If a mine discovered a vein of gold that contained 100 times the amount of gold that has ever been discovered before, what would that do to the global economy?
Is this a joke post or troll? The effect on 'the global economy' would be about nil. There might be discussion of resurrecting Gold coinage, but again: the effect on 'the global economy' would be about nil. Admittedly, I cannot prognosticate the hypothetical; I do think it's more useful to look backwards, into history. Has something similar happened before? Yes. Platinum (Pt) is far, far more useful than Gold (Au) ; there WAS a time in history when 'a discovery of 100 times the amount Pt ever mined before' did in fact occur. That's in 1825, near Perm (Russia). Prior to that date, nearly ALL the platina @ market (1786 - 1825) came from one small, remote, lightly-populated, rain-forest region of Colombia (Choco). That platina ore was exported via Cartagena or Buenaventura. Europe was producing ~60 kgs/ann., including recyled metal, >95% from that Colombian source. Between 1825-1830, Russia produced ~5,429 kgs of Pt, so call that 100x yes? You also might suppose the Pt price totally collapsed by 1830. 100x more Pt! Not so. As catalogue price-currents show, the retail price of Platinum in Europe & the USA did not fall because consumer demand for platinum (dental, battery, etc.) increased dramatically. For example, Platinum was ~USD $4.50/oz in 1814, ~$7.15 in 1828 and ~$10. in the 1830s. Is that counterintuitive to what most people would expect? Also note what I consider 'mostly coincidence' : 1) In 1825, the first recorded PM Bubble occurred. 2) In 1825, the first global financial crisis of the modern era occurred. 3) After 1825, deflation of the 1820s and 1830s was both marked and 'global' if erratic.
This pretty much just happened with diamonds with Russia announcing trillions of karats they've been sitting on since the 70's in a Siberian crater. I would just watch how that plays out.
It won't affect the jewelry diamonds prices. If the reserve diamonds ( retail quality) that are now held in storage by de Beers and the Russians and Canadians mines were all released on the market, they would have a horrendous effect, so that is why it isn't. All of the diamond mining countries have their own finger in the cartels, and they protect the prices. The Russian impact crater diamonds are rumored in the gem trade as not being of "gem" quality, but mostly the industrial side diamonds ( Russian press releases ) that are reduced to grinding diamond size.
I don't have any particular insights to the diamond question, but earlier this year I did hear an interesting "dinner table story" from a fairly wealthy commodity capitalist in global mkts. This elderly gentlemen was formerly a mkt-maker for J-M and then for the Bank of England, working as a key derivatives specialist/trader in the City looooong before any of us little people knew anything about that profession. Much more recently, as a principal exec he'd traveled to SA and met with senior ppl at De Beers by the early 1990s. He traveled to Russia too, and met with energy oligarchs in the mid-late 90s. On one later trip, after the Russians ascertained he did have significant connections at De Beers, he was escorted on a tour, shown giant bins of diamonds and informed there were three such warehouses, full of stones. He was asked to relay the message to De Beers, which he did; to his telling, De Beers soon after 'came to terms' with the Russians' demands (whatever those were.) He didn't claim to be 'the only messenger' nor the decisive link either. I'd presume a few others 'got the tour' as well. I honestly have no idea if any of this is true (I didn't ask for dates, proof, etc.) but this gentleman has been extremely successful, a self-made businessman on the most important energy mkts, co-owning a major concern for much of the past decade. That lends some credibility to the story IMO, but I imagine it's an oversimplification too. That the luxury diamond and industrial diamond mkts have NOT already collapsed (if this "100x supply" is approx. correct) reaffirms my point: the "global economy" will shrug, again.
So much gold would have an affect, but not a massive one. Places that mine gold would be hurt, as would gold exporting nations like south africa. Gold importing nations like India and Turkey would benefit on their current accounts, but a lot of savings would be wiped out so it would be both good and bad for them.
