The first points to be considered are, the probable extent of the depreciation, and the time within which it may be expected. Fortunately, there is one example on record of a perfectly similar change, the study of which will enable us to see the true nature and probable limits of the present revolution. I refer, of course, to the effect produced in Europe by the great supplies obtained from the American mines in the sixteenth and seventeenth centuries.

We do not need to know the whole amount of gold and silver actually in use in the world, either as coin or plate, before the discovery of America. It is a well-ascertained principle, that the permanent or average value of a commodity depends, not on the larger or smaller stock of it already in being, but on the average cost of its production. If a pound of iron is worth only one-thousandth part as much as a pound of silver, it is not because there are a thousand times as much iron now in use as silver, but because it requires a thousand times as much labor to raise an additional pound of silver from the mines, as it does a pound of iron. If the stock already in use be ever so large, the value of it cannot permanently fall below the cost of production; for as the labor of obtaining more would not be remunerated, no more would be produced; and the constant consumption would steadily diminish the stock, till the value of what remained would rise high enough to pay the laborer for the effort of procuring a fresh supply. On the other hand, if the stock is ever so small, no one will pay more for any portion of it than it would cost him to raise or manufacture the article for himself. The steady average value, then, the point about which the price oscillates, never departing from it far in either direction, is the cost of production; and a tolerably accurate measure of this cost, so long as the demand remains the same, is the quantity annually produced.

It is important to recollect this, as many persons have been led to believe, because the very great addition made by the Californian and Australian washings to the stock of gold did not immediately and sensibly affect the value of that metal, that no future depreciation of it is to be expected. But till it is ascertained that this is a permanent increase of supply, and that the newly discovered auriferous districts will continue for many years to yield, not probably as much as they have done,

but enough to make the former sources of supply appear comparatively insignificant, and thus to diminish the average cost of production, the change of value will be too small to be generally appreciated.

Down to the time of Columbus, the average annual supply of the two precious metals certainly did not exceed three millions of dollars. How much was this increased by the supplies from America during the sixteenth and seventeenth centuries? Humboldt is here the only authority generally relied upon; and as he made very extensive and laborious investigations, was well acquainted with all that had been written upon the subject, had ready access to official sources of information unknown to former writers, was well versed in the theory and practice of mining, and critically examined some of the most celebrated mines, it is probable that his statements are a very near approximation to the truth. He tells us that the annual supplies of the precious metals obtained from America were as follows.

Hence it appears, if we suppose the Old World continued to furnish as much as before, that in the first half of the sixteenth century the supplies from America had doubled the annual product. In the latter half of this century, they rendered it nearly five times as large. In the seventeenth century, it became over six times, and in the eighteenth, over eleven times, larger than it was before 1500. The great increase in the latter half of the sixteenth century was owing to the discovery of the mines of Potosi, which were first systematically worked in 1545.

How great and how rapid a depreciation of the value of money was caused by this vast increase of supply? Here,

* Humboldt estimates that all the European and Asiatic mines, as late as 1800, did not yield annually more than five millions of dollars.

again, the means for forming an opinion are very imperfect, being chiefly an extensive and laborious comparison of the prices, at different periods, of certain leading commodities, which are in uniform and perpetual demand. The staple articles of food, such as grain and meat, are the best for this purpose, as it may be presumed that they are not often produced in larger quantities than are wanted, and as nearly the same amount of labor is required for the production of a given quantity of them in one century as in another. If a genuine record can be obtained of the prices actually paid, at one place, for such articles, for a long series of years, the variations, if any, in the value of the precious metals during those years may be deduced from it, allowance being made, of course, for any alterations of the quantity of pure metal passing under the same denomination of coin, and for the state of the coinage, whether worn and clipped, or fresh and perfect. Such a record is found in the accounts of Eton College, and in the lists of prices collected by Bishop Fleetwood and M. Dupré de St. Maur. The conclusions deduced by various writers from these accounts do not agree very well; but the variations do not materially affect the result for the purpose which we now have in view. We select the computations made by Adam Smith, as they were made with great care and knowledge of the subject, and have been generally accepted by later writers on Political Economy.

