The Conquistadors came to the Americas in search of gold and silver, and their quest helped to forge the New World. Today, hard money enthusiasts seek a stable global reserve currency based on gold and silver – instead of paper, ink and electrons on a computer screen. Of course, gold and precious metals would be at the center of this new financial order.
Where would much of this gold and silver come from? One simple answer is South America. For example, Peru is an alluring country in that it was forged by the Conquistadors, brought into postmodern times by the Japanese (including a famous Peruvian leader with Japanese blood) and may one day turn into a key nation in the region. Peru, like many Latin American countries, can indeed be seen as a natural resource depot for Asia's emerging powerhouses. One might cite mainland China, Japan, Taiwan, South Korea, Indonesia and similar nations. India has a voracious appetite for gold, as does Myanmar.
Advertisement - story continues below
Peru, a beautiful Andean nation, ranks high in both silver and gold production. Of course, the question some ask is whether the mining practices in that nation are environmentally sustainable. For example: Will cyanide be spilled? As a developing nation, issues concerning the terms of borrowing, capital investment, crowdfunding, peer-to-peer lending and other 21st-century business models are in a state of flux. That said, Peru could become an excellent destination for natural resource investors over time.
Digging deeper in Latin America
Latin America, especially Peru, Argentina and Chile, will be a part of the 21st-century gold rush. Some analysts say there is more mineral exploration going on in Latin America than any other region in the world. In fact, by 2006, one out of every four mineral exploration dollars was being spent in Latin America.
Advertisement - story continues below
An ancient quest for gold
During the days of Ancient Rome, a military general and fire department chief named Crassus was worth almost $170 billion in today's paper-denominated world. (This total has been put forth by none other than Forbes.) Crassus, seeking to imitate Alexander the Great and conquer India, took his expeditionary legions into Turkey. (Strangely, he refused the advice about what might await his legions in Iraq and Iran from certain interested parties in Armenia.) There he hoped to fight and defeat the Parthians and capture Mesopotamia and Persia.
Crassus, as noted, ignored the advice of his advisers and consequently saw his own son killed at the Battle of Carrhae. Crassus himself had liquid molten gold poured down his throat and was decapitated. His head was used in a theatrical play by those who slew him. This roughly transpired in what is today's Anbar Province in Iraq, and those who stopped Crassus were the Parthians – today's Iranians. Iran would be difficult to invade and occupy today or in Crassus' time. Iran's mountains, arid regions and swamps make some of that nation less than ideal for occupation.
Today's modern English dictionary contains the word "crass" as a reminder to those whose thirst for gold bullion may well be as unquenchable as Crassus' was. Such a lesson cannot be lost on those readers in tune with 21st-century oligarch-led finance capitalism.
Inflation and the threat of inflation, massive U.S. dollar devaluation and efforts to resuscitate the economy will be among the factors influencing the price of gold through the next decade or more. There are those who say America's last round of quantitative easing constituted a national default. Others say, "Let's just continue to print more paper money," as the time-tested preponderance of the Saudi Arabian-United States of America "petrodollar" will continue to underpin the entire global financial system for the foreseeable future.
Advertisement - story continues below
Yet as China builds its own version of the World Bank and IMF, as well as planning a "New Silk Road" from Beijing to Berlin, the world might indeed start to change in ways no one could have imagined around 2000 A.D. In the epoch of Marco Polo, China and India were the world's richest nations. They had the most people. Europe was not the dominant powerhouse. The United States did not even exist – nor did Canada, Australia, New Zealand or South Africa. Some say we are now returning to the "natural order of the world" where China and India are on top based on population density and emerging industrial and technical might. Who can say for sure? But the old order is definitely collapsing.
That said, look for gold to continue its ascent, despite insider manipulation of the price of gold as organized by central banks – which have a monopoly on the creation of paper money that pays for postmodern, conquering armies that would make Crassus blush.
Countering the implosion of paper and digital money is the fact that only 160,000 tons of gold have been mined in all of human history. As such, one gold bar weighing 28 pounds is worth $333,000. At more than $1,200 per ounce and holding the potential to begin rising, gold as they say, is still "money in the bank." The question remains: Where will all of this lead the world in terms of the price and demand of gold? Why the obsession with this metal?
Advertisement - story continues below
Some years ago, the well-known economist Milton Friedman lamented the idea of mankind placing so much value on something that's merely dug up from the ground. There isn't that much gold in the world to begin with. What can you really do with it beyond making jewelry and practicing dentistry? The answer, in short, is that you can do plenty.
The people of Burma wear gold medallions around their necks as a hard currency 401(k). One day, a gold-backed dinar may be in the pipeline and a basket of currencies may well be replacing the U.S. dollar as the major global reserve currency. Digital gold, gold stocks, global gold mining and Latin American gold mining, as well as gold demand in India (which consumed more than 770 tons of gold in 2007) and China (360 tons in 2007) are key issues that deserve vigilant monitoring. Australia is another country that should be accounted for in terms of such precious metals.
What are the postmodern Conquistadors looking for in Latin America in terms of gold and silver mining? For one thing, they're looking for industrial relationships with governments that will enable them to carry out their mining and make a profit. Secondly, these corporations are searching for some new "motherlodes" that will line their pockets. There's something that's always been enchanting about gold and silver. These days, one might speculate that the "faith" in the dollar-denominated system is all that's keeping the system afloat.
