THE PRESIDENTIAL ELECTION IN THE UNITED STATES IN 1896. UNIVEROTY OF In November of last year a great danger was averted from the commercial community. If WILLIAM J. BRYAN and not McKINLEY had been elected President of the United States a commercial and financial crisis would assuredly have followed of such magnitude, so disastrous and far-reaching in its consequences, as has never been experienced before. This opinion was shared by the commercial centres of America and Europe alike. The excitement and anxiety prevailing everywhere before the result of the election was known, furnish an undeniable proof of this. With very few exceptions the daily press and a great number of periodicals also gave expression to the fears that were universally entertained. We may ask, however, if these fears were not exaggerated. Would the reopening of the Mint of the United States to the free coinage of silver at the old ratio of 1 to 16 have indeed been such a dangerous experiment? For, as a matter of fact, this was the paramount issue in BRYAN'S platform, the issue on which the whole campaign turned and which caused such universal indignation abroad. The subject is, in itself, of sufficient importance, to submit it, even now that the Presidential Election is a thing of the past, to a careful examination. We have besides, another reason for doing so, which we will state hereafter. A few weeks before the election there appeared in The Times) a letter from Messrs CLOSE BROTHERS & C° of Chicago, originally addressed to their London house. In this letter they admitted that in case BRYAN should be elected great uneasiness would prevail, followed by a depression in business, but at the same time they argued that the actual influence on the state of affairs would be felt to a less degree than the public seemed to anticipate. The Economist 2) opposed this argument, and in a letter to the Editor of the same paper) Messrs CLOSE BROTHERS & Co. brought forward other arguments in support of their views. We will make this controversy the starting point of our investigations. The views of Messrs CLOSE BROTHERS & C° on the subject may be summarized as follows. They claim that even if BRYAN were elected "no actual changes in the legal status of the currency could occur for some time after the election". In the meantime, it is true, there would naturally be a rush on the Treasury for the gold deposited there. Now, assuming, they wrote, that the Treasury paid out this gold as long as the supply would last, and that this gold (with as much as possible of the metal in circulation) could be withdrawn from circulation so that later on advantage might be taken of the premium which, in the opinion of everybody, would result from the reopening of the mint to the free coinage of silver, at the ratio of 1 to 16, then the immediate result of this measure would be a contraction of the currency and consequent falling off in the prices of commodities. This falling off in prices would, in its turn, cause a considerable increase in the export of all sorts of commodities. Of course, payment would be required for 1) The Times, 14th Oct. 1896. these goods and as America would discontinue buying European goods, no other payment would be possible except in gold. Fresh imports of gold into the United States would inevitably follow and in this case there would be, in all likelihood, an end to the withdrawal of this money from circulation. Consequently, before long the first result of the fears of the effects of BRYAN'S election would no longer be felt. And as to the subsequent results, viz. those that would make themselves felt when the changes in the legal status of the currency should have been brought about, it was the opinion of Messrs CLOSE BROTHERS & Co. that no more gold would be withdrawn from circulation than could conveniently be replaced by silver. At present, they said, there was 600 million dollars of gold in circulation, and it would take years and years before silver to this amount could find its way to America. And so long as this had not occurred to the full extent of this amount, America would continue exchanging gold for silver at the ratio of 1 to 16, and a premium on gold would be out of the question. They further added that much was said about a probable return of American securities into the United States in case BRYAN should be elected, but as a matter of fact, this had happened already some time before, and on a large scale too, and it was far from improbable that a reaction would follow in the event of a new order of things becoming an accomplished fact. Now all these arguments are based on three hypotheses unsupported by proofs and of which it will not be difficult to show the fallacy. These hypotheses are: In the first place, that the 600 million dollars of gold money that are said to be in the United States, are really all used in the circulation; Secondly that a premium on gold would result in an export of commodities which could be counterbalanced only by fresh imports of gold; And thirdly that the re-opening of the Mint in the United States to the free coinage of Silver at the ratio of 1 to 16 would cause a rise in the gold-price of silver to the par of said ratio. Granted that the quantity of gold money in the United States really amounts to 600 million dollars - although the correctness of this estimate is called in question by many and The Economist also refused to admit it it is however a fact that of this amount only a very small portion is actually in circulation. Strictly speaking it is only in California that gold is used as a real circulating medium. And the question arises if in this State people would not eventually continue making their payments in gold just as they did before when the United States were under the regime of a paper currency. But setting this aside, in addition to California, gold is to be found only in the Treasury, in the banks and with a certain number of private individuals; in the latter case, however, it is as a kind of reserve rather than as part of their cash. Now, the first question is this: Would the Treasury in the event of BRYAN having been elected, have continued redeeming the different State- and Treasury-certificates in gold? If not, the Treasury might have retained the gold, even if this metal had gone to a premium, to cover the paper still in circulation, paying out silver only if paper was offered for redemption. In this manner, at any rate, the banks might have acted. And consequently, so far at least, a contraction of the currency would not have occured. Private individuals would probably have retained their hoards, but this would not have affected the position. Contraction of the currency would have occurred only in case private individuals could have obtained gold money and put it aside as fresh hoards. It cannot be denied however that many people would have had a strong desire to do so, and this circumstance alone would indubitably have been sufficient to cause gold to go to a premium at once. But let it be granted that, whether the quantity had been large or small, at all events a certain amount of gold would have been withdrawn from circulation. Now, assuming that this amount had been sufficiently large to bring about, by itself, a falling off in the prices of merchandise, this could only have occurred if this withdrawal had caused a stringent money-market. But this stringency could not have been counteracted by supplies of gold when there was a premium on gold, which would have prevented every body from paying it out at its par-value. The currency would thus be reduced to the following singular position: There would be a depreciation of the value at which it was maintained before, owing to prospects of silver coinage at the ratio of 1 to 16, and at the same time it would experience a temporary appreciation in consequence of the withdrawal of a certain amount of gold money from circulation, which would have brought about an artificial scarcity in this circulating medium, a scarcity which neither a fresh supply of silver could have met (because the re-opening of the Mint to the coinage of silver had not yet taken place), nor a fresh supply of gold, because this metal had appreciated even more than the circulating medium. The escape from this singular condition of things, which would assuredly have caused a more or less grave crisis in the money-market, would probably have been the issue by the banks of Clearing-housecertificates, or some similar expedient, by which the scarcity of the circulating medium might have been met. So far we have left one factor out of consideration in our arguments viz: the return of American securities from Europe. Surely, the assertion of Messrs CLOSE BROTHERS & Co., that the movement. would have come to a termination at BRYAN'S election, is וי |