Big Guns and the Power of Gold
Ask anyone what’s the best part of summer, and they’ll likely tell you “vacation.”
Whether your kids are out of school or not — or whether you even have kids — these warm, muggy months just seem like a great time to visit somewhere new.
Of course, this summer isn’t like any other. Coronavirus is still wreaking havoc… and everyone is being told they’re better off staying home, or at least not venturing too far.
Since I’m stuck, I’ve been musing on trips past… and the history I’ve encountered with my own eyes.
Many of my excursions have involved gold in one way or another — and I’m not just talking about the mining operations that I’ve toured (though I have toured many).
It fact, I’ve seen things in many a museum which have only reinforced my belief that gold is the ultimate way to preserve wealth.
That particular gold bar of truth feels especially relevant after the yellow metal recently hit $1,780 an ounce, a high it hasn’t seen 2011.
So let’s use a couple of my travel experiences to explore gold’s importance… and why it will continue to matter, despite what monetarists say.
Last summer (pre-virus, of course), I was in London, where I visited the British Museum. And as I walked the galleries my eyes fell upon this display:
Bredgar Hoard, Kent, England. British Museum.
These are 37 gold “aurei,” a type of Roman coin, They were discovered in 1965 at an archaeological site in England. They date to 41 – 43 A.D. and the Roman conquest of Britain.
According to the British Museum, these coins represent about four years of pay for a Roman legionary soldier.
Each coin contains about 8 grams of gold, so 37 of them makes for 296 grams of gold. Turn that into ounces by dividing by31 grams per ounce, and you get about 9.5 ounces.
Multiply 9.5 by gold’s recent price of $1,780 per ounce to get $16,996.
Since this coin stash represents four years of pay for a Roman soldier of old, per the Museum, you come up with a pay rate of about $4,249 per year.
This might seem low by current American income standards, but Roman soldiers weren’t technology-focused American soldiers. They were sword-fighting footmen.
And that $4,249 per year places an old Roman soldier at or above the per capita income ranks of many modern, developing nations, per the CIA factbook.1
Of course, these old Roman coins are near-priceless, considering their archaeological significance. They definitely belong in a museum.
But purely from the standpoint of the gold in the coins, they demonstrate how the yellow metal can preserve wealth and purchasing power, even over two millennia.
If ancient Rome and her legionaries is too far back in time for your tastes, let’s use a more recent analogy.
A while back — again, pre-virus — I was in Mobile, Alabama, where I visited the museum ship, USS Alabama (BB-60).
It’s located in Mobile Bay, just as you drive into Mobile along Interstate 10. She’s big and hard to miss.
USS Alabama park area.
There, I saw something that truly drove home the power of gold to preserve wealth over time.
The vessel is located at a military-themed attraction called, appropriately enough, USS Alabama Battleship Memorial Park. It’s a beautiful locale, carefully maintained and filled with World War II artifacts and more recent military exhibits. It’s a kid’s dream (including “big kids” like your editor).
USS Alabama is a World War II-era battleship. She was authorized by Congress in 1939; pre-war, but certainly built in anticipation of future hostilities.
Its keel was laid in the Norfolk Navy Yard, on Feb. 1, 1940. The ship was launched on Feb. 16, 1942. (Two years to construct — that’s just amazing!)
She’s 680 feet long and displaces about 35,000 tons. Here’s a partial shot of the ship:
Battleship USS Alabama (BB-60), Mobile.
Alabama is big. She carries nine main 16-inch guns in three turrets. Each barrel can fire a shell that weighs 2,400 pounds out to about 50,000 yards (25 nautical miles).
Alabama also carries 20 5-inch guns, which fire shells that weigh over 70 pounds each. And 24 “Bofors” guns, at 40mm barrel diameter. Plus 22 “Oerlikon” cannons to shoot 20mm rounds.
In essence, Alabama was designed to bombard targets while defending herself against air attack. This is truly a warship’s warship, built of incredibly strong steel and draped with armor plate — “jewelry steel,” as Navy metallurgists used to call it.
Despite her immense size, Alabama could cut water at over 27 knots (more than 30 miles per hour). Propulsion was via four manganese-bronze screws, turned by steam turbines that delivered over 130,000 horsepower — a lot of ponies!
Alabama served through World War II, first in the Atlantic theater, then in the Pacific. All in all, Alabama earned nine battle stars. She was decommissioned in 1947, after just five years of service life.
In 1964, Alabama was towed to Mobile to become the centerpiece of the current park. She’s now a national historic landmark.
I could spend all day discussing the astonishing materials and engineering of Alabama. Everything about her was the “best” that U.S. science, engineering and industry could produce, circa 1940. The best steel and armor, best brass and copper, best electrical and mechanical engineering…
USS Alabama is a monument to a different time in America, to a different way of thinking. It’s a legacy of a different kind of people who have long since passed on. Indeed, this mighty vessel represents a different view of the world, with different outlooks and different kinds of materials.
