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Goldman’s business practices as ethical or unethical
Goldman’s business practices as ethical or unethical
1) Argue whether you consider Goldman’s business practices as ethical or unethical.
In light of the magnitude and possible links of the of the recent global economic crisis to the negligent conduct Wall Street player, everybody would be forgiven for reprimand to whomever the slightest blame is directed. The agony and anguish that the negligent behavior of one or a few individual players occasioned to hundreds of thousands of innocent victims across the globe is certainly not worth any explanation from any quarters of a corrupt system. The economy of the United States is perhaps the backbone of the entire global economy and without doubt depended by a large following around the world.
This implies that the responsible players at the helm of its management should operate its functions devoid of the slightest mistake that could cause a multiplier effect of unpleasant results across the board. Flouting basic business ethics in such a sensitive system could perhaps amount to the worst ethical bleach of this age. Informed from such a global perspective, this section of this discourse assesses the conduct of one of the players at the helm Wall Street to find its credibility from a business ethics perspective (US Senate, 3).
Operations of the Wall Street are largely accused of the downfall of the US economy from 2008, due to unprecedented departure from safety lending regulations particularly in the financial services sector. The most affected were mortgage, debt and stock markets whose effect spilled over into the other financial institutions in such a rate that almost paralyzed the entire economy. Sooner than later, the global economy were feeling a pinch of the spiraling impact. A leader in the mortgage business was perhaps more responsible than many more players in the market. Goldman Sachs happened to be one of the main two players in the infamous mortgage market immediately before the collapse of the Wall Street in 2008, alongside Deutsche Bank. The conduct of Goldman Sachs in terms of ethical responsibility it had to observe demonstrates incompetence due to a number of abuses.
Firstly, the manner in which mortgage and other related securities were handled in the unstable market left a lot to be desired (Griffin, 94). Goldman Sachs participated in the design of a risky complex securities system whose failure orchestrated the downfall of several aspects of the market. The mortgage instruments designed by Goldman Sachs and other players were complicated in such a manner that the derived securities became more valuable than the original instruments of trade in the market. Goldman Sachs was aware of the fact that risk handling could only be well handled if the system was clearly defined with minimal technical complexities but continued to design a more complex market system. The sale of the designed securities to a wide investor network around the market further spread the risk which was apparently quantifiable in the beginning and in the knowledge of Goldman Sachs.
In addition, the undying desire for profits by the banks created room for a dangerous market trend by allowing a loss cushion for trading in the created securities. By designing a system where counterparties could wager performance of a security on either fall or rise, Goldman Sachs participated in the generation of a dangerous system where such a volatile arrangement attracted uncontrollably high number of transactions greedily driven by profits (US Senate, 8). Besides, Goldman Sachs went further ahead allowed transactions that did not scrutinize transactions that had elements of conflicts of interest. Committing to deal in trading for both profitable and loss causing transactions by Goldman Sachs demonstrates financial negligence of the highest order.
Rushing to cash off its short positions upon realization of how dangerous the market course appeared ahead is in bad faith for the business fraternity. In more than one occasion, its concealment of financial facts relating to transactions cost the investors a significant amount of consideration while making unjustifiable scrupulous profits at the expense of the unsuspecting investors. Such cases included Anderson’s, Timberwolf’s, Abacus’ and Hudson’s where Goldman Sachs took advantage of the investors to make unfair and ethically unclean deals out of the transactions.
Alternatively, despite the high risks involved, Goldman engaged its clients in effecting lending deals and underwrote trading instruments by way of lending originating from subprime institutions notorious for high risks. By encouraging the poor lenders to continue with their volatile system of transactions and incorporating them in its own globally extended system, Goldman Sachs was throwing the global economy to the dogs. Despite the high indication of mortgage market irregularities and uncertainty in 2007, it continued to operate in the business of lending by characteristically engaging in more risky lending (Harper, 1). The author reports that being found guilty of fraud and subsequent fining of $ 550 is an indication of more possible responsibility in the scam.
2) Where exactly is the ethical line that Goldman crossed or did not cross?
