Remarks on the production of the precious metals

The production of silver is in the course of increase. Will that of gold be kept up? It is reasonable to entertain considerable doubt on this point. In Siberia we have seen it retrograde since 1847. The extraction appears stationary – perhaps rather on the decrease in California. Australia alone, with gold fields yet unexplored, appears likely to produce much more than heretofore. Auriferous strata may be discovered elsewhere, and add to the general stock. Combining these various circumstances, we incline to the opinion that the quantities now forming the annual production of gold will not be diminished for a certain number of years; but when the miners have exhausted the gatherings from the alluvial deposits, and it becomes necessary to seek the golden ore in the rocks and mountains, in which nature appears during the various revolutions and convulsions of the world, to have deposited it; then the working of the mines will depend upon the amount of capital and the degree of science, which may hereafter be brought to bear on that description of enterprize.

In a paper read in 1848, before the Royal Institution of London, Sir Roderick Murchison remarks that the principal deposits of gold are found in auriferous “detritus,” and that the same degree of success must not be expected to ensue from exploring the veins, which are ramified through the quartz rock. The result hitherto shown in California fully confirms this theory, as is shown in the following letter from an engineer at St. Francisco, dated 4th April last, after an expedition amongst the localities occupied by the gold diggers: —

“I send you the result of experiments made upon fragments of rock. In each we have operated upon three tons of quartz, reduced to powder, and carefully worked by amalgamation. We have made five experiments upon as many veins in the county of Bath, which is situated between l’Yuba and the River de la Plume. No. 1 has produced [174 - About 14s.]3 dollars 53 cents per ton; No. 2, [175 - About £1 18s.]9 dollars 50 cents; Nos. 3 and 4, [176 - About £2 4s.]11 dollars each; and No. 5, [177 - About £3 8s.]17 dollars.

“In the county of Nevada, experiments have been made on four different points. The first has given [178 - £3]15 dollars per ton; the second, scarcely any gold; the third, [179 - £2 16s.]14 dollars per ton – this mine, upon which a company had established works, has been abandoned; – and the fourth has given [180 - £11 16s.]59 dollars, the vein being of an extraordinary richness, and having yielded large returns to the proprietors.

“In the county of Eldorado, three different veins did not give a larger return than [181 - £3 8s.]17 dollars per ton; a fourth equalled the richness of No. 4, in the adjoining county.

“In the county of Mariposa, out of eight experiments, three veins gave hardly [182 - 12s. to 28s.]3 to 7 dollars per ton; three more gave [183 - £1 8s. to £4]7 to 20 dollars; one gave [184 - £4 16s.]24 dollars; and one more, [185 - £7 12s.]38. The two last veins have attracted miners, who are going to work them. No enterprize requires a more careful and a more expensive examination than an auriferous quartz mine. A good vein, yielding [186 - £7 4s.]36 dollars per ton, may be considered, by moderate people, as worth working; sometimes they are found much richer; but out of all the quartz-crushing mills which have been set up in California, I do not think that one-third are used for mines which are yielding, for any continued period, [187 - £6]30 dollars the ton; so that one-half of the works of this nature are suspended.”

From the above account, it would appear that a vein of quartz, to be considered productive, should give 36 dollars, or [188 - £7 5s.]192 francs per ton. This return represents a weight of 55 grammes upon 1000 kilogrammes, or 5½ parts of gold out of 100,000 parts of quartz. Mineral of iron stone will give 10 to 15 of metal per 100; and the production by melting is infinitely less troublesome or expensive than the extraction of gold. In Australia, it was at first supposed, after an analysis of some ounces of quartz, taken from Mount Ophir, that the ton would yield more than £1100 sterling; but these experiments, made on so small a scale, are of little value. It is not likely that Australia, when the miners find themselves reduced to the necessity of working the quartz rocks, will show any considerable increase of yield over California.

The extraordinary abundance of gold, then, does not appear to be of permanent duration. It is a sudden outbreak which we, accordingly, have to meet. It does not appear to be, as far as we can now form any opinion, a reign of one metal, which is likely to take the place of some other; nevertheless, there will most infallibly be a very marked fall of gold in comparison with silver, unless met by a most extraordinary activity in working the silver mines; other causes, however, although secondary in themselves, appear, concurrently, likely to neutralize part of the effect of this superabundance.

