Gold and the Gold Standard.pdf

GOLD AND THE GOLD STANDARD
those that are elements in the cost of mining gold
itself, such as explosives and other chemicals, mining
machinery, and labor; also, taxes. It is these rising
costs pressing against a fixed gold price that tend
to reduce gold production by cutting into the mine
owners' profits when the value of gold is. declining..
On the other hand, when" the value of gold is
increasing, i.e., when commodity prices are falling,
the prices of the things that comprise mining costs
tend to fall with the prices of other commodities.
This reduces the cost of mining and, since the mine
owner continues to sell all of his gold at the same mint
price as before, his profits are increased. and gold
production is stimulated. Therefore, the production
of gold tends to increase when the value of gold rises
and to decrease when that value falls.
It should be noted, parenthetically, that gold is
produced under widely varying conditions in c}iiferent
parts of the world, that considerable gold is produced
as a by-product of other metals, and that much is
still obtained in backward places by primitive
methods of panning; while large amounts of la.bor
are continually being spent in more or less futile
efforts to find pay dirt. All this means that at any
one time it is difficult to ascertain just what is the
cost of prodtl,cing gold. The significant cost, the
economist would say, is the marginal cost in the gold
mines of substantial gold-producing areas like those
of the Transvaal and Russia. This marginal' cost,
however, is not easily located.
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