Mexico is the world's largest silver-producing nation, with 4,700 metric tons produced in 2015. China ranks second. Peru is third, with 3,700 metric tons mined in 2015. The main silver mine in Peru is the Antamina mine in the north of the country. Bolivia is sixth on this list, and Chile is seventh. One can only speculate as to why Latin America does not launch its own gold- or silver-based regional currency. (The Middle East and North Africa might do well with such a regime.)
Silver is rarely found in a pure form. It might be mixed with chlorine or arsenic. Not many people are aware of this kind of minor – no pun intended – complication, but of course it would be of great concern to environmentalists. Despite these obstacles, nothing has gotten in the way of silver mining. Since ancient times, from the Book of Genesis to Ancient Greece and even Roman-occupied Britain, tales of silver-based wealth have echoed through time. Whether we're talking about the rise of the Spanish Empire or the rise of the state of Nevada (meaning "snow covered") in the United States, silver has been at the forefront of successful, new endeavors.
One might think the world's Western financial elites might not have such a keen interest in gold and silver. We live in a digital age. Money is often exchanged on plastic cards with a magnetic strip. Computers are paramount. Cash is something looked up with suspicion at airports. However, fiat currencies have been known to collapse. Look at Weimar, Germany, as one example. Inflation became so bad, we are told that Germans would have to eat meals at a restaurant very quickly, because the price would continue to go up and up and up as they were eating. People were carrying around wheelbarrows full of money at one point. It must have been a frightening time.
Could this type of hyperinflation happen again – meaning in the U.K. or the United States of America? The preponderance of the Saudi-U.S. petrodollar might be able to keep the wolf from the door.
For those familiar with the legend of El Dorado, this refers to a man and an empire both. The European Conquistadors became obsessed with a lost "City of Gold" in South America. Colombia was suggested as its resting place. Interlopers searched all over the Amazon, in Guyana, Venezuela and elsewhere for El Dorado on various cartographic missions. The truth behind the legend traces itself back to a tribal chief living near Bogota who covered himself with gold dust and disappeared into a nearby lake.
Professional cartographers, adventurers and mercenaries sailed from Europe to the New World looking for El Dorado. One man, Alexander von Humboldt, spent five years in the New World starting in 1799 before concluding that El Dorado might not be an actual place, city, town or empire.
These days, El Dorado is found in the world's major central banks, those august institutions ranging from Berlin to Paris to New York to London that horde a nation's gold. Some people claim to have seen an underground mini-rail system under the streets of New York, where carts filled with gold bullion are transferred to different banks.
Whether this is true or not, the fact remains that you cannot eat gold. Gold is not cattle or timber or salt or opium or wheat. But you can't eat paper money, either. But unlike paper, or fiat, money, gold really holds its value and its buying power. For example, a top-of-the-line men's suit in 1934 might have cost you $35. That was roughly the rate for one ounce of gold. (FDR played around with the rate.) Today, you could probably exchange one ounce of gold for a decent men's suit at $1,200 or thereabouts. This is the reason why so many around the world cling to physical gold.
Gold means different things to different people. One can imagine gold being listed on the Periodic Table of Elements as "Au." Or "Au" could be shorthand for "Australia," that island nation rich in natural resources. There's lots of gold down in the Earth's core. Most of the gold on the Earth's surface came from cosmic encounters with meteors.
Gold is amazing. It's universal in that it has been found on almost every continent – with apologies to Antarctica. It's malleable. It's dense. (Consider the difference in price for one ounce of gold versus one ounce of silver.) Gold was considered to be "The Dollar of the Middle Ages." Make no mistake: Gold is not easy or cheap to produce. As one student of history wrote, "To produce one ounce of fine gold – in South Africa in the late 1990s – requires thirty-eight man-hours, 1,400 gallons of water, electricity to run a large house for ten days, 282 to 565 cubic feet of air under straining pressure, and quantities of chemicals including cyanide, acids, lead, borax, and lime."
"The Power of Gold" by Peter Bernstein is an excellent treatise that should be studied and deconstructed by all gold enthusiasts. Writes Bernstein, in regard to the robust international financial system that emerged between the end of the American Civil War and World War I, "[It was] a system whose simplicity and elegance was unmatched in the history of money." The fabled gold standard "developed all the trappings of a full-fledged religion: shared beliefs, high priests, strict codes of behavior, creed, and faith."
Bernstein additionally says, "The gold discoveries in California and Australia and the Comstock Lode in Nevada, the appetite of Indians for silver, the American Civil War, and Germany's overwhelming ambition to be a great power in effect backed the world into [a gold standard] that no one had anticipated and that many people were reluctant to accept. Once in place, however, the system displayed remarkable durability for the next half-century."
Ultimately, we see that two years before the U.S. and global financial meltdown in 2008, precious metals were humming along quite well in Latin America. This trend should continue in the future based on regional and transnational macroeconomic factors. Beyond that, the ultimate reason gold and silver should do quite well in Latin America and elsewhere is that no matter what our financial elites might tell us, neither the plutocrats nor plebeians fully trust our ink-on-paper and computer-dominated financial system.