It is of little importance to ascertain the amount of the annual production of the precious metals, unless we investigate the proportions in which they are distributed between the two hemispheres. Silver gives rise to a regular trade, and, coming from sources long open, it is sent almost exclusively to Europe, as an article of exchange, against the produce of her soil, or of her industry. Gold in California, on the contrary, a source of unexpected wealth, starting up in a new country, is first absorbed by the wants of a local circulation. A new society, formed in the midst of a desert country, necessarily requires some medium of exchange: some money. Next to the immediate necessities of California come the wants of the United States. These States have, for some years past, been endeavouring to introduce a greater amount of the precious metals into their monetary circulation. The gold of California has powerfully contributed to effect this object. Silver coin now circulates, but in small amounts, throughout the Union. They have coined gold pieces of 20, 10, 5, and even of one dollar. Out of [189 - £16,000,000 to £20,000,000]400,000,000 to 500,000,000 francs, brought in during the three first years, not more than [190 - £2,800,000 to £3,000,000]70,000,000 or 75,000,000 have found their way to Europe. The import of 1851 has been more sensibly felt. According to the returns of the American newspapers, the quantity of gold shipped to Europe from New York and New Orleans, was, during last year, [191 - £8,000,000]200,000,000 francs.

The like result is obtained from other channels of information. The Mint of London, which ordinarily coins gold at the rate of about £2,000,000 sterling per annum; and which, in 1850, had not coined more than £1,492,000 sterling; in 1851, increased their operations to the extent of a coinage of £4,200,000 sterling (above 105,000,000 of francs). The moiety of this gold must have come from California. In the same year, the mint of Paris coined in gold [192 - £10,788,383]269,709,570 francs, of which about half was supplied by the conversion of 100,000,000 of Dutch Guillaumes into French money. In the accounts of the German Mints, we find about [193 - £8,000,000]200,000,000 of Californian gold. If we are to judge from the operations of our own mint, the import of 1852 will be smaller than that of 1851; for we have coined but 14,000,000 pieces in gold during the first three months of this year.

Australia sends regularly large amounts of her gold to England; but a part of the export of gold dust, or “nuggets,” is returned in gold coin. Many vessels have lately cleared from London with £200,000 sterling; and this at a time when England had barely received £800,000 sterling, from Sydney and Melbourne. Considerable amounts will likewise be imported in plate and jewellery. The more wealth increases in the colony, the more gold will be employed both for circulation and for luxuries. The producing country will be most certainly, par excellence, the country of consumption. Europe contains 200,000,000 inhabitants, of whom not one-half are adequately supplied with metallic money. It would require, certainly, an addition of many milliards of francs to the quantity of the present metallic circulation, to put many of these countries in an equally favourable position in this respect with France, Belgium, Switzerland, Holland, and Great Britain. We know, that only nations of industrious habits are in want of a larger supply of gold and silver because they alone carry on trade to any extent. Abundance of production precedes and gives rise to a demand for money. Wealth must exist in a country before the sign of that wealth is required; but, at the same time, it cannot be denied that the circulation of the precious metals stimulates, to a great degree, the creation of richness; it acts like roads, canals, or other modes of transport, which, by opening the means of reaching markets, extend the radius of operations, and give additional value to commodities. One half of Europe has a trade of inconsiderable importance, and derives but a small part of the benefit of the produce of its own soil. It has neither industry nor credit. In many countries now, gold and silver are replaced by the use of paper-money, often discredited in its own, and in all cases valueless out of its own country.

Austria has just made, partly in London, and partly in Frankfort, a loan of £3,500,000, intended principally to restore the credit of her paper money. This will be the first step towards the restoration of metallic money, which had disappeared to such an extent, that the smaller notes were often divided into four, to use for change. Prussia, Poland, Russia, and Turkey, have experienced, in different degrees, the like embarrassment. Before these various markets are all superabundantly supplied with gold and silver, the treasures of Siberia, Australia, and the two Americas, may be diffused for many years over the continent of Europe.

