Posts Tagged ‘gold’
“Financial crises are like fireworks: they illuminate the sky even as they go pop”*…
The unpredictable outbreak of the COVID pandemic caught the whole world off guard and brought strong economies to their knees. Has an exogenous shock ever blindsided markets like this before? As Jamie Catherwood explains, of course it has…
On the morning of April 18, 1906, at 5:13 AM, an earthquake registering 8.3 on the Richter scale tore through San Francisco. The earthquake itself only lasted 45-60 seconds, but was followed by massive fires that blazed for four days and nights, destroying entire sections of the city, Making matters worse, the earthquake ruptured the city’s water pipes, leaving firefighters helpless in fighting the flames.
Eventually, the earthquake and ensuing inferno destroyed 490 city blocks, some 25,000 buildings, forced 55–73% of the city’s population into homelessness, and killed almost 3,000 people. In a matter of days, the Pacific West trading hub looked like a war-torn European city in World War II.
The unpredictable nature of San Francisco’s earthquake made it all the more damaging, and had a domino effect in seemingly unrelated areas of the economy…
The stock market fell immediately in the aftermath of the disaster; but more damagingly, British insurers (who covered much of San Francisco) had to ship mountains of gold to the U.S. to cover claims… which led the Bank of England to raise interest rates… which raised them around the world… which squelched speculative stock trading… which led to the collapse of a major Investment Trust (a then-prevalent form of “shadow bank”)…
The fascinating– and cautionary– story of The Panic of 1907, from @InvestorAmnesia.
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As we prioritize preparedness, we might recall that it was on this date in 1933, in the depth on the Depression, that Franklin D. Roosevelt delivered his first inaugural address. Although the speech was short on specifics, Roosevelt identified two immediate objectives: getting people back to work and “strict supervision of all banking and credits and investments.”
The next day, cabinet members joined with Treasury and Federal Reserve officials to lay the groundwork for a national bank holiday, and at 1:00 a.m. on Monday, March 6, President Roosevelt issued a proclamation ordering the suspension of all banking transactions, effective immediately. The nationwide bank holiday was to extend through Thursday, March 9, at which time Congress would convene in extraordinary session to consider emergency legislation aimed at restoring public confidence in the financial system.
It was a last-ditch effort: in the three years leading up to it thousands of banks had failed. But a new round of problems that began in early 1933 placed a severe strain (largely, foreign and domestic holders of US currency rapidly losing faith in paper money and redeeming dollars at an alarming rate) on New York banks, many of which held balances for banks in other parts of the country.
The crisis began to subside on March 9, when Congress passed the Emergency Banking Act. On March 13, only four days after the emergency legislation went into effect, member banks in Federal Reserve cities received permission to reopen. By March 15, banks controlling 90 percent of the country’s banking resources had resumed operations and deposits far exceeded withdrawals. Although some 4,000 banks would remain closed forever and full economic recovery was still years in the future, the worst of the banking crisis seemed to be over.
“O Gold! I still prefer thee unto paper”*…
The once-fringe fantasy of a return to the gold standard is creeping back into the mainstream.
It has long been dismissed as a fool’s errand, on par with abandoning the Federal Reserve and other trappings of the modern economy. Mainstream economists deride it almost without exception. Reintroducing the gold standard would “be a disaster for any large advanced economy,” says the University of Chicago’s Anil Kashyap, who connects enthusiasm for it with “macroeconomic illiteracy.” His colleague, Nobel laureate Richard Thaler, struggles with its very underlying principle: “Why tie to gold? Why not 1982 Bordeaux?”
Yet the idea that every US dollar should be backed by a small amount of actual gold is more popular than economists’ opinions might suggest. Advocates include members of Congress and president Donald Trump. Enthusiasm for a return to the gold standard has become more prominent since Trump’s most recent nominees to fill the vacant Federal Reserve governorship have endorsed a return. The first two—Herman Cain and Stephen Moore—both dropped out of consideration, but the third, economist Judy Shelton, announced… in a Trump tweet, may be the most ardent in her support…
What exactly is the gold standard, and what would it mean if it were re-established? Timely questions: “The quiet campaign to reinstate the gold standard is getting louder.”
