The Daily News. SATURDAY, JUNE 8, 1912. THE COST OF LIVING.

Taranaki Daily News, Volume LIV, Issue 294, 8 June 1912, Page 4

The Daily News. SATURDAY, JUNE 8, 1912. THE COST OF LIVING.

The ordinary layman, scanning his daily paper, takes but little interest in the cabled quotations of the price of silver and of gold, and is apt to dismiss them with the pert suggestion that the farmers of the country are not sitting upon their doorsteps in, the early dawn waiting for the information. But the price of money, which is dependent upon the output of gold, has a very material influence upon the cost of living. Lecturing in Auckland last week upon the fall in the value of gold, Professor Seagar explained the position at some length. He attributed the world-wide rise in prices in recent years to an increase in the gold supply. The relation between the gold supply and the level of prices, he argued, was "the fundamental theorem on which the whole science of currency and finance is based." Reduced to plain language, this means that prices in any given market represent the ratio between the quantity of goods offered for sale and the quantity of money offered In exchange for them. Given 1 other things equal, the more money there Is in circulation the smaller is its exchange value and, measured in gold, the higher prices must be. On the other hand, the less money there is in circulation the greater is its exchange value and the lower prices must fall, measured in terms of gold. This broad principle, o! course, is affected locally by the amount of a particular commodity that may be offering, but the price of money averaged the world over is the only financial barometer which will indicate the cost of living. Briefly put, this means that the larger the gold output of the world the greater the cost of living, for as its exchange value falls it becomes cheaper, and all prices measured in gold rise correspondingly. Of late years the output of gold has been tremendous. From 1896 to 1909 the total output of new gold amounted to more than £900,000,000—that is, more than half the total production of gold in the world during the four centuries following the discovery of America, and more than double the total supply accumulated in the world in 1860 after the great gold discoveries in California and Australia. "The output of gold," says a recent American writer, "is now ten times what it was in 1850, and nearly four times what it was in 1890. The world's visible supply of gold is now nearly five times what it was in 1850, and twice what it was in 1890." If Professor Seagar's theories are correct, this means that the increased price of necessaries which the Royal Commission has been set up to investigate is due in a great measure to causes which are quite beyond political or local control. Following this up, the Professor aTgues that a rise in the cost of living is not necessarily an evil, because being invariably coincident with a

fall in tlie price of gold it means a buoyancy «f trade, an extension of employment, an encouragement to the investment of capital, and the enlargement of all productive enterprise. In fact, a sudden influx of gold into the world's markets has been described by a great financial authority as producing the same invigorating and reviving effect as a release from bankruptcy in the case of a debtor long struggling under heavy financial burdens. Following this, Professor Segar is of opinion that the present high rate of gold production cannot be long maintained, and that in that event prices will soon begin to fall, and the world will be faced with the conditions that twenty years ago produced the demand for remonetization of silver, so as to enable the money supply to meet the ever-growing demand. Of course, as we have already indicated, this general theory has to submit to variations due to local conditions, but the discussion is of interest at the moment-, and the Royal Commission which is at present sitting might very well take some expert evidence upon the question of how far the price of money in the world's markets has affected the cost of living in Mew Zealand, quite apart from local considerations.