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The Golden Grimace…

Laurence Olivier as Crassus in Spartacus

Threecrow tells us: Think of all the things of beauty created by craftsmen long dead whose works have been melted and now lay hidden and destroyed inside one of those cold, sunless bars.  Gold respects nothing, and, gold is oblivious to the praise it is given by men.  Gold is as cold an entity as history has ever produced.

There is a lesson in the true telling of gold in world history.  There used to be a saying in the western world, “Rich as Crassus.”  One does not hear it often now as Crassus has receded in memory, but long ago he did exist and he was the “richest” Roman of them all in the time of Sulla and the great Civil Wars of Rome which lead eventually to Julius Caesar, the man on the white horse.  Crassus, played so well by Lord Larry in the movie, Spartacus, had gathered his gold in a manner that can be called, without the fear of contradiction, unseemly.

Aside from the wealth he acquired during the many purges of great houses, ancient families of Rome whose names appeared on lists of Sulla’s enemies, Crassus formed, or, rather, cornered the market on fire by insisting that his “fire department” be the only fire department in Rome.  In this manner did he go about the business of setting fires on homes he coveted and promptly arrive with his men and stand there bartering with the owner of the flaming house over the price to be paid for extinguishing the fire.  Nine times out of ten Crassus would end up owning the newly on the market fixer upper and turning a nifty profit on its sale.  Eventually, even his political allies, for you could not call them friends, grew wary of him and thus gave him the province of Syria.  It seemed just about as far away from Rome as they could reward him and with just about the proper balance of danger and opportunity that would tempt him.  A funny thing happened on his way to the goldmine, he encountered a determined company of the Parthian Army and his head eventually landed in Rome, his mouth filled with molten gold.  His reputation for his lust for gold had no doubt preceded him.

I have it by no less an authority then Skip Coon that Crassus was alive when the burning, melted gold was poured down his mouth, his head jerked back by the hair and his jaw forced open by a lowly archer of the victorious Parthian.

So, what is gold?

When the Spanish Conquistadors arrived in Central America they found the peasant class decorating the trees and bushes outside their huts with objects crafted out of pure gold, Hummingbirds, Butterflies, Parrots, all gleaming brightly in the tropical sun.  They were objects of beauty, nothing else.  They made life pretty.  That is how the Mayan saw gold.  For the Spaniards it brought lust and amazement and the curse of desire and the action of attempts to find every last ounce in existence in this brave new world.

And what of our Brothers, The Lakota.  Lame Beaver said many years later, “We knew the yellow stones were there.  Its not good to move the stones.”  The hoopleheads thought otherwise, and it became the cause of many tears.

So, what is gold today.

It appears that it has “become the last refuge of a scoundrel.”  For those who play the world and end up owning all these dollars and Euros and have gathered more electrons in the humming basement and now find themselves at the curb doing “business” with Crassus and his fire brigade it has become one large all-in, a last reach that shall surely exceed their grasp.  If all the gold ever raked out of the earth should fall into one mans lap, or ten men, a hundred men, a thousand men, what is that to us.  Why, it is not even pretty to us now, all compressed into bars that never see the sun.  In the final analysis, the few cannot convince the many that life and living is based upon how many yellow stones you move from the river.  It is vanity to think otherwise.

***

Gold has truths of it own to tell and secrets as well.

One cannot tell from the closest examination whether gold was pulled directly from the earth underneath the Apartheid regime, scooped from beneath a slave labor camp in the Soviet Union, extracted from the death grimace of Crassus, or pillaged from a village in Central America. The various and sundry inhumanities of mankind no more cling to gold than does the impurities that beset other valued commodities. It is alone in this regard. All traces of these horrors vanish in its gleam leaving no telltale signature of their passing presence.

Still, it can reveal secrets often overlooked by us.

Below is a chart of the US Gross Domestic Product – priced in dollars – as usually presented to you in the pages and web sites of various organs of indoctrination commonly referred to as The Media. You will note the unmistakable and uninterrupted growth of economic activity it purports to records, until this most recent financial fiasco.

Magnificent. Is it not?

The upward sloping lines of this chart speaks, we are told, to the dynamism and strength of the American economy in the post-World War II period. Until our recent difficulties, in no single year was there a retrace of the US economy’s phenomenal growth and expansion.

Should you complain that for all this vaunted growth your condition has declined without interruption these seven decades – that the great mass of the nation experienced only stagnant wages and impoverishment – Washington, Wall Street and The Media will protest, in the words of General Turgidson:

“Whah… That’s impossible, Mr. President. I mean, look at the big board!”

The big board says everything was just hunky dory until the Moron and Goldman Sachs ate our lunch.

