The Age of Gold (67 page)

While Hargraves panted for gold, his guide and their horses were panting for water. The summer’s drought had dried up the creek whose bed they were walking. But the boy said there was water farther along, and Hargraves, knowing he would need water to work his magic, consented to continue till they found it. When they did, the boy assuaged his own thirst and that of the horses while Hargraves prepared the crucial experiment. He employed a pick to knock some gravel and dirt off an outcropping; this he troweled into a pan. He took the pan to the water hole and proceeded to wash it, just as he had washed thousands of pans in California.

The very first trial yielded the telltale flash. “Here it is!” he exclaimed. Hurriedly he washed five more pans of dirt. All but one produced gold.

“This is a memorable day in the history of New South Wales!” he told his guide. “I shall be a baronet, you will be knighted, and my old horse will be stuffed, put into a glass case, and sent to the British Museum!”

Nobility eluded Hargraves and the boy, and the horse escaped taxidermy; but New South Wales experienced everything Hargraves envisioned. Dubbing his find “Ophir,” he broadcast the news to the world, and within months a rush to southeastern Australia was under way. The new rush recapitulated the madness experienced on the Pacific’s opposite shore. Sydney and Melbourne were drained of their populations before argonauts from overseas arrived (many of them, like Hargraves, Australians returned from California). “Cottages are deserted, houses to let, business is at a stand-still, and even the schools are closed,” reported the lieutenant governor of Victoria. As at San Francisco, abandoned ships clogged the harbors; as in the Sierra foothills, towns of two thousand, five thousand, ten thousand souls appeared wherever gold did. The miners of Australia behaved about as the miners of California did. “They are intoxicated with their suddenly-acquired wealth, and run riot in the wildness of their joy,” observed an Englishman, John Sherer, who was bent on much the same behavior himself. As in California, the surge of newcomers overwhelmed the aboriginal peoples; as in California, the explosion of wealth made every man the equal—in prospect, at least, and hence in his own mind—of the heretofore most favored. “As riches are now becoming the test of a man’s position,” remarked Sherer, “it is vain to have any pretensions whatever unless you are supported by that powerful auxiliary.”

HARGRAVES’S DISCOVERY IN Australia demonstrated that gold in rush-causing quantities wasn’t an American monopoly. California had revealed what gold geology looked like; Australia showed that it could be found in other parts of the world. For centuries before 1848, the search for gold had been a haphazard affair, with lucrative finds so rare as to prevent all but the most desperate or deluded from making a habit of the hunt. But
during the second half of the nineteenth century—which was to say, during the first half century of the age of gold—prospectors fanned out across the planet. They found gold (and silver) in Nevada in the late 1850s and 1860s. They found gold along the Fraser River in western Canada during the same period, and along the South Platte near what would become Denver. They found gold in Montana in the 1860s. They found gold (and diamonds) in South Africa in the 1880s and 1890s. They found gold on the Yukon River in Canada and Alaska, and on the beach at Nome, and in western Australia, and in eastern Siberia, during the 1890s.

George Hearst wandered less far, but had hardly less success. The payouts from his (Nevada) Ophir tempted his neighbors, who brought lawsuits regarding the ownership of veins that, while separate at the surface, entwined underground. The litigation was horrendously expensive; one suit involving the Ophir set the litigants back more than a million dollars. (Hearst’s head litigator alone received $200,000 per year in fees.) Nor were the lawyers the only ones making money. A story that circulated around Carson City almost certainly embroidered the truth but nonetheless caught the spirit of Nevada justice. In a lawsuit between two mines, according to this tale, a lawyer named Cinc Barnes managed to sell his special expertise—jury-rigging—to one side after the other. He alternately persuaded each party that the fix was in, and that a favorable verdict would follow. He simultaneously leaked the information to stockjobbers, driving up the share price of the one company, then the other, and allowing him to make a killing in each. With some of his loot he paid off the jury, by a fittingly frontier method. The foreman of the jury would lower an empty boot from a window of the room where the jurors were sequestered; Barnes would fill the boot with gold, and attach a note identifying the donor as one party to the suit or the other. The jurors weighed the new evidence, literally, as it came in, until they decided they had enough, when they delivered their verdict. (Precisely how they determined the winner is unclear.)