* Lord Byron
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As we ponder the pecuniary, we might recall that it was on this date in 1795 that James Swan (who had financed privateers during the Revolutionary War, and used some of his proceeds to support the Continental Army) refinanced the national debt of the United States– $2,024,899 in obligations to the French government– by assuming them personally, at a higher interest rate; he then sold them off to private investors in the U.S. and Europe.
Gilbert Stuart’s portrait of Swan, 1795
“The darkest thing about Africa has always been our ignorance of it”*…
Aristotle held that philosophising begins with wonder. The African philosopher Jonathan Chimakonam suggested that, while wonder might have instigated Western philosophy, it was frustration that spurred African philosophy, with the emergence of radically Afrocentric nationalist philosophers such as Léopold Sédar Senghor, Aimé Césaire and Kwame Nkrumah who saw in philosophy an ideological weapon for attacking those who sought to denigrate and subjugate Africans culturally and politically. What is needed now is a 21st-century African synthesis that can help to resolve this struggle. ‘Consolation philosophy’ – spurred by both wonder and frustration – attempts to do just that.
The idea of ‘consolation’ philosophy does not imply an attempt to comfort philosophers. Rather, it suggests a philosophy of life, a project similar to the human-centred philosophical projects of Western existentialists such as Martin Heidegger, Jean-Paul Sartre, Friedrich Nietzsche, Gabriel Marcel, Søren Kierkegaard, Miguel de Unamuno, Emmanuel Levinas and German idealists such as Arthur Schopenhauer. Here I offer a brief presentation of this African philosophical synthesis, which I hope will help to resolve the dilemma eloquently put forward in 1997 by professor of philosophy at Penn State University Robert Bernasconi: ‘Either African philosophy is so similar to Western philosophy that it makes no distinctive contribution and effectively disappears; or it is so different that its credentials to be genuine philosophy will always be in doubt.’…
“Consolation philosophy” understands the human being as a unity of feeling and reason, in a cosmos rich with primal emotion. The provocative– and timely– essay in full at “A truly African philosophy.”
See also “Philosophy is the new battleground in South Africa’s fight against colonialism.”
[Image above: source]
* Geographer George Kimble
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As we take our wisdom where we find it, we might recall that it was on this date in 1899 that the Boer regime in (what we now call) South Africa issued an ultimatum to the British government, declaring that a state of war would exist between Britain and the two Boer republics if the British did not remove their troops from along the border.
The British had challenged the Dutch settlers for a variety of reasons, probably main among them for control of the gold deposits in the region. It was the largest gold-mining complex in the world at a time when the world’s monetary systems, preeminently the British, were increasingly dependent upon gold.
The British ignored the ultimatum, and what we now call the Boer War (actually the second Boer War, as there has been an earlier skirmish) broke out. The two colonialists slugged it out until 1902, when the British took control.
Boer and British troops at the battle of Belmont, Nov. 23, 1899
“If gold rusts, what then can iron do?”*…
Austrian designer Klemens Schillinger has created a series of rings that are sized to show the fluctuating price of gold over the past five decades.
Assay the results here and here.
* Geoffrey Chaucer, The Canterbury Tales
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As we think twice about all that glitters, we might recall that it was on this date in 1924– four days before the publication of André Breton’s first Surrealist Manifesto— that The Bureau of Surrealist Research, AKA the Centrale Surréaliste or “Bureau of Surrealist Enquiries,” opened in Paris under the direction of Antonin Artaud. Located at 15 Rue de Grenelle, it was home to a loosely affiliated group of Surrealist writers and artists met, held discussions, and conducted interviews in order to “gather all the information possible related to forms that might express the unconscious activity of the mind.”
