Jon de Vos: The root of all value
December 29, 2011
Odd for a politician, Ron Paul puts his money where his mouth is.
The ultra-libertarian invests 64 percent of his money in gold and silver stock. He’s banking that the economy will crumble and people will rush to buy gold, the ultimate refuge of value.
In 1971, Richard Nixon took America off the gold standard, replacing it with a fiat currency. This simply means that when the government needs more money, it just prints it. Governments with fiat currencies are more warlike, attacking without being attacked, because they don’t pay for their wars. Vietnam, Iraq and Afghanistan are examples of wars kept off the books and financed by simply printing more money.
According to a study of 775 fiat currencies by DollarDaze.org, no fiat currency has succeeded in holding its value. Twenty percent failed through hyperinflation, 21 percent were destroyed by war, 12 percent were destroyed by independence, 24 percent were monetarily reformed, and 23 percent are approaching one of the former outcomes.
Dreams of gold are as old as man. Because it is malleable, because it is ductile, because it does not tarnish, because it is hard to get, gold has always been the ultimate, universal medium of exchange, amassed by Popes and pirates alike. Gold is so malleable that a one-ounce cube measuring slightly less than one-half inch on a side, can be rolled into a single leaf that is 12 feet long and 15 feet wide.
A medieval religion called alchemy grew from the desire for gold. Alchemy searched for answers to three questions: 1) how to turn lesser metals into gold, 2) a universal cure for disease, and 3) how to achieve eternal life. Heady questions, indeed. Fifteen hundred years later and we can’t even agree on comprehensive health care.
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Zosimos of Panopolis, an Egyptian alchemist in 300 AD, laboriously described the process of changing the base metals into gold, through a chemical, color-changing sequence of baths, involving black, white, yellow, purple, and then on to gold. Zosimos later describes refining the process into an elixir that would instantly transmute iron into gold. This elixir became known as the “philosopher’s stone.”
It’s been estimated that all the gold ever mined, about 125,000 tons, would make a cube about 60 feet on a side. Ninety percent of that was mined since 1848, the California gold rush. The largest producer in the world is South Africa, where huge gold reefs lie within the Witwatersrand Basin. Forty percent of all the gold ever produced came from these reefs.
The first wave of gold production came after Columbus led the way for the looting of Indian palaces, temples and graves in Central and South America. Spaniards converted the New World inhabitants into Catholics before clapping them into irons and working them to death in the gold mines. From 1490 to 1600 Spain extracted 225,000 kilograms of gold, so much that it unbalanced the economic structure of Europe. In the 18th century, 1,350,000 kilograms were mined in South America, mostly from slave-labor mines in Columbia.
Pure gold is too soft to allow prolonged handling, so gold is alloyed with other metals to increase its hardness. Most gold used in jewelry is alloyed with silver, copper, and zinc. Gold alloyed with more than 70 percent silver is called white gold. The content of gold alloys is expressed in 24ths, called karats. A 12 karat gold alloy is 50 percent gold, and 24 karat gold is pure.
Somewhere along the last 1,500 years man lost the recipe for the philosopher’s stone, and today iron remains iron and gold remains the same alluring element men have coveted since the dawn of time.
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