Gold reserve

“ At the present writing the United States government holds an unusually large fraction of the world's gold reserve, about 28 per cent or 2 billion dollars,—an amount equal to two-thirds of the aggregate production of the United States to date. Other large stocks of gold are held, in order, by Great Britain, France, and Russia, these three with the United States holding over a half of the world's total gold reserve. Germany has about 1-1⁄2 per cent of the total reserve, and, with its tremendous debt and no sources of new production, is of course in a particularly unfavorable position. ”

“ The gold situation has become a matter of great concern to the various governments, since national financial stability and the confidence of the public in the national credit are based largely upon the acquirement of an adequate gold reserve. Both in England and in the United States, committees of experts have been appointed to make exhaustive investigations and present recommendations for measures to stimulate production. The report of the joint committee from the United States Bureau of Mines and Geological Survey gives a comprehensive review of the conditions in the gold-mining industry. ”

“ Nay, the liability of redemption for foreign remittances, small as it appears, may become so indefinite as entirely to jeopardize the restoration of stability to the exchange standard.
But is a gold reserve such an important thing for the maintenance of the value of a currency? All supporters of the exchange standard must be said to be believers in that theory. But the view cannot stand a moment's criticism. To look upon a gold reserve as an efficient cause why all kinds of money remain at par with gold is a gross fallacy.355 To take such a view is to invert the causal order. ”

“ The Greenbacks do not, and never did, depend on the Gold Reserve. They depend on the credit of the Government, and the known fact that the credit of the Government is based on $80,000,000,000 of national wealth. Their legal tender quality, their usefulness as money, their receivability for taxes and public dues, make them good in the eyes of the people irrespective of any Gold Reserve. ”

“ The next logical and necessary step is a national central gold reserve if we hope to prevent our gold leaving us at the will of foreigners, and also if we hope to serve the whole nation, just as the Clearing House is serving its members today, and as the commercial zone will be able to serve all of its members, when it has been once organized. ”

“ Manufacturer: I presume that you have been deeply impressed, as I have, with the importance of protecting our gold reserves from the standpoint of a nation among the great commercial nations of the world. We have learned that there are many forces now acting upon gold, because it is the universal reserve of the world. ”

“ Ten millions is only one-third of 1 per cent of the gold reserve already held by this country, and it would obviously have taken a long time for this small increase in annual production to make itself felt in the size of the gold reserves. ”

“ That in the matter of a strong central gold reserve, you will observe that the plan follows the principle in force at the Bank of England where all transactions are in gold, making England the only truly free market for gold in the world. ”

“ They would remain of equal value with gold if the Treasury did not exchange gold for them, so long as any gold remained in circulation as money. A gold reserve, however, is necessary as a precaution128 in a gold-standard system, but only to the extent of the probable demand for gold for export.
The system as a whole is a ridiculous one, and nearly all its features are wasteful and uneconomic.
Gold coin, as a circulating medium, is not as good as paper; it has a high subjective value, and such use of it is wasteful; it should be kept as a reserve for export purposes. ”

“ They are serving the purpose of money usefully and without question. Our gold reserve, amounting to only a little more than $100,000,000, is directly charged with the redemption of $346,000,000 of United States notes. When it is proposed to inflate our silver currency it is a time for strengthening our gold reserve instead of depleting it. I can not conceive of a longer step toward silver monometallism than we take when we spend our gold to buy silver certificates for circulation, especially in view of the practical difficulties surrounding the replenishment of our gold. ”

“ Gold is found all over the world, but the British Empire produces 60 per cent. of it, while the United States produces 20 per cent. Political and commercial control are nearly identical in the case of gold, which is easily reduced to the metal state and thenceforth passes current, requiring no selling agencies. Due to the commerce brought on by the war, the United States now has a larger gold reserve than any other nation. ”

“ With our revenues equal to our expenses, there would be no deficit requiring the issuance of bonds. But if the gold reserve falls below $100,000,000, how will it be replenished except by selling more bonds? Is there any other way practicable under existing law? The serious question then is, Shall we continue the policy that has been pursued in the past; that is, when the gold reserve reaches the point of danger, issue more bonds and supply the needed gold, or shall we provide other means to prevent these recurring drains upon the gold reserve? ”

“ The specie basis affords a means by which greedy speculators work “a corner” in gold and thus extort large 291sums in profits which the people eventually have to pay. The laws and official rulings, for instance, which require the maintenance of a gold reserve in the Federal treasury and the payment of duties and interest on the public debt in gold, create a special and imperative demand for the yellow metal ”

“ The gold-exchange standard would probably enable the country to get along with a smaller gold reserve than will the system to be adopted, inasmuch as it would keep gold coins out of circulation and the demands upon it would be limited to the requirements of meeting foreign trade balances—the only monetary use to which the dollars could not be applied. ”

“ By removing all danger of the debasement of our money, by insuring the parity of every dollar of our currency with gold, and by permanently retiring the greenbacks, we destroy the incentive to hoard gold, cause its return to the reserve, relieve it of half the burden it formerly had to sustain, and reduce to a minimum the tendency to withdrawals. The copious supply of gold thus secured would enable the Treasurer to waive his option to pay in silver whenever the customer preferred gold, thereby enabling merchants to use the less cumbrous metal for foreign shipments. ”

“ Since our gold reserves are now a part of the common reserves of the whole commercial world, the price for the use of gold must be under the control of the Board of Directors of the American Reserve Bank. In this capacity they are acting for every individual bank in the United States whose agent they are. ”

