chapter  1
9 Pages

of the chief reasons why England, instead of calling in

At the beginning of the ’seventies, however, something happened which was to disturb completely the 200-year-old stability between gold and silver, and which was to impart to the currency systems of Europe, as well as to several extraEuropean systems, an entirely new form. Other European countries had, at that time, either a silver currency, as in Germany and Scandinavia (gold ducats and carolinas were also minted in Sweden, but they were accepted at varying rates and scarcely circulated at all) or a depreciated paper currency, as in Austria and Russia. If those countries had gradually attached themselves to the Latin Union, with its free minting of silver and gold at a legally established ratio then the traditional ratio between gold and silver might possibly have been preserved. Adhesion to the Latin Union was, in fact, contemplated by Germany shortly before the outbreak of the war in 1870, but owing to the war the plan never came to fruition. Germany elected instead to adopt the gold standard and to sell all her silver not required for token money; and the Scandinavian countries immediately followed her example in 1873-5. No doubt a contributory factor was a certain fantastic idea that England’s economic supremacy was in some way connected with her gold standard. But the step was ominous. Germany did not, indeed, succeed in selling all her silver, some of it remained as late as 1907, and was still to be found in the form of “ thaler ” pieces which were not regarded as token money but were legal tender to an unlimited extent, like gold. Great quantities of silver, however, were thrown on the market. Thanks to the discovery of new mines and new methods (the furnace and later the electrolytic process replacing the amalgam process), the production of silver increased rapidly; and as the production of gold, though still much greater than before 1850, began to diminish at the same time silver again began to flow into, and gold out of, circulation in the Latin Union. Those countries which did not want to lose their gold had no choice but first of all by common

agreement to restrict, and subsequently (Nov., 1878) entirely to suspend, the free minting of silver (5-franc pieces).