GOLD THE KING.

Timaru Herald, Volume C, Issue 15304, 25 March 1914, Page 5

GOLD THE KING.

ECHO OF TRANSVAAL STRIKE. , . A good many mine stamps have been Jiung up as the result of the strike among miners (says the "Johannesburg Sunday Times" of January 18), and the question has been asked, "How would a, prolonged curtailment of a. gold output affect the industrial enterprise of Europe ?" The answer is that a considerable diminution in the vai'ue of gold exported would create a shortage in Europe, where the craze for armaments is stimulating the demand for gold, and there would probably be a rise in the bank rate, and a limitation of the world's enterprise. The Rand supplies from a third to a half of the world's total output of gold, and this not only finds its 'way to the various countires of Europe, where it is often hoarded up in national coffers, but drifts away to India and Egypt. The "shield'' sovereign has been in great demand in India, because its colour is admired by the Indians themselves, and it has been exported in South Africa, at a. premium of live per cent, to bo smelted into Indian ornaments of gold. Tliers ornaments in India represent so much gold lost to the enterprise of the world, and a., in India, "so in Egypt gold is being hoarded and lost—for the time being at least—as a medium for activity and human employment. But the immecijato effect of heavy curtailments of gold exports from South Africa would be to create a scarcity of money, to lower wages, and to increase the purchasing power of the sovereign. As matters stand afc present the enormous output of gold from the Randmines has rendered the sovereign much less valuable as 9 purchasing agent than it was one hundred years ago, when, gold was scarcer than it is to-day. The issue of legal tender notes can be regulated to balance this position somewhat, but on broad I'ines the financial outlook is affected and determined chiefly by the gold in circulation, and by the numbers of people amongst whom that goltl is properly divisible, and again by the condition ofi the food markets of the world. When there is a shortage- of gold the purchasing power of the sovereign becomes greater all over the world, and less money is likely to be put into nonreproductive works, such as armaments. Capital being scarce, enterprise is restricted ipso facto, and banic gold deposits are drawn upon with effect to increase rates of interest on fixed deposits. A regular proportion of the Rand's gold output is spent in South Africa, and any diminution in that output is therefore felfc throughout the Union with great promptitude. The lack of great industries and the prevalence of merchant middlemen selling oversea goods, establishes a sharp commercial, relationship between South Africa and Great Britain and America. But the blow to local commerce was so great at the conclusion of, the last strike that many oversea firms cut down their credit bills and facilities were restricted by bills at lessened sight periods. This Ni'as.ono local effect of a shortage of gold.

The present strike will exert a. similar effect on the commercial and industrial position, although it is probable that a quick and permanent recovery will be made, and that there will be so much less industrial unrest, that tiie possibility of a recoverv in oversea confidence will be considerable, with a corresponding influx of capital. As it is, the gold stamps of the Rand are makers of financial history.