B 3 125 EOO
OCT l j 1918
GOLD INDUSTRY AND
By HENNEN JENNINGS
CONSULTING ENGINEER OF THE UNITED STATES
BUREAU OF MINES
GOLD INDUSTRY AND GOLD STANDARD
By HENNEN JENNINGS
CONSULTING ENGINEER OP THE UNITED STATES BUREAU OF MINES
The GOLD INDUSTRY AND GOLD STANDARD
By Hennen Jennings
Consulting Engineer of the United States Bureau of Mines
GOLD attracted the attention of primitive man by its color,
lustre and indestructibility*
The earliest mining and metallurgical operations of which
traces remain were those in Egypt that dealt with the ores of gold.
From pictorial rock carvings in upper Egypt, as also from Egyptian
hieroglyphics, it is found that the search, desire, and use of gold ex-
tended back some 3000 to 4000 years before the Christian era.
Starting with use as an ornament, gold soon became the trading
counter and has been an emblem of value to the human race as far
back as history extends. Appreciation of the value of gold has been
maintained through the centuries by the difficulties connected with
obtaining the metal.
With early primitive methods, only the gold most abundant and
easily worked and visible was first sought and this was found prin-
cipally in alluvial deposits, but as knowledge, mechanical skill and
tools and appliances were developed by the human race gold mining
was extended to more difficult alluvial, vein, and lode deposits.
Gold, when it became the counter of trade and a measure of pos-
session, was the most eagerly sought of all possessions, and thus it be-
came the pioneer and stimulant in mining, metallurgy and chemistry.
The search for this precious metal became so intense that the alche-
mists sought its transmutation from other metals, which, though they
failed to accomplish, won them other knowledge and gave birth to
The trading value of gold has been stabilized by history in that no
superabundance was ever obtainable and it has always been necessary
to expend labor and intelligence to an extent largely commensurate
to the bartering value of the gold obtained.
Accurate records do not exist of the actual outputs of gold in
early times, but certainly they must have been small from a modern
standpoint. Great outputs of gold, as of all other minerals, are a
matter of recent times.
Gold Output of the World
It has been officially estimated that the world production of gold
since the discovery of America, in 1492, to the end of 1916, a period
of 424 years, was $16,601,641,319. The output since 1894, a period
of 23 years, was approximately $8,500,000,000, or slightly more than
50 per cent of the total amount mined in 424 years. The average
yearly production up to 1894 was $19,107,644, while, since 1894 to
date it has averaged $369,565,217 per year.
The available gold on hand as gold reserve in 1894 has been esti-
mated at $3,965,900,000. The loss of gold and its absorption in the
arts and manufacture of jewelry accounts for the difference between
the amount produced and the amount on hand.
The amount of gold used in the arts has increased since 1894, and
of late years it has been between $50,000,000 and $100,000,000 a year.
Estimating the consumption and loss of gold since 1894 at $2,000,-
000,000 the amount of gold at present on hand as gold reserve may be
roughly estimated at $10,500,000,000.
The concentration and portability of this wealth can be ap-
preciated by converting it into tons weight, for the total weight of
the entire gold reserve of the world does not amount to over 17,000
tons and it could be easily transported around the world in one of the
Gold, as also silver, have advantages as money counters owing
to large value in small volume, ease of transportation, divisibility
without loss, beauty, brilliant lustre, great durability, ease with which
they can be guarded, and the difficulty of counterfeiting.
The province of the various mints of the world is to give guarantee
of the weights and fineness of the gold they coin. The United States
dollar contains 23.22 grains of gold and 2.58 grains of alloy, making
a total weight of 25.8 grains, or 1.677 grammes, and its fineness is
900. Gold coins of all nations, under normal conditions, are ex-
changeable on the basis of their fine gold content.
