The Birmingham age-herald., 1907-12-30
NORTON DISCUSSES
 GOLD SITUATION Financial-l Legal Factors Dls-
 turbing Business PRICES ARE INCREASING Professor Norton Shows That We Are in the Midst of Gold Deluge. Depreciation Is the Problem
 of the Age.
PRICES ARE INCREASING

or ReVleWS TOT January.
 The financial-legal factors, disturbing business prosperity, fundamental to all the evident effects currently classed as causes, are four, namely: First, the world wide depreciation of gold, which has and is operating to undermine the use of gold as standard of value in various insid- ious ways; second, the ill-reputed prac- tioes of capitalization of corporations pro- ceeding under comparatively new com bination of economic conditions, involv- ing underwriting, investments of com mercial and savings banks, trust com panies and insurance companies; third, the inadequacy of our currency system with especial reference to the bond se- cured bank note system; fourth, the rapid expansion of the banking industry under the guise of trust companies without proper legal requirements covering re- serves.
 Although gold is the measure of the of value, prices may increase because of a cheapening of the standard relative to commodities or because of an increase in the value of commodities relative to the standard. In the one case, inventions in gold mining and new discoveries of gold would be active. In the second case, above mentioned, short crops, deficient economic progress and great pressure of population on the means of subsistence would be the effective causes for the high prices. High prices may, then, be classed historically in two groups (0 imitation prices due to a depreciated money, (b) famine prices due to want.
 That high prices exist there is no ques- tion. All average price levels, whether English or American, show in eight years more than 50 per cent increase. In other words, 1t requires $1.5O to buy what H would purchase on the average eight years ago. If these are not famine prices, because during eight years the crops have been bountiful, progress extremely rapid and the standard of living through out the world upon the increase, then the causes should be sought in the de- preciation of money. If the statistics agree in showing the quantity of gold in- creasing, the cost of production per ton of ore diminished radically by new in ventions, and the worlds stock of gold showing a marked and sudden increase, little doubt remains. The facts are plain. golden deluge is already upon us. In the year 17O0 the annual production was $7,OOO,0OO in 1900. s120oJ,O0O; in 1900. s262,- GOO GOO; in 1907. $425, ,OO0OO0; and the rate z increase is accelerating. When we re- member that the larger amount of each years production is added to all that has been produced before, unlike all other commodities; that at the present rate of acceleration the worlds stock can double in less than 12 years; and finally, that the causes of the gold flood are not sporadic and exceptional, but entirely rational, namely, the ingenuity of chemists and metallurgists, who have succeeded in re- ducing the profitable working cost per ton of ore from $14 per ton to less than g. per ton at the present time, by new in- ventions, this question of gold deprecia- ton becomes easily the financial problem of the age. For the amount of cheap gold ore is unlimited in nature. Mr. Frederick Upham Adams, in the August issue of Success, quotes MT. John D. Rockefeller as saying; Tt seems to me that one of the most startling conditions this country must face is the over-pro- duction of gold'
 Situation Not Complex.
 The situation is not complex. Instead of a Congress as in the civil war issuing millions of paper greenbacks, which did not represent the amount of work which good money hitherto had cost. now 8 freak or combination of nature and hu- man science is flooding the world with golden metal which does not represent the value of the gold of yesterday; as the cost of today's production largely de- termines the value of all the stock on hand, the sudden decrease in cost has resulted in the ordinary phenomena pres ent in all imitation. A rapid increase of prices results. A great speculation en- sues to make profit by the rise. Men borrow and pyramid their profits in the speculation in commodities, securities and land. Under this borrowing demand, in- terest rises until the increase in the rate tends to offset tbe loss in principal to the lender. For, if normal interest is 5 per cent, and prices rise on the av- craze per cent per annum, a normal interest for such imitation must be 10 per cent. Otherwise the principal loaned will be impaired when repaid by the borrower measured in purchasing power for the lender.
 Assuming that world wide gold depre- citation is in progress, how may business men and investors take advantage of of limiting losses in their present com mitments, and, so far as possible, reap ing profits by wise foresight in guarding their future financial operations?
 The man who invests his own capital in real estate neither gains nor loses by gold depreciation. The man owning real estate heavily mortgaged at previous low rates of interest gains largely since the value of the property will advance but not the debt. The man who holds the mortgage loses what the other man gains. This inequality is adjusted by the increas- ing interest rates.
 The common shares of corporations rep- resent the equities and correspond large ly to the case of the man who pur- chases land on mortgage. Common stocks will greatly appreciate in value unless special reasons intervene. Among special reasons are: First, the difficulty of raising prices of services or goods sold by the corporation, as in the street rail-