Bureau member Man Ray’s photograph of attendees at a 1924 Bureau meeting
(Not so) Solid Gold…
During World War II, Hitler banned the export of gold from Germany. But gold, valuable in small amounts and not easily traced, is notoriously difficult to regulate. (Indeed, that is likely where much of its value derives.) Hitler’s edict was, frustratingly to him, mostly unenforceable.
One exception? Nobel Prize medals.
Before 1980, the medals given by Sweden (that’s to say, all but the Nobel Peace Prize , which is awarded by Norway) were made of 600 grams of 23-karat gold — thus subject to Hitler’s export ban. And as the recipient’s name was engraved on the back of the medal, its ownership was all-too-clear. This proved particularly perilous for two German physics laureates, Max von Laue (winner, 1914) and James Franck (1925). At the outset of World War II, they had entrusted the Bohr Institute, in Copenhagen, Denmark (the research institution of fellow physics laureate Neils Bohr) with the safe keeping of their medals, assuming that Nazi soldiers would otherwise confiscate their prizes. But when Nazi troops invaded Denmark, they also raided the Institute. Had von Laue’s and Franck’s medals been discovered, the consequences for the learned duo would most likely have been dire.
Enter Hungarian chemist George de Hevesy, a future Nobel Laureate himself (in Chemistry). He, Jewish, had gone to the Institute looking for — and temporarily at least, finding — safe haven from the Nazis. He and Bohr decided that more standard ways of hiding the medals (e.g. burying them) would not suffice, as the risk of harm to von Laue and Franck was too great to chance the medal’s discovery. The chemist de Hevesy took more drastic action. He created a solution of aqua regia — a concoction consisting typically one part nitric acid to three parts hydrochloric acid, which is so named because it can dissolve two of the “royal” metals, gold and platinum. (Wikipedia explains how, for those with a sizable understanding of chemistry.) He then left the gold-bearing aqua regia solution on his laboratory shelf within the Institute, hidden in plain sight as Nazi stormtroopers ransacked the Institute.
The plan worked, and von Laue and Franck were safe — as were their awards. The gold remained safely on that shelf, suspended in aqua regia, for the remainder of the war, unnoticed by the German soldiers. When the war ended, de Hevesy precipitated the gold out of the solution, and the Nobel committee recast the medals.
Bonus fact: Throughout human history (through 2009, at least), mankind has successfully mined roughly 165,000 metric tons of gold. At gold’s density, that comes out to about 300,000 cubic feet — a relatively tiny-sized amount. For comparison’s sake, all the gold ever mined could be contained by the New York Public Library’s Rose Reading Room (seen here), which has a volume of approximately 1.2 million cubic feet.
From the always-illuminating Now I Know.
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As we remark that sometimes even things that don’t shine are gold, we might send elemental birthday greetings to Morris William Travers; he was born on this date in 1872. As the laboratory partner of Sir William Ramsay (who later won a Nobel Prize for the work), Travers participated in the discovery of the “noble gases”– Neon, Xenon… and Krypton.
Bohr model of a Krypton atom
Not, as Wired reminds us, to be confused with the planet Krypton…
When Jerry Siegel and Joe Shuster created Superman in Action Comics No. 1 (published June 1938), they named their superhero’s home planet after the chemical element discovered 40 years earlier. Retellings of Superman’s origins place his arrival on Earth around the time of World War I, a mere 20 years after Ramsay’s and Travers’ discovery of krypton.
Siegel and Shuster may have been inspired by the element’s cryptic name [from the Greek kryptos for hidden], its ghastly glow, or perhaps just its sound– like George Eastman favoring the strength of the letter K.
Travers went on to be the founding director of the Indian Institute of Science in the course of a long and productive career as a chemist in both academe and industry… still he was, from his days with Ramsey, known in scientific circles as “Rare Gas Travers.”
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