Gold Output a Measure of Industrial Progress
A broad outlook on modern mining and a study of the output
curves of metals since the discovery of gold in California, in 1848;
Australia, 1851; and Transvaal, 1886 — indicate that big mining is
surprisingly modern and that great outputs of other minerals have been
pioneered by gold. Until the last few years, gold outputs have shown
a parallelism with those of coal, iron and copper; with the growth of
railways, and the deposits in our banks. It would seem that the
outputs of coal during the last 18 or 20 years; iron, 15 years; copper,
13; and petroleum, 11, — were greater in aggregate than the output of
these minerals for all previous history.
The mineral outputs of modern times have been possible only
by the advances made in invention, engineering, chemistry and busi-
ness organization. Even so, it would now appear that the gold out-
put of the world has about reached its zenith, and is giving indications of
future decline, as shown by the returns for the past ten years, as under:
1908 $442,476,900 1913 $459,941,100
1909 454,059,100 1914 455,705,000
1910 455,239,100 1915 468,724,918
1911 461,939,700 1916 457,006,045
1912 466,136,100 1917 430,000,000 (est.)
The extreme variation of outputs during this period is not great,
but on the basis of the estimate for 1917, a drop of 6 per cent from
the previous year is seen.
The following table gives the gold returns from all countries of
the world from 1912 to 1916, inclusive, with relative percentages for
the pre-war year 1913.
WORLD'S PRODUCTION OF GOLD, 1912 TO 1916, INCLUSIVE
(Compiled from the reports of the Director of the Mint, U. S. Treasury Department.)
United States . .
Argentina . . .
492 , 200
world's production of gold — continued
Guinea. . . .
New Zealand. . .
British India. . .
lay States . . .
French East Af-
Madagascar. . .
Note. — The percentages given are based on the 1913 production with normal mining con-
ditions, when the Allies produced 91.3 per cent; the Central Powers .6 per cent and the Neutral
countries 8.1 per cent.
The table shows that gold has been mined in about 60 different
countries, and in all the continents of the world. It has been found in
the oldest rocks and thus in almost all subsequent geological forma-
tions. Traces of gold have been proven to exist in sea water, so the
distribution of gold is most widely spread, but never in great quantity
compared to other metals. Exceptional occurrence and favorable natur-
al and commercial conditions are required for its profitable extraction.
Gold Output of Warring Nations
The relative production of gold from all countries are given in
percentages for the pre-war year 1913, and on a war basis they can be
classified as, Allies, Central Powers, and Neutrals, with percentages
as follows: Allies, 91.3%; Central Powers, .6%; Neutrals, 8.1%.
Of the Allies, it is seen that Great Britain, with her colonies and de-
pendencies, produced 62.6%; United States, 19.3%; and Russia,5.8%.
The main gold producers of the world rank in order thus: Trans-
vaal, United States, Australia, Russia, Canada, and Rhodesia.
Australia's gold output from 1851 to 1903 amounted to approxi-
mately $2,060,000,000. The output in 1903 was about $87,000,000
and since then production has decreased gradually until in 1916 it
amounted to only about $39,000,000, or 45 per cent of the produc-
tion in 1903. There is at present no indication of any large increase
of output in the future.
The Candian gold output was very small in 1891, but mounted
rapidly until 1900, when the Yukon placer workings seemed to have
reached their maximum; in that year the Canadian fields produced
$28,000,000. Since 1900 there has been a fluctuating downward
tendency. The years 1915 and 1916, however, showed some increase;
the production for 1915 was $18,977,901 and that for 1916—
$19,234,976. The war conditions are unfavorable for exploitation or
search for new discovery. The extent of territory and natural con-
ditions, however, are such as to give hope of greater future outputs.
Russia's gold statistics are open to doubt. It would appear that
gold has been worked in the Ural district since 1820 and that in the
last 12 or 13 years outputs have varied from $35,000,000 to $22,000,-
000 a year. Some engineers express the belief that Siberia has greater
possibilities for future discovery and exploitation of gold, as also of
other metals, than any other field in the world. At present, in view
of war and industrial conditions, the prospect of large outputs of
gold in the immediate future is uncertain.
