Section VIII.: Of the Absence of any fixed ratio of Value between one Metal and another.

The same error, which led public functionaries to believe, that they could fix the relative value of any metal to commodities, has also induced them to determine by act of law the relative value of the metals employed as money, one to the other. Thus, it has been arbitrarily enacted, that a given quantity of silver shall be worth 24 liv., and that a given quantity of gold shall likewise be worth 24 liv. In this manner, the ratio of the nominal value of gold to that of silver came to be legally established.

The pretension of authority was in both cases equally vain and impotent; and what has been the consequence? The relative value of the two metals to other commodities has, in fact, been constantly fluctuating, as well as the relative value of the metals themselves, when exchanged one for the other. Before the re-coinage of gold, in pursuance of the arret of 13th October, 1785, the louis d'or was commonly sold for 25 liv. and some sous of the silver coin. Consequently, people took good care not to pay in gold coin the sums bargained for in silver; otherwise they would really have paid 25 liv. and 8 or 10 sous, for every 24 liv. of the sums stipulated.

Since the re-coinage in 1785, when the quantity of gold in the louis d'or was reduced by one-sixth, its value has nearly kept pace with that of 24 liv. in silver; so that gold and silver have been paid indifferently. However, it has still continued most customary to pay in silver, partly from long habit, and partly because the gold coin, being more liable to be clipped or counterfeited, was received with more caution and liable to more frequent cavils about the weight and quality.

In England a different arrangement has produced an effect directly contrary. In the year 1728, the natural course of exchange fixed the relative value of gold to silver as 15 9/124 to 1; say 15 1/14 to 1, for the sake of simplicity; 1 oz. of gold was sold for 15 1/14 oz. of silver and vice versâ. Accordingly that ratio was established by law 1 oz. of gold being coined into the nominal sum of 3l. 17s. 10 ½d. and 15 1/14 oz. of silver into the same sum. Thus, the government attempted permanently to fix a ratio, that is, in the nature of things, perpetually varying. The demand for silver gradually increased ; its use for plate and other domestic purposes became more general; the India trade received an additional stimulus and took off silver in preference to gold, for this reason, that the relative value of silver to gold is higher in the East than in Europe; so that, by the end of the last century, the ratio of these metals one to the other in England became about 14 ½ to 1 only; and the same quantity of silver, that was coined into 3l. 17s. 10 ½d., would then sell in the market for 4l. in gold. There was thus a profit on melting down the silver, and a loss on payments in that metal; for which reason, thenceforward, until the parliamentary suspension of specie payments by the Bank of England in 1797, payments of course were commonly made in gold.

Since 1797, all payments have been made in paper. But, if England shall return to a metallic currency, framed upon the former monetary principles and regulations, it is probable that payments will be made in silver instead of gold, as before the suspension; for gold has risen in relative price to silver in the English market, probably in consequence of the large export of specie for commercial purposes, and greater difficulty of prevention in gold than in silver. Gold bullion in the English market is now to silver bullion in the ratio of about 1 to 15 ½, although the mint ratio is still 1 to 15 1/14. A payment in gold instead of silver would therefore be a gratuitous sacrifice of the difference between 15 1/14 and 15 ½.

Hence may be drawn this conclusion; that it is impossible in practice to assign any fixed ratio of exchangeable value to commodities whose ratio is for ever fluctuating, and, therefore, that gold and silver must be left to find their own mutual level, in the transactions in which mankind may think proper to employ them.

The above remarks upon the relative value of gold and silver are equally applicable to silver and copper, as well as to all other metals whatever. There is no more propriety in declaring, that the copper contained in twenty sous shall be worth the silver contained in a livre tournois, than in enacting, that the silver contained in 24 liv. tournois, shall be worth the gold in a louis d'or. However, little mischief has been occasioned by fixing the ratio of copper to the precious metals, because the law does not authorize the payment of sums stipulated in livres tournois and francs in either copper or the precious metals indifferently; so that, in reality, the only metal money recognised by law as legal tender, for sums above the value of the lowest denomination of silver coin, is silver or gold.