Originally posted on Tuesday, November 26th, 2013
The Department of the Interior’s U.S. Geological Survey offers a free booklet on gold, entitled Gold, by Harold Kirkemo, William L. Newman, and Roger P. Ashley. It’s slightly dated but a fascinating trove of … nuggets … of art, science and history.
Some excerpts:
Gold was among the first metals to be mined
because it commonly occurs in its native form, that is,
not combined with other elements, because it is beautiful
and imperishable, and because exquisite objects
can be made from it. Artisans of ancient civilizations
used gold lavishly in decorating tombs and temples,
and gold objects made more than 5,000 years ago
have been found in Egypt.
Nations of the world today use gold as a medium of
exchange in monetary transactions. A large part of the
gold stocks of the United States is stored in the vault
of the Fort Knox Bullion Depository. The Depository,
located about 30 miles southwest of Louisville, Kentucky,
is under the supervision of the Director of the
Mint.
Gold in the Depository consists of bars about the
size of ordinary building bricks (7 x 3.6 x 1.75 inches)
that weigh about 27.5 pounds each (about 400
troy ounces; 1 troy ounce equals about 1.1 avoirdupois
ounces). They are stored without wrappings in
the vault compartments.
Gold is called a “noble” metal (an alchemistic term)
because it does not oxidize under ordinary conditions.
Its chemical symbol Au is derived from the Latin
word “aurum.” In pure form gold has a metallic luster
and is sun yellow, but mixtures of other metals, such
as silver, copper, nickel, platinum, palladium, tellurium,
and iron, with gold create various color hues
ranging from silver-white to green and orange-red.
The basic unit of weight used in dealing with gold
is the troy ounce. One troy ounce is equivalent to 20
troy pennyweights. In the jewelry industry, the common
unit of measure is the pennyweight (dwt.) which
is equivalent to 1.555 grams.
Lode deposits are the targets for the “hardrock”
prospector seeking gold at the site of its deposition
from mineralizing solutions. Geologists have proposed
various hypotheses to explain the source of
solutions from which mineral constituents are precipitated
in lode deposits.
One widely accepted hypothesis proposes that many
gold deposits, especially those found in volcanic and
sedimentary rocks, formed from circulating ground
waters driven by heat from bodies of magma (molten
rock) intruded into the Earth’s crust within about 2 to
5 miles of the surface. Active geothermal systems,
which are exploited in parts of the United States for
natural hot water and steam, provide a modern analog
for these gold-depositing systems. Most of the water
in geothermal systems originates as rainfall, which
moves downward through fractures and permeable
beds in cooler parts of the crust and is drawn laterally
into areas heated by magma, where it is driven
upward through fractures. As the water is heated, it
dissolves metals from the surrounding rocks. When
the heated waters reach cooler rocks at shallower
depths, metallic minerals precipitate to form veins or
blanket-like ore bodies.
Another hypothesis suggests that gold-bearing
solutions may be expelled from magma as it cools,
precipitating ore materials as they move into cooler
surrounding rocks. This hypothesis is applied particularly
to gold deposits located in or near masses of
granitic rock, which represent solidified magma.
A third hypothesis is applied mainly to gold-bearing
veins in metamorphic rocks that occur in mountain
belts at continental margins. In the mountain-building
process, sedimentary and volcanic rocks may be
deeply buried or thrust under the edge of the continent,
where they are subjected to high temperatures
and pressures resulting in chemical reactions that
change the rocks to new mineral assemblages
(metamorphism). This hypothesis suggests that water
is expelled from the rocks and migrates upward,
precipitating ore materials as pressures and temperatures
decease. The ore metals are thought to originate
from the rocks undergoing active metamorphism.
Gold: “beautiful and imperishable, and because exquisite objects can be made from it.” When people ask why currency should be defined in gold as opposed to through the use of some abstract algorithm, a “basked of commodities,” or some other concoction … do not underestimate the value of these “elemental” qualities. As Jerry Bowyer recently observed, in Forbes.com,
I’m beginning to wonder if one could ever really have the moral force in the political arena around an equation like the Taylor Rule, which is an admirable equation, that one could have over something that’s got basically over 4000 years of recorded history behind it, which is a reliance on gold. I’ve come to see the gold standard as maybe the only real hope we’d have of getting some kind of price stability, given the fact that it’s so easy to manipulate theories and to manipulate equations, but it’s not easy to manipulate the supply of gold.
Or as Keynes wrote, in 1922:
[O]ne of the most subtle temptations to improvident national finance would be removed; for if a national currency had once been stabilized on gold basis, it would be harder (because so much more openly disgraceful) for a Finance Minister so to act as to destroy this gold basis.
And as Lewis E. Lehrman, founder and chairman of the Lehrman Institute, wrote in Bubbles for the Rich, Welfare for the Poor in the November 2013 issue of The American Spectator:
Such a system of hard currency—or of paper
money convertible to a defined weight
of precious metal—had prevailed against
all competitors for almost two millennia
among both primitive and modern trading
communities. It is easy to see why. Intuitively,
virtually anyone can perceive the value
of a weight unit of money, the measurable
amounts of labor, capital, and natural resources
resting behind it, and the comparative
value of one’s own real labor, capital,
and resources that one must expend in exchange
for it. The accuracy of these perceptions
were validated in the only reliable laboratory
of economic research available to us:
namely, the evidence of economic history.
The gold standard has been validated in “the reliable laboratory of economic research available to us: namely, the evidence of economic history.”
Why gold?
Why, indeed, not?
The burden of proof lies with the opponents of the tried and true gold standard.
Recent Comments