Adam Smith says the American mines do not seem to have produced any effect upon prices till after 1570, though the mines of Potosi had then been actively worked for a quarter of a century. Between 1595 and 1620, silver fell to about one third of its former value; and about 1636, it had fallen to one fourth part of that value, where it has remained with little variation almost to the present day. Before 1570, a quarter (eight bushels) of wheat of middle quality was sold in England, on an average of a long period of years, for about two ounces of pure silver; about 1600, (still taking an average of many years, so that the very good and very bad crops may offset each other,) the price had advanced to a little over six ounces; about 1636, it had risen to nearly eight ounces. The average value of a quarter of wheat in England, from the repeal of the Corn Laws up to 1852, did not vary much from

forty-three shillings, which contain almost exactly eight ounces of pure silver.

Comparing these results with the table already given of the annual product of the precious metals, we find, -1. That dou bling the annual product of money for half a century had no effect on its value, or did not raise prices at all; 2. That making the annual product five times as great had no effect upon its value for 25 years, after which time, however, the value gradually fell to one third of what it had been; 3. That about 36 years after the annual product had become six times as great, the value had fallen to one fourth of its former amount; 4. That from 1636 to 1848, or 212 years, the value of the precious metals underwent no material alteration, though meanwhile the annual supply of them had become eleven or twelve times greater than what it had been before the discovery of America.*

These facts satisfactorily support two general conclusions: -1. That a very considerable increase of the supply may take place without any perceptible change in the value; 2. That the alteration, when it does occur, is very slow and gradual, the variation from one year to another being hardly perceptible.

Such was the result of the only experiment recorded in history, which enables us to form any conjecture as to the probable effect upon the money-market of the vast addition which has been made to the annual supply of gold within a few years by the discoveries in Russia, California, and Australia. To make the comparison clear and obvious, I have stated the results in their broadest form, or with the fewest limitations and doubts. There will afterwards be considerations to suggest which will modify the conclusions to be drawn from these statements.

Let us now see how great have been the changes in the annual supply during the present century. About the year 1800,

* According to J. B. Say, however, whose conclusions are based upon the lists of prices collected by M. Dupré de St. Maur, though they do not appear to have been so carefully worked out as those of Smith, silver fell to one half of its former value as early as 1536, and to one fourth of that value as early as 1602, remaining unchanged at this point till 1800. But I cannot find any satisfactory evidence that the value of silver was at all affected until the mines of Potosi for a considerable period had been pouring out their vast supplies,—that is, for some years after 1545.

the annual supply of gold amounted to $12,648,000, and of silver to $36,289,008; making a total of $ 48,937,008. There is reason to believe that the large portion of this product which was furnished by the American mines was rather increased than diminished up to 1810, when the contest began which finally produced the independence of the Spanish American colonies. The revolutionary troubles, and the proscription of the old Spanish families to whom the mines chiefly belonged, caused the works in many cases to be abandoned, and there was a great falling off of the product. Mr. Jacob estimated, that, for the twenty years ending with 1829, they did not yield annually over $20,000,000, or considerably less than half of their former product. But he evidently exaggerates the falling off; and the estimate which Mr. McCulloch formed in 1834 may be safely extended to the whole period, making the annual supply from all parts of the earth to be $30,000,000. Soon after 1834, the gold product of the Russian mines and washings began to swell the amount very rapidly, so that Mr. McCulloch affirmed, in 1845, that, if the supply from this source should continue a few years longer, it would cause a fall in the value of gold as compared with silver and with everything else. In 1847, it had raised the annual supply from all parts of the world to $67,000,000, making it nearly one third larger than it had been in 1800. But what was this to the astounding results produced by the discovery of the Californian and Australian gold washings? The gold obtained in Australia alone, in 1852, was estimated at 330,000 pounds Troy; and the supply from California that year is believed to have been 252,000 pounds Troy. It has turned out, indeed, that 1852 was far the most productive year, and there has been a considerable falling off since, especially in Australia. Still, it is safe to estimate the total product of these two countries, in 1854, at 350,000 pounds; and if the supply from Russia and other sources be added, the aggregate is nearly 482,000 pounds, or about $119,536,000. By a curious coincidence, the annual supply of silver from the Mexican and South American mines has been largely augmented during the last ten years, the total for the whole world being one third larger in 1850 than it was in 1845; the aggregate amount mined in the former year was nearly $44,000,000. Putting these two