The World’s Savviest Investors Are Loading up on Gold
The World’s Savviest Investors Are Loading up on Gold By David Forest for Casey Research
Most people don’t know it, but Britain’s Industrial Revolution in the 1700s was funded by an unusual source.
In 1693, some of the biggest gold discoveries ever seen were made in the Brazilian jungle. The discoverers were Bandeirantes, the equivalent of American cowboys. They were Portuguese adventurers who roamed Brazil’s difficult wilderness seeking fortune.
The discovery of Brazilian gold caused the first recorded gold rush – the first time people moved en masse to chase a rich mining find.
One particular Brazilian town became the focus of this frenzy. It’s named Ouro Preto, or “black gold” in Portuguese. Today, it’s a tourist town a couple of hours outside Brazil’s modern mining center, Belo Horizonte. Back then, it had a population larger than the New York of the time.
Ouro Preto’s gold production surged, and the Portuguese government moved to take its cut. Authorities imposed a 20% duty on all gold production, called the “Fifths Tax.”
Portugal ended up with more gold than Spain got from all its South American colonies combined – vaulting the tiny country to prosperity.
But the gold didn’t stay in Portugal for long. In 1703, the country signed the Methuen Treaty with Britain. This facilitated trade between the two nations. The idea was Portugal would buy British textiles and manufactured goods, while the British would purchase Portuguese wine.
The resulting trade, however, was one-sided. Flooded with gold, Portuguese importers bought way more product than the British. The result was a massive outflow of gold from Portugal to British manufacturers.
By some estimates, a full two-thirds of Brazil’s gold windfall ended up in the U.K. Historian Nuno Palma estimates Portugal shipped out gold worth 45 million British pounds between 1700 to 1790. Adjusted for inflation, that’s $169 billion in gold.
That massive wealth injection funded Britain’s continued industrialization. By 1740, the supply of gold coins circulating in the U.K. more than doubled. The British textile industry boomed. Manufacturing became increasingly mechanized and sophisticated.
This spawned new industries and products. Steam power, modern iron working, cement, gas lighting, continuous paper production, and industrial chemicals were all born in the boom funded by Brazilian gold.
Some historians argue this was the greatest increase ever for standards of living in the Western world.
Today’s Industrial Revolution Is Being Funded by Debt
Today, groups like the World Economic Forum believe we’re at a new industrial revolution. World-changing trends are unfolding, such as 5G communications, cloud computing, Internet of Things, electric vehicles, artificial intelligence, and renewable energy.
These brand-new sectors are potentially worth trillions of dollars. They’re reshaping the entire planet – not just the developed world.