Sunday, May 25, 2008

The High Cost of Gold

One of more important Paultard campaigns this past year was their call to return to the gold standard. Oh sure, there were always a few would scoff and insist that Ron Paul wasn't really advocating for a "gold standard," but their clarification on the matter usually amounted to saying that "Monster Island isn't actually an island -- it's actually a Peninsula!" Well, maybe so, but it wasn't the "island" part that concerned me.

Now, we could go over the fact that the gold standard doesn't actually solve any of the problems that Paultards claim that it will, or the fact that the current system grants us with economic flexibility. Instead, I'm going to target one of Ron Paul's more naive claims, his insistence that "there will always be enough gold so long as no one interferes with the free market mechanism." Apparently, Ron Paul believes that the invisible hand can create gold from thin air, so long as the market is there to demand it, like villagers in "Black & White" who pray to the player for grain. Unfortunately, Ron Paul neglects one critical fact: Gold mining is expensive. Not just in raw dollars, but also in terms of the human and environmental toll.

The Paultards look at a hunk of gold, and all they see is a glittering rock. They don't really put much thought in how it got there, like a person who loves eating meat, but who doesn't want to know the conditions that the animal was raised in. A recent article from Spiegel online reports the some of following hard truths associated with their beloved metal:

  • Mining enough gold for just one wedding ring produces about 20 tons worth of waste.
  • There are no proper environmental standards, nor do miners consider the rights of local restaurants. For example, in Guatamala, mines have been set up in areas which the residents consider sacred.
  • Goldmines use an estimated 182,000 tons of cyanide a year, effectively destroying the land. Further, the toxic waste poisons the ground water and rivers, and in Indonesia, it is dumped directly into the Ocean. In fact, these substances are so toxic that we are still dealing with the effects of waste products left behind by the Ancient Roman Empire.
  • Mining operations tend to only employ a few people, and local residents rarely see the benefits to their economy.
Meanwhile, in Mozambique, the high price on gold has encouraged a hefty rise of slave labor, prostitution, and disease. Drinkable water is also becoming scarce as a result of pollution. The temperatures reach below freezing levels at night, causing workers to freeze to death. And all this for a few grams of gold dust, scattered throughout the Earth.

The problems in the gold industry combines two things that makes libertarianism what it is: A love for gold, and a hatred of regulation. The problem is bad enough right now, when gold is primarily used for the sake of technology and jewelry. But what happens if we increase the demand for gold even further, by forcing people to exchange in gold currencies for all transactions in general? Returning to the gold standard under a libertarian system would cause the price to skyrocket even further, causing people to harvest as much gold as possible for as little cost as possible, environmental and social concerns be damned.

This is also the main reason why Ron Paul's solution of returning to the gold standard to end the oil crisis doesn't work. He's not actually increasing the supply of oil at all, he's simply matching one hard to extract finite resource to another hard to extract finite resource, in the hopes that two wrongs can make a right. It's sort of like having a diet plan that hopes to bring a 500 pound man to average body mass, not by asking him to lose weight, but by forcing everyone else to become fatter.

7 comments:

Anonymous said...

Generosity compels me to assume that the author of this ignorant blog is very young - old enough to engage in name-calling and sarcasm, but too young to have actully had time to do any homework on the subject of the gold standard.

Money is valuable because it is scarce. This is why sand (and government paper) are bad money. To argue that gold is poor money because there is a limited supply of it is so silly that perhaps this blog is satire. To argue that government counterfeiting gives "us" economic "flexibility" is so silly that perhaps this blog is comedy.

The fact that gold is difficult to find and mine is exactly why it is good money. The best thing for the gold standard would be if no more were found.

Ron Paul is NOT advocating, as this ignorant blogger lies, that people be "forced" to use the gold standard. He is advocating that they be allowed to. He understands that the wisdom of thousands of years will then prevail and they will choose for their money something rare and valuable and will reject couterfeit government paper. Legal tender laws currently prevent this natural market choice.

His ignorance continues as he claims that if people went on a gold standard, the price of gold would skyrocket. The price?? On a gold standard, price is expressed as a unit of gold!! This snide fool has grown up thinking in terms of counterfeit paper and can't think outside that habit.

As for the problems of gold mining, our ignorant little author is spewing the standard Marxist line: employers are evil / workers are victims. However, the mining workers are all there because they choose to be there. But then, freedom of choice is never a value to Marxists, who know what's best for us all.

I recommend Ron Paul's book on the gold standard and his new book, Revolution (currently #1 on both Amazon and the New York Times best seller list) as well as any books by Murray Rothbard, especially The Mystery of Banking, which is a free PDF download. Also The Theory of Money and Credit by Ludwig Von Mises.

Also visit Mises.org and LewRockwell.com. Learn about the nature of money and the Federal Reserve. And ignore little fools whose only mental talent is snide insults and warmed-over government propaganda.