Gold, however, keeps it own counsel, and has a decidedly different take on such things.

Measured in billions of ounces of the metal (the gold price of the US Gross Domestic Product as opposed to its dollar price) the evidence for hunky dory is somewhat diminished. In fact, we see violent lurches in the total value of economic activity over the entire period, with pronounced and long term declines in the value of that activity between 1970 and 1980, and again between 2000 and the present. A closer comparison of the two measures of economic activity is shown below.

Make note of the three episodes of rather violent contractions in the value of total US GDP as measured by in gold – circled in red. If we are right, this represents hundreds of billions – indeed trillions – of dollars in catastrophic value destruction taking place in the real economy even as the  economy appears to expand in dollar terms. The most recent contraction begins not in 2007, as government statistics would lead you to believe, but in 2000.

It has, so far, resulted in the loss of nearly 10 trillion dollars of annual output. At 61.4% loss from its peak in 2001, the present crisis has not yet reached the levels of losses suffered during the Great Depression – 65.2% – nor that of the extremely devastating collapse of the 1970s – when the gold value of GDP fell by 82.4%.

What does this mean?

Honestly, we are not sure exactly what it means. During the Great Depression, the dollar was backed by gold, so the collapse of the economy in gold terms equaled the collapse of the economy in dollar terms. The contraction was so severe and unprecedented every industrial economy had to sever the link between gold and its paper currency just to maintain economic activity. As the economies of the great nations collapsed, the contraction of the money supply turned massive amounts of gold into lifeless hoards, completely withdrawn from circulation and laying idle. Lord John Maynard Keynes proposed that economic activity might be restarted if paper money was severed from its link with gold, and billions of dollars worth of government printed money was injected into the economy to artificially create demand for goods.

Obviously, this worked.

Since that time, however, US GDP has had two measures: the more familiar one being that of its expression in dollars, but, there has always been another, hidden, expression of this economic activity as measured by the value of commodities – in first place gold. That gold measure asserts that we have been through at least one more Great Depression level event during the 1970s – an event that exceeded even the Great Depression itself in magnitude and duration. It also asserts we are now going through another event right now that is at least of the magnitude of the Great Depression and of the duration of the 1970s.

It also shows one other thing:

Unlike the event during the 1970s, the present depression event is now showing a contraction of economic activity BOTH in terms of gold AND in terms of paper dollars.

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  1. May 21, 2010 at 5:23 pm

    Educational and fabulously interesting as always!

  2. June 21, 2010 at 8:01 pm

    I am responding to your responses on the abolition of work and of money — which didn’t seem to have a reply box. I will have to come back and study this longer post.

    Following you “follow the lines of reasoning so far as the assumptions embedded in them direct” in the first responses was refreshing and enlightening.

    On What is to be Done with that understanding, the stuff about voluntarism yielding what we need, I’m not with you.

    Toward the end you wrote:

    “Once money is revealed to be worthless, this implies the work no longer is bound by the law of value.”

    “the law of value” that’s what I just don’t get. I think the word, “value,” gets in the way of understanding that

    humanization, becoming more human (some say civilized, evolved, kinder, gentler, wiser, farsighteder, etc) proceeds by a series of negations of the notion that “might makes right,” one step of which is exchanging one’s living time to be bossed, dictated to by another human for enough of the commodity “universally accepted as a measure of equivalence of “living time bossed by another” one needs to purchase the necessary labor (world average at time of purchase) time of others embodied in what one needs to sustain one’s humanity. Those with the MIGHT to get to boss more of our time, more labor time from us than the amount of labor time, bossed time of others, in our necessities (becomes they own the means of production, or nowadays the legal right to finance the perpetuation of the relations you describe nice and sharply) have enjoyed the RIGHT to exploit us since Capital (stored bossed time, stored in money) “freed” peasants from land Lords dictating their living time.

    I used to think, with some one I think named Saye (Marx criticizes in a footnote in Capital I don’t remember which vol,)
    that labor time chits could be substituted for money now that time is internationally standardized and the exchange rate of national currencies are so rapidly altered by real changes in productivity, hence labor time in commodities of equal use,
    so chaotically from the perspective of ordinary workers and consumers, so viciously manipulated
    without regard to their measuring equivalences of national average labor times by financiers.

    What is refreshing about what you point out is that during the epoch in which Capital has dictated the conditions of exchanges of different forms of labor time, the amount of time one must be bossed by another in exchange for the means to get one’s needs, wants, met by others, has quantitatively declined to the point of a qualitative change — the nature of which I don’t know; and the means of exchange, the money form has gone through so many changes to become “fiat money” that it’s function has become absurd enough for you to just call for abolishing it and then let’s just see.

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