Reverse Alchemy

The correction has not weakened the case for the Corporate Gold Standard. In ten weeks, it has made it roughly twice as strong — and the industry has not noticed.

I. The Last of the Magicians

Isaac Newton spent an enormous share of his working life trying to turn base metal into gold — not as a hobby, and not briefly. He left an alchemical archive so vast that when John Maynard Keynes bought the papers at Sotheby’s in 1936 and read them, he concluded that the founder of modern physics had not been the first man of the age of reason at all. Keynes called him “the last of the magicians”.

Newton never made an ounce of gold. What he did instead was take a job at the Royal Mint — Warden in 1696, Master from 1699 — and in 1717 fix the guinea’s value in silver at a level that quietly, almost inadvertently, put Great Britain onto a gold standard for the next two centuries. The greatest mind of his age failed for decades to create gold, then spent his final decades defining money in terms of it.

Three hundred years later, the mining industry has finally solved the transmutation problem. It simply runs the reaction backwards. Rock becomes doré. Doré becomes bullion. And bullion becomes — reliably, at industrial scale, within days of leaving the processing plant — US dollars. It is the only transmutation in monetary history that works every single time. The industry performs it on very nearly 100% of what it digs out of the ground, converting the one asset that has preserved purchasing power for five thousand years into a currency that has lost roughly 98% of its value against that same asset since 1971.

Newton was trying to make gold out of lead. Our industry has perfected the art of making paper out of gold. Only one of those two processes has ever been shown to work at scale — and it is worth asking whether it is the one we want.

II. The Test

This was the argument of Chapter 22 of this year’s In Gold We Trust report — “The Corporate Gold Standard” — developed with Chris Ritchie, former president of SilverCrest Metals, and Alexander Scanlon. I return to it now for a reason that has nothing to do with authorial vanity and everything to do with price.