The South American and Central American Fields
Of these fields, Mexico is the most important. The revival of
gold mining commenced with a very small output in 1890 and the
maximum production was reached in 1911, with an output of
$29,200,000. Owing to revolution in that country, the output
in 1916 dropped to $7,690,707, which was a million dollars increase
over 1915. When the country is in better political and economical
condition, there is good ground for hoping for increased returns.
In other sections of Central and South America the outputs have
not been large, but there yet remain large stretches of unexploited terri-
tory and abandoned properties which may be found profitable to work.
The following tabulated statement for the Transvaal is given in
full, as it is the most complete record of gold mining operations in the
world. The yields, working costs and dividends, from 1887 to 1916,
a period of 30 years, have been obtained by sworn statements to both
Boer and British Governments.
THE WITWATERSRAND GOLD MINING INDUSTRY'S PROGRESS
Total. . .
Official statistics showing annual tonnage milled, value of output, working costs.and dividends,
taken from "South Africa" newspaper,
The total output for these 30 years was £492,198,901, or about
$2,300,000,000. The yearly return for 1916 was £38,107,909, or
about $185,000,000, which was 40 per cent of the world's output for
that year. The dividends amounted to 24 per cent for the whole
period, but only 18.6 per cent for the years 1915 and 1916.
There has been a great struggle to lower expenses, which have
been reduced from 42 shillings to about 17 shillings per ton. The
average yield has decreased from 49 shillings to 26 shillings. It
would seem that the Transvaal fields have reached their maximum
output and are on the down-grade.
The Rand Gold Mines are greatly favored in the fact that coal
is found in close proximity to the gold. Also, native labor has been
moderate in its wage demands, and outnumbers the white workers
nearly 8 to 1, thus allowing skilled white workers opportunity for
generous pay, which they have obtained.
The existence of gold in Rhodesia has been known for many years
but material gold returns started only in 1898, and have steadily
increased until 1916, when the output amounted to over $19,000,000.
There was a falling off, however, in 1917, of nearly two million dollars.
The total production from 1898 to 1917, inclusive, amounted to
$194,672, 165. At present the output is depressed by labor and supply
conditions, and although the territory for mining operations is vast,
with still unknown possibilities, there have been no new discoveries of
The total production of gold in the United States has been given
by the Director of the Mint, as under:
From 1792 to 1847 $24,537,000
From 1848 to 1872 1,204,750,000
From 1873 to 1916 2,599,670,200
The yield up to 1847 was obtained from the Eastern coast; from
1848 to 1872, largely from the placer mining in the West; and from
1873 to date, by combination of placer and lode mining and recovery
of gold from refineries.
Gold From Placer IMines
Gold dredging in the United States dates only from 1896, and
since that date the production of gold has been estimated at $120,-
In 1916 the greatest amount of placer mining, including dredging,
was done in Alaska, where over 60 per cent of the gold was thus re-
covered, and in California, where 38 per cent was recovered.
The yearly production of gold in the United States, by states,
from 1914 to 1917, is as follows:
PRODUCTION OF GOLD IN THE UNITED STATES, BY STATES,
1914 TO 1917— Inclusive
Although there are enumerated in the foregoing table twenty-
three states from which gold has been taken, the first seven in rank
have produced 89.62 per cent of the total for the United States during
the past four years. These states are, in order: California, Colorado,
Alaska, Nevada, South Dakota, Arizona and Montana.
Placer mining operations in 1916 produced about one-fourth of
the gold output of this country, and of which 56 per cent came from
All of the gold-mining corporations of the United States do not
make public their yields, costs, or profits, as is the case in the Trans-
vaal. Our government does not make demand for such information.
Some of the largest and best managed, however, give most complete
and generous information, which can be found in the transactions of
mining societies, mining journals and handbooks.
There would appear to be no reason for secrecy in gold-mining
returns, as it is the one business in the world that does not face
competition in marketing its product.
The richest and most easily accessible placer deposits in the United
States, as elsewhere, have long since been worked out. Alaska is
an exception in that the discovery of placer gold there is of com-
paratively recent date and guarded by great climatic difficulties.
