SOME EFFECTS OF THE GOLD DISCOVERIES. [From the Illustrated London News.]

New Zealand Spectator and Cook's Strait Guardian, Volume IX, Issue 900, 18 March 1854, Page 4

SOME EFFECTS OF THE GOLD DISCOVERIES. [From the Illustrated London News.]

The estimated value of all the gold in Europe and America, in the year 1848 (before gold was discovered in California), was £550,000,000; and the vtlue of the annual produce of all the gold mines of the world, except those of Japan and China, was then estimated it £10,000,080. Both these estimates are probably too large ; and it is quite certain that the latter is not too small. ' There is no reason to be surprised, therefore, that' the statesmen who attend to such subjects felt considerable alarm lest the value of gold should be depreciated when California — in which gold was discovered in 1848 — added, in 1850, £8,000,000 to the annnal supply, and not less than £15,000,000 in each of the following years. When gold was discovered in Australia — which, added in nineteen months (from May, 1851, to December, 1<852>) nearly £20,000,000 more to the supply—the alarm was considerably heightened. From these two new sources we estimate the increase to the supply of gold, above the amount, obtained in 1 848, at no less now that £30,000,000 a yetr ; or the annual supply, which, prior to 1848 was not more than £10,000,000, is now, £40,000,000, and is increasing every year. The Government of Holland, alarmed at the pro-; bable depreciation of gold, ceased to use it as the! standard of its money, and adopted silver. Five, year 3 have now elapsed since the discoveries were 1 made, the quantities are increasing every year, and hitherto the effects have not been what tht alarmists anticipated. At present, indeed, there is a very considerable rise in the prices of many things, especially of food, suggesting a deprecia- j tion in the value of gold.; but this is so obviously ; the consequence of great consumption and com- ; paratively insufficient supplies, that at most only a small part, if any — for how much cannot be known — can be the consequence of a depreciation in the value of gold. In the autumn of 1850 a very considerable rise began in the value of silver, principally caused by the Government of Holland subs ituting silver for gold as the money of ; that country ; apd, though checked, it continued to rise, and was as high-priced at the beginning | of 1852 as 61|d. per ounce for standard silver. Last week the price was 61|d. ; and it has remained permanently, since the rise in 1850, something more than Id. per ounce dearer than the average price for a considerable period prior to that time. This is the only evidence we yet have of the gold discoveries having led to a depreciation in the value of gold ; and the permanent enhancement in the price of silver is as likely to have been caused by the substitution of silver for gold in Holland, and by the demand fox silver in India (where the use of gold as money is unwisely prohibited), as by the great abundance of gold. A still more remarkable circumstance according to common apprehension, than the small depreciation of gold, is the fact that money has latterly become dearer^ or the rate of interest has

