EXPORTS 69
The answer to this question will be in two parts. First, that in so far as the movements in such an exchange are free, obeying the natural law of supply and demand and each commodity moving from a point of lesser value to a point of higher value, the fact of gold being a prin- ciple in the exchange can be counted as neither favorable nor unfavor- able. Being free bargainers, both parties must benefit in such an ex- change or no exchange could take place. The party that sends the gold is better oflf, as well as the party who gets the gold. Thus a free and healthy exportation of gold would result in a country from such causes as an extensive gold-mining industry, an inflation of the currency with an increasing use of credit money, or from a decreasing demand for jewelry. This free or natural movement of gold, then, forms no part of the *' balance of trade ^^ discussions for gold so moving simply takes a place along with all other conmiodities forming the international trade.
The second part of our answer refers to a movement of gold that is not free^ that is to a movement consciously instigated by a nation acting through its government. It was such a movement the "mercantilists*' believed the successful nations succeeded in bringing about, draining gold from the less successful nations to themselves, in spite of the strong tendency to a counter flow which such an unequal distribution of gold would induce. They believed such a nation was thrifty in that it was saving wealth in the form of stored gold, to be reexchanged in time of war or stress, for useful commodities from other countries. This idea was probably a survival from times when interest-earning capital wealth was little known.
It is necessary to keep clearly in mind that we are not now discussing the free or natural movement of gold. Gold acquired with intention to save is not for use in coinage or any other way, for that comes through a natural demand. Gold stored in vaults serves no present use, but only the potential use contingent upon war.* It is capital wealth out of use — ^not drawing interest. For a nation to store wealth in this way it must buy gold with its commodities from other nations, paying an ever increasing premium as the foreign supply diminishes. Whatever the enactment which brings this about, it is in essence a tax upon the coun-
s The mind of the reader may here revert to the gold stored in the United States Treasury as security for paper money in circulation. The money problem properly forms no part of our subject, but for the sake of keeping proper pro- portions in the mind it may be well to state what this store of gold is. Accord- ing to the report of the Secretary of the Treasury, there were one thousand eight hundred and fifty-eight million dollars in circulation and in the treasury, in the form of gold coin and bars, on April 1, 1913. Fifty-eight per cent, of this was security for gold certificates in circulation. If our balance of exports for the last twenty-five years had been paid for in gold, the amount would have been sufficient to increase this government stock sixfold, making it about eighty per cent, of the world's stock of gold.
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