JOURNAL OF BANKING, CURRENCY, AND FINANCE. .... PAGE 593 594 ......... 595 ....... 596 598 Rates of Taxation in. Principal Cities and Towns of Ohio ............. Commerce and Navigation of the United States with the World from 1845 to 1855. Exports of Coffee from Rio de Janeiro in 1854 and 1855.-Exports from New York... Buoyage of Charleston Bar, South Carolina.... Lighthouse at Cape Florida.-Sweden, West Coast-Buskar Light, Winga Sound. Light for Salamis Roads and Port Peiræus, Athens, Greece............ Ocklockonee Shoal, Florida-Bell Boat Bell Boat off Southwest Pass, Mississippi River Condition of the Boston Insurance Companies in 1955 JOURNAL OF INSURANCE. POSTAL DEPARTMENT. Foreign Insurance Companies in Kentucky Postal Prohibition in the United States "Postage on Letters between Canada and the United States.. COMMERCIAL REGULATIONS. egulations of the Coal Trade in New York..... Law of Louisiana relative to Contracts made by Women..... RAILROAD, CANAL, AND STEAMBOAT STATISTICS. The Railroads of Wisconsin Statistics of the Massachusetts Railroads in 1855.. Steamships between the United States and Europe.. Cost of Kailroad Management.-English and French Railroads in 1854 and 1855......... Stock Manufacturing Companies in Massachusetts, Statistics of... Smuggled Boots, Watches, and Lace.-Temperature of Commercial Cities in Temperate Latitudes 647 The Coolie Trade.-The Courtesies of Business Life............................ Gloucester and Marblehead Fisheries.-Do Fraudulent schemers Succeed? HUNT'S MERCHANTS' MAGAZINE AND COMMERCIAL REVIEW. MAY, 1856. Art. I. THE GOLD OF CALIFORNIA, AND ITS EFFECTS ON PRICES.* GOLD, California gold, not only interests us all, but puzzles some of the wisest among us It would probably be waste of time to say much of the general uses of the precious metal which has been at all times so closely connected with the history of man. But when it was found that fifty millions of dollars, or more, in gold, were coming annually from California, people began to wonder what was to be the effect among us, and to anticipate great and sudden changes, which do not appear to have taken place, though six or seven years have elapsed without diminution in the quantity. There seems to have been a mistaken view of the subject, and it may be worth while to consider what may be the cause of error in regard to it. It was supposed that the influx of so much gold would make money very abundant and cause a great increase in the price of property of all kinds, producing a state of things entirely new. That it has that tendency, there is no doubt; but there are some reasons why the effect should not be as rapid in its progress as was expected. A merchant of great sagacity and eminently successful told me, that having been for a long time in the habit of keeping about $100,000 by him, lending it on short loans, so that he could command it readily if needed, and always feel perfectly at ease, he had been induced to invest it in purchases of property, chiefly railroad stocks, from an apprehension that the influx of gold would make money so abundant as to render it difficult to get even a low rate of interest for it, and that he must make The substance of a Lecture, furnished by the author, the Hon. THOMAS G. CARY, for publication in the Merchants' Magazine.-ED. the purchases without delay, or property of all kinds would be found rising rapidly in price. But he had found, he said, that the stocks had fallen in value, and instead of receiving dividends from the roads, he was called upon to pay assessments for new shares, so that he was then really in want of money; while people who supposed that he had it still to lend, were offering him 8, 10, 12, and even 15 per cent for the use of it. Others who had made similar calculations, think now that they were mistaken; while there are also some who still maintain that the present high prices of certain articles, owing to the abundance of gold, are to be permanent; and many are apt to deplore the shipment of it to Europe, as if that ought in some way to be stopped. There is obviously a great difference of opinion as to the effect of the change that is going on; and I propose to offer some suggestions, drawn from my own experience and observation, that may aid in considering how far the old landmarks that we have usually referred to are likely to be removed by this sudden influx. Without presuming to offer them as conclusive, I may, perhaps, throw a little light where it seems difficult to account for some facts on the theory commonly received. A piece of meat costs more than it did a few years ago. A piece of cotton cloth costs no more than it has usually done for many years. A day's labor costs more than it did five or six years ago. Houses and lands seem not to have risen since then, though they have risen in twenty years considerably. Vacant lots or unproductive tracts of land, unless it be in peculiar spots or at the West, that were bought five or six years ago, can hardly be sold now for one-third more than the cost, which would be necessary to cover interest. Now, if the whole quantity of gold and silver that there is in all the world were to be doubled at once, we should probably see just the state of things that was anticipated. The prices of all property would be vastly increased. If we now get a bushel of corn or a day's labor for a dollar, or the same value in gold, we should probably have to pay nearly two dollars, or double the quantity of gold, for the same corn or labor; and so of most commodities and of houses and lands, which would be worth about twice as much as they are, measured by money. The man who should have either kind of property to part with would find himself not much better off than he is now, unless he had debts to pay, because all that he would desire to purchase, with the gold that he would receive for what he sells, would be found equally advanced in value. The man who lives upon a fixed annual salary would find himself in a deplorable condition, because his salary being the same as it was, would purchase only one-half of the articles wanted for the subsistence of his family that he obtains now. The man who is in debt, having money to pay, would find himself relieved at once of about one-half of his debt, as he would have to raise only the same number of dollars or the same quantity of gold that he had agreed for, and he might do that with one-half the property or one-half the labor that was necessary when the debt was contracted. The man who has the debt to receive would find that he has, in effect, lost one-half of it; for the money that he would get by his contract would purchase only one-half of the commodities or the land that it would have done previously, when the contract was made. Precision in such matters is not easily attained, but this rough outline will answer our present purpose. Bearing it in mind, then, let us recol A few years lect for a moment what has recently taken place among us. ago it was suddenly made known that gold was to be had in California in great quantities and with