disaster. In administrative management, it has ruthlessly sacrificed indispensable revenue, entailed an increasing deficit. . . . piled up the public debt by $262,000,000 in time of peace. In the broad effect of its policy it has precipitated panic, blighted industry and trade with prolonged depression, closed factories, reduced work and wages, halted enterprise, and crippled American production."

The assertion was repeatedly made in the campaign that there was an adequate quantity of money and that low prices were not the result of gold appreciation; that, in fact, there is little relation between money and prices.

REPUBLICAN PLATFORM, 1912

"The steadily increasing cost of living has become a matter not only of national but world-wide concern. The fact that it is not due to the protective tariff system is evidenced by the similar conditions in countries which have a tariff policy different from our own, as well as by the fact that the cost of living has increased while rates of duty have remained stationary. The Republican party will support a prompt scientific inquiry into the causes which are operative both in the United States and elsewhere to increase the cost of living."

It was repeatedly stated during the campaign that this world-wide phenomenon of rising prices was undoubtedly due to the fall in the value of gold in consequence of the great increase in gold production.

142. THE FUTURE OF GOLD PRODUCTION1

The great increase in the output of gold since 1890 has been due in the main to two contributing discoveries that were directly related to each other, namely, the discovery of the Transvaal field and the discovery of the cyanide process.

The discovery of the cyanide process must be regarded as one of the greatest achievements of modern times. And there can be no doubt that cyaniding will be hailed by coming generations for its importance, not so much to the mineral industries directly, as for its bearing upon world-economies in rendering possible a greatly increased output of gold and silver year after year. In the comparatively brief twenty-year interval since 1891, when Messrs. McArthur and Forrest brought the modern perfected cyanide process prominently before the mining world, the output of gold has amounted to 284,081,289 fine

'Adapted from the Annual Report of Director of the Mint, 1911, pp. 46, 66-67; 1914, pp. 261-62.

ounces. This is a most astonishing showing, especially when compared with a total output of 401,311,148 fine ounces for the entire 397 years previous—from 1493 to 1890. Nor, if we except the Klondike, has this record production been boomed by the development of new fields. The cream of the world's gold fields had already been skimmed in previous years in California, Australia, South Africa, Siberia, India, and elsewhere. It is mainly on the cast-off leavings of the old fields that the cyanide process has achieved a record production of the yellow metal. And among those leavings we must not forget the innumerable lower-grade properties whose exploitation has been rendered fundamentally possible only by the cyanide process. It is these latter which now furnish the bulk of the world's supply of gold, and upon which the world must depend very largely for its future requirements.

Of course, it is possible that at any time new deposits equally rich with those of the Transvaal and the Klondike may be laid bare; and it is conceivable that the cyanide process may be superseded by a method which would again revolutionize production. But until such new discoveries are made there can be no leap in production comparable to that of the past twenty years.

Since 1906 the rate of production in the United States, including Alaska, has been practically at a standstill. There is nothing to indicate a considerable change in either direction. Australasia has been on a declining scale since 1903, the annual yield being now about $28,000,000 below the high year. Russia, Canada, and Mexico have shown an increase of late about sufficient to offset Australasia.

Investigation has recently been made into the question of the life of the Rand as a gold field. That there is an immense amount of payable ore in sight, and that very low-grade and at present unpayable ore exists by hundreds of millions of tons, is beyond dispute. But as a paying proposition in the aggregate how long the Rand will last is the subject that has been engaging attention. The Engineers' Committee of the Transvaal Chamber of Mines has recently arrived at conclusions which are regarded as rather unpalatable. The orebearing formations show considerable fluctuations, and working costs appear to be increasing as the mines deepen. But it is impossible to make a definite forecast, especially as in the eastern section of the Rand recent developments lead to an increase of the estimates of ore reserves. Beyond the proved claims, which are yielding fair to good

results, it is estimated that there are 1,720,000,000 tons of ore in that section. The whole matter resolves itself into a question of working costs, but under any circumstances the Transvaal production will continue to be on an enormous scale for many years to come.

