The Sun.
London, England, 1856-09-19 00:00:00

THE SILVER DRAIN.

(From the Times' City Article.)
The facts already discussed with regard to the
drain of specie to India and China have a bearing
on the question as to the influence to be exerted
on prices by the gold discoveries. "Granting," it
will be said, " that the adverse consequences of
the present condition of trade between Europe and
China must be sustained, not by England, but by
France, from the loss of her silk crop, still the
boarding universally practised in the East must
greatly check that general increase of wealth and
prosperity which are looked for from the flooding
of Europe with the treasures of Australia and Ca-
lifornia." This supposition is entirely erroneous.
When the gold discoveries were first announced it
was pointed out that whatever might be their ex-
tent it could constitute no addition to the wealth of
the world, and that, although they would produce
the grandest results, these would be confined to
the impulse they would exercise in attracting man-
kind to the settlement of new regions, and to a
disturbance of the relations of debtor and creditor,
which, as far as concerned all fixed contracts,
would prove extremely advantageous to the former,
As the value of gold depends entirely on its scar-
city, no addition to the quantity held will be at-
tended by any corresponding addition to the worth
of the total ; that is to say, if the world possesses
one hundred millions of gold to-day, and another
hundred millions are discovered to-morrow, it will
find itself no richer, because gold, in relation to
other articles, having thus become twice as plenti-
ful, it will then require two sovereigns to purchase
the amount of goods that in the first instance
might have been obtained for one sovereign. All
expectation, therefore, of visible consequences in
the shape of a great concentration of the precious
metals in this country, or in the United States,
or even in the various banks of the chief cen-
tres of commerce throughout the globe, were
delusive. The relative stock held in each coun-
try was still destined to depend upon the balance
of its other imports and exports, while the
increased supplies would go on quietly diffusing
themselves in every quarter according to the unal-
terable laws of trade. If, owing to the augmented
quantity, a greater number of pieces of gold are
now required in every traneaotion, the mode of
absorption of that which has lately been produced
is perfectly comprehensible ; and, supposing the
yield to become a thousand times greater than has
yet been witnessed, the consequences will still be
manifested in no other way than in a proportion-
ately increased abundance of gold coin in the hands
of every individual. The amount held by the vari-
ous banks of the world has never, perhaps, been
equal to a 20th part of that which is in circulation,
and hence, although their stocks must increase in
proportion to ,the commonness of the metal, the
effect in their case is comparatively insignificant.
Supposing an addition to the circulation of an
amount calculated to affect the prices of all com-
modities to the extent of 25 per cent., all the in-
crease that could positively be looked for in the
aggregate held by the several banks would be about
one-fourth.

The hoarding practised by the people of India
and China must of course delay this diffusion ; but,
so far from checking the activity and relative pro-
sperity of the gold-finding nations, it must operate
to perpetuate the ardour of the search just to the
extent that it retards the depreciation of the arti-
cle. It is the hoarder only who can suffer, since he
is accumulating a substancewhich is daily diminish.
ing in value. There is little reason, however, to
suppose that this hoarding has withdrawn any
amount calculated materially to interrupt the
changes in progress. Even if twenty out of the
hundred millions sterling produced in the last eight
years have thus been buried or converted into or-
naments it can only have reduced by one-fifth the
speed of the general movement.
Notwithstanding these conclusions, it will, per-
haps, be denied that there are any signs of prices
having as yet been influenced. This is a point on
which each person must be allowed his own opinion,
because no labour could collect the facts requisite
to demonstrate the actual state of the case. While
the gold discoveries are operating to produce dear-
ness, all the discoveries of science are tending iu an
opposite direction. The agriculturist thus extracts
from his land crops which a few years back would
have been deemed incredible, and the Manchester
spinner and Birmingham manufacturer are enabled
to multiply goods at a cost regulated by little else
than the wear and tear of machinery, while at the
same time the extension of steam navigation is fa-
cilitating the acquisition of every kind of raw ma-
terial. Because beef or bread, cotton and woollen
goods, hardwares or trinkets, may be as cheap or
cheaper than they were when California was un-
known, we are not, therefore, to conclude that
then, has been no result. The probability is, as
was long ago pointed out, that, even if the time
should arrive for gold to be depreciated to a quarter
of the value at which it stood in 1848, the possessor
of a fixed income will find that he can still procure
as many of these articles for his money as he could
at that period. But his state will have been one of
stagnation, and the results of all the advancement
of society in comfort and luxury will be simply to
leave him where he was while the standard of
living has been rapidly improving. A person with
500/. a•year, if he could cbtain now no more than
was procurable for the same money half a century
back, would be in a disagreeable position, and it is
an effect of this kind that the holders of fixed in-
comes must henceforth be expected gradually to
experience. Whether he can already trace its,com-
mencement in the augmented sums demanded for
all kinds of labour, in the increased possession of
gold among classes where it wits formerly a rariiy,
and in the general scale of expenditure of every
branch of the population, must be for him to de-
termine. Certain it is that there is no other way
in which the question can be tested, and that those
who look elsewhere for proofs of the action of the
increased supply will look in vain, no matter to what
extent it may be multiplied.