Placer mining on a large scale started in this country with the
discovery of gold in California, in 1848. The appliances and methods
used were, first, the gold pan, followed by the rocker, long-torn and
short sluice box; and subsequently by diverting water, shoveling and
washing gravel into long sluices and working on a large scale ; then
drift mining, hydraulicking and gold dredging.
It has been estimated that an ordinary pan holds about 20 pounds
and that from 45 to 100 pans a day is a good day's work. With a rocker,
two cubic yards, or say, 3 tons, is a good day's work. The cost of
sluice mining depends on the character of the material, amount of
water, grade of the surface, and climate, but it may be said to vary
from 20 cents to a dollar per yard in temperate climates.
In Alaska, gravel is subject to a preparative cost for thawing,
amounting to 20 cents or more per cubic yard. Drifting, i. e.,
underground mining of a thin stratum of gravel and bedrock adjacent,
varies in cost from one to three dollars per cubic yard, and in Alaska
as high as from four to five dollars.
Hydraulic mining, i. e., the concentration of water under great
pressure on banks of gravel, with provision for the removal of the
washed material and obtainment of the gold, varies in cost from 2}4
to 12 cents per cubic yard, and in Alaska up to 25 cents.
Gold dredging was instituted to work gravel deposits that could
not be economically worked by other methods. It can be successfully
employed only when a great number of favorable conditions exist, in
which case remarkably low costs rule, — from 4 to 9 cents in Cali-
fornia, and up to 33 cents or over in Alaska.
Lode or Quartz Mining
Lode or quartz mining in the United States and Alaska produces
75 per cent of the output. For the world, the percentage is much
larger. In South Africa practically all the output is from this source,
and shafts as deep as 5000 feet have been sunk on the Rand to develop
the conglomerate deposits.
In the United States lode mining has been conducted in a great
variety of formations, and vary the deposits from narrow veins of
banded quartz with high per ton yield, to great irregular masses of
low-grade ore. The gold is often associated with tellurium and
other minerals. When pay has given out at shallow or moderate
depths, explorations to depths of 4700 feet or over have very often
The treatment of the ores depends upon their richness and as-
sociation with other minerals, and the processes for recovery mostly
in use are the jaw and gyratory crushers, for the larger rocks; followed
by stamp mills, ball mills or rolls, for finer crushing; then plate
amalgamation, by which in certain ores the greatest gold return
is obtained; and concentration by vanners, shaking tables or oil
flotation devices. The concentrates are treated by smelters, chlorina-
tion or cyanide works. After stamping or amalgamation the whole
pulp is often economically treated in bulk by the cyanide process.
Yields and Mining Costs
The yields and costs vary in different districts and in different
mines in each district. The greatest gold producers have been mines
of low or moderate yield per ton, but with great mass occurrence and
good conditions for economical working. The best example of such
mining is the Homestake Mine in South Dakota, which has been
working since 1875, and has produced over $147,000,000, the ore
not averaging over four dollars a ton and costs ranging from 2}4 to
3 dollars per ton, with dividends $40,000,000, or 27 per cent of the
The records of the Alaska Tread well Group of Mines started in
1885, and brought up to June, 1916, showed there had been crushed
and treated 26,000,000 tons, yielding $63,000,000 or $2.37 per ton, and
at a cost of $1.42 per ton. The workings were extended to a depth of
2300 feet. Some of them were under the sea, and the majority of the
mines were flooded with water on April 21, 1917, and are now closed.
Lower yields and lower costs have been obtained by the Alaska
Juneau Company and the Alaska Gold Mines, which are only a few
miles distant from the Alaska Treadwell Mines. Working on a large
scale has been started only recently at these mines. In 1916 the
Alaska Gold Mines crushed nearly 2,000,000 tons, giving a yield of
97 cents and at reported costs of 73 cents. The Alaska Juneau's
large mill has only recently been put into operation. It is antici-
pated their yields and costs will be still lower. These are the lowest
yields and costs known in gold mining. Hydro-electric power is used
and all natural conditions ideal for cheap working.
