James Laurence Laughlin Answer to Coin Harvey 1895


Laughlin, professor of political economy at the University of Chicago, was one of the outstanding economists in the country, and one of the most ardent defenders of the gold standard. More than once he tried to expose the crudeness of "Coin" Harvey`s economics. In 1895 he held a public debate with Harvey, from which this passage is taken.

James Laurence Laughlin I would like to discuss, in connection with the principal topic of the evening, money as a measure of value. Money is used as a common denominator, to which other things are referred for comparison. In order to compare goods with money there is no more need of as many pieces of money as there are articles to be compared than there is of having a quart cup for every quart of milk in existence, or of having a yard stick in a drygoods store for every yard of cloth on the shelf. The idea that it is necessary to multiply the measurements of value is absurd; but it is of the foremost importance that the measure of values should not be tampered with, and should not be changed by legislation to the damage of all transactions based upon it. Right here is the whole secret of the opposition to silver as money. Silver has lost its stability of value. It is no better than any ordinary metal for stability. The action of India in June, 1893, sends it down 20 per cent. The mere rumor of the Chinese indemnity sends it up 10 per cent. The greater or less quantity of money there is roaming about in circulation is no reason why any one gets more of it. Money, like property, is parted with for a consideration. No matter how many more coins there are coming from the mint under free coinage and going into the vaults of the banks to the credit of the mine owners who own the bullion, there are no more coins in the pockets of Weary Waggles, who is cooling his heels on the sidewalk outside the bank. The increased number of handsome horses and carriages on Michigan avenue does not imply that I can get them if I have not the wealth to purchase them with. I must produce, work, turn out goods, and labor. I must get gold or silver or something equivalent to the value of the goods, and in that way I shall get there and in no other way. There is no way of getting rich by short cuts or by legislation or by merely increasing the means of exchanging goods, when goods themselves are the principal thing.

Money is the only machine by which goods are exchanged against one another. No matter how valuable, it is not wanted for itself. It is only a means to an end, like a bridge over a river. Do you suppose that the farmers of this country really believe that with each ton of silver taken out of the mines by the silver law-makers in the Senate that there are created bushels of wheat and bushels of corn and barrels of mess pork? The silver belongs to the mine owners. How will it get into our pockets or the pockets of anyone else? Do we insult any one's penetration by supposing that the Congressional silver kings are going coaching about the country distributing their money for nothing? Our farmers are no fools. They know they can get more money only by producing more commodities to be exchanged for it, and for those commodities they want as good money as any other men in the country have got. . . Now, as to the free coinage of silver at 16 to l. Let us get to the point of this question at issue. The market ratio is now about 32 or 34-it skips about so much you can t be really certain. It has been 34 to 1; it is somewhere between 32 and 34 now. If that be the market ratio, and in the mint ratio you propose 16 to 1, there is a premium of sixteen ounces of silver profit on withdrawing every ounce of gold in circulation. Consequently free coinage of silver at 16 to I means single silver monometallism; 16 to 1 leads to a single silver standard, and in the language of my opponent, we will start with all the South American countries and Mexico as companions. Free coinage of silver then is absolutely certain to drive all our gold out of circulation. The mere hint of it almost did that in the panic of 1893. May 1, 1895, the first of this month, there were $568,000,000 of gold in circulation. Since gold must be inevitably driven out if free coinage of silver is adopted, there will be no increase in the quantity of money. To the people who support free coinage hoping to increase the quantity of money I say it is perfectly evident on the face of it that it will contract the currency by the total amount of $568,000,000. It could not change prices, therefore, by increasing the amount of the medium of the exchange. That is plain.

The only way it would act would be by increasing the price of everything; because goods would be reckoned in a cheaper medium than that of gold. This my friend admitted this evening. If prices would rise, he says, we would have a glow of satisfaction. It is the kind of glow of satisfaction which comes to the inebriate after he has been supplied with drink, after he has been a long while thirsty. For example, take a pair of gloves worth 100 cents in gold; they would exchange after free coinage for about 210 cents in silver. A dozen eggs, now selling at 15 cents, would sell for about 30 cents, and everything we buy would rise in proportion, since the intrinsic value of the pure silver in the dollar is worth but 51 cents.

As free coinage of silver would inevitably result in a rise of prices it would immediately result in the fall of wages. Its first effect would be to diminish the purchasing power of all our wages. The man who gets $500 or $1,000 a year as a fixed rate of wages or salary will find he could buy just half as much as now. Yes, but someone will say, the employer will raise his wages. Now, will he? But the facts on that point are clear and indisputable. It has been one of the undisputed facts of history that, when prices rise, the wages of labor are the last to advance; and when prices fall, the wages of labor are the first to decline. Free coinage of silver would make all the articles of the laborer's consumption cost him 100 per cent more unless he can get a rise in his wages by dint of strikes and quarrels and all the consequent dissatisfaction arising from friction between the employer and employe! He would be able to buy only one-half as many articles of daily consumption as he had before.

In short, a rise of prices necessarily results in a diminution of the enjoyments of the laboring class until they can force the employers, through a long proeess of agitation, to make an increase in their wages. Are we willing to sacrifice the interests of the laboring classes to the demands of certain owners of silver mines who hope to hoodwink the people with the cry of more money? This would be, clearly enough, distinct and serious damage.

The damage runs in other directions, however. The proposal to adopt a depreciated standard of value is simply an attempt to transfer from the great mass of the community who have been provident, industrious and successful, a portion of their savings and gains into the pockets of those who have been idle, extravagant, or unfortunate. The provision which has been made for old age, for sickness, for death, for widows and orphans, or by insurance, will be depreciated in the same ratio. No invasion of hostile armies, burning and destroying as they advance, could by any possibility equal the desolation and ruin which would thus be forced upon the great mass of the American people.

Such a depreciation, however-as all experience and history has showndoes not fall alike upon the shrewd and the unsophisticated. The shrewd ones, the bankers, etc., will be easily able to take care of themselves; while we plain people will be robbed of our hard-won earnings without any hope of compensation.

Free coinage of silver at 16:1 would injure all those who wish to borrow; because it would frighten lenders and make them unwilling to lend except at high rates of interest. Moreover, since the average term of mortgages, in general, is not over five or six years, present indebtedness of this kind does not run back to 1873. Free coinage is essentially dishonest. .

In conclusion, gentlemen, extraordinary as is the proposal for free coinage it is in truth only a huge deceit. It was born in the private offices of the silver kings, nursed at the hands of speculators, clothed in economic error, fed on boodle, exercised in the lobby of Congress, and as sure as there is honesty and truth in the American heart it will die young and be buried in the same ignominious grave wherein lies the now-forgotten infant once famous as the rag baby. Free coinage is greenbackism galvanized into life. That heresy in its old form of a demand for more money has already been laid low. It will not long deceive us in its new form of a demand for more silver, or for silver fiatism. Nor in any other respect is it what it presumes to be. It is not a proposition for bimetallism. It is a wild leap in the dark for silver monometallism. Under the cry for more money are veiled the plans of a daring syndicate of mine owners and speculators, who have hoodwinked the people in certain parts of the country and who, while deluding them with a specious argument for more money, are laughing in their sleeves at a constituency so easily gulled.