Principles of Political Economy: Abridged with Critical, Bibliographical, and Explanatory Notes, and a Sketch of the History of Political Economy — John Stuart Mill — John Shaqi
Principles of Political Economy: Abridged with Critical, Bibliographical, and Explanatory Notes, and a Sketch of the History of Political Economy
John Stuart Mill · en
Two periods of production of silver, in which the production of
silver was great relatively to gold, stand out prominently in the
history of that metal. (1) One was the enormous yield from the
mines of the New World, continuing from 1545 to about 1640, and
(2) the only other period of great production at all comparable
with it (that is, as regards the production of silver relatively
to gold) was that lasting from 1780 to 1820, due to the richness
of the Mexican silver-mines. The first period of ninety-five years
was longer than the second, which was only forty years; yet while
about forty-seven times as much silver as gold was produced on an
average during the first period, the average annual amount of
silver produced relatively to gold was probably a little greater
from 1780 to 1820. The effect of the first period in lowering the
relation of silver to gold is well recognized in the history of
the precious metals (see Chart X for the fall in the value of
silver relatively to gold); that the effect of the second period
on the value of silver has not been greater than was actually
caused—it has not been small—is explicable only by the laws of the
value of money. If you let the same amount of water into a small
reservoir which you let into a large one, the level of the former
will be raised more than the level of the latter. The great
production of the first period was added to a very small existing
stock of silver; that of the second period was added to a stock
increased by the great previous production just mentioned. The
smallness of the annual product relatively to the total quantity
existing in the world requires some time, even for a production of
silver forty-seven times greater than the gold production, to take
its effect on the value of the total silver stock in existence.
The effect of this process was beginning to be felt soon after the
United States decided on a double standard. For this reason the
value of silver was declining about 1800, and, although the annual
silver product fell off seriously after 1820, the value of silver
continued to decline even after that time, because the increased
production, dating back to 1780, was just beginning to make itself
felt. Thus we have the phenomenon—which seems very difficult for
some persons to understand—of a falling off in the annual
production of silver, accompanied by a decrease in its value
relatively to gold.