The Thompson Dilemma ? Gold's New Politics
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Story Filed: Monday, October 08, 2001 1:20 PM EST
Oct 05, 2001 (Miningweb/All Africa Global Media via COMTEX)-- Gold Fields [GOLD] boss Chris Thompson departed from self-promotion at the Mining Investment Conference to rebuke industry stakeholders for failing their product. His excoriation is rooted in an insightful observation.
Central banks have been gold's traditional custodians. Through successive versions of the gold standard, the metal was linked to all economic endeavour via a prudently managed umbilical cord to the national currencies. In latter years though, central banks relinquished their custodianship having sampled the many chaotic delights and mysteries of free-floating fiat currencies.
Thompson says the industry is at fault for not accepting transfer of custodianship from the central banks. Consequently, gold producers have no substantive accumulation of knowledge that might allow them to manage their product from rock face to ring finger. That is in stark contrast to their commodity cousins who live and die by surplus-deficit cycles.
Here we must coin the "Thompson Dilemma": gold cannot recover without flushing out its weakest, but biggest players ? governments. The metal price might be nearly destroyed before it can be restored.
Central bankers, government treasury officials and a league of post gold window investment experts readily propagate the view that gold is not money. That is the subtext for the Thompson Dilemma. The finance-treasury complex neither wants, nor likes the yellow metal. Yet it will never surrender its tyranny over gold.
That makes gold's future intensely political, especially because custodianship is vastly different from ownership and control.
Gold producers must assume custodianship, but it will become another futile gesture if they do not force the transfer of ownership to the citizenry. Let citizens vote with their wallets on whether or not gold is money. Otherwise, what is the point of being the custodian of a product that is controlled by institutions whose intention is to destroy you?
The word destroy is not used lightly; not in these times. Nothing less than war has been declared on the industry. The reward for gold producers' good citizenship and profound wealth creation over many decades is to be sacrificed on an altar of Monetarist experimentation that has yet to run its course. The war against gold is immoral for all the reasons that the war on drugs is right.
Gold must be made free. The right to buy, hold and sell gold must be unfettered and encompass all refined forms.
It requires a brutal confrontation with the great lie that gold is superfluous and heathen.
If gold is of little monetary significance, then the central bankers must withdraw their support for government regulation of it. As a commodity declared irrelevant to modernity, governments and the agent provocateur central banks have no business in its market.
Ounce for ounce, computer chips are more valuable than gold ? mostly because that market is blessedly unshackled from the nanny state. Let it be so with gold.
Alas, there is not a single central banker or fiscal official who will agree to match gold sales with more relaxed controls over it. And that is the great deception. Propagandising its worthlessness but panicked about losing the right to dictate its terms.
That is also the best point of leverage for the gold industry. Challenge the deception; don't cower in the face of it. Make a new peace or be put out of business. It must, perforce, be a guerrilla war aimed at the hearts and minds of the masses rather than a conventional one where lobbyists and politicians skirmish with no casualties.
Thompson isolated three areas to tackle if the industry is to gain custodianship ? jewellery, investment demand and new applications.
Investment demand is described as the "new" market opportunity. Indeed, it is the most promising means to outflank the finance-treasury complex.
The industry needs to make private ownership of gold simple and affordable. There is far too much friction in the system even without regulatory obfuscation, primarily because of the absence of supporting infrastructure. As Thompson noted, it doesn't work to call up your broker and place an order for a few ounces of physical gold.
It seems improbable that the large institutions can be persuaded to participate. After all, they have made more money betting against gold so there are too many vested interests to overcome.
The Internet provides an alternative where secure electronic currencies backed by gold are already in circulation. The nascent industry just requires promotion, education and some infrastructure (linked credit cards) to be widely successful.
There will be no shortage of squealing about the risks of money laundering. It is a red herring because the backing gold has no "velocity" because it is such an inconvenience to store and transport. With most physical gold centralised in a handful of locations, the risks of confiscation are too great for the underworld to use it. The criminal cannot hide his stash and the deposit taker has to be exceptionally careful lest the reserve base be compromised by dirty money.
The World Gold Council is, as Thompson suggested, an ideal vehicle that can both promote and lend credibility. It cannot happen soon enough. And maybe we will one day talk of Thompson's Triumph.
by Tim Wood
Copyright Miningweb. Distributed by All Africa Global Media(AllAfrica.com)
KEYWORD: South Africa
Copyright © 2001, Africa News Service, all rights reserved.
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