The midland journal. (Rising Sun, Md.) 1885-1947, 1899-11-10
How the Gold Standard Works.

From the mines of the Transvaal, Lon
don has been for some time drawing
nearly two million dollars worth of gold
week-$62 900, 900 during the first eight
months of this year 1t is this supply that
has enabled her to meet the demands of
Germany, France and India and still
keep up her own reserves without forcing
general liquidation. But with the war
in the Cape this supply must be now cut
off. Indeed the Cape, for the time being,
will be all importer, not an exporter, of
gold. So the Bank of England will be
obliged, in order to protect its own re-
serves, to stop the drain TO Germany and
India, prevent drain to the United States
be constrained to put OH the screws,
curtail loans, put up discount rates, force
liquidation of both commodities and
securities with the inevitable result that
some things will be dumped on our
markets. And we are not in as good a
position to stand this dumping as year
ago.
Our people are buying much more freely
of foreign goods our imports for Septem-
Der were $7o,4oo ,ooo the largest i'll any
normal month since October, 1895, and
so while our exports are of larger value
than ever before, the balance of trade in
our favor is not so large as year ago.
Thus the merchandise trade balance in
our favor for September was but $50, 600,
600, as against $42, ooo 900 for September
a year ago, and $o2, ooo, 900 fos September
two years ago And then there is reason
to believe that these reported balances
are larger than actual. Our railroads
have way of charging about a cents less
a bushel on grain transported from Miss
issippi river points to the seaboard for
export than on grain transported for
domestic use, and the value of our exports
Of grain is computed on a basis of the
quotations for grain transported for do
nestic consumption and sold in the sea-
board markets. 1t follows that foreigners
are paying about q cents less bushel for
our grain than they are credited with
paying in our trade returns. And as we
are exporting weekly about eight million
bushels of corn and wheat, this in itself
means all overestimate i'll the value of our
exports of say 100000 a week. In one
sense this is SMALL item, amounting TO
perhaps no more than SIS, DOC, 900 year
AN amount equal to scarcely X per
cent of the value of our total exports
But there is only too good reason to be-
lieve that there are other items of very
similar nature. For instance, there is
little doubt that much of the petroleum
exported by the Standard Oil Company is
sold for less than the domestic quotation,
while it is at the domestic quotation that
all exports Of oil are valued in making up
the trade returns. Then, again, there
can be no question that our imports are
undervalued i'll our trade returns though
to what extent it is impossible to say.
But it is evident that the reported trade
balances in our favor are larger than the
actual and we much doubt if the actual
balances are more than large enough to
Offset the foreign indebtedness constantly
accruing against us on account of interest
charges, ocean freights and expenditures
of Americans abroad. At any rate, we
have at present seemingly no power TO
draw gold from Europe. Rather is
Europe, aud in the face of the great
reported trade balances in our favor, more
likely to draw gold from us. And gold
moving away means contraction of our
currency, followed by contraction of the
of goods, price and trade depression. We
have experienced such results before as
we have experienced expansion, rising
prices, trade revival, when gold moved
back again. In short, we have been
subjected to trade cycles dependent on
the movements of gold. And to these
movements the cosmopolitan financers
who profit from such cycles, buying on
the depression, selling on the rise, and 10
whom the world is indebted have the key
BY calling for payment of part of this
Indebtedness they can draw gold away
from us, one of the debtor nations, cause
price depression, wreck industries and
then when they have bought the wrecks
loosen the purse strings, extend credits,
initiate prices sell out. And at this time
there are indications that a call upon us
for payment of part of our Indebtedness
is imminent, payment they may force,
though such Indebtedness is represented
by sundry stocks and bonds and not
payable by its terms on call, by dumping
securities which we have given them in
times past upon Cur markets. The cutting
off of the supply of gold from the Trans
vaal, the demands upon London for gold
the struggle to keep up the British gold
reserves may, not unlikely will, force this
dumping. And if there comes this dump
ing, this drawing upon us for gold, there
will be an end to our boom in prices
Such is the main factor upon which the
movement of prices i'll the immediate
future is dependent, and this being the
factor, and the development of this factor
being uncertain, known only, if at all. to
those who directly control it, the cosro-
politan financiers, we can but guess what
that movement will be-
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