The Effect of Demand on Changes in Silver Prices

¹⁶³ Since the discovery of America, the market for its silver mines has been growing more extensive for three reasons.

Reason 1: The European market has become more extensive.

¹⁶⁴ Most of Europe has improved since the discovery of America. England, Holland, France, Germany, Sweden, Denmark, and Russia, have all advanced in agriculture and manufactures.

Italy did not go backwards.

• The fall of Italy preceded the conquest of Peru and has recovered a little since.

Spain and Portugal have gone backwards.

• Portugal is a very small part of Europe.
• Spain’s decline is not as great as imagined.

In the start of the 16th century, Spain was a very poor country, even compared to France.

France has improved so much since then.

• Emperor Charles 5th travelled frequently to Spain and France.
  • He said that everything abounded in France but everything was wanting in Spain.

The increasing produce of European agriculture and manufactures must have required a gradual increase in the amount of silver coin to circulate it.

The increasing number of wealthy people required the like increase in the amount of their plate and silver ornaments.

Reason 2: America itself is a new market for its own silver.

¹⁶⁵ The advances of its agriculture, industry, and population are much more rapid than those of the most thriving European countries. Its demand must increase much more rapidly.

The English colonies are a new market which requires a continual increase in silver supply for plate and coin, which it never needed before. Most of the Spanish and Portuguese colonies are new markets. Before their discovery, New Granada, the Yucatan, Paraguay, and Brazil were savage nations who had no arts or agriculture.

Arts and agriculture has now been introduced into all of them.

Even Mexico and Peru are markets which are much more extensive than before.

Their people were much more ignorant in arts, agriculture, and commerce than the present Tartars of Ukraine.

The Peruvians were more civilized than the Mexicans.

• They had no coined money even though they had gold and silver ornaments.
• Their commerce was done by barter.

There was scarce any division of labour among them.

• Those who cultivated the ground built their own houses, made their own furniture, clothes, shoes, and instruments of agriculture.
• The few artificers among them were all maintained by the sovereign, nobles, and priests, and were probably their slaves.

All the ancient arts of Mexico and Peru have never furnished a single manufacture to Europe.

The Spanish armies of 250-500 men found great difficulty in getting subsistence.

• They caused famines almost wherever they went.

The populousness and cultivation of Mexico and Peru were exaggerated.

The government of the Spanish colonies are less favourable to agriculture, improvement, and population, than the government of the English colonies.

The Spanish colonies, however, are advancing in agriculture and improvement more rapidly than any European country.

The many defects of civil government of all new colonies were compensated by their fertile, cheap, abundant land, and happy climate.

Frezier visited Peru in 1713.

• He said that Lima had between 25-28,000 people.

Ulloa lived in Peru between 1740 and 1746.

• He said that Lima had more than 50,000.

The difference in their accounts of the populousness of other towns in Chile and Peru is the same. Their information is credible.

The increase in population there is similar to the increase in the English colonies.

America is a new market for its own silver. Silver demand in America must increase more rapidly than the demand of the most thriving European country.

Reason 3: The East Indies is another market for American silver

¹⁶⁶ Since the discovery of the American mines, the East Indies has continually been taking more silver.

Since that time, the direct trade between America and the East Indies via Acapulco ships has been continually increasing.

The indirect trade via Europe increased in a still greater proportion.

During the 16th century, the Portuguese were the only Europeans to regularly trade to the East Indies.

In the last years of the 16th century, the Dutch began to encroach on this monopoly.

In a few years, the Dutch expelled the Portuguese from their main settlements in India. During the 17th century, those two nations divided the East India trade between them. The Dutch trade continually increased while the Portuguese trade decreased. The English and French traded with India in the 17th century.

It has greatly increased in this century. The Swedes and the Danes traded with east India in the 18th century.

Even the Russians now trade regularly with China by caravans going through Siberia and Mongolia to Beijing. The east India trade of these nations has been continually increasing, except the French trade which was destroyed by the last war. The increasing consumption of east India goods in Europe is so great.

It affords a gradual increase of employment to them all. Tea was a drug very little used in Europe before 1650.

Presently, the value of the tea annually imported by the English East India Company for local consumption is more than a £1.5 million. Much more is being constantly smuggled from Holland, Gottenburg in Sweden, and from the French coast while the French East India Company was in prosperity. The consumption of Chinese porcelain, Moluccas spices, Bengal piece goods, etc. has increased in a like proportion.

The tonnage of all the Europe-East India shipping during the last century, was not much greater than that of the English East India Company before the recent reduction of their shipping.

¹⁶⁷ When Europeans first began to trade to China and India until today, the value of the precious metals in those countries was much higher than in Europe.

Rice countries grow more food than wheat countries because rice yields two or three crops in the year with each crop being more plentiful than wheat. Rice countries are much more populous.

Their rich have a super-abundance of food and can command much more labour. The retinue of a grandee in China or India is much more numerous and splendid than those of Europe. Their super-abundance of food enables them to give more food for all those precious metals and stones, which are the great objects of the competition of the rich.

¹⁶⁸ If the mines which supplied India was as abundant as the mines which supplied Europe, precious metals and stones would naturally exchange for more food in India than in Europe.

But the gold and silver mines which supplied India were less abundant and the precious stone mines which supplied India were much more abundant than those which supplied Europe.

Precious metals in India, therefore, would naturally exchange for more precious stones and food than in Europe. The metal-money price of diamonds would be lower in India. The metal-money price of food, the first of all necessaries, would also be much lower. Chinese and Indian manufactures are not much inferior to European manufactures.

But in countries of equal art and industry, the money price of most manufactures will be proportional to the money price of labour. The money price of labour is lower in China and India on a double account= on account of the few food it will purchase, and on account of the low price of that food.

The money price of food is much lower in India than in Europe. Labourer’s wages in India will buy less food.

But the real price of labour is lower in the great Chinese and Indian markets than most of Europe. The money price of most manufactures, will naturally be much lower in China and India than in Europe. Through most of Europe, land transportation costs very much increase the real and nominal price of manufactures. It costs more labour, and therefore more money, to bring raw materials than finished products to market. In China and India, the extent and variety of inland navigations reduce the transportation costs. It further reduces the real and nominal price of their manufactures.

On all these accounts, the precious metals are extremely advantageous to carry from Europe to India. Only silver brings a better price in India or China. It will command more labour and commodities in India than in Europe. It is more advantageous to carry silver to China and India than gold.

Because in China and most of India, 10-12 fine silver is worth one fine gold. But in Europe, it is 14-15 silver to one gold.

In China and most of India, 10-12 ounces of silver will purchase an ounce of gold. In Europe, it requires 14-15 ounces. Silver is one of the most valuable cargoes in European ships sailing to India. It is the most valuable article in the Acapulco ships which sail to Manila. The silver of America is one of the main commodities that connects the world through commerce.

To supply a very big global market, the amount of silver from the mines must be sufficient to=

• support the continual increase of coin and plate needed in all thriving countries
• repair that continual waste and consumption of silver in all countries where silver is used