With the closing of the mints of the Latin Union to the free coinage of silver in 1874, we enter upon the second phase of the bimetallic question. This second phase is quite distinct from the first, which had just ended disastrously, if not ignominiously. Though the object was the same, the maintenance of silver as a co-ordinate standard of value with gold, the motives were different and different means of attaining the desired object were advocated. The position of silver was forced upon the attention of the commercial nations by the impending danger that the rush for gold as a sole standard of value would result in a serious rise in the value of that metal. What had proved impossible of achievement to France and her Latin allies, it was now sought to attain by the united action of the civilised world.

The example of Germany in "demonetising ' her silver was copied by several of her northern neighbours. Germany, just emerging into a fresh national life after the Franco-German war, proceeded energetically in the re-modelling of her coinage, and between 1873 and 1879 she threw upon the market more than 7,000,000 lbs. of silver (a). Holland and the Scandinavian Governments pursued the same policy, and the United States of America in 1873 ceased the coinage of silver. This serious decrease in the demand for silver, and the increased supplies from the mines and from the "demonetised" silver currencies, soon resulted in a fall in the gold price of that metal. The price of silver bullion had for a couple of centuries or more averaged from 5s. to 5s. 2d. an ounce. In 1873 it dropped to 59 1/4d.; in 1875, 56 7/8d; in 1876 in six months it fell from 56 1/8d, to 48 1/4d., and has almost without intermission declined until it has reached its present price of about 2s. 3d. an ounce. Simultaneously with this fall in the gold price of silver, and in striking conformity with it, has occurred a fall in general prices, dating from about the same year, 1873.

(a) Shaw, History of Currency, p. 219.

These two phenomena, the fall in the price of silver and in the prices of all commodities, form the groundwork for the bimetallists' attack upon the single gold standard. Put shortly, their argument was as follows: There has been a sudden and unprecedented demand for gold for coinage purposes to take the place of the silver thrown upon the market; the supplies of gold are not only stationary, but actually declining, and the world's stock has proved quite inadequate to meet the demand. Consequently gold has risen or "appreciated" in value, in accordance with the accepted theory that the value of money depends upon the quantity in circulation and the amount of work that quantity has to perform. This "appreciation" shews itself in a fall in prices, and silver, having become a commodity and being no longer the standard of value, has naturally shared in the fall. The remedy, the only remedy they said, was to come to some agreement to coin silver again, to circulate at a fixed ratio as legal tender. By so doing the quantity of money in circulation will be increased, and prices will rise again.

Their opponents, the gold monometallists, denied the premises upon which the bimetallists based their arguments. The year 1873 and its immediate predecessors, they said, were years of abnormally high prices, and all arguments based upon these prices were fallacious. The drop which occurred, however regrettable, was only a natural reaction; temporary rises and declines in prices were unfortunately unavoidable, but time would remedy the evil. As to recoining silver as a standard of value, the advocates of the single standard denied the possibility of raising silver to anything like its old price; they might increase the demand for it, but the supply had so grown that a return to the old level was not practicable. The smallest rise in price would stimulate production and cause mines hitherto regarded as unprofitable to be re-opened. Moreover, they regarded silver as a cumbersome and clumsy medium of exchange for large payments, and deprecated any attempt to open the mints again to its recoinage for this reason. As to any international agreement to maintain silver in circulation, a majority of the party frankly denied its possibility and viewed the proposal as quixotic.

In England the drop in the price of silver was regarded with comparative equanimity. England was neither a silver producing country, nor was she a holder of silver to any extent. It was only in her Eastern possessions, particularly India, that the blow was severely felt. But the decline in general prices was a serious handicap to a commercial nation like ours, and the strength of the bimetallic party in England was mainly the result of its promise that the recoinage of silver would force prices up again.