In time Hearst’s Ophir began to play out, prompting him to seek opportunity elsewhere. He dabbled in San Francisco real estate, an occupation that proved mildly profitable—and far more attractive to Hearst’s
wife, Phoebe, than the rough existence of mining camps—but ultimately unsatisfying to the Boy (now Man) The Earth Talks To. Hearst was never happier than in the field, breaking rocks with his hammer and filling his saddlebags with specimens. One trip took him to the geologically confused region where the Wasatch and Uintah Mountains collide, just southeast of Salt Lake City. A prospector there had grown frustrated trying to develop a claim that had seemed promising at first but now failed to produce. Hearst saw more than the owner did, and bought him out for $30,000. The mine, called the Ontario, yielded mostly silver, and that only with difficulty. Yet Hearst was a master of difficult rock, and although developing the property nearly drained him—he spent a million dollars before making a nickel—in time the Ontario returned $75,000 per month.

Another man—one less confident of his mining acumen, or less addicted to the gamble of mining—might have rested on the stunning success of the Ontario. (Phoebe wished he would, especially as she had no desire to live among the Mormons. Consequently, while George directed the development of the Ontario, she decamped for Europe, where she spent many months enjoying all that George’s wealth could purchase in the way of culture for her and education for their ten-year-old son, William Randolph.) But Hearst always had to search farther, to listen to what the earth was telling him.

In the 1870s the earth called him to the Black Hills of Dakota. A reconnaissance expedition under Colonel George Custer had discovered gold in the Black Hills; this set off a rush to the region, which provoked resistance by the Sioux, who considered the Black Hills sacred, and who had been promised the region as part of the settlement William Sherman encouraged by threatening the utter destruction of the Sioux nation. Custer led a contingent against an Indian army headed by Crazy Horse and Sitting Bull; at the Little Bighorn in June 1876, Custer met an annihilating defeat.

Yet the Sioux couldn’t keep the miners out of the Black Hills any more than the Yosemite Indians had kept miners out of the Mother Lode; and Hearst joined the rush there. According to family lore, Phoebe was getting terminally tired of his chasing after new discoveries, and particularly of his
habit of gambling everything they had on his latest find. “George,” she said, while he was packing for Dakota, “if you find a good mine, let’s have it as a homestake.” “Puss, we will,” he agreed. “We’ll call it the Homestake mine.”

Phoebe was right to worry that the Black Hills would swallow most of Hearst’s money, for within months he and a partner had bought some 250 claims, covering an area of 2,600 acres. The ore was very poor by Sierra or Comstock standards, averaging less than four dollars of precious metal per ton. But the veins were hundreds of feet thick, and could be quarried rather than mined. The scale of operations dwarfed anything in California or Nevada; eventually 600 stamps were employed to crush the ore, manned by the workforce of a company town that sprang up to service the Home- stake.

The returns were commensurate with the investment. The Homestake turned a profit in 1879; during the next twenty years it yielded $80 million. At the beginning of the twentieth century it was the heaviest producer of gold in the United States, and remained so for several decades. It continued to produce gold until the beginning of the twenty-first century, when it was finally closed.

A
LTHOUGH HEARST COULD
have been forgiven for forgetting it, especially after the gold of the Homestake made him one of the wealthiest men in America, all that yellow metal wasn’t really wealth, but merely a marker for wealth. King Midas knew the difference, but, human nature being what it is, his hard-won insight was often forgotten.

