GOLD AND SILVER.

Auckland Star, Volume II, Issue 554, 19 October 1871, Page 2

GOLD AND SILVER.

Twenty years since, when California gold discoveries had become fully demonstrated, a sort of panic set in among the Governments of Western Europe, to a lesser extent in England, and more modified in the United States. '1 he question which presented itself whb the probable change in the value of gold consequent upon its increased abundance. It was supposed that, both in relation to silver and to other commodities, gold would have a lower value; that is, that, a perpetual fixed income, like an annuity, or a revenue from Government stocks, or a ground rent, would gradually diminish in real value so that tho recipient of, say .§I,OOO per annum, would gradually get less and less for the money as its purchasing power diminished. iVlost Governments appointed commissions to investigate the matter. Tho United States passed the Mint bill of 1852, which made gold alone a legal tender. The French did the same ; but Holland, under the supposition that if gold alone was produced in greater quantities it would lose its relative value, but that silvor would maintain its position, adhered to silver alone as the standard by whicli permanent incomes would retain their purchasing power. It happened, howover, that for tho first ten years of gold production here, aided by Australia, gold did not much deteriorate in value, and its relative valito to silver, 15} to 1, was not changed, jln the list ten years, however, a change has taken place, not in respect to silver, but in relation to commodities, arid tho fact, shows itself in greatly increased expenses of living all over the world. It is estimated that in England $4 now is not more than equal to §3 ten years since. On the continent of Europe the chunge is still greater, and still more in Australia and the United States. But throughout India the purchasing power of money has undergone still greater reduction. An important element of this change in the last ten years has been the United States war. When tlie war broke out there was in circulation §2(iO,000;000 bank notes, and §300,000,000 coin. There is now in circulation $70U,G00,000 of paper money and little or no coin. The latter?; has passed off into the markets of the world, greatly increasing the general supply. At the same time, there was a great reduction in the

quantity of commodities produced—cotton, tobacco, rice, manufactures, shipping, etc. Of the first art'clo, India became the source of supply, and silver poured out of Europo profusely into the Indian market for raw commodities 'aud.ifor railroad construction, so glutting it that English afl_-.nl. reports show that the natives used tho' silver for waggon tires and other unusual purposes. The gold of the United States' and Australia more than supplied tbe\vacuum caused by sending the silver to Indii, ami a rapid decline in the purcha.iug power of money lias taken place. Sueli a moment, is .the favourable one tor a return to specie payments in the Uniten States to call in the superfluous paper money and -substitute the-coin. But there are no signs as yet of such a consummation. The prospect now is of a reflux from the India market and from China, while the production o! silver on this-coast promises to more than rival that of gold. .A London financial authority states, in relation to tho Indian flow of. silver : " Ihe reader can draw from this his own.conclusion ; for, it is undeniable, that the yield of silver is rapidly increasing on the Pacific Slope, and soon will attain to such dimensions tli.it, there will be a material fall iv the value of the metal. The broad rule ought therefore to be kept in view that a fixed income is less desirable than an income derm-d from real estate or industrial undertakings, for it undergoes a diminution in its purchasing power through a constant, if slow, process, which must, however, be felt severely at the end of tenor twelve years." Without, assenting to the full scopo of this proposition, since there will no doubt bo a restored activity in tlie production of commodities, which will 'end to compensate for tho increase of the precious metals and maintain an equilibrium, there is no doubt but the part California is to play in the world's operations will be more important in the future than in the past.