Eureka!: How Gold Rushes Transformed the World

I'm your host, Everett Millman, and this week's episode is going to take an exploration of the history of gold rushes. I kind of pause there because exploration isn't appropriate word because that's sort of what you have to do to find gold. But this is an interesting topic because gold rushes really have transformed our world, stretching all the way back to ancient Rome and to the modern day.

So I'm going to start in the period of the most important gold rushes and that is in the 1800s. And then a little later I will circle back and talk about some of the other periods of gold rushes. But the 1800s are famous for the Industrial Revolution. This is when economic conditions completely changed because of industry and people moving to cities. But interestingly enough, gold rushes were pretty low tech at the time. And it really embodies the pioneer spirit that we tend to associate with the American dream and the idea of Manifest Destiny and this westward expansion. All of this really is encapsulated in how the gold rushes went down.

Before we get to the California gold rush, which is the one I think most people are familiar with or at least heard of, we have to start in the 1830s. And that is when there were a pair of very important gold rushes further east in the United States. You had one in Charlotte, North Carolina and another one in Georgia in the South Appalachian. And each of these are noteworthy because they directly led to the foundation of two branches of the United States Mint. There was one in Charlotte and one in Dahlonega, Georgia. Now even a lot of people who are tuned into the gold industry and know some of the history have never heard of these two mints because they no longer exist. And in fact, they were rather short-lived. They only existed for the purpose of processing all of the gold that was coming out of the mines in Charlotte and in Dahlonega. And a lot of the stories that we tend to associate with the California gold rush, such as there was a quote in a Mark Twain novel where a character says, "there's gold in them thar hills." That actually comes from the Charlotte and Dahlonega gold rushes. And as I said, an enormous amount of gold was processed at the two branch mints of the US Mint. And that's where a lot of our first gold coins were produced, at least in mass production.

Now those two gold rushes were like most gold rushes, very short-lived. You really don't get another big event like that until the California gold rush, which really kicked off in 1848 and 1849. This is where the phrase "49ers" comes from. And this was a massive, massive event. There was an incredible movement of people and human capital all the way across the country to the West Coast. Back at this time around mid-century in the 19th century, hardly anyone had settled in California. It was still a territory. There was very little development. But once news hit that there was gold to be had there, in about the span of a year, California became a US state, meaning it reached a certain threshold of population where it could become eligible to be a US state. That's a pretty incredible turnaround. That's a fast transformation. And the California gold rush is also famous because of how much gold it produced.

So estimates are that over the span of the rush through the 1850s, over 750,000 pounds of gold were extracted from California. Now that translates to about 11 million troy ounces. That's the measurement we typically use for precious metals. And that is quite a bit. I know it probably sounds like a lot, 11 million. But in comparison to some of these other gold rushes I'm going to talk about, you're going to see that in context that might not be quite as crazy as it sounds. But obviously the California gold rush is well-remembered. It brings up the classic image of a prospector panning for gold in the river. And that's not a myth. You know, that image is actually very true to how these gold rushes often played out. It wasn't an era where there were big mining companies that could go and, you know, dig a giant pit in the middle of the earth and break through the rock to get at the gold. Instead, it really was small groups and even individuals who had basically nothing going and exploiting what are called alluvial gold deposits: gold in streams of water and rivers. You literally could just take a pan and go down to the water. And in a day's time or a few days, you would start to collect enough gold for it to mean something, for it to change your life.

And a lot of the development that sprung up around this is a result of people finally having money. Because remember, in this time period, our money is still backed by gold. So even in the case of you panned and you got a little bit of gold flakes or even gold dust, that might seem like nothing and almost impossible to measure. But that was as good as money out in the Wild West. You could go to like a hotel or a restaurant and pay in gold dust, which is what many people did. And again, this reinforces that pioneer drive of conquering the wilderness and roughing it on your own -- sort of the American ideal about having an opportunity. Many of these gold miners were enticed to go out West and follow the gold rush precisely because they really didn't have any other opportunities where they were coming from. So when people say that the California gold rush embodied Americanism and the entrepreneurial spirit, they're not exaggerating.

