THE ACCUMULATION OF GOLD.

New Zealand Herald, Volume XXXI, Issue 9617, 15 September 1894, Page 1 (Supplement)

THE ACCUMULATION OF GOLD.

[from Chambers's journal for july.] We live in a record-breaking age, and are

becoming so accustomed to hear strange facts

thjtt we no longer express wonder at them. 'Sm announcement, therefore, some weeks ago, that the amount of gold held by the Bank of England exceeded anything previ-

Dusly recorded, and the fact that since then

it has gone on increasing has not aroused any very special attention, particularly as there is every probability of a further influx. The nearest approach to the existing state of affairs was in 1879, shortly after the City of Glasgow Bank crash, when then, as now, confidence in commercial circles had so broken down that many people were only happy when they knew their money to be safeiu the Bank of England. Mostof the surroundings, however, are now entirely different. There has been no great financial crash and no sudden lUtes of confidence. For upwards of three yearsj%pwever, things have been slowly going from Bid to worse ; almost every enterprise, however promising, and in whatever part of the world it has been entered into, has proved unsuccessful, and the great commercial community has lost all heart and all hope, as well as a considerable amount of its money. The object now is apparently to save something from the wreck; and where Euglfth money invested in foreign countries is at all getatable, it is being brought home for safety. We are consequently threatened with a " flood of gold." For years we have been told by those who ought to know, that bad trade and declining prices have been principally owing'to the scareity of this precious metal, and yet, with a superabundance, trade gets worse, and prices appear to have no bottom. Recent experience of the oversupply of most articles of produce has been a sad one, yet an over-supply of gold appears to act contrary to all the recognised rules of political economy, otherwise gold would also become depreciated; or, in other words, articles measured by gold would advance in value. We may rest assured, however, that if a natural law is apparently suspended, it can be only for a period, and must, sooner or later assert itself. It is therefore absolutely certain that the great accumulation of gold which is now taking place, and which is being constantly added to by the increasing discoveries in South Africa, will at no very distant date lead to revived business activity, and a fresh outburst of speculation. There are many circumstances at present existing propitious to such a movement. The outlook for a continuance of peace, and an absence of disturbing political" rumours, has rarely been so brignt, and there is indeed a prospect of some reduction in the enormous expense annually incurred in maintaining the immense Continental armaments. There can be no want of confidence, therefore, on that ground. But further, the great distributing classes in the country have on the whole done exceedingly well of late, inasmuch as they have been purchasing at continually declining prices, but not making a proportionate reduction to the general public, who, rinding almost every article of necessity remarkably cheap, are not disposed to grumble. But seeing that nearly every purchase effected can be made cheaper than the one before, they have been extremely cautious in their dealings, and bought only sufficient for actual requirements. The consequences have been twofold—first, either an accumulation of money in the hands of the wholesale dealers and the larger shopkeepers, which, for want of better employment, has been left in the bank, and helped to swell the existing large reserves; or what amounts to much the same thing, the requirement of much less assistance from their bankers, where they have been accustomed to make , use of overdrafts or discounting facilities. And in the second place, by the depletion of invisible stocks, caused by the determination to work their businesses with the smallest ones possible, and to replenish quickly when necessary. Thus the large visible supplies of various important articles of consumption are extremely misleading, and due solely to the fact of unequal distribution while the importer or original producer is indisposed to unduly press sales so long as the cost of carrying, owing to ridiculously cheap money, is so small. Once confidence is felt that the price of any article has about touched bottom there will be a rush on the part of retail houses to go into stock, and with increasing demand and decreasing supplies values must eventually be affected. One great factor remains which has never played an important part in any previous trade revival. To what extent will the low price of silver retard it? We have ace the competition of the East and silver-using countries generally, as well as those where a depreciated paper currency is in circulation, to an extent hitherto unknown ; and as present prices to all such peoples are by no means unsatisfactory, the resistance to any upward movement may at first be serious. But the universal belief that abundance of mouev means high prices is based upon a very solid foundation. The money, however, must be honest, and not, as is too often the case, manufactured by Governments for the purposes of inflation and speculative manipulation.

With an abundance of _ honest money, therefore, whether gold or silver, prices must «.ve£tually rise in the countries which possess it. It has been largely owing to the scarcity of the former, and the superabundance ot the latter, that' the depression in me gold-standard countries has been so great; hut some adjustment in the production of the two metals now promises to relieve it. It is true, if silver remains at its plesent low gold price, the values of everything produced in silver-using countries will be difficult to raise; but it is extremely probable that floating supplies of this metal are rapidly disappearing, and will not long weigh heavily upon us. It is true the stocks throughout the world are gigantic, and must long remain a source of uneasiness ; but inasmuch as they are almost entirely under Government control, there is no fear of any sudden opening of the flood-gates. It mey be fairly assumed, therefore, that with the slightest incentive the value of silver will improve, and in that case the most serious drawback to a general revival will be removed.

The improvement foreshadowed may not happen to-morrow, next month, or even next year, nor is it possible to say what will give it the first impetus. Probably some trivial and unimportant event for the moment entirely overlooked, but of sufficient consequence to turn the current into a healthier channel. It may be somewhat delayed; there will probably be more than one false start; but its advent wiOllio no very long period is a, certainty.