a lofty principle pervades the work not always to be found in French speculations. Neither are we at all prepared to dissent from the economist's position—that the immense addi- tions to the quantity of gold will finally cause a considerable fall in its value, accompanied [probably] by general disturbance and, by variations in individual incomes. We do not, however, think that M. Chevalier has exhausted the subject of the fall in value of gold, or treated it with very great depth ; and though the treatise is by no means to be called onesided or unfair,- there is so far a touch of the advocate in it, that mere force and prominence seem given to the future evils that may arise, than is allowed for counteracting causes. This shortcoming is owing to two circumstances. The author only addressed himself to a French public, not generally very well informed upon the principles of money ; so that the earlier part of his treatise deals with matter, which to English readers of econo- mical publications will seem elementary ; and the same may be said of the statistics of gold production. The exposition, how-- ever, is extremely clear, and will be useful to many, while the sta- tistical portion is valuable as bringing to hand the leading facts. The other I'ault has also a French origin, and originates in an earnest desire that the Government should take' steps to avert an evil which M. Chevalier anticipates, from an impending depreciation of silver as compared with gold. In France the standard is silver, and the unit the franc, containing a axed quantity of silver. Originally the proportion of silver to gold was estimated at 15t, to 1, and till the late dis- coveries in California and Australia this proportion was preserved. Practically, however, gold may be used instead of silver. A Louis d'or or Napoleon of twenty francs is good as a discharge for that sum, and in proportion for other amounts. Now if gold, by falling in value in reference to silver, should be allowed to pass current at its nominal amount in francs, debtors, both public and private, will be enabled to discharge their debts in a reduced value. Assume that this proportion should fall about one-third, and gold instead of bearing a proportionate value of Mt to silver should only be 10. Then take an extreme case for an instance. A man owing twenty francs could pay them with a golden Louis, though it would take a Louis and half to purchase (under the conditions assumed) twenty silver francs ; this silver franc being undoubtedly the standard and unit of money in France. M. Chevalier, holds that this amount of silver was what the cre- ditor stipulated to receive—an opinion that may be true as re- • On Me Probable Fall in the Value of Gold ; the Commercial and Social Con- sequences which may ensue, and the measures which it invites. By Michel Chevalier, Member of the Institute of France, &c. Translated from the Crouch by Richard Cobden, Esq. Published by Ireland and Co., Manchester; Ridgway, Lon- don ; and Black, Edinburgh. garde past, or may be present, contracts, but probably questionable as regards the future, since men will clearly contract with their eyes open after this exposition. Now gold being the acknowledged standard in England, the State, our author admits, will be justified in upholding payments in that metal. General derangements may ensue—they cannot be avoided under such circumstances ; possessors of fixed incomes will suffer by a reduction of their real value—of their purchasing power over the necessaries or luxuries of life ; it may be hard probably in the State to take advantage of these natural changes to virtually reduce the interest on their debts.. but it will be honest—the creditor gets the amount of gold he stipulated for. It will not be honest, he holds, for the French Government to per- mit gold to be used in the manner described, discharging debts in a lower real value than they were contracted in. Ile, therefore, proposes that Government should possess the power to regulate at fixed intervals, say of six months, the proportionate value which gold coins should bear to the silver franc. Thus the gold Louis of twenty francs might be made to pass by State announcement for 19 francs, 181 or 18 francs, &c. M. Chevalier is aware of certain difficulties in the working of his plan ; but we do not think he allows for the whole.
" The plans recommended in this work, respecting a gold currency, are they absolutely free from all inconveniences? I do not pretend that they are. It would result that from the fact that the cashier had in his charge gold coins which he was justified, on the 31st December, in considering worth a certain sum, he would, without having touched, or added to or de- ducted from them, on the 1st January, when the periodical revision of the tariff took place, possess the same gold coins in true relation with silver. What is said of cashiers would also be true of every private individual having in his house or pocket any gold coin. In what concerns the receivers of the public revenues the objection is serious. It seems, in fact, that they would be placed in a false position, and every six months (I assume that the revision would be half-yearly) be exposed to a clear loss, or find themselves in the way of making an unmerited profit. This difficulty, however, is not insurmountable. Would it not suffice, for example, if the cashiers were to state the amount which they had separately in gold and silver coins? It would also be well if they distinguished the sums which they held in bank- notes. Such a task need not be very difficult." [There is no difficulty in the statement ; but no statement can prevent a loss on the gold coins.]
