Gold is our past and our future

The past century was akin to that fictional space/time described by Charles Dickens in A Tale of Two Cities. It was the best of times, it was the worst of times; it was a time of wisdom, it was a time of foolishness.

Golden times, let’s say, punctuated by troubling fiscal/monetary decisions.

In 1909, U.S. population was 90.5 million. Now it exceeds 300 million. Nevada’s 1909 population was some 80,000. Now it is about 2.5 million. The 1909 federal budget was less than $1 billion. Now it tops $3 trillion.

Congress approved a 1909 resolution calling for the 16th Amendment to the Constitution and sent it to states for ratification, which came in 1913. So the amendment authorizing income taxation began gestation when average annual income was $944.

Consider your annual income and income tax last year and you know you don’t need my comment on the 2009 state of affairs. Now consider the national debt. Don’t faint.

In 1909, W.E.B. DuBois and associates formed the National Association for the Advancement of Colored People. In 2009, such advancement means a man of color lives in the White House and wields presidential power.

In 1909, however, the Federal Reserve System didn’t exist. There had been no world wars, no Great Depression, no dot-com explosion or dot.con implosion, no Alan Greenspan housing bubble, nor any of the Ben Bernanke quantitative easing uneasiness.

From 1834-1934, gold officially was valued by the United States at $20.67 per ounce (lo, what fools these mortals be). This month it exceeded $1,200.

In 1909, Nevada’s George Wingfield had forsaken Goldfield for Reno (apparently to please his new wife) and the millionaire power broker proved prophetic regarding that mining camp town where he got rich. As his biography reports, he then told a colleague:

“As for what Mr. [Bernard] Baruch said to you about Goldfield being a place of electricity and opportunity, just remember one thing Chester—when I pull up my roots, the grass will grow in the streets.”

Ego aside, this captures the boom/bust nature of mining in Nevada or anywhere else it is feasible.

On the day this month when gold hit $1,200 an ounce, Nevada Mining Association president Tim Crowley pronounced the industry pleased. He added, though, that precious metals people take nothing for granted because prices fluctuate.

The Silver State, so called for the precious metal mined here, is mineral rich. Crowley said much mining focused on metals other than gold helps provide materials for the practical economy and so must await economic recovery to see flush times.

“We’re hopeful that the construction industry turns around,” he explained, to cite one example. He talked of Nevada’s copper for construction, molybdenum for steel, lithium for batteries, geothermal for energy.

Crowley also touted the industry’s economic and related underpinnings for Nevada, saying, for example, that $14,000 per employee goes from mining into state coffers annually.

So what’s the point? Actually a couple: 1) Long term (the next hundred years), Nevada mining will build on the state’s metals heritage; and 2) short term, the price of gold will prove a harbinger of the nation’s economy into the 20-teens.

Nevadans, some of whom don’t like the state’s mining, should look at metals extraction and related businesses as contributors rather than as predators in both good and bad economic times.

Meanwhile, gold is the ultimate fear/greed barometer in markets. If gold zooms significantly higher from here, that would signal central banker and congressional hubris is about to haunt them—and us.

Is it still the best and worst of times?