The scarcity of gold had restricted its use; in France, for example, the smallest gold coin was [194 - Say 16s.]20 francs. Since it has become more common, the Mint have coined pieces of [195 - 8s.]10 francs, which are much liked, and are convenient for use. These smaller coins appear likely to take the place of a portion of our silver, which is needlessly cumbersome. It is supposed that the use of Bank-notes of [196 - £8 to £4]200 and 100 francs has economised the use of several hundreds of millions of the precious metals. The 10-franc pieces, when more generally used in circulation, will take the place of, and drive out a portion of silver coin. The demand for silver then will diminish, whilst that for gold is increasing. Silver will be used as change for gold – as gold is for bank-notes. This is the case to such an extent in England, where the silver circulation is small, that the Mint in London, which coined £1,492,000 sterling in gold, in 1850, only coined £130,000 sterling in silver in the same year, whilst, in the same year, [197 - £3,440,000]86,000,000 francs in silver were coined at the Mint in Paris. It must not be forgotten that the use of the precious metals is not confined to the limits of Christian civilization. The Chinese import Peruvian and Mexican dollars in exchange for their silks and teas; they attract by their trade the gold produced in the neighbouring Islands, and in the Straits of Sunda. This industrious nation has sent its contingent of labourers and traders both to California and Australia. A portion of Californian gold has already gone to China, but Australia appears better situated for the purpose of supplying the eastern regions and the southern portions of Asia with the precious metals. The Australian gold, however, sent there will be as so much lost treasure; for whilst the precious metals which are thrown into circulation in Europe continue in use as coin for a long time, that which is sent to China, or India, or Africa, altogether disappears; it is not required for circulation, but seems to be consumed.

Nothing appears more likely to restore the confidence of those who have taken alarm at the abundance of gold than the consideration of the almost unlimited extent of its market. What people, civilized or uncivilized, agricultural or manufacturing, do not enter into competition for a supply! What are the millions of francs extracted from the Cordilleras when compared with the capital created by the labour of the inhabitants of the whole globe?

The combined washings of the Altai, California, and Australia, during a quarter of a century, would be required to produce a sum equal to the annual revenue of England alone. This unexpected harvest of the precious metals is but an addition to a common fund of wealth; it cannot produce a deep or a durable impression on the almost incalculable mass of wealth already existing in the world.

After all, Europe herself does not preserve gold and silver as relics. Money is used by wear and tear to such an extent that it must from time to time be recoined, and the consequent loss falls on the community at large. The use of silver and gold plate, of gold work and jewellery, is increasing every day, as a distinguishing mark of the rise of the middle classes; the manufacturers of France, England, and Switzerland are at work for all the world. English statisticians have estimated the loss, from use, disasters at sea, and export without return of the precious metals, in the United States and Europe, at more than [198 - £5,000,000]125,000,000 francs a-year. A more moderate estimate reduces this sum to [199 - £3,000,000]75,000,000 francs. As to articles of luxury, the sums of gold and silver employed therein annually, have been estimated by Mr. Jacob, at [200 - £5,920,000]148,000,000 francs, without including the consumption of the United States of America. Mr. M’Culloch, who embraces the United States in his calculations, puts the amount at [201 - £6,000,000]150,000,000. France, herself employing upwards of [202 - £1,200,000]30,000,000 francs, it may be admitted, without fear of exaggeration, that the sum of [203 - £5,000,000]125,000,000 of gold is used for domestic purposes. Here, then, we have an annual consumption of [204 - £8,000,000]200,000,000 francs; the proportion borne by gold in this absorption of the precious metals is every day becoming more important. What remains, at the present time, of the enormous masses of the precious metals which Mexico and Peru have poured forth during the last three centuries? The amount of gold and silver now in the form of circulation would scarcely equal the produce of the mines during the last fifty years. The 30 milliards which America sent to Europe, from the Spanish Conquest to the beginning of the 19th century, has almost entirely disappeared. It would appear as if industry, in its contact with gold and silver, must have volatilized it. France converted into coin a large amount of the precious metals; but when coined, it did not remain there. Exportation appears constantly to produce the effect of banishing it from the country. Thus, in twelve years, from 1840 to 1852, we have imported [205 - lbs. 329,612=£15,376,500]123,012 kilogrammes of gold, and we have exported [206 - lbs. 190,827=£8,902,125]71,217 kilogrammes; the difference in favour of the import being [207 - lbs. 138,785=£6,474,375]51,795 kilogrammes, equal to [208 - £7,245,520]181,138,000 francs, showing an average of [209 - £600,000]15,000,000 francs per annum. Jewellery, goldsmith’s work and gilding, employ, annually, in France, quantities of gold exceeding that sum in amount. The excess, then, is taken from the coinage, which accounts for the ordinary premium on gold in our market. The average would be considerably reduced if we except the year 1851, during which the import has exceeded the export by [210 - lbs. 92,451=£4,312,875]34,503 kilogrammes; but the results of 1851 may be considered as exceptional. Already, the greater part has disappeared; gold finds its way from France to London. The Bank of France, whose metallic reserve in 1851 included an amount of [211 - £4,000,000]100,000,000 francs of gold, now does not hold above [212 - £600,000 to £800,000]15,000,000 to 20,000,000. French gold coin, common enough in Paris, is scarcely seen in the provinces.