Now this phenomenon was not isolated just to the United States by any means. Another prominent place where gold rushes had a profound impact on the economic development of that whole region in the country is in Australia, and particularly in Western Australia. So again, same time period throughout the second half of the 1800s, there were a number of gold rushes in Australia. And this attracted a huge influx of immigration, mainly from Britain and the British Commonwealths. But also from other parts of the world. It might be hard to kind of put yourself in their shoes, but the idea that there was gold to be had and you could freely go and try and get some yourself was an amazing opportunity for people all over the free industrial world. And in fact, Australia itself likely would not have been settled or developed to anywhere near the degree that it has been if not for these gold rushes.

Now like I said, this was an international trend. I think it partly had to do with the advancement in technology, that it was a little bit easier to exploit the environment and to find the gold and to get to the gold. So we do see other gold rushes in places like Siberia in Russia, Canada, of course, in South America, in the Tierra del Fuego region of Chile and Argentina. And in Brazil, actually one of the oldest, one of the earliest gold rushes in this period came in the 1690s in an area that even today is still known as Minas Gerais in Brazil. That's the name of the province or the state. That actually translates from Portuguese to "general mines." So this is yet another place where a gold rush has left a lasting cultural impact on the modern day area.

There's probably no place where this is more present or prominent than South Africa. South Africa was yet another place in the pre-industrial era that was not heavily populated. It was not a particularly productive region until the discovery of gold in the 1880s. And this was such a big deal that it kicked off a series of wars between the British and the Dutch for control over different parts of what is today the country of South Africa. I can't overstate how incredible the South African gold rush was. It's in an area that's called the Transvaal region in the Witwatersrand Basin. And this is a type of statistic that might blow your mind, but more than half of all the gold that has ever been mined in human history came from this area, from Witwatersrand. That is insane because it was all mined in a relatively short period of time, too.

South Africa's gold mining industry definitely dropped off quite a bit in the late 20th century, starting around the 1970s. But from 1880 on, it was far and away the top producer of gold in the world. It's estimated that some 1.5 billion troy ounces of gold, which is equal to roughly 40,000 metric tons, has come out of Witwatersrand. As I said, that's more than half of all the gold that has ever been mined in human history, coming from one place. And that is including all of the gold that was ever mined beforehand, going back to ancient times, and all the gold that has been mined since, including today. And again, this also fits the theme of the opportunity of a gold rush led to all sorts of other developments and all sorts of other settlements and businesses sprung up around the gold rush fervor.

Another really good example of that type of trend happened in the Klondike gold rush, which occurred up in the Yukon region of Canada near Alaska. Now although I've been emphasizing how this transformed the human landscape in these areas, it led to development, it led to cities springing up and infrastructure being built, and other businesses starting around the gold mining area, that isn't to imply that this wasn't really hard, dangerous work. I mean, this was treacherous stuff back in the 1800s without mass transportation to even get to some of these remote places where the gold was being mined.

So in the case of the Klondike gold rush, it's estimated that about 100,000 people packed up and set off for this remote region of Western Canada. Only about 34,000 people even made it. And of that number, an even smaller percentage even found any gold, only about 4,000 people probably. And then of those 4,000 people, an even smaller proportion, maybe only a few hundred or a hundred ultimately struck it rich. So the vast majority of people who engaged in the gold rush actually didn't profit handsomely off of it. It's reasonable to assume that some of them died along the way. And that is one of the themes of the westward expansion in the US and some of these pioneering episodes is that it was a major sacrifice. It took a lot of failure and a lot of people not making it in order for a few who came after to succeed.

And so as I described about other businesses and enterprises bringing up around the gold rushes, there is a very interesting factoid about the Klondike gold rush. And that is that a former president's grandfather, Frederick Trump, actually got his start in the Klondike gold rush, but he was not one of the miners. A very entrepreneurial guy, as you can imagine, he actually set up a series of restaurants, hotels and brothels in the Northwest area on the way to the Yukon. So he was doing a lot of business with the people who were going to be gold prospectors or perhaps were coming back from having mined some gold. And that's where his fortune started. So a very interesting little tidbit that connects these gold rushes to our present day. Now after the 19th century, after the end of the 1800s, you don't have very many more gold rushes throughout the world.

