SHOWING THE FLUCTUATIONS IN THE VALUES OF CO

Explanation.-The upper line (thus in the diagram i The two lower lines represent the values of gold and silver as compare variations in the space between the upper line and the two lower lines the prices of 1845-7. For further explanation see page 142.

1847

The Era of Gold

DIAGRAM

1862

FM No. 3.

OMMODITIES AND OF GOLD AND SILVER SINCE 1840.

represent the rise and fall of prices of commodities as compared with red to each other and as compared to the values of commodities. The indicates the rise and fall in values of commodities during the period.

1874

Prices 40 to 50 per cent

1875

above 1845-7

1876

4-5 indicates the increased demand for and consumption of all sorts of commodities incident to the gold hunting fever which prevailed throughout the world. The great rise from 1860 to 1867 was largely the effect of the general progress of civilization and the general increase in the scale of expenditure in social life. But of the special events which increased the demand for and values of commodities, the four great wars mentioned were the most potent. These were the causes which operated to increase the values of commodities independent of the increase or decrease of the stock of precious metals. These created a demand for new articles, viz. munitions of war, and diverted labor from its usual employments to supply them; the result being an increased demand for labor, and consequently an increased cost. The demand for labor continued temporarily after the wars to supply the waste incident to them. But this being done there was no longer so much employment, the supply of commodities became excessive, resulting in a decline of prices and of the wages of labor. (The "rise of prices" indicated at this period refers, of course, to prices in gold — the rise in currency prices was much greater.)

But now taking the two lower lines, the continuous one representing the value of gold as compared with the values of commodities, and the dotted one representing the value of silver as compared to gold and also to the values of commodities, we see a great descent in the lines of both from 1850 to 1855-6. Silver declined because its value was "tied to the value of gold" by the laws then in force in the United States, France, and practically in the greater part of Europe, making one ounce of gold legally equal to from fourteen

to sixteen of silver.* Silver being the money of nearly all Europe, its value sustained the value of gold, and prevented a much greater decline.

The whole difference between these values of the precious metals and the values of commodities was called "the rise of prices."

*The following table shows the relative legal values of gold and silver in the coinage systems of various countries:

RELATIVE VALUES OF GOLD AND SILVER IN THE COINAGE SYSTEMS OF COUNTRIES OF THE GOLD STANDARD.

RELATIVE VALUES OF GOLD AND SILVER IN THE COINAGE SYSTEMS OF COUNTRIES

*These countries issue a gold coin for commercial or trade purposes.

RELATIVE VALUES OF GOLD AND SILVER IN THE COINAGE SYSTEMS OF COUNTRIES OF THE DOUBLE STANDARD.

The "Latin Monetary Union," mentioned in the foregoing table, was a convention ratified at Paris, December 23, 1865, between the governments named,