"With regard to the public in general, it would not be impossible to pre- vent private interests from suffering a serious loss at the end of each six months, in consequence of the depreciation of the gold which each individual might have on hand. In fact, everybody might so arrange as only to have just so much as he pleased in his possession. This rule might be easily ob- served, if, adopting an idea which has been thrown out, the law were to limit to a certain maximum, such as the sum of a thousand francs, the amount which the creditor should be forced to receive in gold ; so that in private transactions, beyond this sum, it should be left to the voluntary :agreement of parties to decide the nature of the money. in which payment hould be made. But it is a clause which would give rise to great difficul- ties in regard to the State, and to certain large establishments such as the bank.
" In all this I do not trouble myself about those individuals who should have hoarded large sums to keep them indefinitely concealed. If, at last, after a long lapse of time, they experienced a great loss, they would have only themselves to blame.
" In fine, we must not forget that the evil of which, at this moment, we are seeking the remedy,—that is, the loss which the holder of gold specie might in spite of himself encounter, in consequence of the fall of that metal in the course of six months, would not, in all probability, be anything con- siderable."
The extreme difficulty of fixing the true decline in the value of gold seems to have escaped M. Chevalier ; as well as the ques- tionable policy of permitting the notions of any government, periodically to change the value of the money in every man's pocket (for whatever decree depreciated gold, would. pro tants) raise silver) ; and more especially of such a suspected government as now exists in France. He himself neither attempts to fix the positive depreciation of gold that has now taken place, or to say that any has taken place ; which is indeed extremely difficult to do, whether we look to general prices, or to the more particular tests of the rate of interest in England, the value of our public securities, or amount of bullion in the Bank, as these and any other test are influenced by concomitant circumstances which we cannot separate. Neither does M. Chevalier attempt to state the comparative decline " of gold in relation to silver, except by a reference to the premium paid for silver during the late demand for that metal to export to the East, which he says varied from 1 and 2 to 4 per cent. But would the French nation submit to have the possibly corrupt agents of a government practically and periodically fix the value of their money, which he, an accom- plished master of the subject, declines to do in his closet as a mat- ter of speculation ? The proportion whibh one metal bears to another in the bullion market is indeed the best test we have ; though it is not perfect, from the practical impossibility, already alluded to, of separating the many circumstances that go to make up an economical whole from the single influence we wish to get at. For instance, the actual cause of the late premium on silver in France, seems to have been mainly, if not entirely, an urgent commercial demand, the supposed decline in gold. having really nothing to do with it. But how long would. this test, such as it is, continue a natural and honest one, when the value of money was to be changed every six months by the nominal market prices of gold and silver ? Would not gambling speculations, now confined to the Bourse or the mart, from which the unskilful can absent themselves if they please, extend to the money of every man in a way he could not avoid ? Uncertainty, and speculation to boot, would it seems to us be mixed up in every transaction, and the social derangement in pecuniary affairs would closely resemble a part of that which M. Chevalier very ably describes as the inevitable result of a fall in the value of the gold standard. The only mode, as it seems to us, in which France
can retain a silver standard, is to make silver the sole tender— to enable a creditor to demand that metal in payment of his debt. This, however, we suspect would really raise the value of money in France andinflict an injustice upon the debtor.
That the value of gold must fall' though we can discover no distinct proof of it as yet, and that, as a consequence, fixed in- comes must decline in proportion, are, we think, undeniable pro- positions. When and to what extent this decline will take place we cannot tell ; but we believe there is no remedy for it, and that any attempts at remedy would work more evil than good, always except to those who got money given to them. This, however, is too large a subject to enter upon at the end of a review. ?We may, however, observe that the effects of the change may pro- bably be less than many persons expect, because they look only to masses, and forget the units that compose them, or fix atten- tion upon wide intervals and neglect the intermediate circum- stances. Mr. Cobden, in a judicious preface to his translation, points to life insurance. If gold declined at the rate of 20 per cent, it is beyond all doubt that the family whose head insured 5001. might receive what would only be equivalent to 4001. But if the insurer died early so great a decline could not have taken place, perhaps no decline at all ; and if the insurer lived long, he would pay a large part of the premiums in depreciated money. So the fundholder has had ample notice to sell out, and reinvest in some security, the income from which would change with the value of money. We are aware that these and similar examples that might be quoted do not apply universally, or without quali- fications; but we mention them as hints. Of this, however, we feel quite sure, that changes of fashion or opinion, and even great social improvements, affect invested incomes quite as much as they are likely to be affected by a decline in the value of gold.
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