The Liverpool Standard and General Commercial Advertiser.
Liverpool, Merseyside, England, 1852-06-29 00:00:00

EFFECT ON PRICES .BY
OF GOLD.

THE INCREASE

The writer of the city article in the London Times
furnished his readers, on Friday last, with a long exposi-
tion of his views respecting the probable effect of the
Australian and Californian supply of gold upon prices in
this and other countries. As any opinion from such a
source mast naturally possess some weight, we shall
briefly record the leading points of the article in question.
The Times assumes that the total amount of gold and
silver in the world is £400,000,000, of which X 150,000,000
is estimated to be gold, and the remainder silver. The
annual consumption for the purposes of art is set down at
a little under £6,000,000. The addition made to the
gross stock since the discoveries in California and Aus-
tralia is computed to have left us an excess of £30,000,000
in gold over what has hitherto been found sufficient for
current wants, and to maintain an equilibrium in the
general relations of property. This would, at the first
glance, have appeared to warrant a decrease in the
purchasing power of the sovereign to the extent of 20 per
cent. ; or, as stated by the Times, the effect would be the
same as if a measure of 25 inches had been extended to
30 inches. No such startling change, however, has taken
place ; and this is, in part, accounted for by the circum-
stance, that silver as well as gold, being in use in various
countries as money, the increase in the stock of gold
has had to be diffused over both metals ; thus making the
increase only about 7 per cent. To this extent the
Times considers that at present depreciation in the
price of gold is 'taking place, and that the process will
have been completed at the end of three or four years, at
the end of which period the consequences of the increase
of gold will be felt by that metal alone, and the relations
of property measured by a gold standard, will proportion-
ally exhibit a more rapid disturbance. "At the same
time," the writer justly remarks, " it must not be over-
looked that the increase of gold each year will have mean-
while diminished the percentage of alteration which would
otherwise take place. For instance, the total amount of
gold in the world, which is now assumed at £150,000,000,
would then possibly be £250,000,000, and a production
which, operating upon the first sum, would cause a rise
in prices of 10 per cent, would, under those eircum-
stances,.cause-only an additional rise of 6 per cent. This
is a feature of great importance in the whole question,
beeaueo it will constantly tend to counteract that increas-
ing ratio of disturbance which might be anticipated if the
supply of each succeeding year should prove larger and
larger. It is likewise to be borne in mind that, with a
diminution in the purchasing power of gold, there will be
a proportionate diminution in the inducement to seek it.
If the quantity of gold were doubled to-morrow, a man
who is at present content to work for one ounce a week
would then not be satisfied with less than two ounces."
At the present rate of increase—P 0,000,000 per annum
—the Times considers. that it will require little more than
fifteen years to cause an alteration in the relations of pro-
perty to the extent of 50 per cent. The writer combats
the idea, put forth by some parties, that the increase in
our commercial transactions, caused by the addition of
California and Australia to the consuming countries of
the world, will absorb a large portion of the increase in
gold. He says justly that

" Cheques, bills of exchange, postage stamps, clearing
houses, circular notes, money orders, railroad and steam-
boat season tickets—all show the rapid tendency of civi-
lization to supersede the necessity of a constant barter of
the precious metals ; and it may even be questioned whe-
ther, with the growth of morality and of detective skill,
the danger of forgery, which was the sole objection to
notes below £5, has not also disappeared."

And with respect to the quantity consumed in arts and
manufactures, which is thought likely to increase, he
adds :

" The very form of the supposition assumes a large
alteration in value to have previously taken place. A
reduction of 5 or 10 per cent. in such things as gold
and silver would make little difference in the number of
purchases of wrought articles, in which, after all, the
manipulation const►tutes one of the chief elements of
expense. It is, moreover. against all experience to sup-
pose that a large demand would be coincident with a
falling market. With a possibility of gold and silver
steadily declining in value, people would be much more
likely to diminish than to increase their purchases. This
ground of calculation seems, therefore, to have no better
foundation than the other. Any increase of consumption
that may possibly take place is, consequently, likely to be
altogether of an unimportant kind as regards the great
question at issue ; and even if anything of the sort should
be observable, it will probably be more owing to electro-
plating than anything else—an invention which it was at
first thought would lessen the demand, but which has
increased it by superseding all inferior materials."
The concluding remarks of the Times betray the same
confusion of ideas on the subject of the currency which
was once manifested by Mr. Cobden :
" With regard to minor points, little requires to be
said. Some people are still found to ask whether the
Bank is to go on giving the price of £3 17s. 9d. per ounce
for gold ; whereas all that the Bank gives when it issues
a note is an acknowledgment that a certain amount of
gold has been deposited with it, which the bearer may
have back whenever he likes to apply for it. Gold con-
stitutes the general measure of price, and is therefore the
only thing that has not a price of its own. It is simply re-
ceivable at the rate mentioned ; that is to say, when one
man talks of owing another £3 17s. 9d., he means that he
owes him an ounce of gold. To speak literally of a money
price of gold is just as if a person were to ask how much
tea he must give fora pound of tea. Others, again, inquire
if the increase of supply will not affect the rate of interest
for money, which is plainly an impossibility, since the £5
that may be paid for interest is just affected to the same
proportionate extent as the £lOO which is lent. If a man
borrowed 100 loaves of bread on condition of returning
105 loaves at the end of the year, he would not expect
the rate of interest of five loaves to be affected in any
degree by an increased production of bread. The same
illustration, if it be applied to the question whether the
price of the funds can be affected, will show that in that
case also the gold discoveries can have no direct action.
The recent rise in consols is merely consequent upon a
continuance of that absence of healthy enterprise which
has been observable ever since the madness of 1847. Con-
currently with the increase of capital caused by the active
events of the last few years, there have been no fresh
outlets for its employment, and the public therefore rush
to consols and exchequer-bills, or other established secu-
rities."

The assertion that gold is not fixed in price is simply
absurd. It is perfectly true that when a man owes £3
17s. 9d, he owes in fact an ounce of gold ; but the price of
that gold is obviously fixed. It pays a settled amount of
indebtedness to government and to the private creditor.
We do not find that a pound of tea pays any settled
amount of indebtedness. And with respect to the increased
supply of gold not affecting the interest of money, the
argument of the Times is equally erroneous. Interest is
paid for the use of money, irrespective of the commodity
in which if If the supply of money be-

s to be repaid

comes superabundant, owing to enlargement of it

11—the usance, or interest, will be cheapened precisely

ed when

e same w

two per