SHORTAGE OF GOLD

Taranaki Daily News, 20 October 1930, Page 16

SHORTAGE OF GOLD

AN ALTERNATIVE PROPOSED. PLATINUM CURRENCY SCHEME That there is something queer about the present trade depression everyone feels in his mind. Practically all commodities have now been steadily falling ever since the war boom collapsed (writes H. W. Wison in the London Daily Mail). But the fall in the past few 'months has become precipitous. Wheat, wool, rubber, sugar, tea, coffee, copper, tin, lead, zinc, silver, have dropped to knockout prices. Every manufacturing industry in this country is depressed, yet the consumer finds that whatever he has to buy—in Great Britain, at all events —is just as dear as it was a year or two years ago. In the shipping industry, which is one of the most important, freights now stand at only 78 per cent, of what they were before 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? Prices are measured in gold. That metal is the ultimate standard, i 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 value? 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 for it. A gold famine is setting in. The periods of great prosperity in world trade have been the periods of 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 rich gold deposits at Sutter’s Mill in California. This event was followed by big gold discoveries in Australia. The world’s output of gold, which had averaged only 1,700,000 ounces , annually from 1841 to 1850, rose between 1850 and 1860 to 6,400,000 ounces, and continued at or near that level 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 of currency. Events proved that, where it was not the basis, politicians could not be trusted; they would recklessly print paper money and cause fearful mischief and ruin—themselves Usually escaping the punishment ' which ought to have been dealt out to them.i

At the same time the production of gold has begun to decline. The 22| million ounces which werij turned out in 1912 have shrunk to something under 19| million ounces. The world’s most iniportant 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 of gold has been a, process of manufacture. Elsewhere it has been a gamble. The only promise of new fields of any vahip is, perhaps, in Canada; and they cannot he opened up for years. The idea of transmuting some baser metal into gold which haunted the alchemists is realisable to-day, but 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 gold supply is certain to shrink and to multiply our difficulties hereafter, is there nothing that can be done? There is not much* prospect of persuading the Bank of France or 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 does might/ be relieved by the concurrent use of some substitute.

Silver is no good for such a purpose. It is far too plentiful, having become a by-product of base metal refining. The days when 15oz of silver would buy an ounce of gold are for ever past. The present ratio is more like 15oz of silver to the ounce of gold, and is still rising. 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 4405. 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, for jewellery, for use in industrial chemistry as a catalyst and resistant substance, and for many electrical appliances. At present the annual output docs not exceed 250,0000 z. But, if there were a steady and almost unlimited demand for it the viitput would increase and the cost of production would fall. There are very rich supplies of it, though in a refractory 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 this country is 77s IOAd an ounce) it might perhaps be 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 not 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 to bimetallism, but not the bimetallism of fifty years ago, when silver was regarded as the alternative to gold. That kind of bimetallism was killed by the terrific drop in the price of silver and by the opening of the Rand, 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 arid persistent world-malady.