Increasing Ratio of Gold Production to Business

Abstract

not in any respect the theme of my short paper. I shall tell you of the present and past production of gold and shall speak with more assurance perhaps than you may feel that I should, about future production. Future production is of course the most important. Ever since the war we have had showered on us a vast amount of words, the main theme of which is Our Vanishing Gold Reserves. I believe it was Professor Huxley who defined tragedy as the explosion of a perfectly good theory by hard fact. This tragedy has overtaken the exponents of the theory of Our Vanishing Gold Reserves, because as a matter of fact our vanishing gold reserves are increasing. Chart I shows the production of the world's gold since 1860. The peak was reached in 1915. The drop from 1915 to 1922 was not due to the exhaustion of gold reserves, although it was coincident with the final exhaustion of several important gold districts. It represents mainly the effect of the war upon the gold miners and gold capitalists, and it also is the result of the very great increase in commodity prices, which perhaps is another way of saying the same thing. The gold miner is not a particularly altruistic fellow. He does not mine gold because the League of Nations thinks we need more or somebody else thinks we need less. He mines for the sole purpose of making a profit. When he can make money, he produces; and when he cannot, he quits. Perhaps the world's worst metaphor is speaking of very profitable things as a regular gold mine. A regular gold mine faces many difficulties, and the cost of gold is regulated by the cost of supplies and labor, which throughout the mining industry represents a very large proportion of the cost of the commodity which the mine produces. The cost of producing the world's gold varies from $6.00 to over $20.00 an ounce; the average cost is probably about $15.00. The selling price is fixed at $20.67. So you get some idea of what incentive there is to mine gold. The gold miner cares nothing about the quantity of monetary gold or the gold standard or its effect on credit, except indirectly, in so far as it may ultimately affect the cost of commodities, which runs up his mining costs.