been raised, as the great additions have been i made to the money of the world. Last year i money was scarcely worth 2 per cent. ; now the minimum rate is 4y. The discount agents or i brokers in London, who continually borrow large | •inns of money "on call," to lend again (that is, ' they will return the money to those who lend it on three days' or a week's notice), would not last autumn, borrow at any price, and refused to receive on loan the money offered them. When they received it they gave only 1 or 1| per cent, (or it, and discounted the best bills at if. At present they give 3f per rent for money on call, and no bills can be discounted at a lower rate than 4| per cent. Since last autumn, therefore, the rate of imprest has been raised to ore than 2 per cent ; and money, notwithstanding large and continued importations of gold, is so much dearer now than it was then, in the present year, in fact the mines of California and Australia have been more productive than they wete last year. , To the end of August in the present year the quantity of gold carried to the American mints from California, was ■S8, i 644,416 dollars, against 32,045,598 dollars in the same period of 1852 ; or 6,198,818 dollars moreUn the first eight; months of 1853 than in 1852. There has been' imported into England, to the end of July in the present year, no less than £12,920,000 of gold ; while in 1852, £16,080,000 was imported-, making together in the nineteen months £29,000,000, or three times as much as was annually procured from the whole of Europe and America, prior to the Californian discoveries. In the teeth, bowever, of all these darge supplies, the rate of interest has risen both here and in America, and continues to rise. Lest it should be supposed that this is only the recovery from the great depression of last year, caused by the sudden increase of gold from Australia and California, we must add that the present rate is nearly one per cent, above the average rate of several years : and that before the gold discoveries — namely, in 1844 — there was as low a rate of interest as at any time last year. Thus money, a« it has become plentiful, or as it basincretsed in quantity, has become dear — an apparent contradiction and a contravention of experience ; for commodities, as the rule, become cheap as they become abundant. The explanation of this circumstance is to be found in the double meaning of the word money. It is plain that the descriptions given of the quantities of gold obtained from the mines, or imported into the country, apply to the gold itself, as a commodity, before it is coined into money, /just as similar descriptions would apply to so much wheat or so much iron. But wheat or iron, when obtained, is -consumed or used, and disappears, or is applied in some way which precludes any application of it in another. The gold, however, remains ; and when coined, becomes as money the instrument of exchange, the means of buying and selling all other commodities and the representative of all the wheat, iron, cloth, &c.,in the world. Gold has two very distinct characteristics. It is a commodity of which the quantity and -value are described as so many pounds sterling ; and it is itself the pound sterling — the instrument for measuring the value of all other commodities. It is both a measure and the thing measured ; and the confusion which prevails concerning it — the apparent -contradiction noticed — arises from not discriminating between gold as a commodity and gold as money. As a commodity, it is measured by itself as money ; and the new supplies being a large addition to previous stock, we deicribe it as abundant or plentiful. -But as money—as the instrument for exchanging commodities — it is abundant or scarce >in proportion as there are few or many exchanges to make. Amongst pastoral tribes, where each family lives on the produce -of its own herds, aCid is clothed by the skin of its own cattle or the wool of its own sheep, spun and woven at home, and where, consequently, no exchanges are mads, a single piece of gold is an abundance of money; it is more than can be used, for there is nothing to be bought or sold. In a community like ours, where no family produces the chief part of its subsistence or its clothing, and where •many families, though very usefully occupied, produce directly no part of their own subsistence, and where, consequently, the whole community is sustained by exchanging the produce of one or another, a great deal of money is required. In proportion to the whole wealth of the commercial world, and to all the exchanges made in it, rhe total amount of gold is a small sum. All that has ever been washed from the sands or dug from the mine, or found or gathered, and that now exists, melted into one lump, would go into a very small barn. The total amount produced every year is not of greater value than our own wheat crop, and that is only a very -small portion of the annual produce of the labour of this oive community. The quantity of gold in the world, or annually produced, is, therefore, a mere trifle in propcrtion to the vast amount of wealth to be exchanged, and it is much more the activity of trade than the quantity of gold found, which decides whether it shall be considered scarce or abundant. We buy clothes to wear, and food to consume it, and land to make a profit by it. We use these things in possessing them. But we use money only when we part with it. Persons labour for money, or borrow it, or steal it, only to buy other things with it. It is exclusively wanted as an instrument of exchange ; and while gold, as a commodity, is abundant or scarce, as a few pounds' weight are obtained, as money, it is abundant or scarce, as the quantities of other thiugs to be exchanged are great or small, and as exchanges are numerous or few. The scarcity of money, therefore, indicated by the present high rate of interest, is not caused by a small supply of gold, but a wonderful activity of business. Now let us direct our attention to the influence of the gold discoveries in increasing the business of Europe. They gave a sudden and an unexpecfd addition of a new commodity to the value of £30,000,000 to the wealth of the world. It was not before knoVrn, nor possessed by any one, nor could it be produced like a web of cloth or a crop of oats, by regular and foreplanned labour. The new gold was an addition to all the commodities that before extsted to be exchanged. The fortunate finders were eager to buy other things with it. Its uses and value are well known ; it is much coveted, and easily exchangeable for all other things ; and other men were as eager to get it as the finders were to part with it for other things. Hence, as is well known, the gold discoveries have increased trade very much, and have excited great activity thougbout the industrial world. More wine and brandy, and clothing, and implements were

required in California and Australia than before; goods of all kinds were sent thither. More food, more commodities of all kinds were required by the persons who produced these goods. More ships were needed ; more labourers and more productions of all descriptions were required. Except the electrical suddenness of the consequence of the discoveries, results precisely similar ensued from setting trade free. The wheat of America or Poland suddenly acquired a value it did not before possess in Manchester and Birmingham ; there were actually more commodities to exchange, and more exchanges took place — there was increased trade, and increased exertion. The great point, therefore, now to ie ascertained — the great problem which i« doubtful and to be solved — is whether this increase of business be less or more, or precisely equal, to that increase in the instrument of exchange which ensued from the new gold discoveries. At first it ! was supposed that the increase of business would : be far less, and that the instrument for effecting j exchanges would be increased beyond the exchanges to be effected. Experience hitherto shows to us that this is not so, that the instrument in fact is less iucreased than the amount of business; and hence it is really more required than before. Notwithstanding the large imports of gold mentioned, money is more than 2 per cent, dearer, or the rate of interest more than 2 per cent, higher than at the beginning of ihe year. In such an increase of activity as that arising from the gold discoveries, all the industrious classes desire to share. The manufacturer wants more raw materials to work up, more machinery, and more labourers. The merchant wants more goods to import and export, and more ships to carry them. More food is required by the additional hands employed ; more of everything men use or consume is in demand. The increased competition makes all willing to give more for what they want, including more money; and hence money, as the means of obtaining other things, is very much sought after. The increase of price which ensues is already operating to mate men produce more of all the thing* that are required .; and the supply of such as can be augmented by art and industry will soon be commensurate to the demand. Food and clothing will probably, ere long — though at present the former, from an inauspicious season, is rising — fall in price, as they have fallen successively in former years ; but land — which cannot be augmented — and cattle, and commodities which require long periods to increase them, will for some time rise in price.; but we may not with certainty calculate from the increase in the supply of gold on a universal rise in price. So many elements enter into this -question df relation between the precious metals used as instruments of exchange, and all other commodities which are bought and sold, that it is very difficult to form a judgment on the subject, and very hazardous to express an opinion. We shall content ourselves by saying, in conclusion, that such a vast increase of business has ensued, and is likely to continue, from the annual supply of gold ; and the new born activity pervades so completely the whole commercial world, that it seems likely to require, absorb, and use all the gold that can be procured. It is so plain that the appetite or the activity of trade grows with what it feeds on, that in the end, probably, there will be no gold too much.