The Mother Lode in California, on which a 10-stamp mill was
started in 1852, has been prospected or worked over an area of 125
miles, and has produced, according to estimates, over $230,000,000
in gold. At two of the mines shafts have been sunk to vertical
depths over 4000 feet. Many mines, however, have been abandoned
at moderate depths owing to failure to make them pay. The early
returns per ton from the Lode were much higher than recent returns,
which do not average over $4 per ton. Some old abandoned mines
have lately been opened up again and by hydro-electric power and
better system of mining and management, made to yield substantial
A notable case is that of the Plymouth Consolidated Mines, in Ama-
dor County, on the Mother Lode, reopened after an idleness of 24
years, liberally equipped by capital and costs reduced to about
$3 per ton.
The North Star Mine, in California, is a good illustration of a
persistent but narrow vein of quartz, worked under good manage-
ment, and being made to pay moderate profit for a very long period.
The mine was discovered in 1851, and since then to 1917 has produced
1,470,000 tons, yielding $18,610,000, or an average of $12.66 per
ton. The total dividends have amounted to $5,137,000, or about 35
per cent of the yield. The returns for 1916 were $10.42 per ton,
with costs at $6.26 per ton.
An example of very rich yield, but with short life, is found in
the case of Goldfield Consolidated Mines, Nevada. Here, within
eight or nine years $50,000,000 has been taken out, but the yield
fell from $38.50 a ton in 1910 to $7.52 in 1916. The costs must have
been moderate on account of the magnitude of the lode.
The Portland Mine, in Colorado, is another rich telluride mine.
It has produced over $40,000,000, with an average yield of $27 per
ton. The dividends, however, have not amounted to over 20 per cent,
as a great amount of development, dead work, and costly mining
and reduction have been necessary.
Burdens on Gold Production
The writer was in California and Montana in December 1917,
where he had opportunity of discussing with a number of operators,
managers, and engineers the effect of the present economic con-
ditions on the future output of gold, as also the proposed excess
war profits tax.
As labor and supplies go up, so must the cost of winning gold
be increased, and the purchasing power of gold decreased. An index
as to the decreasing purchasing power of gold is obtained by
noting some of the increases in cost of supplies used in its obtain-
ment, some of which are given in the table below.
The advance in cost of hydro-electric power has been small.
The cost of coal and petroleum varies in different localities, but
where necessary to use for power seriously advances the cost of
Labor, about 20 per cent.
Steel (in California) 40 to 280
Manganese steel (largely used in dredging) .... 130
Machinery, etc 75
Miscellaneous 10 to 200
Some companies with liberal margins between profit and loss can
continue to work under present, or even much worse labor and sup-
ply conditions, but the excess war profits tax may so operate as to
induce them to curtail outputs. Some of the mines working on very
small margins are being closed down gradually and others may be
kept going for a time by reducing development work and up-keep
of plant, and generally marking time while hoping for better future
There has been a fear among operators that through the workings
of the Priority Board there may be difficulty in obtaining transporta-
tion and other necessities to keep their mines in constant operation.
The amount of tonnage that gold mining calls for from the
the railroad, where hydro-electric power is used, is very small, as
the finished product of the mines is most concentrated. It would also
work a great hardship in the gold mining industry to close down the
works and make the elderly and less efficient workers who have not
already been tempted by higher wages, seek employment and remove
their families from the district in which they have spent a large part
of their lives.
The excess war profits tax has been somewhat of a puzzle to
many of the operators. The crux of the whole matter is how rightly
to determine the rate per cent earned on the invested capital; that
is, the result of dividing the net income by 1 per cent of the capital.
If the rate obtained is between 7 and 9 per cent, there is no tax
to be paid. If above 10 per cent, it progressively mounts until a tax-
ation of 60 per cent of all net profits can be imposed.
Difficulties at once arise in the interpretation of what is invested
capital and what net income, and what are the legal deductions
from ordinary income allowable before net income is ascertained.
Invested capital may have an inflated showing in some system of
accounts kept, while in others it may be over conservative, in order
to provide against the exhaustion of the mine.