To be precise, an analysis of the case by Goldman Sachs enables the isolation of basic ethical misconduct areas that it ventured into. Firstly, the most important flaw that the bank orchestrated is directly related to risk factors. The low risk practice is a vital financial market regulatory directive that conspicuously appears to be in contention and gravely defied by the bank. By engaging in plainly risky mortgage business and attracting such trading as would have precipitated risky trading leaves a huge question on the commitment of the bank to comply with this regulation. Appearing to facilitate the same risky behavior through support of suspicious securities shows acceptance of risky financial practices by Goldman Sachs (US Senate, 14). Secondly, formulating a complex market appears to be an indirect creation of a volatile market that cannot retain risks which was a major misgiving of Goldman Sachs. By instigating the risky network of uncertainty in securities trading, the bank was opening up loopholes for abuse of unsuspecting investors.
Thirdly, creation of high risk products in the financial products, however simple the system is, is a definite wrong and a forbidden practice in the financial market. From the conduct of the bank in accelerating the design of new products from existing risky ones sends the wrong picture of a committed financial player. Goldman Sachs failed by allowing secondary securities to hold significance despite the downward trend of the main mortgage products.
Works Cited
Griffin, Ricky W. Management, Mason, OH: Cengage Learning, 2010. Print
Harper, Christine “Goldman Sachs Says it Bought Too Many Illiquid Assets Before 2008 Crisis,” 9 February 2011. Web. HYPERLINK “http://www.bloomberg.com/news/2011-02-09/goldman-sachs-says-it-bought-too-many-illiquid-assets-pre-financial-crisis.html” http://www.bloomberg.com/news/2011-02-09/goldman-sachs-says-it-bought-too-many-illiquid-assets-pre-financial-crisis.html (accessed 3 May 2011)
US Senate, “Wall Street and the Financial Crisis: Anatomy of a Financial Collapse,” 13 April 2011. Web. HYPERLINK “http://hsgac.senate.gov/public/_files/Financial_Crisis/FinancialCrisisReport.pdf” t “_blank” hsgac.senate.gov/public/_files/Financial_Crisis/FinancialCrisisReport.pdf (accessed 3 May 2011)
Goldman Sachs Fraud Case
Goldman Sachs Fraud Case
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Table of Contents TOC o “1-3” h z u HYPERLINK l “_Toc264926934” Table of Contents PAGEREF _Toc264926934 h 2
HYPERLINK l “_Toc264926935” Abstract PAGEREF _Toc264926935 h 3
HYPERLINK l “_Toc264926936” 1.0 Introduction PAGEREF _Toc264926936 h 4
HYPERLINK l “_Toc264926937” 2.0 Goldman Sachs Company PAGEREF _Toc264926937 h 6
HYPERLINK l “_Toc264926938” 2.1 Historical Background PAGEREF _Toc264926938 h 6
HYPERLINK l “_Toc264926939” 3.0 Goldman Sachs Company Fraud Case PAGEREF _Toc264926939 h 7
HYPERLINK l “_Toc264926940” 3.1 Implications of Goldman Fraud Case PAGEREF _Toc264926940 h 9
HYPERLINK l “_Toc264926941” 4.0 Conclusion PAGEREF _Toc264926941 h 11
HYPERLINK l “_Toc264926942” 5.0 Recommendations PAGEREF _Toc264926942 h 12
HYPERLINK l “_Toc264926943” 6.0 References PAGEREF _Toc264926943 h 14
AbstractOperations in financial institutions have over time been compounded with various complexities. The purpose of this paper is to review the impacts of fraud cases on how they can be prevented in light of Goldman Sachs Company. It reviewed various contributions to the subject under review by a host of authors. Findings indicate that the implications are wide and varied and range from economic losses at different levels to loss of credibility within the legal sphere and immense psychological effects to victims. The paper concluded that more than ever, financial institutions are liable to incidences of fraud. In order to curb similar malpractices, the Securities and Exchange Commission needs to be empowered to effect different policies in a timely manner. Besides, transparency and accountability needs to be enhanced at all organizational levels.
1.0 IntroductionIt cannot be disputed that globalization has had various effects on different facets of the corporate environment. More than ever, the commercial environment has increasingly become diversified in different ways. The free flow of products and information across the globe led to the emergence and development of the service industry. The service industry within the commercial sector offers a wide range of products to the consumer base. This is however also compounded by various complexities that undermine its credibility and ability to offer quality services.
