In 1873 Germany made gold the standard throughout the new German Empire (having prepared the way by legislation in 1871 which made gold a legal tender alongside of silver), and provided that silver was thenceforth to be used only in the subsidiary coinage.  The same year Belgium, and the next year the other countries of the Latin Union (France, Switzerland, and Italy) took steps which resulted in demonetizing silver; that is, in limiting its coinage to governmental account, and in making gold their one standard money.

The United States at that time had neither gold nor silver regularly in circulation (except in California), and there was a long-continued discussion of “a return to specie payments,” which meant the return to a metallic standard, and the redemption of greenbacks on demand.  Meantime in 1873 a law was passed making the gold dollar “the unit of value,” and dropping out the standard silver dollar from the list of coins authorized to be issued at the mint.[6] From 1873 until 1879, prices (in greenbacks) were falling in this country very rapidly because the country with the increase in population, wealth, and business, was “growing up to” its unchanging currency supply.  For a like reason at the same time gold prices throughout the world were falling.  While this country was lowering its level of prices from an inflated paper money to a gold commodity basis, the gold basis itself was sinking to a lower level.  The very demand of our treasury and banks for gold caused the retention of our own gold product (which between 1864 and 1876 had been nearly all exported) and required an enormous net importation of gold between 1878 and 1888.  This reduced suddenly by one-half the amount available each year from our production for the rest of the world.

Sec. 6. #Definition of the standard of deferred payments.# These various changes in the purchasing power of the standard money had great effects upon industrial conditions.  Particularly had they shifted the positions and claims of debtors and creditors, because of the enormous importance of money as “the standard of deferred payments,” Let us now get a more definite understanding of that term.

As a medium of exchange, money comes to be the unit in which most prices are expressed and compared; in other words, it becomes the common denominator of prices.[7] This makes it also the most convenient unit in which to express the amount of credit transactions and of existing debts.[8] A credit transaction is a trade lengthened in time; one party fulfils his part of the contract, the other party promises to give an equivalent at a later date.  The equivalent may be in any kind of goods; for example, in barter one may part with a horse on the promise of a cow to be received later; or a small horse on the promise of a large one; or a flock of sheep on the promise of its return at the end of the year with a part of the increase of the flock.  A simple standard in which to express the debt is the thing borrowed,