The interpretation of the returns and the bookkeeping of a gold
mining corporation becomes a most serious matter. It would
seem from a reading of the law that a premium is placed on making
a showing of high or inflated capitalization; also that large out-
puts and high yearly incomes are so penalized, and especially with
low capitalization, that it would become a temptation to decrease out-
puts and take two or three times the usual length of time for mining
the gold, as when once mined all hope for further profit of working
To illustrate, let us assume an invested capital of $1,000,000 and
a net income of $1,000,000 in sight in the ground and with little
hope of more, but which may be taken out in one or more years.
What is the proper course for the management to recommend to its
shareholders? If it is taken out in one year, the rate is 100 per cent
and the company must pay the government $479,400. If in five
years, the rate is 20 per cent, and the company would have to pay
a tax equal to $23,900 by 5, or $119,500. If in ten years, the rate is
10 per cent, and the company would have to pay a tax equal to
$1400 by 10, or $14,000.
Should a small group of miners or prospectors form a small
company, of say, $10,000 to $100,000 capital, and expend the entire
capital but strike it rich and take out as net profit an amount equal
or more than the capital put in, in such case, would not they be
obliged to turn over to the government nearly half of their profits?
And under such conditions, is not the search for new gold discovery
greatly discouraged by the tax?
It is the writer's view that the elimination of all excess profit taxes
on gold mining and the encouraging of maximum outputs might in
reality bring in greater revenue to the government than the tax;
for larger dividends paid to shareholders would mean greater revenue
Almost all countries of the world have as their financial basis
the legal standard of gold. Only a few retain the double standard
of gold and silver — Italy alone among the combatants.
Prior to the war, while there was freedom in trade and inter-
communication between the different countries, the prices of various
commodities were regulated both from within and without by the
operation of the laws of supply, demand, and competition, and
stabilized by the intrinsic value of gold.
The debts of the principal belligerents at the time of their entering
the war and those contracted since their entrance, as also an estima-
tion of further debts per year, are given in a rough and approxi-
mate manner in the table hereunder. They are sufficiently accurate,
however, to illustrate the danger of the world's financial situation.
DEBTS OF PRINCIPAL BELLIGERENTS
Total to Dec, 1917
Future yearly est.
Great Britain . . .
United States. . .
Austria- H u ngary
Turkey and Bul-
The table shows at a glance the great difference between the debts
incurred by the Central Powers and those by the Allies. Taking
into consideration the number of combatants and the necessary
munitions and supplies used by them, is it not evident that the Cen-
tral Powers are getting far more value for their debts contracted than
As regards the stock of gold on hand in the world and the amount
held by the United States, used as money and security, the following
quotation is given from the Report of the Secretary of the Treasury,
1917, page 24, viz:
"The gold monetary stock (coin and bullion used as
money) in the United States on November 1, 1917, is
estimated at $3,041,500,000. The increase in the past
10 months has been $174,500,000; in the past three years
$1,236,500,000; while in the past five years it has been
$1,161,333,000. In five years the portion of the world's
gold monetary stock held by the United States has in-
creased from approximately one-fifth to more than one-
This indicates that the calculation of the gold reserve made pre-
viously in this paper, corresponds closely with the estimate of the
Secretary of the Treasury.
Accepting $10,000,000,000 as the proper gold reserve of the world,
it may be calculated that at the beginning of the war the gold reserve
was 35 per cent of the total debts of the principal belligerents, while
at the present time it is only about 8 per cent.
When prices of labor and commodities are so advanced that it
is not possible for the majority of the gold mines of the world to work
at any profit, then labor and supply prices must become lower, or
gold becomes automatically demonetized.
Storage Cells of Human Energy
Gold coins can be considered storage cells of human energy, as
to obtain them labor of hand and brain must be expended; in fact,
they are thus charged with human electro-motive force. They are
able to give out strong genial currents of trade confidence, circulating
and binding trade, and bringing together different industries and
peoples in different lands ; their value is not founded on the fiat of any
one or more legislative bodies of one or more countries that may be
experiencing fleeting prosperity, but they are certificates from nature
of man's work and accomplishment.