In particular, the financial sector has suffered various shortcomings that stem from its inability to uphold utmost transparency and accountability. While this is partly contributed to by advances in technology, it is in most instances attributed to lack of credible systems within the respective organization. The sensitivity that is associated with financial dealings has further made it difficult for the affected organizations to secure the trust of clients once they have fallen victims of these shortcomings. This has culminated in immense losses in the financial sector and further curtailed the growth of the same. Perhaps the most critical issues pertain to the relative ethical concerns. Emergent research indicates that the surrounding ethical concerns have far reaching implications on the performance and overall credibility of the affected organization (Ellis 37).
Incidences of fraud in the financial sector have particularly been on the rise in the recent past. These have been contributed to by technological advancements and have led to significant financial losses. In most cases, employees of the financial institutions at different levels have been on the spot light for failing to undertake necessary precautionary measures to prevent the occurrence of such incidences. Together with the criminal investigation agencies, the media has also played a critical role in highlighting the concerns and educating the public about practical measures that can be undertaken to curb the practice. Despite this, research indicates that the incidences continue to be experienced in the financial sector.
Notably, this has affected various financial institutions at both the national and international levels. One of the organizations that have been under intense criticism for failing dismally to prevent fraud within its operations is Goldman Sachs. This paper analyzes ways in which the Goldman Sachs fraud case affects entrepreneurial activity, business ethics and trading activities. Various researches have been done concerning the topic and most of this has been brought forward by its prominence and dominance in the global market. This research paper will investigate and analyze whether, and to what degree, the fraud case affect Goldman Sachs entrepreneurial activity, business ethics and trading activities. The scope of this paper will cover the aspects of the fraud case in the company and ways in which it affect organization and entrepreneurial performance, productivity, and global trading. It will also consider possible solutions to the problem and ways in which it can be prevented in the future (Lange& Powell, 65).
2.0 Goldman Sachs Company2.1 Historical BackgroundGoldman Sachs is a financial and investment organization that is involved in global investment banking and securities .The firm participates in HYPERLINK “http://en.wikipedia.org/wiki/Investment_banking” hinvestment banking, HYPERLINK “http://en.wikipedia.org/wiki/Securities” hsecurities sales and management, HYPERLINK “http://en.wikipedia.org/wiki/Investment_management” hinvestment management, and other monetary services principally with institutional clients. The organization was founded in 1869 by Marcus Goldman and its headquarters are located in New York City at HYPERLINK “http://en.wikipedia.org/wiki/200_West_Street” h200 West Street in the HYPERLINK “http://en.wikipedia.org/wiki/Lower_Manhattan” hLower Manhattan area (McGee 47). At the moment the company has branches in key international financial centers and concentrates on financial services which include provision of HYPERLINK “http://en.wikipedia.org/wiki/Mergers_and_acquisitions” hmergers and acquisitions advice, insurance services, property and HYPERLINK “http://en.wikipedia.org/wiki/Asset_management” hasset management, and HYPERLINK “http://en.wikipedia.org/wiki/Prime_brokerage” hprime brokerage to its customers, which include multi national HYPERLINK “http://en.wikipedia.org/wiki/Corporation” hcorporations, states and HYPERLINK “http://en.wikipedia.org/wiki/Government” hgovernments and individuals. The firm also participates in HYPERLINK “http://en.wikipedia.org/wiki/Proprietary_trading” hproprietary marketing and dealing and HYPERLINK “http://en.wikipedia.org/wiki/Private_equity” hprivate equity arrangements and is a HYPERLINK “http://en.wikipedia.org/wiki/Primary_dealer” hchief trader in the HYPERLINK “http://en.wikipedia.org/wiki/United_States_Treasury_security” hUnited States Treasury security market. The company is credited to have produced some of the greatest United States secretary of the treasury for example, Robert Rubin and HYPERLINK “http://en.wikipedia.org/wiki/Henry_Paulson” hHenry Paulson who served under President HYPERLINK “http://en.wikipedia.org/wiki/Bill_Clinton” hBill Clinton and Paulson under HYPERLINK “http://en.wikipedia.org/wiki/George_W._Bush” hGeorge W. Bush respectively (Baker, 56).
