by Edmond J Bugos
Gold "gets dug out of the ground in Africa, or someplace. Then we melt it
down, dig another hole, bury it again and pay people to stand around
guarding it. It has no utility. Anyone watching from Mars would be
scratching their head" - by a well known investor
Why humans would guard something that has no utility must have escaped
notice there.
I'd like to know what kind of society the Martians in this allegory had.
I mean, under what system of social cooperation were they able to arrive
at the far superior technology required to observe humans from way off in
the distance? Do the individual members exchange ideas, or goods? If
not, how were they able to economize on scarce resources in order to
produce their technology, or is there no such thing as scarcity in outer
space? What motivates them to act? Are they centrally organized like a
simple ant colony or collectively motivated like the coercive Borg in Star
Trek, or is their division of labor organized by a complex but voluntary
system of the free exchange of property titles, which here on earth forms
the basis of civilized societies?
If not, I wonder then why "anyone watching from Mars" would not also
scratch their head about paying someone to guard this hoard, let alone of
the concept of utility, especially to an "individual"? In fact, if such a
system were so unfamiliar, what sense could a Martian make of any human
action? Maybe the philosophy of exchange is not foreign to this
observer.
If that were true, neither could a common medium be all that foreign. In
fact, if our Martian observer knew anything of our history or of such a
system of cooperation, the reasons for the puzzling activity would be no
less clear to him than to any informed economist right here on earth.
Corruption.
But let's fast-forward the economic mumbo jumbo and cut straight to the
chase. Since we're in outer space already, amongst superior beings, we
may be forgiven for our excursion into a little fantasy.
Imagine that we had the technological capability to travel through time,
and you signed up for an expedition that would catapult you, say, 5,000
years into the future, what would you choose as money to bring with you...
assuming that you were only allowed to choose one of the following
prospects? Keep in mind that your decision could mean the difference
between life and death!
1. Gold
2. Silver
3. Brazilian seashell necklaces
4. As much top grade Light Crude (Oil) as you can carry
5. Salt
6. Cigarettes
7. Dutch tulips
8. Cattle (or a lamb?)
9. A bottle of 5,012 year old scotch
10. Federal Reserve Note (US dollars)
11. Euros
12. Government bonds / bills d'etat
13. Chinese Remnibi
14. 1923 German Reichesmark
15. Microsoft or Apple shares, or other kind of claim on asset
I know your answer.
You already know what the Martians apparently don't. Aside from a few
drunks and jailbirds debating the merits between the scotch and smokes,
I'd bet that most 'humans' probably picked gold or silver.
The value of gold as the medium of exchange is a topic in itself but we
don't have to go there today - we don't have to know why humans have
preferred it to other goods to know that it has outlasted any of them.
What other commodity, or currency, has survived as money for any similar
length of time?
What has held its purchasing power better? Many of those above have been
money at different times and different places, but scarcely any of them
has been money as long as gold. Gold is one of the oldest, and it is
still accepted where it isn't restricted by a state protected legal tender
monopoly.
It was first coined at least 2500 years ago; it adorned Egyptian kings as
far back as 4500 years ago; yet suddenly, in only the last three decades,
it has apparently lost all of its utility, as if history vanished, and
barbarism with it... as if empire and dominion, conquest and plunder, or
any of those activities usually associated with the history of gold no
longer exist. Indeed, for our Martian observer to be scratching his head
over this implies that he must have only begun his observation in the last
thirty years, and is totally ignorant about the 4500 years of human
history before 1975. I'd say that's out of line with most Alien accounts,
especially since widespread sightings of UFO's date long before 1975.
Gold has a monetary value, which can only mean something that is
attributed by a market.
The state can say something is money but the concept of value being
attached to something implies the market has a say. Allow me to contend
that what this Martian observer puzzles over as a waste of resources is
not the "utility" of the metal, or the question of why we bother mining
it. If he only started with this utility as a given, implied by the act
of guarding it, and wrote it off to some human affinity or other, what
would really puzzle him is the same thing that should puzzle you: that the
state would go to so great an expense to withhold such a desired thing
from freely circulating. Indeed, the costs do not end with the
remuneration of the security guards at Fort Knox, or wherever. They only
start there.
Truth may not need the support of government, but fiat and fractional
reserve bank notes do.
It takes additional resources to force individuals to accept something as
money which isn't by choice; and if the integrity of this money is subject
to the inflationary whims of a fractional reserve banking cartel, the
costs can quickly pile up. Genuine savings are depleted, debased or
frittered away... the control over the means of production compromised,
inefficiencies burgeon, inhibiting progress and technological innovation,
and instability reigns. Moreover, the policy undermines both the moral
fabric of society and its adhesive force: the division of labor. Why
would humans, as an observer who was not foreign to human history might
astutely question, allow such self-defeating and costly institutions?
This, at least, is what puzzles me.
The answer is ignorance... induced by a misinformation campaign that is
costly in itself.
The value of a sound money is that it prevents planners from
redistributing the wealth and savings of the productive classes to the
political classes in order to finance expensive unproductive agendas - or
from depleting the savings of fixed income earners, or the wages of the
poor... as Greenspan wrote many years before becoming a central banker:
"In the absence of the gold standard, there is no way to protect savings
from confiscation through inflation" (published by Ayn Rand in 1966).
Alas, the Martian observer can no longer be confused about either the
utility of this metal or the reason that it is being guarded (rather than
allowed to circulate). Its absence from circulation has been answered: it
is part of a scheme to raid the savings of productive classes.
The utility of this metal should thus be clear: it restricts the coercive
elements of society and protects savings; it is but an instrument of the
sound money principle... and it is interchangeable with the idea of
freedom.
There is no way to understand the utility of gold - or to make sense of
the entire activity described in the quote - if one does not grasp
history, or these ideas.
Comedian Jerry Seinfeld, who specializes in irony, perhaps reveals the
fallacy best when lamenting that if Martians were watching (human) dog
owners follow their pets around with a doggy bag, they'd probably think
that the dogs were in charge. Just what you need... another head
scratcher.
