Why it's time for the gold bubble to pop

You're stranded on a desert island. You have no way of knowing whether you are alone or near other humans. All you know is that you have just arrived on a beach, there are no other humans visible and your ship has sunk. You see two boxes floating offshore and realize that you can only rescue one while the other will be swept out to sea. One of the boxes is the purser's strongbox. You happen to know that it contains a significant quantity of gold coins destined for a dealer in New York, as well as the gold jewelry of several wealthy passengers. The other box is a military survival kit containing tools and non-perishable food. Which box do you save?
Unless your brains have been turned to soup by cable news and failed economists, you save the survival kit because it has objective rather than subjective value related to the preservation of your life.

Let’s face it. Gold has limited uses in industry, but most of its value is based upon its use in ornaments and as a basis for currency. So the value of gold is virtually 100% based on emotion. Gold marketers have pushed it as a “standard” for currency even though there is no objective justification for its use. How could this have occurred?

The acceptance of gold as a unit of exchange is shrouded in history, but its not hard to discern the origin based upon the geological and chemical properties of the substance.

Gold is pretty. It a substance that looks like something people want to have.

Gold can be found in a virtually pure state. The fact that people could find pieces of this attractive substance in easily accessible forms led people to first, value the substance and second, to look for it using more and more sophisticated means. This meant that cultures began to invest in the acquisition of gold as a societal good.

Gold is useless for utilitarian purposes. It’s too soft to make good tools or weapons. This meant that gold would be used primarily as an ornamental or luxury product, leading to its use as a medium of trade between cultures and eventually as a formal coinage.

Gold is easy to work. The very physical properties that make gold useless for tools and weapons make it ideal for making ornamental objects. It’s low melting point made it easy for cultures to cast multiple copies of the same item, thus making the concept of coinage based upon standardized products of identical weight possible.

The purity of gold is easy to validate with low-tech tools. All educated people know how Archimedes was able to determine the purity of a gold crown based on the weight of the crown related to the amount of water it displaced. Gold dealers eventually developed a standardized system of comparing the colors marks left by gold rubbed on a rough black surface to determine purity of a piece of jewelry.

So we have a pretty substance useless for anything except ornaments and trade which is easy to work and whose purity is easy to determine. That is what made gold a standard for exchange.
So what has changed today?

Gold is still a pretty substance that is easy to work and whose purity is easy to determine. There are a few industrial uses for gold, including as a coating for high-end electronic components, but the industrial uses are very limited and there is more than enough gold in the system to fulfill those needs for centuries to come. So why does gold still have this mystique as something with “actual” value in excess of currency backed by national governments? The answer comes in two words – tradition and marketing.

Many cultures have a tradition of gold being “portable wealth” that can be used anywhere, so gold should be horded as a safety net for future disaster. This was primarily a cultural value among those tribes whose history included a tradition of conquest and diaspora. These tribes wanted to believe that if the knock on the door came at night, they could run away carrying the wealth necessary to start over in a new nation. In most of the world today, this makes absolutely no sense, but it’s a tradition. This tradition has made its way into the survivalist culture even though they know that a case of bullets, whiskey, or crop seeds are worth many times their weight in gold. They also have created a mythic “gold standard” as a part of their disdain for government, even though they depend on products and services made possible by government every day of their lives.

So what’s the problem with that?

Gold mining is among the most polluting industries in the world. According to Worldwatch Magazine, "Moving Glaciers to Mine Gold?", Payal Sampat, September/October 2005, 79 tons of mine wastes is produced for ounce of gold extracted and refined. A search through the Internet for court cases and health reports involving gold mining will show that mercury and cyanide are two substances often produced in significant quantities as byproducts of mining and refining operations. For a substance whose primary use is in feeding the vanity of the rich and lining the pockets of speculators, this is an industry overdue for termination with extreme prejudice.

What can we do?

There are two fronts in this war. One is economic. Stop buying gold. Stop supporting the trade. Write articles about the fraud of gold valuation. The other is regulatory. Repeal the General Mining Act of 1872. This act allows (mostly foreign) companies to enter Federal lands and mine for substances of economic value while paying a pittance to the government, which is left with despoiled land costing far more to clean up than was originally received in royalties. Western senators have blocked this repeal for decades. It’s time to close this unfortunate chapter in our history and put our national interests first. We should also move to hold companies accountable for acting in a responsible manner. Companies with multiple violations should be faced with a “corporate death penalty” where the company is seized by the government and its assets auctioned off to pay for the crimes committed while the executive go to prison and the stockholders are left with nothing.

The myth of gold and the corruption of societies and governments in its service have caused untold harm to hundreds of millions of people and degradation of the environment in service to this fraud. It’s time to put a stop to this and for humanity to grow up. The era of measuring value by pretty toys is over. Clean air, clean water, and honest government are worth far more than any amount of pretty pieces of metal, where every ounce drips with blood.

(c) Copyright 2009 by L.D. Tagrin
All rights reserved

Ecology - The Science of Life

Welcome to the blog Ecology Contains Everything. I chose this title because Ecology, to me, includes everything that deals with living things. Ecology is the science which studies living organisms and their relationships within the context of their environment. Note the final phrase of the preceding sentence. Context is everything. Ecology isn't as interested in how bacteria perform on the petri dish as it is how they perform in their native habitat - whether that habitat is a rotting log or the human body.

My postings will cover a broad field of human activity and how they make an impact on other humans and the rest of life on this planet. I hope that they will engender discussions focused on reality an highlight the implications of our actions as they interact with others.

Larry