"Hard Money" After the First World War, French, Italian and Belgian paper moneys lost over three fourths of their former gold values. The paper moneys of Germany, the old Austrian Empire and Imperial Russia became virtually or utterly worthless. Before the First World War, mankind had had, at many different times since inconvertible paper money was first used, sad and bitter experiences with its many and disastrous failures. The saddest, greatest, most far-reaching and most disastrous experience in all history will occur at the end of the present war. The money of Germany, her allies, all the European countries overrun by Germany, and that of Japan and the countries overrun by Japan, will have little or no value. After a bitter lesson in the unreliability of inconvertible paper money, a demand for a return to "hard money" always arises. This time it will be greater than ever. Mankind, in its evolution to higher stages of civilization, has almost instinctively selected gold and silver for monetary purposes. Their beauty, their malleability for coins, their durability and their relative scarcity make these metals ideal for use as money. Unlike inconvertible paper money, the quantity cannot be increased at the mere behest of government. No war, revolution nor unwise governmental action in time of peace can increase the physical quantity of gold and silver beyond that mined from the earth. But inconvertible paper money can be printed to any extent. It is a mere promise to pay, and is no better than the ability to pressures or unwise judgment of the managers affect the value of such paper moneys, since they inevitably lead to overissues sooner or later. Already we can see convincing indications of popular demand for "hard money"-gold and silver, and currency freely convertible into these metals-in lieu of the inconvertible papei money which arouses public distrust. Attached (page 34), marked Exhibit "B", are some instances. Mankind's wish for protection against the fluctuations and failures of inconvertible paper moneys and managed currencies is the fundamental reason why "hard money" is desired and should be retained-why it should be favored over any form of inconvertible managed currency or paper issues. Managed currencies that are not convertible into gold or silver vary in effectiveness with the wisdom of the managers. Nations rise and fall in power, solvency and prestige and their inconvertible paper moneys experience like changes. Over centuries of time, sooner or later governments end. Their paper moneys end with them. But gold and silver survive all vicissitudes of nations. After each sad experience with inconvertible paper money, man instinctively wants a return to "hard money". Many there are who would limit "hard money" to gold alone, and so the question at once arises-Is gold sufficient in quantity for this purpose? Shortage of Physical Gold Prior to 1800, both silver and gold were standard money and bimetallism generally prevailed, although ratios were not uniform. The Napoleonic wars, like all such major wars, disorganized the monetary systems of the nations involved. When peace came, Great Britain took steps to return to "hard money" had as subsidiary currency. The plan adopted introduced also the unprecedented policy of pegging the price of gold. (The reasons for both actions are discussed on pages 13-16). This pegging of the price of gold proved to be the most progressive, happy and beneficial development in the long history of money. It was so successful that ultimately it led the newly created German Empire to adopt gold monometallism after the Franco-Prussian war of the early 1870's, and Germany's action soon compelled other nations to do the same. For the remainder of the nineteenth century and until 1931— a period of about sixty years-the gold standard reigned supreme, although for a time during and after the First World War, Great Britain and other European nations were "off gold." England first adopted the single gold standard in the "horse and buggy age", before steam, steamships, railroads, electricity, automobiles, trucks, aeroplanes, the telegraph, telephone and wireless had radically changed the world economy. Full statistics are lacking, but international trade was probably less than 10% of its volume just before the present war. The population of the world was less than half of that of today. The amount of "hard money" required for the business of the world, whether gold or silver, was but a fraction of that now necessary. Gold was in ample supply. With the smaller world trade prevailing in the 1870's, when the exclusive gold standard was generally adopted, there was also no scarcity of gold, for the discovery of new mines in California and Australia in 1849 and the 1850's had greatly increased the world supply of the metal. Thereafter, however, world trade increased more rapidly than gold production, and by the 1890's an insufficiency of gold began to be quite noticeable. It was overcome for a time by the discovery of the cyanide process of treating gold ores, which brought into commercial production the so-called Rand mines of South Africa (the largest ever discovered) and many smaller |