The table of ratios on p. 323 shows that the value of silver as measured by gold steadily and persistently fell after 1859, and that its downward pace was greatly accelerated in 1875 and 1876. This was due to great changes in the relation beween the demand and the supply of the two metals caused in part by an increase in the production of silver and a diminution in the amount coined, and in part by a large increase in the use of gold for currency purposes. The statistics of the production of the precious metals given in the Appendix show a steady gain in the proportion of the annual output of silver to gold after 1860. For the five years 1865 to 1870 the annual average increase in the production of silver over that of the preceding quinquennial period was $10,700,000, while in the case of gold it was only $4,725,000. For the next five years the figures for silver show an annual increase of $28,375,-000, while those for gold show a decrease of $14,800,000.

In the period 1876 to 1880 the increase for silver was $23,875,000, while the production of gold but little more than held its own. To these figures must be added the annual sales of silver bullion by Germany in the years 1773 to 1879 inclusive, amounting in the aggregate to $141,784,948.* The chief cause of this increase in the production of silver was the discovery of very rich mines in the western part of the United States, especially in Nevada.

On the demand side the case in not so simple, but that there was a falling off in certain quarters and a limitation in others of the field for the extension of the use of silver as money is clear. During the years 1871 to 1876 Germany introduced her present monetary system, which involved a change from the silver to the gold standard. This was accomplished by acts passed in 1871 and 1873, the first authorizing an imperial gold coinage, and the second its substitution, together with a new imperial silver coinage issued on a subsidiary basis, for the old silver coins which had been previously minted by the various states out of which the empire was formed. The amount of silver required for the new coins was very much less than that formerly in circulation, and accordingly a considerable quantity of the metal accumulated in the imperial treasury, a portion of which was sold between the years 1873 and 1879. So far as Germany is concerned, therefore, there was a considerable falling off in the demand for silver, accompanied by an addition to the supply thrown upon the bullion market.

During the entire nineteenth century India served as the chief outlet for the surplus silver of the world. Her capacity to absorb this metal seemed for a time to be unlimited, a peculiar fact due to the custom of hoarding the precious metals as a means of saving, and to their extensive use in the manufacture of idols and personal ornaments. During the decade 1857-67 the Indian demand was abnormally great on account of the Sepoy rebellion, the transfer of the government from the East India Company to the crown, the construction of railways and other public works, and the importation of cotton to Europe to take the place of the American exportation temporarily stopped by the war between the states. All of these events gave occasion for the shipment of unusual quantities of silver from Europe to India. About 1867 a marked change in this situation is observable, the imports of silver into India decreasing greatly.* The reason for this seems to have been the disappearance of the main sources of extraordinary demand and the beginning of annual interest payments on the large public debts which the events above mentioned occasioned. These payments were due to England chiefly, and were made by the sale in London of bills of exchange on India, the purchase and shipment of which by people who had debts to pay there to a considerable extent now taking the place of silver. From 1867 on, therefore, there was evidently a relative decrease in the demand for silver from this quarter.

* Laughlin, p. 141.

A limitation of the field for the monetary use of silver was caused not only by the events in Germany already described, but also by the reduction of small silver coins to a subsidiary state in the United States and throughout Europe generally, and by limitations placed upon the minting of larger silver coins in the states of the Latin Union and in this country. Before describing the means by which this was brought about, however, we must note the main causes for the increase in the demand for gold,

* See Appendix which also helps to explain the relative fall in the value of silver.

Reference again to the table on p. 323 will show that the divergence between the bullion and the legal ratios in both France and the United States was favourable to the introduction of gold into the currencies of those countries after 1853. That it was so introduced in large quantities is rendered certain by the statistics of the mints of the two countries and by many other kinds of contemporary evidence. The same may be said of Switzerland and Belgium, whose monetary systems were assimilated to that of France after 1865, and of the Netherlands, Denmark, and the Scandinavian countries whose monetary movements closely followed those of Germany. In this latter country, as we have seen, gold became the standard of value in 1873, and has constituted an important part of the circulating medium ever since. In Italy and Austria the circulation of coin was small during this period on account of the currency of inconvertible legal-tender notes, and in the United States from 1862 to 1879 gold played a smaller role for the same reason. It has been estimated that between 1850 and 1876 not far from two billions of dollars' worth of gold were absorbed by the currencies of the various countries.* When it is remembered that before 1850 silver was the chief money metal everywhere except in England, the effect of this change in demand upon the relative values of the two metals will become evident.

In explanation of this great increase in the demand for gold, the chief emphasis must be laid upon the enormous growth of commerce on a large scale since the middle of the nineteenth century. It was this which made gold acceptable to all the nations and preferred to silver for all purposes except that of small payments; and it was this, therefore, which more than any other one thing accounts for the changes in legislation which have been noted. Germany was doubtless influenced in her action by the large indemnity in gold which she forced France to pay her as the price of peace in 1871, but it was chiefly because of the belief of her statesmen in the superiority of the gold over the silver standard for modern commercial nations that she demanded the payment of so large a portion of that indemnity in gold.

* Laughlin, p. 174.