SHORTAGE OF GOLD

Hokitika Guardian, 30 October 1930, Page 3

SHORTAGE OF GOLD

AN ALTERNATIVE PROPOSED

PLATINUM CURRENCY SCHEME

That there is something queer about tile presem. uaue uepi eve.yoiiu .eeis in Ins mind. Pracucai.y all comlnoUiiics liave now been sicaUiiy inning ever since the war boom uinapaed H. W. Wnsou in the London Haiiy Mail). But the fall in the past few months has become precipitous. Wheat, wool, rubber, sugar, tea, coffee, copper, tin, iead, zinc, silver, have dropped t-u knock-out prices. Every manufacturing industry in this country is depressed, yet tlie consumer finds that whatever he has to buy—in Great Britain, at ail events —is just as dear as it was a year oi two years ago. In the shipping industry, which is one of the most important, freights now stand at omy i 8 per cent of what they were hefoi'e the war. Their fall has been the heaviest of all. What is the cause of this long-con-tinued fall in prices, or rather what is meant by a fall in prices S’ Prices are measured in gold. That metal is the ultimate standard. Therefore, when the cost of all other articles drops, what is really happening is that gold is rising in value. And why. is gold rising in valuer* Because there is too little of it in the world to do the work required of it as a means of currency, and because there is every indication that the supply of it has begun to shrink, in relation to the demand *or it. A gold famine is setting in. The periods of great prosperity in world trade have been the periods ol rising gold supply. The great boom (which credulous people used to attribute to Free Trade, and which began about 1849) was really due to the discovery by a little Mormon girl of ricli gold deposits at Sutter’s Mill in Cali.ornia This event was followed by big gold discoveries in Australia. The world’s output of gold which had aver aged only • 1,700,000 ounces annually

from 18J l to 1850, rose between 1850 to 1860 to 6,400,00 ounces, and continued at .or near that levelj till 1870, when it began to shrink. .As it began to shrink;, trade began to stagnate. A long' period of depression followed, with prices generally falling till 1895. In 1890 the cyanide process, of working low grade gold ore, such as existed in immense quantities on the Rand in South Africa, was patented; by 1893 its effect was becoming marked and between 1890 and 1897 the gold output of the world was doubled. Prices began to rise, and, despite the SpanishAmerican War and the Boer War, the world enjoyed a period of marked prosperity. Between 1897 and 1912 the output of gold was doubled once more. Since the Great War the demand for gold has greatly increased, as it has become the almost universal basis ot currency. Events proved that, where it was liot the basis, politicians could not he trusted; they would recklessly print paper money and Cause fear ill mischief and ruin—themse.ves usually

scaping t])e punishment which ought to have been dealt out to them. At the same time the production of gold has begun to decline. The 22$ million ounces which were turned out in 1912 have shrunk to something under 19£ million punces. The world’s most important goldfield, the Rand, with its banket formation, has passed its zenith. Nor is there anywhere else any large supply of gold in sight. On .the Rand the production ol gold has been a process of manufacture. Elsewhere it has been a gamble. The only promise of new fields of any value is, perhaps, in Canada; and they cannot he opened up for years The idea of transmuting some basei metal into gold which, haunted the alchemists is realisable to-day, hut at such a cost as far exceeds the ordinary methods of production, and is therefore of no commercial importance. If the world is starving for gold, and if the goid supply is certain, to shrink and to multiply our difficulties herea ter, is there nothing that can he done? There is not much prospect of persuading the Bank of France oi the United States to part with the vast amounts of gold which they have collected and sterilised. That way lies little hope. But it might be possible to reach an international agreement by which the work which gold doe' fright he relieved by the concurrent use of some substitute.

Silver is no good for such a purpose, rt is far too plentiful, having become a by-product of base metal refining. The days when looz. of silver would buy an ounce of gold are for ever past. The present ratio is more like 45 ozs of silver to the ounce of gold, and is still rising.

There is only one possible alternative—the precious metal platinum. It is a rare metal, exceedingly difficult to extract, and of great intrinsic value. Its price has varied from 25s fifty years ago to 440 s in the war, and about 240 s per ounce to-day. It is costly because the demand for it is relatively small—for dental purposes ‘or jewellery, for use in industrial chemistry as a catalyst and resistant substance, and for many electrical appliances. At present the annual output does not exceed 250,000 ounces. But if there were a steady and almost unlimited demand for it the output would increase and the cost of nrod"etion would fall. There are vefv rich supplies of it, though in a i®fractory ore, in South Africa, and it

is also found, though not in such abundance, in the United States, Canada, South America, and Soviet Russia. If it were monetised at the same value as gold (the mint price in the country is 77s KRd an ounce) it might perhaps he produced on a considerable scale, without loss, as the market for it would be certain. Or a higher price might have to be fixed. Even if such a monetisation of platinum brought no immediate relief, the prospect of future relief and the cessation of the famine of gold would have a certain psychological influence. For the platinum is there and the gold is not. A century ago platinum coins were actually struck in Tsarist Russia .of the value of 22s and 445. It is nof clear why they went out of use, but by the middle of the nineteenth century they had disappeared. What is proposed here is a return ti bimetallism, hut not the bimetallism of . fifty years ago, when silver was regarded as the alternative of gold. That kind of bimetallism was k.lled by the terrific drop in the price of silver and by the opening of the Rarnl goldfield. But this form of bimetallism, relying on platinum as the alternative of gold, is liable to no such unwelcome surprises, and should work a cure for a mysterious and persistent world-malady