New-York tribune., 1909-02-08
GOLD MYSTERIES
The TransUadI Output-Reseruss
Outside England.
London. January IL

sd
production OF the Transvaal sold mines Dur
ing the last five years 1t has run I'D fror,
f16.O54.sOs to f2s.95T610. the record for 1ses
being phenomenal, with monthly average a,
nearly f2500.000. 1t rashly assumed a ,rear
ago that the output would decline in cops.
quence OF the withdrawal OF Chinese labor. b,,,
it has risen steadily Kaf1r labor formsrJv "a.
quired for railway building. reconstructtoa
schemes and other enterprises being uassed a,
the mines With this enormous prodretien .
large increase in the values OF mining stock.
might naturally be expected; yet with few er
ceptions the quotations a long way below
those of 1904, when the output was much small
er. The notable exceptions are Modderfontss,
and Robinson shares. which are about vhs-.
they were; but Consolidated CsoldheIds ar5
nearly all the other Witwatersrand shares AZ.
much cheaper than they were when the visi4
was one-half what 1t is. Why the shares shouId
Sdecline in value when so much more gold conos.
out of the. mines is one of the anomalies q,
finance. 1t is. at least. prima facie evidence
that the industry is not profitable as II va.
when Chinese labor was introduced and sys
tematized.
worlds gold supplies? That is another amor
ally. At least one-third Of the aggregate ,oI.
production comes from South Africa ana ..
much three-ifths from the British Fmng-..
and the bulk Of it finds its way into the London
market and then disappears. The weekly
shipments are absorbed and distributed abroa1
so rapidly that there always seems an abnormal
scarcity OF it. With the worlds production nr
gold at Its maximum, and with the single SONAR.
mile known as the City the main centre Of in
ternational exchange on the gold basis. the stork
in the issue department Of the Bank of Eng
land is no larger than it was thirty years aen
end O the wear this stock - a..
less than it had been twelve months before and
the last bank return shows a reduction Of mora
than f4,125,000 in the reserve from the corrs-
spending week a year ago. The gold from tha
Transvaal. Australia and the empire r,1a
through London through a mill race an5
none Of It remains In sight. The demand for
gold for mechanical arts is large. but this does
not account for its rapid disappearance Otba-
European countries and America are increasing
their gold stocks while England is not enlsrgfng.
its reserves, or. at least. is not keeping then,
where they can be seen. The leading banks %
issue in France. Germany. Russia, Austria
Hungary. Italy. Holland. Belgium and spain
added 57,25s765 to their gold reserves last wear
while the Bank Of England was either keeping
the note circulation stationary or reducing its
stock Of bullion. Therein lies the secret Of the
disappearance Of gold from England. when there
is the maximum OF production in the empire for
the worlds supply.
The Continental nations attract this gold sur
plus by higher rates of interest and measures
for increasing the note circulation. France il
bidding for gold from the Transvasl before
it leaves the Cape. and Germany and Russia
have been making systematic efforts to enIargs
their gold stocks In England the banking acs
OF 1914 has not operated to increase the gold
reserves either OF the bank OF the kingdom.
1t was designed for another purpose: namely.
the prevention Of an Overissue Of notes through
the automatic action of supply and demand
Apart from a fixed number or millions secured
by consoIs, the note issue for more than sixty
years has represented the bullion in the bank
held for its redemption It is limited by the
gold deposits which maintain its value. IRE gold
in the issue department. Is a reserve for the pro-
lection OF note holders, and IN addition TO IL
there Is a large reserve against the banks own
liza bilities- While the banking act has regu-
lated the currency perfectly. # has not enlarged
the issue to meet the requirements Of com
merce, and the protection of the fnaI cash re-
serve of the country has not involved a large in
crease Of bullion There have been no accurnu-
lations of gold in the Bank of England 70 cor
respond either to the vast increase Of produe-
tion or to the enlarged stocks in foreign coun-
tries. II there are any in the joint stock banks
or elsewhere in the kingdom. they are not whers
they can be seen when there are risks either Of
a gold drain or emergency Of financial panic
The Bank OF England always has the power OF
raising the rate c3 interest and attracting gold
and this is considered an adequate safeguard for
the defence Of all the banks, whose balances
are kept by it. and for national reserves Il
money and credit. Yet the Bank Of France the
Bank of Germany and other Continental banks
of issue have the same resources at their COM
mand. with larger stocks of gold in sight
There are ALWAYS Aasy going ouriTf1fzrs Isl 10 are
prepared TO assert that ali the gold received from
vastly increased production in the Transvaal and
elsewhere is not lost They assume that there's
much more of it in the joint stock banks than IS
generally supposed, and that the sold reserves
OF the kingdom have been materially enlarSsa
since the WitwateTsTand discoveries The proofs
are not easily supplied Sir Robert Gfen not
long ago estimated that there was not more than
f52,OOOOOO or f5J,OO0OO0 Of gold in the king
dom an ultimate cash reserve when the de-
posits in the banks exceeded fS1OCto1V"
While he did not pose as an aIarmist. he as
serted that England was not in a position Tor
facing great European war and the COLLAPSE
of the credit system. Certainly il would o.
great gain if the joint stock banks were under
obligation TO show by weekly statements no"
much gold they carrying and whether they
hold cash reserves in proportion to their HAHN
ties. If public information about them we're as
definite as it is about the Bank of England
would be known with precision how much or
how little of the enormous production Of soa
remains In the kingdom and what reserves tners
are behind the current system OF English oanA-
ing.
The rigorous methods adopted year ago loF
preventing an exhausting drain OF gold TO Amer
lea carried the rate of interest up to - anu
enabled bankers temporarily to make hish
profits This was speedily followed by an eA
f11, al