The price of gold: as influential as a global power
The record price of gold and the universal obsession with the sparkling metal make it a parallel global power.
(Page 7 of 7)
"I think, within the next five years, the dollar will be relinked to gold," says Steve Forbes, publisher of the magazine that bears his family name. "In this imperfect world, gold is the thing that has the most stable, intrinsic value."Skip to next paragraph
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But going back to the gold standard, Mr. Forbes acknowledges, is a somewhat heretical notion. "You don't want to be seen as a kook, so it's still in the closet," he adds.
The gold standard acts like a financial straitjacket. It restricts a nation's economic flexibility by limiting regulation of the money supply. Keynes called it a "barbarous relic." Most modern economists agree.
In recent months, however, returning the dollar – the keystone currency of the global economy – to a gold standard has become a cause célèbre for tea partyers and others disaffected by American government. They envision gold as a harsh disciplinarian, a schoolmarm menacing the Federal Reserve with a paddle. Binding the currency to the rare metal, they argue, would curtail spending, restore fiscal responsibility, and ward off inflation.
In a gesture of support, legislators of more than a dozen states have pushed to make gold an alternative currency for a variety of transactions. In Utah, US-minted gold and silver coins became legal tender in May, though it's commonly understood that their market worth greatly outstrips their face value, which means no one will actually use them to buy anything. That seems almost fitting, since gold's value has always been more symbolic than tangible.
Though it's hard to picture gold as the future economic compass, the metal readily points to past lessons: When people lose faith in their fellows, they reinvest it in gold.
Back in California, Philip Mike Murphy was prepared for that new world order. Four weeks after the entrepreneur and former mine foreman from Tehachapi, Calif., brought to market his invention – the Mine-Tech Ultra Gold Processor, a dry washer that strains gold from dirt – he said he'd already sold two for $1,495 apiece and had at least a dozen potential customers lining up for more. Two of the battery-operated contraptions juddered and chugged beside his RV during the prospectors' outing, where he said five miners had approached him to buy. When asked why people like gold, Mr. Murphy paused. Then he said, "I don't know, to be honest.
"If I were around during the gold rush I'd probably be the storekeeper or the bar owner," he added. "Those guys made the money."