In 1776, the same year that the father of Mariano Vallejo helped Junípero Serra establish the presidio at San Francisco, Scotland’s Adam Smith published a book entitled
Inquiry into the Nature and Causes of the Wealth of Nations
. Smith wrote during an era of official amnesia regarding the Midas insight; the conventional wisdom of Smith’s day equated national wealth, and the power wealth could purchase, with stockpiles of gold and silver. British imperial policy sought to secure for the mother country as much precious metal as possible, even at the expense of Britain’s colonies (
especially
at the expense of Britain’s colonies, it seemed
to Thomas Jefferson, who penned the other landmark manifesto of that pregnant year: the American Declaration of Independence). Smith contended that this mercantilist thinking was wrong. National wealth, he said, consisted not of gold and silver but of goods and services people could actually use. The wealthiest nation wasn’t the one with the fullest coffers, but the one with the most productive people—people busy producing (and consuming) bread and beer and boots and books and bonnets and (the example dearest to Smith’s heart) pins. If gold helped a nation become productive—that is, if gold stimulated commerce—then it served a beneficent purpose. If it strangled commerce, it might better be thrown into the sea.

Smith’s ideas required time to take hold in Britain. Not till the middle third of the nineteenth century did the British government abandon mercantilism in favor of free trade. (One of those responsible for the conversion was John Bright, the uncle of the frustrated buccaneer who partnered with Asbury Harpending.) Britain’s embrace of free trade was an essential element in the ascendancy of its empire during the long Victorian period, a time when the small island attained astonishing sway over a remarkably large patch of the planet. British merchants penetrated nearly every market; British industrialists led the world into the modern era of urban plenty. (Urban poverty existed alongside the plenty, as Charles Dickens and many others noted.)

Yet Britain’s new free-trade power rested on gold fully as much as its old mercantilist power had, albeit in a different way. The British hewed to a gold financial standard, largely because in an otherwise uncertain world the solidity and stability of gold offered crucial reassurance to the deep- pocketed investors who were being asked to send their wealth to the far corners of the globe. Britain’s initial adherence to the gold standard had been a bit of an accident, the result of one of Isaac Newton’s few miscalculations. As master of the royal mint, Newton in 1717 set the price of silver too high, thereby prompting people to hoard their silver coins and pay their debts with gold. Silver gradually disappeared from circulation. Eventually Newton’s error came to seem inspired, and in 1821, Britain’s de facto gold standard became de jure.

Other countries were less intrinsically enamored of gold, but as British trade expanded, so did the reach of the gold standard. Germany followed Britain’s example in embracing gold; as one of the architects of Berlin’s new policy explained, “We chose gold not because gold is gold, but because Britain is Britain.”

Germany also chose gold because the discoveries in California and elsewhere made such a choice possible. The purpose of money is to lubricate trade: to allow bakers and brewers and chandlers and hostlers to do business with one another without having to resort to barter. For trade to increase, the money supply has to increase. (Otherwise prices fall, discouraging producers from producing.) In modern economies, central banks adjust money supplies to suit the needs of commerce. Under the regime of the gold standard, however, adjustments were essentially fortuitous, dependent on the world supply of gold. The gold strikes in California and Australia and elsewhere greatly augmented the world’s available gold supply: credible estimates asserted that in the quarter century after Coloma, more gold was mined around the world than had been mined in the previous 350 years. All this gold amply lubricated world trade and allowed other countries to join Britain on the gold standard.

The United States gravitated toward gold for the same reason Germany did. Much of the money for America’s industrial expansion—including the construction of the Pacific railroad and other rail lines—came from Britain. British investors insisted on receiving their payments in gold; this encouraged those American individuals and groups soliciting British investment to insist on receiving
their
payments, from their domestic customers, in gold as well. The only way to guarantee this was to have the government make gold the basis for the American dollar.

But gold wasn’t as beloved of the rest of the population as it was among the bankers. Bankers, being creditors, benefit from a strong dollar, one that can purchase at least as much on repayment as at the time of lending. Debtors, by contrast, prefer a weak dollar, one that is worth less at repayment than when borrowed. Farmers are typically debtors, needing loans for land, equipment, seed, and workers’ wages; and the large portion of farmers among the American population in the nineteenth century tended to
favor a weak dollar. (If a farmer borrowed $100 when a dollar bought one bushel of corn, he had to grow 100 bushels to repay his debt. If the dollar grew stronger, for example to where it bought two bushels, he had to grow 200 bushels to redeem his debt. If the dollar weakened, to where it bought only half a bushel, he had to grow just 50 bushels.)