How does mining gold create new wealth?

Back in the late 1970s when predictions of economic doom and gloom were very popular, I read some of those books lauding the gold standard. In a lot of ways it makes sense to have money back up by some type of universal standard and store of value.

But I kept thinking -- if gold is true wealth, then the only way to create new wealth for the world was simply to mine gold. How did digging more of that yellow metal out of the ground add to the wealth of the world?

How does getting rid of that yellow metal destroy wealth? Does the world's supply of food or industrial capacity change if some gold is sunk to the bottom of the sea as when Spanish galleons were sunk by British ships during the 1700s?

There seems to be no comforting, solid yardstick for financial value. Everything is relative, including currencies. The value of the U.S. dollar can go up today against the Japanese yen but down against the euro. Tomorrow it may be the opposite. It's totally out of our control, but has very real consequences for businesses, consumers and travelers.

Yet as long as people are able to get their needs and desires met, the economy is functioning. And new products and innovations keep expanding our options and therefore our wealth. The real store of value is the "means of production" coupled with the ability to market what's produced to the end consumer. Consumer desires do change, so the challenge for businesses and investors is to keep up with that.



gold standard
gold standard