Klondike and the barbarous relic

Gold was discovered in the Klondike region on August 16th, 1896. It precipitated a mass migration as people from the US and elsewhere surged into the area hoping to get rich. Most went via Alaskan ports, and then trekked with a ton of equipment down to the Yukon in Northwest Canada. To avoid mass starvations, the Mounties only let in those who had a year's supply of food with them. Boom towns such as Dawson sprang up to service the incomers. Dawson's population went from 500 in 1886 to 30,000 by the middle 1898. Infrastructure failed to keep pace with the influx, and Dawson's wooden houses were prone to fires, while epidemics broke out in its insanitary conditions.

About 100,000 headed there, hoping to strike it lucky, but given the arduous trek from Alaska, only about 40,000 made it. The ones who became rich were mostly the ones supplying clothes and equipment, rather than actually finding gold, although about $300m of gold was mined. This was nothing like the California gold rush of 1848-1855 that yielded $2bn - $3bn (at today's values), though again, it was mostly the suppliers who made the money. The Klondike gold rush lasted 3 years, and faded when gold was discovered at the beaches near Nome in Alaska in 1899, sending most of the prospectors up North.

Gold has always excited the imagination and the avarice, from King Midas to Auric Goldfinger. Keynes called the gold standard "a barbarous relic," echoing the words of John Austin Stevens in the New York Times of 1873 who said, “gold is a relic of barbarism to be tabooed by all civilized nations.” Its value has been attributed to its permanence, in that it does not fade or tarnish, and reacts with only a few things. Its lustre gives it value as ornament, and its scarcity enhances that value. All the gold humans have mined in history would fill about one-third of the Washington Monument. The largest nugget of it ever found came from Ruby, Alaska, in 1998, and weighed 24.5 pounds, giving it a value of over half a million dollars.

When President Nixon in 1971 cancelled the convertibility of the US dollar into gold, he effectively ended the gold standard, and by 1973 the Bretton Woods system was replaced in practice by a regime based on freely floating fiat currencies. There remain those known as "gold bugs"  who advocate returning to a gold standard to inhibit the ability of governments to inflate currencies at will, but most bankers and economists suppose this would be akin to time travel into the past, and think that independent central bankers represent a reasonable way of restraining irresponsible governments. Critics suggest, however, that the government can appoint central bank directors inclined to do their bidding.

Both the forty-niners of California and the Klondikers were lured in their thousands to endure some hardship and sacrifice in the hope of striking it rich, but very few of them made any significant amount. It was not the gold itself, but the dollars it would buy that they sought. Nonetheless, few people are as thrilled by a bundle of dollar bills as they are by the bars of that gleaming metal in the vaults of banks. People still buy gold today as a hedge against inflation and market volatility, and I played a small role in allowing Americans to do so. I was working with the Republican Study Committee on Capitol Hill in 1974 when we tacked an amendment allowing private US citizens to own gold onto an Eximbank annual appropriation bill. It was carried, and gold ownership remains legal in the US to this very day.