I came across this article from Sabhlok City blog where he points that an estimated 200 tonnes of gold are sitting under Indian ground due to mismanagement by the Indian management of its mines.
Of course the first instinct of most would be extract it as soon as possible and the underlying assumption would be that it would greatly improve the Indian economy.
But I'm not so sure. Firstly there is already a great deal of gold in hands of private individuals but it does precious little to propel the economy as it part of the great Indian parallel hidden economy.
There is a great of production and monetary transaction which simply does not figure in the official GDP.
Let us be very aware of what these precious metals entail:Brutal civil wars have been fought in Africa and elsewhere over possession of what is considered a rare resource. But is it that precious and rare?
India historically was not lacking in gold mines but what made it rich was not relentless mining but trade and industry.
Our silk, spices, teak, ivory,incense, steel, weapons,horses ,elephants found ready markets in other parts of the world.
Please note that in pretty much all the above skilled labor and capital is used to create a finished product
Even horses and elephants have to be trained, well groomed and cared for to find a willing buyer in the competitive market for animals in the ancient world
Capturing elephants for their ivory is no laughing matter either.
And in return we received gold from the Romans,Arabs, Persians and other peoples.
In other words , gold was used a unit of payment.
What happens when there is a sudden infusion of gold? Well look no further than the Spanish Empire
Spain was first in the empire game in the late 1400s while England was relatively a late bloomer. In the race of Americas it meant that it got access to the gold and silver South and Central American territories while England had to make do with relatively staid North America
Spain raided unknown tons of gold and silver from the Americas and the process inflicting incredible brutalities on the unfortunate indigenous peoples of the Americas. Effects of which still linger to this day.
Ah but one thing happens when you raid and kidnap Lakshmi is that Shiva does the dance of destruction on your economy. Before Spain realized there were bankrupt(within 200 years) and their currency was worth near nothing.
Why? As PJ O' Rourke put it best in his commentary of Adam Smith'sThe Wealth Of Nations: What Spain was doing was the equivalent of robbing a bank of its deposit slips rather than its money
Why were English enterprises (soon to become the U.S and Canada) successful while Spain failed? It was mostly by accident. While England failed at acquiring gold in its quest for the Americas, it acquired just the right amount(but not too much) by raiding Spanish ships. All the while its subjects engaged in profitable and productive pursuits such as farming ,fishing and metal work in the colonies.
Later again England did loot a great deal of gold from India to lubricate its industrial revolution. But do note the difference. Contrary to what some heavy breathing conspiracy theorists claim , the Rothshilds bank(which indeed financed a lot of imperial ventures but not all and also did lose a great deal of many on failed ones) did not steal trillions of dollars worth of gold in 1700-1800s. Because if it did
a) England would've ended up in the same fate of Spain economically
b) If they are lying around in gold vault as is claimed by the conspiracy theorists, it simply makes no sense for a shrewd investor like Rothschild not to make good use of this resource over time rather than let it rot.
Furthermore it is rather impossible move that amount clandestinely, especially after the fall of Tipu Sultan and the siege of his assets(which undoubtedly included gold stolen from Kerala temples) where there was a great deal of international interest in those wars due to Tipu's alliance with France and his friendship with the American colonists also fighting Britain.
But rather England and her daughter Americas benefit from the Scottish Enlightenment with its common sense views on freedom, economy and governance not to mention various scientific advancements rather than any gold bullion.
What precious resources did they have consisted of very productive North American farmland and livestock.
Especially cattle. It is not for nothing that the Latin word for money pecus also means cattle. Similarly Vedic tribes would measure their wealth in the number of cattle. So when a man from one tribe lifting cattle from another, it was often a declaration of war. This later became a more of a ritual when populations grew large enough to become empires such as Cholas and Chalukyas as late as the 10th century.
Just a currency note is simply a place holder for a national economy which is really an incredibly complex barter system and its value depends on the productivity of its citizens so is the value of gold on which many currencies are based dependent on its rarity.
On another note, the dollar moved away from the gold standard under the Nixon administration, thereby giving the Federal Government even greater powers to print fiat money hence creating runaway inflation. As an aside, the reason colleges in U.S costs have risen almost exponentially since the 1970s is not just the absence of gold standard but the availability of government funds and financial aid which in turn incentive high tuition fees
I'm afraid bringing this gold out will therefore have nothing but negative consequences. Imagine runaway inflation of the 1970s with African levels of corruption of violence.
I just don't see the upside.
I am cross posting to Sabhlok's comments board to see his take on the matter.
Anyone else here with a knowledge of economic history who imagines a different scenario , please let me know