“The Gold Rush”
Ben Bernanke, former president of the Federal Reserve of the United States, was asked: “Is money gold?” And he replied: “No. It’s just a precious metal.”
Since I was a child, I used to wonder why there was so much interest in people for gold and why it’s something that is given so much value. I thought you could extract as much gold as you wanted, something like an infinite mine. Who gave that value to gold? It is a fact that gold has been used as a hallmark of luxury since many years before Christ, even in the Bible there are many references to gold, silver and other metals. Gold, as a chemical element is a metal considered soft, the most malleable of all (a little piece of gold as tiny as a box of matches can be crushed in such a way that it can cover an area of about 12 tennis courts together), it doesn’t get oxidized, it is durable and does not age either, it can be given very varied forms, it is one of the few showing that yellow color and as if that was not enough, it is relatively scarce. Despite all the gold seen in churches, domes and even hanging on the necks of rap singers, if all the gold in the world could be melted and built into a large and solid cube it would only be about 20 meters on each side.
Perhaps because of its beauty, religious value, ability to manufacture fine jewelry and its scarce reserve in the world (this is the most important), Gold has been used as a standard or reference for many years, first as a currency and then as the backing of those papers that we use to identify as money. In other words, everything still lies in the greed of men for that noble metal, because if there is no one willing to pay for it, humans would need another pattern or go back to the days of bartering, which was the first way of known exchange (but it was so difficult to exchange an egg for a camel), even salt was used by Romans as a currency and from them we inherited technical words like “salary”. It should be noted that other countries such as Mexico and non-communist China adopted the silver standard (which did not last either) and even what was called the double standard (gold and silver) existed. Although everybody knows that diamonds are highly expensive everywhere, few people know that their value are fictitious if they are compared with what we call precious metals, a diamond is just a carbon in one of the most stable forms known, just like graphite, believe it or not they are not that rare, there are too many diamonds in the world and they can be created in laboratories. The company (monopoly) “De Beers” controls the value of all the world’s diamonds at their will. There is a misconception that diamonds are a good investment; while gold and silver are commodities that can hold value in times of inflation, diamonds will not. In the blink of an eye any “expensive” diamond could be worth less than any fancy moonlight … So we better keep talking about the one and only, gold.
In August 15, 1971 occurred the Nixon Shock, the United States was at war with Vietnam and the country had “printed” a lot of “money” compared to the gold reserves in order to support the war, the nation was virtually at risk, therefore president Richard Nixon decided to cancel temporarily the Bretton Woods Agreement and finishing the gold standard era. Nevertheless this action called the Nixon Shock is considered to be a political success. Prior to the Nixon Shock there were a lot of countries buying gold from the United States reserves like General Charles de Gaulle, who brought several vessels from the French army to “buy” twelve tons of gold back in 1965, seconded by others. There were other actions taken on that Sunday with the Nixon Shock but since that they American dollars stopped being “money gold” and became “fiduciary money” that is money without an intrinsic value, people have to believe in that paper with numbers. Of course, the US dollar continued to be the preferred currency of exchange throughout the world. Eventually the gold was replaced in some way by oil, creating the term “petrodollar“. Still nowadays the American dollars is used on more than 67% of all monetary transactions around the world.
Between the years 1980 and the mid 1990s a very shameless event occurred in Cuba, performed by Satan’s teachers, the Castro brothers. They “found” their golden reef in innocence and the necessities for their new “Indians”, first skimming the Cubans who fled after the Cuban disgrace that started on the first day of 1959. The Brian’s filibusters created the infamous “Casas del Oro y la Plata”, not even the devil himself would’ve ever imagined that sinister invention. Using methods only seen before during the Third Reich with the Jews, Castro took away all the valuable properties still held by the Cuban people and exchanged them for a false currency that they called “dollars”. At that time Cubans had a strong censure against the American currency that could lead you straight to the Castro’s dungeons. Forced by the new chaos created by the regime, Cuba became the scenario of several crimes and we can tell real horror stories regarding that black era for the Cuban people that never knew what occurred to that gold stolen from them. But the only fact in this case is that it was shared and kept by the Castro brothers and their relatives as shining passports to escape out of the country.
This post is not made to talk about politics nor to bias people in favor or against any party or country. However, as a Cuban I must let the world know about the crimes committed by Communism and the above is just another action against the people in Cuba performed by the regime.
Until now we have seen that gold has been used since ancient times by humanity as a method of change and/or reference for the exchange of goods and services, especially at the governmental level which can give power to its economy and strength to its currency. Especially in times of war, gold is the most trusted currency. The gold standard limits the circulation of foreign currency in accordance with this pattern and allows national and international exchange based on that reference. The world is managed using the US dollar as currency. A dollar today hardly buys ninety-five percent less gold than the same dollar 50 years ago. That is the explanation for our grandparents who are unaware of economic issues and often say “back in my day, with one dollar you could acquire an undetermined number of items.” Well, grandpa, it’s precisely because that money then used to be solid gold.
The gold rush is a global fact and is the way that the many migrations in search of that precious metal are called. Although this was mainly denominated to the social fact where many men were attracted to California in 1848 for Marketing without equal for the time. Yes indeed, pure Marketing, it turns out that a general found some nuggets of gold and while thinking about keeping the secret hidden for him and his people, he told it to who he should not, a journalist named Samuel Brannan who did not even shrink, he set up a supply store and he opened many more later, anticipating the arrival of the people. Imagine what he did afterwards, shouted as much as he could about the discovery of the gold, until it reached the New York Press and much more when president James Polk made the discovery official. Thousands of people participated in the search for gold, were they founded towns and… Guess who took the biggest slice of that cake?! Bingo! Samuel Brannan! He became a millionaire without taking even a single nugget of gold and afterwards he passed away in extreme poverty due to a divorce that took what he had and much more… A good story for those that think that millions are hard to spend. Gold is still extracted from mines and in recent years some 58,000 tons of gold have been extracted from mines around the world and added to the world’s coffers, so gold also falls and rises like any product in the market.
Regarding the value of gold as a currency, I would only add the comment of Allan Meltzer, an American economist, in relation to Gold and it’s support of the currency “We do not use the gold standard, not because we do not know it but because we know it.”