little labor. Up to that time, gold had in general been worth what it cost to obtain it, and no more. Taking one source with another, the mines that yield well with those that fail and cause utter ruin, gold was worth just about its average cost, with a fair remuneration for the capital and labor employed in getting it. But here seemed to be an opportunity of getting gold at much less than the cost of what was then in circulation. Those who should be first on the ground had the best chance not only of collecting it, but of using it before its relative value should decline through mere abundance of supply. Large numbers of people who were then engaged in profitable industry left their occupations and went to California for gold. Many vagabonds went with them, who were no loss here and did nothing but mischief there. But probably 50,000 men, whose labor was of great value, left the Eastern, Middle, and Western States of the Union with this object. The withdrawal of so much energetic industry had a serious effect on the prices of agricultural products and work of mechanics, causing temporarily a great advance of wages generally, and therefore an advance in most of the products of labor. The supplies for their subsistence at the mines were to be sent to them chiefly from the Atlantic States at great cost, and, as it afterwards appeared, with great waste. Nobody could calculate how much of any article would be required, and while there was a great want of some things, others were sent in such abundance that part of them were thrown away-barrels of pork being sunk in the mud just to make crossings for the streets in San Francisco. But all that was used there had to be paid for, and part of it at enormous prices, so that the gold came here in large quantities-and what were we to do with it? Suppose for a moment that by embargo, war, or any imaginable cause, we had been at that time cut off from all commerce with the rest of the world, and were living, like the people of Japan, in hostile seclusion from foreign intercourse-what would have been the effect of retaining all that gold among ourselves? The increase of gold is not in general to be regarded as a useful addition to the wealth of a community under such circumstances, except the portion that is taken for utensils or ornament. The greater part of it is used as a mere instrument of exchange; and if we have enough for that purpose, we are not the richer for having more to circulate only among ourselves for the same use. The man who supports his family by his labor takes pay for his labor in gold and silver, or bills which are promises to pay in those metals, that he may select the meat and clothing that he requires with more convenience than he could by taking his pay in the material on which he works, and carrying about a sack of corn or a roll of leather on his back to make exchanges with the butcher and others. The gold, as a standard, represents the value of his labor and likewise the value of the articles that he wants to buy. Whatever represents the one will procure the others for him, whether it be one gold eagle that he receives or two. He is no better off for having two gold pieces instead of one, if the two will procure him no more of what he wants than one had procured before; and so on through all the transactions of life. Now, we had gold enough for all such purposes before. As we have seen already, to have doubled the quantity of gold that we had here, if we had nothing to do with it but to use it here, would have only raised the prices of everything that we buy among ourselves, without making us richer. If one hundred millions of currency, of all kinds, answered our purposes for exchange, we should not have been better off for having two hundred millions. But suppose, that instead of sending us gold that we did not need, the men who went to California had employed themselves in collecting and sending the same value in copper or other metals, to be used in the mechanic arts; hides, to be used for shoes; or cargoes of oil; and that they had collected the finer peltries, sea-otters' skins, &c., on the Pacific coast, to be exchanged in China, and had sent us teas and silks, sugar and coffee from there and from the great islands of the southern seas, we should then have received positive additions in valuable merchandise, making the country the richer for them-that is, if they were worth to us more than the labor of those who went for them. As we had in fact, however, open commerce with all the world, we could send the gold at once to Europe to pay what was due there. In one respect it was more convenient to have it in bullion than to have had the copper, hides, and other merchandise that I have mentioned. We could send it abroad more readily, while it would take time to dispose of the other articles. But whatever were the uses that we had for the gold, it came to us, in fact, as merchandise, being, in the main, return shipments for outfits, and for the food, clothing, &c., that had been sent from here, and remittances to families of the miners. It will then be asked, perhaps, why did not the gold that was sent to Europe raise prices there just as it would have raised prices here, if we had kept all this gold in the United States for want of intercourse with other nations? It was because in Europe it became mingled with the metallic currency of the world, which is so vast that all the product of California is as yet small in proportion. It is estimated that in France alone, where specie is chiefly used as currency, what are called the hoards-that is, the sums, great and small, kept in reserve for use in case of necessity-amount to something like 120,000,000 of pounds sterling. That would be nearly 600,000,000 of dollars; so that all the product of a year from California would be but ten per cent in addition to that amount, even if it all went to France alone. Even in Ireland, depressed as the people have been, it is said that the hoards among the small farmers, who live but poorly, are very large in the aggregate. If we think, in this view, of all the countries bordering on the Mediterranean and Levant, where specie only is used, we can easily conceive that some time yet must elapse before all that we shall send can amount to such a proportion as will materially disturb the values that prevail there at present. It is said that a river in Australia runs inwards from the highlands, and loses itself in a vast desert of the interior. Suppose that an engineer should discover some gorge in the mountains through which the river might be turned in a new direction, at no great expense, and that the government should authorize this to be done, so that it might run towards the ocean; if it should occasionally overflow its banks, it might fertilize the country through which it would pass-but would it raise the level of the Pacific? Probably in no perceptible degree. For the present, it is somewhat so with the gold that we send to mingle in the great ocean of currency for the world at large, whatever may be the effect hereafter; and |