In other words, constructing something like this battleship is a lost art. Lost knowledge and skills in terms of design, engineering, naval architecture, shipbuilders’ arts and even the naval warrior’s mind that created this massive hull out of ores from the Earth — mostly from U.S. mines and U.S. earths, I should add.
It’s good that the ship is now a floating museum because… frankly… I doubt that the U.S. could duplicate it any more.
All of which brings me to the key point, here… How much did it cost to build USS Alabama?
You sitting down?
The cost to construct USS Alabama was… $80 million back then.
No typo. Eight-zero-million dollars. For a “Battleship, Quantity 1” as contracting officers are wont to note when engaging in procurement.
At first, it seems like a crazy number. Only $80 million? For a 680-foot long, 35,000-ton battleship with nine 16-inch guns and all the rest of the warfighting gear? Seems like the wrong number…
By comparison, just across Mobile Bay, Austal shipyards are currently constructing new “littoral combat ships” (LCS) for the Navy, at a (current) cost of over $500 million each.
New-build littoral combat ship (LCS) at Austal yard, Mobile.
And what does that $500 million get you?
LCS has no armor — zero. Its main armament is a tiny, 57mm gun that can shoot accurately to perhaps 8,000 yards. See it in the photo above; it’s sure no battleship, and for only eight times the nominal price!
Different times, different ships, to be sure. This is 2020, not 1941.
And very different “dollars” between then and now.
When Alabama was under construction 80 years ago, the U.S. didn’t just have the ability to make incredible steel and roll 18-inch armor. The U.S. still had a monetary mindset based on gold… and the price of gold in 1941 was $32 per ounce.
Let’s do some math.
Divide the $80 million cost of the battleship by $32 per ounce of gold… and you get 2.5 million ounces of gold.
In other words, the U.S. government dedicated the equivalent of 2.5 million ounces of gold — in terms of materials and labor — to build USS Alabama.
What’s that same 2.5 million ounces of gold worth today? For simplicity’s sake, let’s use $1,750 per ounce instead of its recent highs.
Take 2.5 million ounces of gold, multiply it by $1,750 per ounce and you get… $4,375 million — or $4.4 billion, if you prefer.
OK, that’s more like it… Well over $4 billion to build a battleship like USS Alabama, with all the steel, armor, big guns, propulsion and more. (That is, if the U.S. could do it as a matter of industrial capacity, which we can’t… but let’s not dwell on that.)
So the “$80 million” battleship from 1941 is now a $4 billion asset, in terms of equivalency of money over time.
Here’s another way to look at it. Today, gold is priced at over 55 times the number back in 1941.
Another comparison is the current cost of a “capital” ship like a modern aircraft carrier. The Navy’s recently built USS Ford-class aircraft carrier cost about $15 billion, almost four times the price-adjusted cost of battleship USS Alabama.
Like the Roman gold coins discussed above, the far more recent USS Alabama illustrates how gold represents preservation of value over time. The $80 million ship from 1941 represents over $4 billion today.
And whether it’s coins or battleship-equivalents, using the measure of gold demonstrates the comparative value over time, then and now.
When we look at USS Alabama today, we’re peering into a time machine. We see steel and machinery fabricated by people long gone. Only that steel and machinery remains of them… Their thinking processes, designs, materials, supply chains, labor and ethics from three and four generations ago.
It’s important to understand how vastly different things are today versus 1941. Indeed, per the writer L.P. Hartley, “The past is a foreign country; they do things differently there.”
But for all the time and experiences that separate us today from the past… there’s one thing that absolutely withstands the test of time.
It’s that gold will hold value over the long haul.
In this regard, you must own gold — “real metal.” You need your own physical gold (and yes, silver). Both are critical elements to protect against monetary and financial uncertainty.
The recent price move with gold could be your final call. If you’re not onboard with yellow metal, the price could take off without you.
So I once again urge you to consider acting now.
There are many ways to buy gold, both online and at local sellers in most cities. But let me mention again a group called the Hard Assets Alliance (HAA), which deals in precious metals.
Hard Assets has in-stock supply right now, with among the lowest premiums in the business and the easiest website interface to navigate, bar none.
(Note: Agora Financial owns a share in HAA. We’ll collect a small cut if you open an account and buy. But we wouldn’t have made that deal unless we liked how they treated their customers to begin with.)
Whatever you decide to do — and however you get some gold — it will protect you over the long haul, HAA is set up to buy, sell or hold. HAA can either deliver precious metal to you or store it for a competitive fee. HAA has secure vaulted storage in numerous locales. That way, if you store with HAA, you don’t have to worry about security on your own premises.
I used to say that gold’s next big upswing will happen when it happens…
But it sure looks like the move is happening now. And it’s likely to happen fast.
Use the current period to buy gold while it’s available. There are many ways to do this, including using HAA.
Get rolling! And if you wait too long, you’ll be chasing momentum.
But if you get in ahead of the crowd, you could use your gold to fund your future summer vacations, whenever we’re allowed to enjoy them again.
On that note, I rest my case.
That’s all for now… Thank you for subscribing and reading.
Managing Editor, Whiskey & Gunpowder
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