Meanwhile the general advance in the trade of the world tended to be all in favour of gold. Every elementary manual of economics would show the advantage of gold as a standard. But what changed the whole venue in favour of gold was the discovery of gold in California and Australia and the general industrial development in Europe. While in the sixteenth century the gold and silver which came from South America were for the most part employed by the Spanish Government for the promotion of a political and military policy in Europe, in about the nineteenth century commercial influences alone determined the acquisition and distribution of the precious metals. Again while even up to the first half of the nineteenth century the value of silver obtained was nearly as much, if not greater than, that of gold and the relative value between gold and silver was maintained at a high level, in the later periods the position grew to be altogether different. Even the precious metals themselves were not available in very large quantities. Jevons wrote in 1863:

"Thus while industry, trade and prosperity were rapidly advancing in Great Britain, America and most other parts of the world, there was no corresponding advance in the production of the precious metals. Prices, both in gold and silver, continually receded. Now, if, while the introduction of free trade, railways, telegraphs and innumerable other improvements accelerated the extension of trade, no new discoveries of gold and silver had been made, what must have occurred? Prices must have continued in the downward course which they had pursued for thirty or forty years before. But they did not continue in this course - on the contrary they turned upwards in a sudden and decided manner. And this change was simultaneous with the discovery of the new gold fields. Half the Prerogative Instances of Bacon are exemplified in this question, and, if the philosophy of observation and common sense may be applied to statistical matters, we can draw but one conclusion - that prices have risen in consequence of the gold discoveries." The other countries in Europe followed England, firstly, for the sake of uniformity, secondly, because their principal trade was with her, and, thirdly, because they were anxious to advance in the same lines as industrial England. In 1871 Germany, which had just come into existence as an Empire, substituted gold for silver as the standard of value, although arrangements were not completed before 1873. Other nations followed the example of Germany for the same or similar reasons, France being the last to give up silver as currency. While owing to this change the special demands for gold came to at least 200,000,000, that is about ten times the then average annual production of gold, the output from the mines was falling off.

The result was a marked fall in prices, and low rates of profit, interest and discount prevailed. The whole world was wavering at the time whether to stick to gold or not.

The Royal Commission over which the present Lord Courtney of Pen with presided, emphatically stated in 1888 that the fall in prices was "mainly due, at all events, to circumstances, independent of changes in the production of, and demand for, the precious metals." Since that report conditions have changed altogether.

While in 1888 the production of gold was 23,000,000, in 1900 it was 51,000,000 and in 1913 98,000,000. On the other hand, while the production of silver was valued at 21,000,000 in 1878 it was only 18,000,000 in 1888, 27,000,000 in 1900 and 24,000,000 in 1913.

In order to facilitate a proper understanding of my point I have to make brief reference to the fluctuation in the value of silver. In 1833 the average was 59-3/16d.; from that date up to 1850 the value was fluctuating between 59-3/16d. and 60-3/8d. In 1851 the value improved to 61d. and from that date up to 1872 the range of fluctuation was within the narrow limits of 60-5/16d. and 62-1 /16d. - the latter value being that of 1859 and the highest known in the history of silver. The price of silver began to fall from 1870, the average for that year being 60-9 /16d.; since that date, with slight variations, the fall has been continuing until in 1914 the value came down to 22 1/8d. Now, it should be remembered that 1870 was the crucial year in the history of the precious metals, for in that year England decided to have a gold standard; and since then the more the number of countries following the English procedure the less became the price of silver. Let us begin from 1872 and just mark the progress of the decline and fall of the value of this metal. Between 1872 and 1875, so a Select Committee of the House of Commons states, the total production together with export was 74,700,000. Out of this total India took 9,100,000, France 33,500,000, Russia 4,000,000, Spain and Portugal 4,000,000, England 5,000,000, United States 7,600,000, Japan and China 7,500,000 and other portions of Asia 3,000,000. The reason why over 55 per cent, of the total supply during the four years was taken by countries that had decided upon a gold standard was because they had not finished the arrangements for the adoption of gold as their standard. There was at the same time an appreciation in the value of gold; and the exports of silver to the East also increased as a matter of fact from 1872 to 1877 as silver was being taken by the East more heavily than during the period between 1859 and 1871.

Other considerations also came into play. Although during this period, even as far late as 1888, the production of gold was decreasing, the cost of production of commodities was also decreasing on account of a fuller application of science to manufacture in gold standard countries; further, in these countries, plans for economizing the use of gold were being successfully adopted owing to the extension of banking; the reduction of transport charges and the large increase in the quantity of commodities manufactured naturally kept prices at a low level. On the other hand, the silver-using countries were not in such an enviable position; they had no manufactures and they had to depend upon the countries with gold standards for transport. After 1888 silver production was increasing. The Royal Commission, therefore, erred both with regard to the appreciation of gold and the depreciation of silver. The fact that the prices were at a low level in gold was due to economic causes; and the fall in the price of silver was mainly due to the gold countries trying to get as much out of the silver countries as possible.

In any case, the majority of the Royal Commissioners recommended that there should be no change in the gold standard of England - this recommendation being based upon the assumption that gold never altered in value, while silver and other prices moved up and down owing to economic causes. Nevertheless silver was in use as money in the principal countries - besides, of course, Asiatic countries. The countries making large use of silver were France and the United States. In the United States an Act providing for the more extended use of silver was passed in February 1878, under which the Government was purchasing $2,000,000 worth of silver every month. In 1890 again the United States Congress passed an Act authorizing the purchase of 4,500,000 oz. of silver every month to be put into circulation at the ratio of 16/1 as compared with gold; and on January 1, 1894 the amount thus put into circulation in the form of silver certificates and treasury notes amounted to $461,627,165. But all this had not much effect in the maintenance of the value of silver; while in 1872 silver was worth 60-5 /16d. an ounce in 1878 the value was 52-9/16d., in 1890 47-ll/16d. and in 1894 28-15/16d.

This situation is easily explained. Although the Asiatic countries altogether favoured silver and some European countries as well as the United States were making an extended use of silver, there is little doubt that its dethronement from its high pedestal as the standard of value has had a great effect in the reduction of its value. Further, the large purchases by the United States, as also the large exports to the East, were quite ineffective in view of the great increase, which was taking place at the same time, in the production of that metal. While in 1869 the approximate production of silver was 43,000,000 oz., in 1871 it was 63,000,000 oz., in 1881 79,000,000 oz., in 1888 108,000,000 oz., in 1899 153,000,000 oz., in 1903 165,000,000 oz., and in 1913 225,000,000 oz. The value continued to fall and the United States found that the coinage of silver, if continued, would, before long, destroy the gold standard; as up to 1895 they had been exporting gold for large amounts, they were ultimately forced to stop buying any further silver. The conditions were such that even England and Germany were seriously considering the restoration of the old system under which gold and silver were in joint use as the money of the world. At this juncture the rather unexpectedly large increase in the production of gold put an end to all further speculation in the matter; from 40,000,000 in 1895 the output of gold jumped to 47,000,000 in 1897, 57,000,000 in 1898, 61,000,000 in 1899, and since then, with slight variations, the output has been increasing.