The South African Mining Journal in a recent issue refers to the great varieties of estimates as to the life of the Rand which have been made in recent years. In conclusion, the article observes: "To summarize all these prophecies, and without quoting a number of other forecasts, we arrive at the following: 1901-Mr. Hammond says the Rand will last until 1926. 1902-Dr. Hatch and Mr. Leggett say until 1944. 1904-The Loan estimates that authorities say until 1934. 1911-Dr. Hatch indicates a life until 1950, and in the same year Mr. Hull prolongs the period by about 15 years. Mr. Boustred then put the date of exhaustion at A.D. two thousand and something. Next the Chamber of Mines gives evidence, which is interpreted in some quarters as meaning that the Rand will be of a very minor importance after 1940, and Mr. Mathers informs the world that the Rand will be productive until 2008. We do not propose to analyze these various prophecies such action would be as futile as the prophecies themselves. It is now admitted that Mr. Hammond's 1901 estimate was based on false premises. The former chief consulting engineer of the gold fields did not reckon on working costs being reduced to the extent they have been. We firmly believe that long before the date of exhaustion determined by other authorities has been reached it will be generally admitted that these other authorities also did not base their estimates on correct assumptions. Who at this date will make so bold as to say what changes in the economic aspects of the industry may not be effected before the end of the present decade ? And since every little improvement, every little reduction in working costs, must have a hugely important influence on millions of tons of ore, who can limit or determine the productive era of the Witwatersrand? In any case, the death of the Rand is not going to be a sudden affair. The decline will be very gradual and protracted."

VII

THE STANDARD QUESTION: THE CONTROL OF PRICE LEVELS

Introduction

In this chapter we are concerned only with the standard of deferred payments. It has been noted that this function of money was of later origin than the others, being necessarily delayed until the development of contractual relations and the institution of credit had given rise to time obligations. Consequently, in the early periods of monetary history the question of deferred payments was of minor importance. Today, however, it is the paramount issue in monetary discussion. The standard, gold, no longer serves extensively as a medium of exchange, and as a common denominator of value for a given moment of time it gives rise to no real problems. It is, practically speaking, only as a standard of deferred payments that we have at the present time a monetary problem at all, so far as gold is concerned.

It has been noted in chapter i that an ideal standard of deferred payments should be absolutely invariable, like a yardstick, and that in practice we should choose for such standard a commodity as nearly stable in value as possible. The evils of a fluctuating standard of deferred payments manifest themselves through changing price levels. Obligations payable in money that are entered into at one price level may be payable at a future date when the level of prices may be substantially lower or substantially higher. If lower, the borrower finds that he has to repay a greater purchasing power than he received, or, what is more to the point, he finds it more difficult in consequence of lower prices (and wages) to repay his loan than would have been the case at the former level of prices. If prices have risen, the lender does not receive back a purchasing power equivalent to that given at the time of the loan.

While the greenback and silver movements in the United States found their popular support partly, perhaps mainly, in the desire for a larger supply of money, they also involved, as has been noted, the injustice to debtors caused by an appreciating standard of deferred

payments. At the present time the situation is reversed, the agitation over the high cost of living being a result of the losses suffered by creditors-owners of bonds and other long-time investments-in consequence of rising prices; though accompanying this, of course, is the inequity that results from the failure of salaries and wages to advance with like rapidity. Former eras of high prices have also given rise to discussion of the question of deferred payments though perhaps in a less definite way so far as the general public has been concerned. The public attitude toward the control of prices, however, is shown in the various historical attempts in almost every country to fix the prices of staple products and to punish violations of the law by fines, imprisonment, and even death.

Students of money have long given the control of price levels their close attention, and numerous devices have been suggested for procuring a stable standard of deferred payments. The first phase of the discussion centered around the choice of such a standardwhether it should be the precious metals or some other commodity, such as wheat (corn), or whether labor might not serve as the measure of future payments. In the second place, the argument for bimetallism, at least on the "scientific," as distinguished from the popular, side, was mainly that it would give us a less variable standard for deferred payments. A third device was that of the tabular standard, first proposed by Mr. Jevons in the seventies' after a long period of rising prices, and discussed by economists more or less continuously ever since. Finally, we have a variation of the tabular method of control known as the compensated dollar. First suggested by Williams in 1892, it has again been independently advanced with much refinement and elaboration of detail by Professor Irving Fisher. The plan has been the subject of much discussion and has had a wide though not universal indorsement by economists.

143. THE NATURE AND PURPOSE OF THE MULTIPLE STANDARD2

BY DAVID KINLEY

The unit of measure under the tabular standard is the aggregate price at a given time of a long list of articles, a definite quantity and quality of each being chosen, just as is done in making a table of index

'Jevons gives credit for suggestions along this line to some English writers as early as 1830.

2

Adapted from Money, pp. 276–77. (The Macmillan Co., 1904.)