And to illustrate how this happened, I want to circle back to ancient Rome, because one of the things that the Romans were really famous for was their engineering prowess and how innovative they were in building things and in exploiting natural resources and the environment. So the Romans were the best gold miners during antiquity. Far and away during their era, they mined quite a bit of gold. And in fact, that was one of the reasons that it was so important for the Roman Empire to expand far beyond the Italian peninsula is that as Rome conquered different lands, it could exploit their resources and take their gold.

And so something that's interesting is that in all of the places where the Romans were mining gold in southern Europe, in Spain, and parts of North Africa, there are virtually no modern gold mining operations. There have not been since that time, which is pretty hard to believe because as advanced as the Romans were, it's not as if they were working with the modern technology and industrial tools that we have now to mine gold. And nonetheless, they were so good at mining gold and did it so comprehensively that most of these places were basically tapped out. There was no more gold left to be had. I mean, if there was, I guarantee you someone would be mining it now. And I bring that up because it's a pretty good parallel to where we're at now. Although global gold mining is rather consistent almost every year, about 3,000 metric tons of gold is mined. And as I said, it's pretty consistent year to year.

There are actually very few major gold deposits left to be found. So it's sort of a repeat of what the ancient Romans went through that we are reaching a point where you're not going to find another viable place for a gold rush to occur because the gold is simply not there in the quantities that it would make sense. Now that's not to say that we are necessarily running out of gold yet. There are still plenty of places that have small but consistent gold yields. And there are still places that have not necessarily been exploited by industry as well. If you look at the Amazon River Basin, there is a lot of artisanal, in some cases illegal, gold mining that goes on there. So I'm not trying to imply that we have necessarily reached peak gold, so to speak. But it is interesting to note that we probably never will see another gold rush again. And it bears repeating that had we not had these type of gold rushes, the world would look like a very different place. There'd be a lot of big cities that do not exist, but it is probably one of the next top factors.

So that brings us to about a stopping point for our gold rush discussion. And we will move on to our question from the listeners. This week's question from Phil in Leeds, and he asks, will money ever be backed by gold again? Now, I don't want to come off as biased and immediately jump and say, yes, absolutely. Because even if I do tenuously hold that view, I don't think it's something that is possible to happen anytime in the near future. But you know, this notion about backing money with gold again, it has been in the news quite a bit lately. In both Russia and China, they have been accumulating massive, massive amounts of gold. They're central banks for the past 10 years. And there's quite a bit of speculation that if either of those countries wanted to move further away from the US dollar and not be beholden to using US dollars in international trade, they may try and use gold to back their own currencies.

Now that doesn't necessarily mean a 100% backing. Even in the times of the gold standard, it was more common to have about 40% of your money supply backed by gold, or the value of your money supply backed by gold. But then we also have elsewhere, the prime minister of Malaysia made some pretty prominent comments at a summit in Japan earlier this year about how he thinks it would be safer and more stable for the countries of that region to all agree to back their currencies by gold, at least when they're engaging in trade with one another.

And I want to point out if it's not clear to everyone that the reason this is even a topic of discussion is because despite its many drawbacks, using gold to back money is really a way to create stability. It's a way to create trust. We are in an era right now where those two things are in short supply. So that's why, although it's very unlikely and far-fetched that anyone will take the jump and try and back their currency with gold in the near future or certainly in the next 20 years, some of those wheels are beginning to turn. And the discussion is going on, people are kicking around the idea, and in a limited capacity, it could be the type of thing we see in the next sort of transition in our monetary system.

So as always, I want to thank everybody out there for listening. I really appreciate you for tuning in. And be sure to check out our next episode where I discuss all the reasons why gold has been rising this year, and everybody is talking about what's going on with the gold price. So don't miss it.