There is and always has been considerable misunderstanding in the popular mind as to the supposed advantages of rising prices. It must be borne in mind that what we should always strive to maintain is a stable standard of value. Any change in the value of money is an evil. It is possible, though not certain, that to a nation like England, with a large foreign trade, a fall in the purchasing power of money, with its attendant rise in prices, is a lesser evil than its converse. For instance, the period between 1860 and 1873 was one of the most prosperous periods in English history, and prices were constantly on the up-grade. But we must remember that the nation was peculiarly able to bear the disadvantages arising from rising prices. It was the period succeeding the adoption of Free Trade, and though the connection is in some quarters denied, yet it must be admitted that our foreign trade increased so fast that a maintenance of the rate of growth could hardly be hoped for. Not only were prices rising but wages' also rose, and the price of foodstuffs, so far from sharing in the rise, had greatly fallen. Rising prices as a rule mean hardship to the wage-earning classes of the community, a very large proportion of the population, because prices usually rise faster than wages. This hardship was not felt to any great extent in the period preceding 1873, but if the programme of the bimetallic party had been carried out and their avowed object of raising prices been achieved, there is little doubt that it would have caused severe distress in some quarters, for such a rise must have necessarily been sudden.

The loss inflicted on the mercantile community by the fall in prices after 1873 was a real one, for it meant that the anticipated profit of the manufacturer would possibly be turned into an actual loss. Modern manufacturers do not work to order but must anticipate demand, and the margin of profit is so small that it requires but a very small drop in prices to change this profit into a loss. Constantly drooping prices to a certain extent paralyze industry, and so react on the whole community. Nevertheless it must be remembered that the loss is incurred during the process of the decline, and that a sudden jump upwards is not the remedy.

The history of the bimetallic movement is a record of abortive international conferences held at the instance of France or the United States, at Paris in 1878 and 1881, and at Brussels in 1892, with the object of rehabilitating silver as a standard of value, and maintaining it in circulation by international agreement. The question was thoroughly ventilated in this country by means of a Select Committee of the House of Commons appointed in 1876 to enquire into the depreciation in the value of silver, and also by the Boyal Commission of 1886, usually called the "Gold and Silver Commission," but although a considerable addition to our information on the subject was gained, no practical result ensued. The failure of the international conferences was undoubtedly chiefly due to the attitude adopted by England. London had acquired a reputation as the central gold market of the world, and the country was firm in its resolve not to jeopardise this reputation by rash experiment. Thus, while the English delegates usually shared in the opinion that silver ought to be maintained in circulation as much as possible, they neither would nor could promise England's active support in establishing a universal recoinage of the metal.

For many years the bimetallic question was the most prominent economic problem before the world, yet about the years 1897 - 1898 all interest in the matter suddenly dropped. With the recent recrudescence 'of Protection so fresh in our minds it is perhaps rash to say that bimetallism is dead, but at all events it has totally ceased to be a factor in the political world; if not dead it is at least dormant. How are we to account for this sudden loss of interest in a subject which only a few years ago divided the world into two hostile camps? The reason is that the chief arguments of the bimetallic party have been rendered useless by the recent trend of events. The ground has been cut away from their feet and the party has no longer a raison d'etre.

First of all, the general level of prices, which had almost constantly dropped since 1873, became stationary about 1895 - 1897, and then slightly rose, as is shown by Mr. Sauerbeck's index numbers of the prices of forty-five staple commodities published annually in the Journal of the Institute of Bankers. This cut away one prop of the party. Then the opening up of the South African Goldfields, and the rapid increase in the world's annual output of gold, cut away the other prop.

The bimetallists had argued that gold had appreciated in value owing to the supply being insufficient to meet the increased demand, hence the fall in prices. This insufficiency in the supply was being rapidly counteracted by the output of the South African mines, and the chief argument in favour of adopting a double standard of value was invalidated.

Looked at in one way this result was a triumph for the bimetallic party. The more extreme of the monometallists had denied that the increased use of gold had resulted in a scarcity of that metal, but the rise in prices which followed the increase in the gold supply seems a confirmation of the bimetallic argument.

From a purely theoretical point of view the arguments put forward by the bimetallic party were more logical than those of their opponents, but in England, at all events, it was not a question of theory. The victory of the gold monometallic party was a victory of strong common sense and practical business habits over abstract theory. Considering the length of the tradition which lay behind the use of gold as a single standard in England, the unique financial position which London had built up by means of this gold standard, and the generally successful commercial position of the country, it would undoubtedly have been rash in the extreme on her part to abandon her coinage system in favour of a scheme which, however logical in theory, had, it must not be forgotten, been a distinct failure when put to the test of experience.