From 1840 to 1852, French commerce imported [213 - lbs. 27,264,889=£81,794,667]10,175,312 kilogrammes of silver, and exported [214 - lbs. 9,882,794=£29,648,382]3,688,279 kilogrammes. The excess of import, [215 - lbs. 17,382,095=£52,146,285 or £4,346,312 per annum.]6,487,033 kilogrammes, represents a sum of 1,303,893,633 francs, or 108,657,802 francs a year. Admitting that [216 - £600,000]15,000,000 are annually absorbed in the demands for articles of luxury, and [217 - £400,000 to £480,000]10,000,000 or 12,000,000 for wear, our monetary reserve of silver would have increased at least [218 - £44,000,000]1,100,000,000 since 1840. This leaves a large margin in the circulation of France for the displacement of silver by gold coin. When the import of gold shall have exceeded the export by an amount equal annually to [219 - £8,000,000]200,000,000 francs, with this accumulated reserve of [220 - £44,000,000]1,100,000,000 and with an annual excess of [221 - £3,200,000 to 3,600,000]80,000,000 to 90,000,000 francs over the import and consumption of silver, it will require at least ten years to restore the equilibrium between the two metals, to the state in which it was in 1840.

No subject has given rise to more rash and speculative opinions than that connected with the trade in gold and silver. Amidst the great variety of conflicting phenomena, statistics appear almost valueless; but so long as gold continues to bear a premium, in spite of the apparent superabundance, and notwithstanding its partial demonetization, it may well be considered doubtful whether the relative proportions, established by law between gold and silver in so many countries, will be materially affected for at least some years to come.

Various remedies have been proposed by alarmists, to prevent the evils of the influx of Californian and other gold. Some have desired that government should limit the quantity of gold to be annually coined. This expedient, in the event of a depreciation in value, would be of little avail, for the quantity imported and kept in the shape of bars, would equally augment the general stock, and weigh down the price. Others have thought of altering the legal value, but this plan would be useless as long as gold remained at a premium. If gold became depreciated it would be injurious only until the fall was ascertained, and considered durable; this once determined, things would go on as before.

Then comes the question as to the demonetization of gold; doubtless no point is of greater importance for a standard of circulation than a fixed value. It is a fact that in all those countries where a double standard of gold and silver is established, one or other has always obtained the ascendancy, and maintained a premium, and has ceased to appear in the shape of money; logically, it would appear quite enough to regulate all prices by the value of one metal, without exposing trade to the uncertainty of an alteration in value of two. In the adoption of one only, however, it is desirable to examine which of the two has, over any given period of time, been subject to the least variation. Before the discovery of California, silver would certainly have had little chance of being selected. Even now it appears to me that the question has not so materially changed as might at first sight be supposed.

It should be remembered also, that it is not so easy for all countries who may have adopted the double standard to exclude one from their monetary code. The example of Holland has proved that gold, having lost its character as legal money, will no longer be used as a token. To demonetize gold is to exclude it from the market. For a great commercial country like Holland, living in the greatest freedom, and carrying on its trade by exchanging and carrying the products of all the countries in the world, to exclude one of its habitual means of exchange, may not be attended with great risks. England, though little disposed to imitate Holland at present, might perhaps do so with less danger, from having the commerce of the whole world in its hands. France, unless under pressing necessity, could not demonetize her gold without exposing herself to a complete disturbance in all her relations, both at home and abroad. Our trade is tied up by a completely protective system, without alluding to those direct prohibitions which disgrace our customs’ tariffs; almost all the duties which affect articles of primary consumption are, in short, disguised prohibitions. In exchange for the products of our own country, which we have to sell to the foreigner, we can hardly purchase in return anything but raw materials. Thus, bar and pig-iron, those articles of primary importance, have been subjected to duties at the rate of 100 per cent. on their value. In those countries enjoying a legislation attentive to the wants of trade, and where the custom-houses are only for the objects of revenue, the imports and the exports will show an even balance. In our country, where we have been desirous of opposing a barrier to the free course of exchange, goods exported have always a preponderance in value over those imported. In 1850, for example, the imports represented a value of [222 - £31,600,000]790,000,000 francs, and the exports [223 - £42,720,000]1,068,000,000 francs, showing a difference of [224 - £11,120,000]278,000,000. England and the United States, together, receive of our products an excess of [225 - £9,440,000]236,000,000 above the exports we receive from them; and as those countries with which we trade cannot pay us in goods, they must make their return in gold and silver. This was the reason of the import of [226 - £8,800,000]220,000,000 francs in coin in 1850, as shown in our official returns. So long as the system of protection is the ruling policy of France, so long will it be impossible to deprive gold of its value as money; to attempt it would be to withdraw from trade one of its most useful means of exchange. It would check, if not stop, all intercourse with those countries who can only pay in gold, or who can only sell us those commodities which we endeavour to exclude by our tariffs. Gold flows naturally only to those countries where it is marketable; and it is only so where it is in use as coin as well as in commerce. A profit of half per thousand is sufficient in the present day to turn the current of the precious metals. This circumstance ought not to be lost sight of in the consideration of monetary legislation.