The electro-motive force of the storage battery cells depends
not only on the amount of the electricity poured into them, but also
its pressure or intensity. In electrical parlance, the rate of flow
is known as the amperes and the pressure the volts, while the power,
In the gold cells filled with human energy, the amperes can
be considered the number of workers and the volts the forces and
tools placed at the disposal of the workers by discovery, science, and
organization. The watts may be considered the labor force stored
in the cell or coin.
In the mention of the labor elements poured into the cells, it must be
understood that labor should include the work of managers, engineers,
metallurgists, chemists, overseers, mechanics, and other skilled
laborers, as well as the more unskilled work of drillers, trammers,
The electric storage battery of cells can be rendered useless or
burnt up by excessive charges of current; they can also dry out and
stop working, or be feebly active should there be an insufficient
number of cells in the circuit to do the work demanded.
Translating these conditions to the human electro-motive coin
cell, the value of gold can be destroyed by its too great abundance and
its too great ease of obtainment. History is almost uncanny in
showing how visions of super-abundance as seen or painted by owners
and miners, have been doomed to disappointment, and how, con-
sidering time and averages, nature has demanded full toll in labor
for her gold.
The electric storage cell can dry out and disintegrate unless
refreshed with new current; this means that should the obtainment of
new gold cease while drafts on the old coins are vastly increased, that
the whole storage battery of gold energy may get so out of adjust-
ment as not to do useful work, and gold would become demonetized
and the accumulated labor energy of centuries past, locked up in
old coins, become inert and valueless. Should all gold mining stop
or very radically diminish, this would be the result.
As long as this country, or in fact any country, continues to
measure values by gold standard and pledge its credit on this basis, in
the long run the cost of obtaining new gold supply must fix its limita-
tions to the rise in wages and commodities. Gold is a sluggish
governor and seems at times inoperative, but its plentifulness and
cost of obtainment is ever operative, though not the only factor in
the rise and fall of prices.
Gold Coins Represent Past Labor Achievement
The real value of the gold coins is that they represent past
labor achievements and can not be duplicated in the future without
equivalent labor effort. Promissory bills or notes, or contingent
division of profits made by either governments, banks or individuals,
can be made mere scraps of paper almost overnight by war, revolu-
tion or commercial failure, but for thousands of years gold, while
showing fluctuation in purchasing power, has ever been valuable.
Our government securities and liberty bonds, pledged on a gold
basis, take the place of gold coins only as long as the people in this and
foreign countries have faith that the Government can make good its
promises; when this is seriously doubted by the many, gold will go
to a premium.
The great gold reserves of the past would not be so necessary if
the recognition of the fundamental necessity of measuring gold
values in units of labor necessary to win it were better recognized and
insisted upon by governments that pledge their credit on a gold basis.
Safely to lessen gold reserves while upholding the legal gold standard
is the great financial problem of the day for this and other countries
To attempt to adjust the value of the gold coin by changing its
weight in fine gold by government fiat, would be to take away all
intrinsic merit from the gold standard and result in confusion and
utter lack of financial faith and confidence.
The temptation to enlarge obligations and thus reduce the propor-
tion of gold reserves to an inadequate amount and meet the difficulty
by refusing to pay coin for gold pledges, also has great financial dangers.
The conception and definition of money has been one of the most
fruitful subjects of disagreement, argument and books known to man.
It would seem, however, that the main functions of money are first,
facilitating exchange; second, a means of estimating comparative
values of commodities.
The unreality of paper money is forced upon the writer by his
study of gold, the happenings of the time and the outlook for the
future. Money must in a large measure be based on sentiment and
good faith, for money, even including gold, has no intrinsic value
except as an incentive or stimulant to future human enterprise, effort
and labor. Its stored value vanishes when the mass of the people
repudiate it. When faith in it gives out, those that may seize and
wish to make new divisions will find only waste paper in the bonds,
notes and securities so eagerly desired and coveted.
