Financial Legislation and its Limitations. 33 



was very noticeable in the recent history of the production of 

 gold, in the year 1885, which was the moment when prices had 

 reached their lowest level, and when credit had contracted to its 

 utmost, after the expansion of 1880 and 1881. That was the 

 very time when the first large investments were made in the 

 South African mines. Thereupon, a period of boom in gold 

 mining supervened. In 1889, it reached a tremendous scale and 

 the amount raised became very large.^^ There was a slump after 

 the Baring crisis of 1890, but subsequently, when prices reached 

 the bottom again, about 1895, there started up a new boom in 

 the South African gold mines; so that it is a natural inference 

 that the influence of contraction of credit in stimulating supplies 

 of gold is important, and that, if anything of the sort is true, it is 

 that gold is forthcoming in order to compensate for lack of credit, 

 rather than the other way about. The new supplies of metal tend 

 temporarily to lower interest and increase nominal capital. 



It is often said that the great gold finds at the end of the 

 Middle Ages, following Columbus's discovery of America, were t^"' for pros- 



1 r 1 • r perity, but 



the cause of the tremendous expansion of commerce and must be cieariy 

 industry that took place after that event. The probability is from'thrreai 

 that the causal impulse ran the other way. It was not new gold ^^"/J~^"*"" 

 but thirst for it that sent Columbus on his voyages. In a lecture 

 entitled " The Present Monetary Situation,"-'' by Professor W. 

 Lexis of Gottingen, delivered at Dresden, in 1895, he said, speak- 

 ing of the Californian and Australian finds, and of the great 

 activity in business that followed them : " The discovery of gold 

 did not call forth this activity but served to accelerate and to 

 further it." Again, speaking of the recently found treasure, he 

 said: "Neither has the new supply of gold in any way operated 

 as a stimulus in the business world at large; it has only served 

 to increase the stores of gold lying idle in the cellars of the 

 banks. "^° At most, then, the gold supply may cause reaction, 

 but not action. 



^ Van Oss, Stock Exchange Securities, p. civ. The first considerable 

 returns from the Rand were in 1887. Raffalovich, op. cit., year 1893-94, 

 table, p. 323. 



^ American Economic Association. Economic Studies, vol. I, no. 4, p. 254. 



** Ibid., p. 238. 



Gold dis- 

 coveries impor- 



prise. 