In fact, the change in the relative value of gold and silver, which was so strongly anticipated, appears anything but imminent; if any great change is now taking place, it appears rather to be that of a simultaneous depreciation in the value of both metals. Deep thinking persons are not content with expressing their fears; they are already providing themselves with the means of averting the evils which they anticipate. This is one of the causes which have raised the value of railroad stocks, and of landed property; and this explains the comparative abandonment, not of speculation, but of capital ordinarily seeking investment in government stocks. Alarm is felt at placing money on security, of which both the capital and the interest may remain at a fixed value; these may be the more sensibly affected, if the value of the precious metals is altered; whereas the shareholder of a railroad would have a chance of having his income increased; and the landed proprietors that of having their capital augmented in the same proportion in which the value of money would be depreciated.

In dwelling on these facts, I have no idea of setting myself up as a prophet. I would confine myself to the wish to indicate some of the symptoms of the present position of these matters; the danger, if any exists, is certainly not very near at hand. We have already seen the use of bank notes in France increased to an extent which, owing to the stability of their value, has largely taken the place of specie. It is but reasonable to suppose, that the present abundance of gold and silver will make no greater disturbance within a short time, than has the great increase of paper money.

The influx of the precious metals has been, in a certain sense, a providential occurrence during the revolutionary state of Europe. Credit had either disappeared, or had at least become stagnant. Everywhere, amidst the tempest of the times, both past and prospective, business had been suspended, or carried on only for ready money. Affairs had assumed an aspect of a primitive state of exchange. An increase of metallic circulation might again restore confidence, and calm agitation. The average excess of money imported over that exported, which, before 1848, was not above [227 - £3,200,000 to £4,000,000]80,000,000 to 100,000,000 francs, amounted in 1848 and 1849 to nearly [228 - £12,000,000]300,000,000 francs for each year. Specie in these times supplied the wants of trade, and maintained prices; but, in more easy times, when used not alone, but concurrently with paper money and bills of exchange, for the purposes of circulation, gold and silver would naturally be in use in proportion to the movements of trade. The reason why [229 - £24,000,000]600,000,000 of francs in coin now encumbers the vaults of the Bank of France, is, because capital is only employed in the stock markets, and that the restoration of trade on a large scale is still confined to a sort of anticipation; but let the industry of the country experience a complete restoration of confidence in the future, and we shall soon see the metallic reserve of the bank diminish; and, as a natural consequence, our market will attract an import of the precious metals from abroad. In short, gold and silver will then be wanted; the state of trade will improve, and we shall have to seek for an increased supply.

Let us not then either despair or be too confident; the world is not entering on an Eldorado, nor is it on the eve of a state of ruin. Those who consider gold and silver as positive wealth, who confound an abundant supply of the precious metals with an abundance of capital, and who affirm that the gold imported from California must lower the rate of interest, should remember that the rate of interest is determined by the state of confidence, as well as by the general rule of the supply and demand for loanable capital, and that confidence depends upon the good order existing throughout the civilized world. California itself shows the delusion of such an idea – for there, where gold is strewing the land, interest has risen as high as from eight to ten per cent. per month. Those on the contrary, who, at the idea of the galleons seeking freights in the western continent, dream only of ruin and catastrophes – who anticipate that the day will arrive that the Bank of France will pay persons to take away her gold – should not forget that she sells it now without difficulty even at a small premium, and that this increased trade in gold has not hitherto ruined anybody.

Paris, August, 1852.

notes

1

£20,000,000

2

£24,000,000

3

lbs. 797,629=£37,209,423

4

£4,000,000

5

A kilogramme is equal to about 2 lbs. 8 oz. 3 dwts. 2 grs., and is worth about £125; 30 kilogrammes would therefore weigh about 80 lbs. 3oz. 20 dwts. 12 grs., and would be worth about £3750.

6

£5,960,000

7

lbs. 6,381,530=£297,700,000

8

lbs. 295,717,106=£887,151,318

9

£1,280,000,000

10

£320,000,000

11

£240,000,000

12