Money can be converted into reality only by working masses led
by efficient officers, and who not only make use of the muscular
energy of the masses, but harness into service all the impersonal
obedient servitors that discovery, invention, science and engineering
have placed at the command of man, and which force far exceeds all
the muscular energy of man.
The payers of income tax in 1915 did not amount to more than
one-third of one per cent of the population. The envied rich amount
to only a fraction of this number. They may enjoy pride of pos-
session in the paper showings of their bank deposits and lists of
securities, also the power it gives, but their absorbing power of that
which money can really give to them individually is very small and
confined largely to what they and their families can eat, drink and
wear. All other possessions they must share or pass on to others.
The rich are merely deflectors, gates or valves in energy currents.
The greatest wealth by the individual has been obtained by organizing
labor and producing the necessities of the many at the lowest prices
and taking small profits per unit, but with the greatest number of
As labor in its broader sense has been organized and stimulated
to produce a maximum amount of commodities, it provides for its
own necessities and comforts as well as those of the few, and makes
possible a greater division of such commodities among themselves.
Thus, great production is beneficial to the many as much, and in
proportion more, than to the few.
The decennial census of 1910 shows that above 93 per cent of the
male population of the United States over 21 years of age is occupied
in gainful pursuits. A far more difficult problem than the destruc-
tion of capital would arise among the workers should the present
order of things be suddenly abolished — determination as to how a fair,
satisfactory, stimulating division of salaries and wages could be
arranged and enforced among the workers, so that they would have
more leisure and at the same time more wants and necessities.
Wages and Production Must Correspond
Any advance in wages of one class of workers must in fairness be
followed by proportionate increases in the wages of other classes and
as the laborer's wants and requirements for subsistence and comfort
are dependable on his fellow-worker, so must the cost of his subsistence
increase as his own and other wages are raised. Thus, in the end no
material gain can be obtained by labor unless there is some corre-
sponding advance in the output of his work.
The Government at the present time is the greatest employer of
labor and purchaser of commodities. The danger of allowing the
prices of commodities to rise above the future cost necessary for
obtaining gold, it is hoped has been made plain. Certainly the
Government should insist on the stoppage of all classes of profiteering,
but how is it possible to fix prices of any commodity and make low
bids possible unless there is some limit fixed upon wages and salaries?
The war must be won and it will take money as well as men to
accomplish it. However, it does not help matters to pledge credit
unnecessarily to please or placate either labor or capital, and the more
we get for money on a gold basis at the present time the less will be
the burden of debts incurred on future generations, which must of
necessity be paid by the mass of the people rather than by the few.
Allies Must Uphold the Gold Standard
The financial integrity of the country has been pledged on a gold
basis. As 91 per cent of the gold output of the world comes from
the Allies' territories, as a war measure it is plain that it is to the
advantage of the Allies to uphold the gold standard. For the past 10
years the world's yearly output of gold has been almost stationary,
and the present high cost of labor and supplies are acting very
seriously against any increased production.
To stop gold mining in a time of financial stress, as has been indi-
cated, would be like closing the doors of a bank when a run is made
upon it. It therefore must be evident that it is vital for this and all
Allied countries to encourage gold mining.
Unfortunately but little help can be directly extended to the gold
industry, but as far as possible, encouragement should be given and
the excess war profits tax placed upon this industry should be recon-
sidered, for while the war may have proved profitable to every other
class of industry in the matter of earnings, certainly it has been
seriously injurious to the gold industry.
Indirectly, the gold industry, as well as new issues of Liberty
Loan Bonds, can be greatly helped by the reduction in prices of all
necessary commodities, and this certainly should be seriously, judici-
ously and fairly taken in hand by the Government.
The war is to be won by the efficiency, harmony and morale of the
workers behind the firing lines as much as by the exercise of these
qualities by the soldiers at the front. The right conception of what
gold, and in fact money in any form, has the power of doing, or not
doing, seems to the writer a matter of most vital concern at the
present time. A better understanding of this problem, he believes,
would tend to knit together governments, labor, and capital, and make
for efficiency, harmony, and happiness.