444 INFLUENCE OF BECENT GOLD DISCOVERIES ON PRICES. 



silver of Mexico during the sixteenth and seventeenth centuries, 

 will show that the supposed analogy fails in the only important 

 point. The silver mines of Mexico had been at work for many 

 years before the discovery of the rich mines of Potosi in 1545, 

 and yet it was not until 1574 that the general level of prices 

 was sensibly raised in Europe. From 1574 prices steadily advanced 

 until about 1650, when they reached their maximum, at least for a 

 time, and remained stationary or nearly so for a century, at the end 

 of which time, or about 1750, another marked advance in prices took 

 place. The argument deduced from these facts, by those who assert 

 that the recent discoveries of gold cannot yet have produced a 

 sensible alteration in prices, is this, that if the extraordinary increase 

 of silver which followed the discovery and working of the Mexican 

 mines required a period of more than fifty years to produce a sensi- 

 ble effect on European prices generally, we may from analogy expect 

 that as long a time, or nearly as long a time, must elapse from the 

 opening of the California and Australia mines before any material 

 effect on prices from that cause can be expected. 



Mr. Sterling has examined very fully and exposed, I think very 

 ably, the fallacy of this reasoning. The analogy between the cases 

 is only apparent. The value of silver was lowered in 1574 and 

 1750, and at those epochs only, at least to any considerable extent, 

 because at those two epochs, and at those only, the cost of produc- 

 tion of silver was sensibly diminished. In 1574 a reduction in the 

 cost of production of silver wa3 effected by the introduction of the 

 principle of amalgamation in place of that of smelting the silver 

 ore, and by the facilities afforded for the adoption of the new method 

 (in which quicksilver is largely employed,) through the discovery of 

 the quicksilver mines of Huancavaleca. Again, in 1750, a still 

 further reduction of the cost of production of silver was caused by 

 the comparative cheapness and abundance of mercury from and after 

 that date. 



At both the epochs in question, therefore, the reduction of the 

 cost of production of the metal was followed by an immediate and a 

 permanent elevation of prices. And so it must be with gold. The 

 law in both cases is the same ; a reduction of the cost of production 

 of either must necessarily occasion (provided of course an indefinite 

 supply can be obtained at that cost) a permanent fall in its value 

 as compared with other commodities. But from the different condi- 

 tions under which the two metals are produced, the time required 

 for the development of the phenomena is materially altered. Silver 

 requires for its production the application of extensive capital and 



