[The Director of the Mint in his annual report for the year 1911, discusses the recent increase in the output of gold, the manner and extent of its absorption into monetary and industrial uses, and some of the probable changes in the future. Omitting many details of the evidence, we give here the most essential parts of the discussion. (Annual Report of the Secretary of the Treasury on the State of the Finances, June 30, 1911, p. 266.)]

The world's absorption of gold and the rise of prices. The enormous increase in the production of gold which has occurred in recent years, and the relationship that may exist between these enlarged supplies and the advancing prices of commodities, has awakened a world-wide interest among economists. It has seemed for this reason worth while to undertake the task of tracing the yield of the last two decades into actual use for the purpose of discovering where it has been located and how much of it has been placed where it would probably exert an influence for the expansion of credit, the stimulation of industry, and the rise of prices.

The new golden era may be said to have had its beginning with the discovery of the Transvaal deposits in South Africa and the development of the cyanide process, which was first used successfully in the treatment of the Transvaal ores, but has since contributed in an important degree to the increased production of nearly all gold-mining districts. . . .

The production of the world for [three of] the ten years from 1890 to 1899, inclusive, and for [three of] the eleven years from 1900 to 1910, inclusive, is given in separate tables and the yield of the three principal producing countries is also shown separately. The African product is mainly from the

Transvaal but includes Rhodesia and lesser fields which altogether had in 1910 a production of $19,592,679. [Tables abbreviated].

By way of accounting for the distribution and employment of this product, . . . [several tables are given below].

Gold used in the arts. It is confessedly a difficult task to make a satisfactory estimate of the amount of gold consumed in the arts and industries, for the reason that only a few countries have made it the subject of official inquiry. Evidently, however, it is necessary in any consideration of the influence of the new supplies of gold upon prices to make some allowance for the portion of these supplies or of the existing monetary stock that has been diverted to industrial uses. . . .

[Page 272] The following is the bureau's estimate in detail for the consumption in the arts and waste of gold for the calendar year 1910, excluding Asia and Africa:

[1 Note effect of the Boer War.]

Gold Production - Fibst Period - 10 Years, 1890-1899, In Million Dollars.

Years.

Africa.

United States.

Australia.

Others.

Total.

1890..........

9.8

32.8

29.8

40.6

113.1

1895..........

44.7

46.6

44.7

62.6

198.7

1899..........

73.0

71.0

79.3

83.3

306.7

           

Total 10 years.....

420.0

467.0

458.2

614.5

1959.9

Average................................

42.0

46.7

45.8

61.4

195.9

Gold Production - Second Period - 11 Yeabs, 1900-1910, In Million Dollars.

Years.

Africa.

United

States.

Australia.

Others.

Total.

1900 .........................

8.61

79.1

73.4

94.2

255.6

1905..........

113.2

88.1

85.9

92.9

380.2

1910..........

175.1

96.2

65.4

117.7

454.7

           

Total 11 years .................

1123.9

955.3

862.7

1095.5

4037.6

Average ............................

102.1

86.8

78.4

99.5

367.0

Some writers of repute in the past have made large estimates for the abrasion which coins suffer under use. This was doubtless a larger factor in former times than it is now, the principal use of coin in modern monetary systems being to serve in reserves against paper money in circulation. . . .

Exports to Asia. There are practically no figures for the absorption of Western or Central Asia. The statistics for China are of little value, but on the whole there is a movement outward, showing that the production, possibly augmented by unrecorded imports, exceeds the recorded imports.

In statistics of the precious metals India is the most important country of Asia, and has long been one of the most important in the world. The Government of India has advised this bureau that the uncoined gold imported into that country might be considered to be used for ornaments and in manufactures. This amounted in 1910 to $47,026,698.

The movement to India deserves to be treated in a class by itself. A large part of the gold and silver that goes there sinks out of sight, and whether it is made into ornaments or buried in the ground, is withdrawn at least in large part from the monetary stock of the world. Some of it may be brought out in periods of emergency, such as times of famine, and reconverted into money, but in the past a steady stream of the precious metals has moved into India and disappeared as a factor in the commercial world. Sir James Wilson, K.C.S.I., for many years in the Government service in India, in a comprehensive address delivered before the East India Association of London, on June 14, 1911, reported the net

World's industrial consumption, 1910.

Countries.

Gold (value).

United States ..........................................................

$ 33,756,500

Germany ..................................................................

15,536,000

France .......................................................................

16,836,000

Great Britain ................................................................

18,000,000

All other countries .........................................................

27,720,000

   

Total .................................................................................

111,848,500

imports of gold by India since 1840 at about $1,200,000,000, or one-tenth of the world's production in that time. . . .

Sir James Wilson, in the address alluded to, sums up his explanation by saying:

As for India, her prosperity is steadily advancing. Great numbers of her people prefer to spend their savings on gold rather than on other commodities. The probability is that altogether apart from questions of currency, India will continue to absorb gold in ever-increasing quantity. . . .

Egyptian absorption [page 275]. The Egyptian situation is somewhat like that of India. The country is on a gold basis, and for thirty years has been steadily taking gold in the settlement of its trade balances. The high price of cotton in recent years and the increasing production of the country explains the trade balances, but there is some mystery about the way the gold disappears from view. It does not enter into bank stocks, and it is difficult to understand how a country of its size and population and in which the masses of the people are so poor can absorb so much gold coin. In the first period under review the customs records show net imports of $58,670,000 and in the second period $146,660,000. For the year 1910 they were $30,000,000.

Some light is shed upon the situation by the following statement in an address by Lord Cromer, made in London in 1907:

A little while ago I heard of an Egyptian gentleman who died leaving a fortune of £80,000, the whole of which was in gold coin in his cellars. Then, again, I heard of a substantial yeoman who bought a property for £25,000. Half an hour after the contract was signed he appeared with a train of donkeys bearing on their backs the money, which had been buried in his garden. I hear that on occasion of a fire in a provincial town no less than £5,000 was found hidden in earthen pots. I could multiply instances of this sort. There can be no doubt that the practice of hoarding is carried on to an excessive degree. (The Statist, Nov. 2.) ...

The movement to South America [page 276]. During the first period there was little change in the gold stocks of South America, but in the second period there was an important movement to several countries. Two in particular, viz., Argentina and Brazil, drew heavily for the accumulation of reserves as a basis for their paper currencies. This policy in Argentina is being carried out under the law of November 4, 1909, and in Brazil under an act that went into effect December 2, 1906. The total stock of gold in Argentina at the close of the calendar years 1889 and 1899 was estimated in official returns to this bureau at $13,000,000 and $25,-000,000, respectively; the stock in the conversion fund and in the Bank of the Nation on the 31st of December, 1910, was $244,400,000.