“ A. Stabilizing the Dollar Would Destabilize the Present 100% Reserve. To the plan for stabilizing the dollar, as described in Chapter IV, there should be added a proviso of some kind to insure the permanent adequacy of the gold reserve.
We have a 100% Government reserve against our present gold certificates. These certificates are really warehouse receipts, issued at the rate of one dollar for every 23.22 grains of pure gold deposited, and redeemable at all times at this same rate. ”

“ Thus a very simple method is provided whereby this form of currency may be transmuted into another without contracting the circulation.
The great desideratum is to make our vast stores of silver available for ultimate redemptions, and this, natural bimetallism effectually accomplishes. Our gold reserve would therefore cease to be indispensable to the preservation of our national credit just as soon as the greenbacks and gold certificates were converted into the bimetallic notes or cancelled. But there need be no fear that the gold reserve would ever become depleted. ”

“ Speaking of the matter in a more definite way, we must assume that from the primary form of reserve, which is what we started out with, such a part of our capital in gold as will always prove equal to the average demands upon deposits must be kept constantly available.
We must have what are aptly called secondary reserves, which will meet all ordinary, yes extraordinary, or unusual calls; but, finally we must have such access to an almost incomprehensible store of gold, as to impress and overwhelm the imagination, and place its possible exhaustion beyond human conception. ”

“ It was decided that the reserves of the National Bank should be kept in ingots of gold, until the increased confidence of the people in the new order of things should render gold reserves no longer necessary. ”

“ The over-production of gold is relieved in a measure by the utter disappearance of a part of it. What becomes of all the gold? Nearly one million five hundred thousand dollars a day is taken from the mines of the world. Only a portion of this output is consumed by the arts and in jewelry, and in the natural legal reserve of Governments. From the best information obtainable, much of the surplus goes into the hoarding places of all classes. ”

“ For, supposing the gold exported considerably to exceed the amount of this reserve, which is invariably the case in every extensive drain which commences while the reserve is either at or below its ordinary average, the amount of circulating medium in the hands of the public must contract, at least by the difference between the amount of the available reserve and that of the exported treasure. ”

“ In the meantime, the inclination of our timid citizens to take gold from the reserve for hoarding “had grown by what it fed on,” while large shipments abroad to meet foreign indebtedness or for profit still continued and increased in amount.
In these circumstances the inexorable alternative presented itself of again selling Government bonds for the replenishment of its redemption gold, or assuming the tremendous risk of neglecting the safety and permanence of every interest dependent upon the soundness of our national finances. ”

“ The Straits Settlements, inasmuch as it is a country for whose trade requirements silver coins are better adapted than gold, and a country which is anxious to maintain its reserve at as small an expense as possible, would in fact seem to be a place peculiarly adapted to the gold-exchange standard. ”

“ But while it is no new theory that gold in the pockets of the people is absolutely useless for the purposes for which a currency reserve is held, all but the highest authorities have believed until fairly recently that no gold standard can be really stable unless gold actually circulates in the country. ”

“ An early resumption of the circulation of gold for internal purposes is not contemplated. The public has become used to paper money, which is in some ways more convenient and cheaper; and the luxury of a gold circulation is one that we can hardly afford at present. Gold will be kept by the Bank of England in a central reserve, and all the other banks should, it is suggested, transfer to it the whole of their present holdings of the metal. ”

“ While the United States, with less gold in the country and less reserve in the banks than formerly, is showing the most enormous surplus—and a legitimate and better-protected surplus by reason of the new bank act—and the Bank of England is counting $100,000,000 of gold in Canada as a London bank reserve, and Russia has counted, as gold in her reserve, money on deposit which has been loaned out on time ”

“ If gold appreciates, or does not depreciate too far, the reserve will always be adequate to insure redemption. But as there is always the possibility of an excessive depreciation of gold, some method of insuring an adequate reserve should be provided. Of several possible methods, the best seems to be: to fix a definite ratio of reserve to certificates, such as 50%, which shall always be maintained; to appropriate at the outset, to the profit of the Government, all surplus above the 50% and invest it in Government bonds ”

“ Reserves have absorbed enormous quantities of gold, easily obtained as a consequence of abundant gold production, in the past fifteen years. Proportions of gold reserves to bank-credit have grown. In the preceding period, when gold production went on less rapidly than business development, percentages of reserves were lower. ”

“ It cherished the gold as a precious asset: a sign of solvency and a ready resource in time of need. The gold reserves of some of the belligerents increased considerably in the course of the war.
These gold reserves, as the name implies, were not in active circulation. Gold passed entirely out of circulation. It flowed into the treasury, and part of it was retained there. The larger part flowed through the treasury, and was employed by the government in purchase of war material abroad. Some part of this outflow from the belligerent states remained in Europe ”

“ The metallic reserve might with safety consist of one-half of gold and one-half of silver, the latter at its market value, and the notes be redeemed either in gold or its equivalent in silver, under such regulations as may be deemed necessary to keep them at par and to give no advantage to either metal. ”

“ The United States has many unworked gold mines, "gold reserves" they are called, whose value can not in any way be exactly estimated. The value of the placer mines can be better judged than that of the lode or quartz mines. The placer mines are chiefly in Alaska and California. These mines may yield gold to the amount of a billion dollars. There are lesser, but important resources of placer gold in Montana, Idaho, and Oregon. ”