Gold Rush: World Production in the 21st Century

Late last year, the Discovery Channel produced a new reality television series entitled Gold Rush.  The program followed a group of unemployed men from the Pacific northwest as they headed north to the Alaskan wilderness in an attempt to strike it rich.  Completely inexperienced, the so-called miners leveraged everything they owned to purchase, borrow, and hire the equipment needed to search for gold on a long abandoned claim.

By the end of the summer, at least one of the miners quit and the others were not much better off than when they began.  But the dream—the American dream—lived on: to work for something which has inherent value; to ultimately provide for oneself and one's family.

 

In its first season, the series became the most watched show in America on Friday evenings.  As a result, the Discovery Channel will film a second season.

Is this the start of a twenty-first century gold rush?  The television series Gold Rush makes it seem as though gold production in the United States has dried up, as if there is only enough gold to sustain the meager existence of only a lucky few.  As has been argued before, this is far from the case.  There is just enough gold produced at a given time.

2009 World Gold ProductionIn 2009, the United States produced 210 tonnes of gold, making it one of the world's biggest producers.  In fact, the US produced nearly as much gold as South Africa, whose proportion of world gold production has decreased dramatically since the 1970s.  Russia's productivity, relative to the rest of the world, has decreased dramatically as well.  Over the same time period, the productivity of the US as a proportion of total world production has jumped nearly 250%.  Former United States Gold Commissioner Lewis Lehrman, in a 1983 Washington Post article, observed that, "This is one reason why a common criticism of the gold standard — that it would most benefit South Africa and the Soviet Union — is wrong."

What do gold production rates have to do with the case for a gold-backed dollar?  In the same article, Mr. Lehrman contends that, "Gold is the optimum monetary standard because it exhibits, better than any commodity, a necessary virtue of money: total new gold production in any single year is only a minor fraction of the total supply of gold in existence — about 2 percent."  Because of the costs of gold production, total supply is both limited and stable.  A dollar backed by gold would have the same virtues.

At the outset of a new millennium, why move forward to a modernized gold standard?  Writing twenty-five years later at the time of the Great Recession, Mr. Lehrman convincingly reasons that, "...the plan would provide not just an American but a vast worldwide countercyclical 'stimulus package' — one not financed by yet more government debt — since when all other prices declined, the gold 'price' would stay constant, stimulating gold mining (in which America now rivals South Africa)."

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