 The Alchemist
Alan Leishman
18 October, 2004
Throughout
the middle ages, one of the driving zeals of mankind's awakening
intellect was that of Alchemy.
The science
of chemistry had a long and painful birth, emerging eventually
from its alchemist roots.
The two driving forces of Alchemy were the primordial desires
to prolong life and to reduce toil and labour by creating instant
wealth in unlimited quantities.
The Alchemist
sought:
1) The "elixir
vitae" or the water of life - the key to eternal life
or to prolong life to centuries rather than decades.
2) The philosophers
stone - which would enable them to turn all metals, (eg lead)
into GOLD
Alchemists
were believed by millions of people for more than a thousand
years.
For example the Greek ecclesiastics in Constantinople in the
4th century believed that all metals were composed of 2 substances;
the one metallic earth; and the other a red inflammable matter
they called sulphur. The pure union of these substances formed
gold, but other metals were contaminated with foreign substances.
The object of the philosopher's stone was to disolve out these
ingredients by which iron, lead, copper, and all metals would
be turned into gold.
In 1404 in England an act of parliament was passed declaring
the making of gold and silver illegal. Great alarm was felt lest
an Alchemist should suceed, and ruin the state by providing boundless
wealth to some designing tyrant, who would make use of it to
enslave his country.
This law soon subsided and future kings issued patents and commissions
to try and find the Philosopher's stone.
In the sixteenth century the possession of the stone and elixir
was thought to be the solution to all the problems of science.
Some Alchemists made fortunes from sponsorship, while others
dissipated their wealth in the pursuit of turning other metals
into gold.
Some were scoundrels, while others were able and intelligent
men.
George Agricola 1494-1555 for example, wrote "de Re Metallica"
which survives in text and sketches, as the best archive record
of mines, mining practices and metallurgy of his period.
Digressing
for a moment here, there are 2 theories of history:
a) the coincidence
theory.
b) the conspiracy theory.
It is a part
of b) that a) is taught in all western schools and universities.
This is evidenced
in Economics by the fact that the Keynes/Milton Friedmann school
of economics dominate the Austrian school, Von Mises/Rothbard,
almost to the total exclusion of the latter.
However there is one exception -- the internet, where von Mises
has many supporters.
Keynesian economics favours deficit spending.
The Austrian school prefer the discipline enforced by a Gold
Standard to balance budgets.
Returning to
the theme of Gold and Alchemey in 2004, we find an interesting
similarity.
This time it is not, as so often claimed in antiquity, lead
that is being turned into gold, but paper.
The new paradigm depends upon modern media, (the press,
TV, films etc), to convince the public, that the world's fiat
monetary system, based on the Federal Reserve Note, (also known
as the US $), is as good as, (or better than) GOLD, in terms
of a store of value.
In medieval times the Alchemists depended on conjurer's slight
of hand, or the spreading of rumours to convince the superstitious
public of their success in turning base metals into Gold.
In 2004 gold
is the Keynesian barbaric relic, not lead or other base metals.
Paper money is the only real store of ultimate wealth, not gold.
Not only that, but thanks to a wonderful invention known as a
printing machine, we can have unlimited quantities of paper money
at almost zero cost, as outlined in a famous speach by the Fed.
Reserve's Bernanke in a speach entitled; "Deflation:
Making Sure "It" Doesn't Happen Here."
My reflection here is that paper money would have been impossible
without the discovery of the printing press, and the introduction
of other security technologies to prevent forgery.
We scoff at
the duped medieval serfs and many of the intelligensia as well
who believed in Alchemy, but now 99% of the current western population
today probably do believe that gold is a barbaric relic, and
that fiat money is more valuable, because of media propaganda
to this effect and lack of access to the alternative viewpoints.
The new paradigm
according to the Fed.Reserve Chairman is evidenced in this quote:
"I have
been quite surprised, and I must say, pleased by the fact that
central bankers have been able to effectively simulate many of
the characteristics of the gold standard by constraining the
degree of finance in a manner which effectively has brought down
the general price levels."
(Alan Greenspan, To Rep. Ron Paul before the Congressional
Committee, 02/11/03).
So the "science"
of Alchemy may have been brought up to date. The paper system
by simulating the gold standard is now as good as gold?
The interesting
question remains however. All previous attempts at Fiat money
systems (paper not linked to gold) throughout history from John
Law in France to the Reichsmark in Germany, to name only a few
well known landmarks, have eventually failed and the value of
the currencies has returned to the value of the paper it was
printed on, ie approaching zero.
If only those
ancient Alchemists had discovered they were investigating the
wrong materials in metals, and they should have been experimenting
with paper. Or perhaps looking at this from another angle and
with the hindsight of history, the Alchemists were the unwitting
predecessors of the Keynesian movement in the days before the
invention of the printing press.
Astrologers
No one can
foresee the future, except of course if we accept the claims
of the Astrologers, who were incidentally the third part of the
trilogy on the wish list of the ancients, along with the Alchemists
search for eternal life and immense wealth.
Nowadays we have Mahendra with a remarkable
recent track record in predicting some future events, and liaising
closely on the gold markets with Bill Murphy.
Some vestiges of superstition remain today in even the most emminent
scientists, but there is another element that influences markets.
For example, I prefer Fundamental analysis to Technical analysis
of any market including the precious metals. However there comes
a time when an Astrologer or a Technical Analyst can achieve
Guru status. At this point the tail can begin to wag the dog,
and a market prediction becomes self fullfilling through the
number of followers of the guru buying or selling some item on
the guru's recommendation.
Mahendra could be approaching this status now with some links
to hedge funds and other institutions, and therefore becoming
a market mover, whether one believes the underlying astrology
or not.
Conclusions
This essay
has attempted to connect the dots from the Alchemists of the
past to the modern day new paradigm that fiat paper money, (not
linked to gold), is the new better store of value compared to
(barbaric relic) gold.
The jury is
out on the judgement of this new paradigm, but history has always
rhymed in the past, and every other fiat money system finally
collapsed.
What will happen
this time? I don't pretend to know, but I will certainly be following
the ongoing story with interest, and perhaps commenting from
time to time as events unfold.
Take another
very close look at the Emperor!
Is he really clothed, in gold foil, or in paper, or is he really
naked?
Alan Leishman
Copyright ©2004 Alan Leishman
 dalhn@freesurf.ch
References:
The
Alchymists
"Extraordinary
Popular Delusions and the madness of crowds" -Charles Mackay - 1841
Disclaimer
Alan
Leishman is not a registered Investment Advisor or a Broker/Dealer. Readers are advised that the information contained
herein is issued solely for information purposes and is not constructed
as an offer to sell or the solicitation of an offer to buy. The opinions and analysis included herein are
based from sources believed to be reliable and in good faith
but no representation or warranty, expressed or implied is made
as to their accuracy, completeness or correctness.
Readers are urged to consult with their own independent financial
advisors with respect to any investment. All information contained
in this report should be independently verified with the companies
mentioned.
________________
321gold Inc
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