Ron Lawl said...

Anonymous, I'm not the one arguing with you. Reality is the one who's arguing with you. You claim that I'm too young to understand the economics, but history proves me right and it proves you wrong. The gold standard doesn't work in the long run, especially not in a modern economy, period. Your conclusion that gold makes a superior currency because it's ultra-scarce is like watching someone argue that solid steel makes a better packing material because it's really strong. It's not that we're "too young" to understand the fact that steel is stronger and more rigid than bubble wrap, it's that we disagree with the idea that stronger/more rigid is better for packing material. Just like we disagree that having a completely inflexible/rigid material for backing our currency will automatically lead to the best currency.

See, your problem is that you're one of those condescending Paultard jackasses who think that you can get something for nothing. You live in a delusional world where gold currency would be far more valuable than fiat currency, but where gold currency would be just as obtainable as fiat currency with the same amount of work, thus putting you ahead. It doesn't work like this, because your premise depends on scarcity, and yet you fail to apply that scarcity to your own personal bank account. What happens when we have a growing population, and an increase to resources? How do you pay interest and late fees on debt, essentially forced to pay back more money than what was in the system to begin with? Paultards will never answer these questions.

Do you know what happens when we have a great increase in population/production, but currency supplies are still stagnant? It was called the great depression. It happened worldwide. Read up on it sometime. The countries that remained on the gold standard were the countries that took the longest to recover.


Seriously, AnonymousCoward, do you have an actual logical argument somewhere, or some sort of empirical evidence? Or is your entire argument equivalent to saying "People believed in creationism for thousands of years, so obviously,, it's superior to the theory of evolution." Your insistence that I read Ron Paul's book is no better than telling me to read the bible. Simply clinging to an out-dated economic world view is not a valid argument. You haven't addressed ANY of the criticisms or critiques against it, other than to say "But gold is better!" You also haven't shown any actual advantages, except to say, "But gold is better!" In short, you're a complete ass, who doesn't know what the hell he's talking about.

Keep arguing for your "so completely rigid and inflexible that nothing could possibly go wrong!" economic policy, and then act surprised when no one takes you seriously. The problem isn't that I"m young, the problem is that you're a dinosaur who still cries blasphemy when people insist that the Earth is round and that the Earth goes round the sun.

Jack said...

"Ron Paul is NOT advocating, as this ignorant blogger lies, that people be "forced" to use the gold standard. He is advocating that they be allowed to. He understands that the wisdom of thousands of years will then prevail and they will choose for their money something rare and valuable and will reject couterfeit government paper. Legal tender laws currently prevent this natural market choice."

Actually silver has a longer historical basis as a medium of exchange as gold.

And another problem with using gold as a medium of exchange is that we'd be even more at the mercy of foreign influence. There would be no such thing as monetary policy, thus we'd be like Argentina or China Peg was to the US.

Heck, since China is predicted to become the top gold producer in the world, having a voluntary gold currency would be the US peg onto Chinese gold.

glen.h said...

Arrgh! For God's sake don't mention silver! Bimetalism as a standard was a fav for cranks ala Ron Paul back in the days of the gold standard- you might give the St Pauli Boys some ideas to drone on about!

MacPrince said...

Actually, AnonymousPaulTard, Ron Paul's waste of paper is currently at number 5 on the New York Times list, not #1. And Amazon? There it's not even above the top-10 fold. As of this writing (2008-05-27 1:30 PM Eastern), it's at #15 on Amazon.

Sometimes I think it would be fun to be that deluded and detatched from reality, but then I snap out of it and re-commit to living on this planet.

Lurker said...

So, is there a conflict of interest if Ron is pushing SO hard for a gold standard, when he has so many investments in gold and gold mining? I am looking at his 2006 Financial disclosure, and the following places are mining, or gold based operations that he has interest in.
Vista Gold Corp.
Newmont Corp.
Agnico Mines
Claude Reserves inc
IAM Gold Corp.
Pan American Silver (Ok, yea, thats just silver)
Great Basin Gold Ltd
Golden Cycle Gold corp
ISIN (Formally River Gold Mines Ltd.
Barrick Gold Corp
Virginia Mines
Goldcorp inc
Mettalline Mining Corp

Paul looks to have a monitory interest in gold being a slandered.

MNTX said...

In his book, Paul has said over and over that Gold should be allowed to compete with 'fiat currency', however, he is so ignorant, he forgot that it does. The Gold Bullion act that Reagan signed allowed for gold coins to be minted and would be legal tender. HOWEVER, the US Citizens have freely chosen not to go in masse to Gold. The extreme inflation of gold prices make it unstable as a currency, even more than fiat. Why would any first world country hedge its investments against a single commodity? No country has ever survived economically on a commodity based currency, ever. It is too risky to have your currency hedged on a single commodity that is far more vulnerable to market whims than a currency backed by the full faith and credit of a country.