THE REMARKABLE DEPRECIATION OF GOLD. Its Tex zonoa os roe
-srscreroa.") Sia,—Your correspondent "Latona " in his interesting letter in last week's Spectator takes rather too enthusiastic a view of the advantages of the depreciation of gold. It -is, of course, clear that the production of gold has some influence on the course of prices. If, for example, a mountain of gold were discovered which made gold as abundant and accessible as coal, a much greater amount of gold would have to be paid for commodities; indeed, so great an amount as to make gold an impossible standard. Nothing, it may be noted in passing, would so disorganize industry and impoverish the world as such a discovery. It has, however, to be borne in memory that gold is very durable, and that any change which the quantity produced in any year may make on prices depends, not on its relation to the production in any other year, but on its relation to the total quantity of accumulated gold already existing in the world, and to the increase in the requirements which this whole stock has to meet. Those who have followed the figures closely know that while the line of prices has some relation to the line of the production of gold, it is quite possible for one to rise during a period in which the other falls. While, therefore, I was one of those who expected a rise in prices to follow the expansion in gold production, I feel sure that there is nothing in the experience of the past to justify any absolute certainty that we might not have in the future, without any contraction in the gold production of the world, a considerable contraction of credit or a considerable fall in prices.
As to the effect of the rise in prices, I am surprised that " Latona " should say "Nor is the interest of the mortgagee classes at any permanent disadvantage ; with rising prices their security improves daily." If the burden to the borrow- ing individual or colony or country measured in commodities be greatly reduced, this can only be at the expense of the lender. If by the depreciation of gold all prices were to be nominally doubled, the owner of an unburdened property would still only possess the same property, and the amount of commodities that he would receive in exchange for it would remain the same. If, on the other hand, he had a mortgage on it for two-thirds of its value, the result of the change would be that two-thirds of the value would belong to the borrower and only one-third to the lender. Of course, the security is in a sense improved by the reduction of the amount of the burden, a loan for one-third of the value of a property being better secured than a loan for two-thirds. We are too ready to forget that all trade is really barter, and that the currency which is convenient and necessary in afju ling our bargains is not a magician's wand which can enrich Ls all. If prices tell too strongly in favour of the borrower and against the lender, in time loans will be more difficult to obtain. Most economists hold that the steadier prices remain the better. My own ideal would be a slight continuous rise in prices sufficient to give confidence to enterprise, without being sufficient to discourage too severely those by whose readiness to lend enterprise is so largely supported.--I am, Sir, &c.,
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