WARNING: THE FOLLOWING ARTICLE CONTAINS SPOILERS
A few weeks ago, I watched a great film called Puss in Boots. In the movie, Puss teams up with the infamous feline burglar Kitty Softpaws and his childhood frenemy Humpty Dumpty to steal the golden goose and save their hometown, San Ricardo, to make their foster mother proud. They eventually succeed, and the villagers of San Ricardo get a golden egg each, while Puss regains his honour and is a town hero once again. Although the golden goose is ultimately returned to its home in the movie, I immediately questioned whether having a real life golden goose, and thus a nearly limitless supply of gold would have serious economic impacts on a society.
Let’s start with some maths. In the film, each golden egg laid by the goose appears to be solid gold, and is roughly the size of a small watermelon. Thus, each egg is around 10cm in diameter and 4200cm cubed, or 81.1kg of gold. 81.1kg of gold is roughly worth £4.2 million. Based on my interpretation of the movie, the goose lays around 1 egg every 15 minutes, meaning in a single day, the goose produces around 7.8 tonnes or £404 million in golden eggs. The latest estimate for the amount of gold left unmined in the world is 57,000 tonnes, meaning the golden goose would double the world’s total amount of available gold in 20 years. This would undoubtedly have an effect on the market for gold, but how severe would the implications be?
Firstly, the increased supply of gold would cause the price of gold to fall, as excess supply results in firms selling gold to have to lower the prices in order to encourage consumers to buy gold. This fall in the price of gold would have a disastrous effect on the mining industry. Hundreds of mining operations would become unviable, meaning nations reliant on gold mining would experience severe downturns. Although China and Australia produce the most gold in the world, countries like Peru, South Africa and Kazakhstan would be most adversely affected, as gold takes up a large percentage of their total outputs. These nations would experience significant falls in real national output and exports, meaning nations worldwide could fall into recession. This would inevitably lead to worldwide consequences, as the market for gold and mining is international. As a result, hundreds of nations worldwide could experience decreased national output and decreased imports, specifically from nations with large mining industries. This reduction in output would have considerable negative human impacts, as several nations would experience decreases in the quality of life of their citizens.
Several economies would also have to change their monetary systems. Although no currencies are linked to the gold standard anymore, gold is considered an asset against inflation. As a result, nearly every country in the world has a significant gold reserve. For example, the US Federal Reserve holds over 8,000 tonnes and the Bank of England holds around 300 tonnes. The existence of the golden goose would also cause governments and gold owners worldwide to change their reserves, meaning prices of gold substitutes and other commodities like silver, nickel, cobalt, real estate and even cryptocurrencies would increase. As a result, the increased supply of gold would have an intricate effect of several commodity markets, and would force governments to develop other types of national reserves. This process would take several years to fully execute, meaning monetary systems worldwide would be gradually changing for decades. In the meantime, countries may be more vulnerable to inflation.
The uses of gold would also eventually change. The large supply of cheap gold would lead to gold replacing copper as the metal conductor used in electric installations, as gold is a superior choice for use in electronics. This is because gold doesn’t oxidise and is more ductile than copper. As a result, gold would become a more regular material for use in the electronics industry. Moreover, the jewellery market would be considerably affected, as products containing gold would lose value. As jewellery is a Veblen good, the reduction in the price of jewellery containing gold would significantly decrease the quantity of products containing gold sold. In the long term, gold would therefore become far less used in the jewellery industry. Other industries that use gold, such as dentistry, medicine and aerospace engineering would also be affected, with all three experiencing reductions in the costs of production as a result of a cheaper supply of gold. Furthermore, the golden goose would have a large effect on the gold trading market. Currently, gold is the 4th most traded commodity, and it offers more price stability than the top 3 (in order: crude oil, coffee and natural gas). Thus, the decrease in the price of gold would be catastrophic for gold traders worldwide, and would cause the gold trading market to drastically reduce in size.
On the whole, a real-life golden goose would be disastrous for economies all over the world. Although the situation would’ve been much worse a century ago, as many major currencies were directly linked to the gold standard, the modern-day implications would be severe and fairly long-lasting. Due to this, the goose’s safety would have to be guaranteed. If the goose wasn’t under government protection, Russia’s Wagner Group (a military organisation with ties to gold mining) and several other military and government organisations would possibly be interested in an assassination attempt, meaning the goose’s impact on the gold market worldwide may be short-lived after all. In the movie, Puss and the villagers of San Ricardo handle the situation very well, by taking a limited supply of gold from the goose, before returning it home with its mother, enabling them to boost their disposable incomes while not crashing the local economy. I’m sure Puss and the villagers talked through the economics of the situation before taking action. Unfortunately, the discussions didn’t make it into the final cut of the film.