and gold for many of the larger transactions.
Both were made legalized forms of money (and standards
of deferred payments) in units of specified weights
and fineness, the weights bearing a certain ratio
to each other. Thus it was possible for a debtor
to discharge his obligations with that one of the two
metals that at the moment was the cheaper at the legal
ratio. Fluctuations in the prices of gold in
terms of silver were at times such as to cause a large
part of the full-weight coins of one or the other metal
to leave circulation (in accordance with Gresham’s
law). So from time to time the ratio was slightly
changed by law in the various countries to permit
the circulation or to bring back the kind of money
that had been undervalued in terms of the other.
But it is a very remarkable fact that from the time
of Xenophon until the discovery of America (a period
of nearly 2000 years), the market ratio of silver to
gold bullion in Europe remained pretty close to 10
to 1, being only temporarily altered by sudden and
unusual occurrences. From 1492 to 1660 the ratio
changed to 15 to 1, where it remained with remarkable
stability until about the year 1800. At the establishment
of the mint of the United States in 1792 that ratio
was found to exist. Men had come to look upon
the ratio of 15 to 1 as the natural order, determined
(it was sometimes said) providentially by the deposit
of the two metals in due proportion in the earth’s
surface. But as we now see it, this in part was
mere chance and in part was due to the equalizing
effect of the wide use of both metals so that the one
could be easily substituted for the other in case
of a divergence of the market ratio from the legal
ratio as money. From the year 1500 until 1800
the Western hemisphere was the main source of the precious
metals, the alluvial deposits were widely scattered,
were gradually discovered, were usually found in small
quantities, and were extracted in primitive ways.
The existing stock of precious metals, gold and silver,
more than other products of mine and field, is at any
time the accumulation of many years’ production,
and is changed very little, proportionally, by a large
change of output in any year or short period.
It changes in volume as does a glacier fed by the snows
of many years, not as does a river, filled by a single
rainfall. For a short time after the discovery
of America (from 1493 to about 1544) the average coining
value[1] of the world’s production of gold,
nearly all found in America, was about 1-1/2 times
as great as that of silver; but thereafter for three
centuries from about 1545, the annual value of silver
produced was between 1-1/2 to 4 times as great as that
of gold, averaging about twice as great. Silver
was the money chiefly in use in the ordinary transactions
in all of the principal countries of the world.