The company having massive impact in the market world made a name for itself by pioneering the use of commercial papers for entrepreneurs and this was the major reason why it was invited to join the New York stock exchange (NYSE) in the year 1896. In the company history, one of the most achievements it experienced was its own initial public offer in 1999. The idea to go public was a long term deliberation that made some of its employees, partners and non-partner members own part of the company.
At the dawn of the new century, Goldman Sachs was financially stable and could support its operations accordingly. However, its operations hit the rock in 2001 when it experienced major employee cuts. In addition, it is indicated that the company spent a significant $7 billion in acquisitions (Jones & McDonalds 72). The September eleventh attacks had massive impacts on the company operations as it reduced both the revenue and earnings of the same. The faltering of the IPO and merger activities in 2002 increased the vulnerability of the company. Despite the inherent challenges, the company’s leadership announced that the company did not have any merger plans and could carry on the operations individually. Considering the fact that the company has a reputation for success, it is believed that it would easily address the challenges with ease and prosper in its activities.
3.0 Goldman Sachs Company Fraud CaseAs many people are currently aware, Goldman Sachs has been charged with fraud by the Securities and Exchange Commission’s. The government has categorically accused Goldman Sachs of the criminal activity of defrauding it customers by failing to disclose that it has a conflict of interest in mortgage investments it sold during the period when the housing market was faltering. The Securities and Exchange Commission (SEC) filed civil charges against the company and one of its executives. The commission alleges Goldman Sachs failed to divulge in details that one of its customers assisted in creation and then bet against the subprime mortgage securities that the company sold to investors (McEwan 34). Also, the company was accused of promoting and pushing a mortgage investment that was secretly devised to fail. Rough estimates show investors in the mortgage securities could have lost more than one billion US dollars.
SEC alleges the company deliberately misled potential investors by failing to disclose that the hedge fund manager John Pauson made billions of dollars by betting against the housing market and he selected company’s assets that went into a complicate security called “abacaus”. Essentially, Goldman Sachs informed e investors that ACA Management, which was a third party, had reportedly selected the pools of different subprime mortgages that were employed in the creation of securities. These are commonly referred to as synthetic collateralized debt obligations. In filing the civil suit, the Securities and Exchange Commission (SEC) targets one of the banks that, was bailed out with the help of taxpayer money, and later withstood the financial crisis and came out stronger than before (Robb, 32). Further, Ellis indicates that the SEC sought to recoup the financial resources that had been lost by the investors as well as impose an unspecified amount in civil fines against Fabrice Toure, who was the chief executive of Goldman Sachs (Ellis 56).
The case concentrates and counters one of the key causes of the financial crisis which was the establishment of investments and savings resulting from home loans allocated to borrowers who could not afford the houses they were buying. The suit goes beyond the possibility of banking but also concentrates on issues of business ethics since this bankers where much aware they were selling lethal financial products that could endanger the financial system but were much concerned with the money they would earn by doing so.
The Securities and Exchange Commission’s fraud case against Goldman Sachs creates a variety of challenges. In terms of SEC, it appears to be one of its first lawsuits that address sales of securities based on subprime mortgages and also the case involves one of Wall Street’s most prominent and dominant bank. In any way you view it, this is a significant case. Different to most S.E.C. enforcement actions, the Goldman’s case failed to close with a resolution between the two sides. Since SEC, was earlier held responsible for not discovering the Bernard Madoff Ponzi scheme in a timely fashion, the agency was so much gritty to bring down on Goldman Sachs in order to defend its reputation and restore public confidence in its performance. After the global recession, the alarm bell for tight financial regulation cropped up hence needs to counter such events. This was also a contributing factor to why SEC acted swiftly (Allen 22).
3.1 Implications of Goldman Fraud CaseGoldman fraud case has had far reaching implications on the financial sector and it exposed various weaknesses that have compounded operations in this sector for a significant period of time. In particular, issues of transparency, accountability and professionalism when dealing with different financial operations were brought to the fore. The ethical and professional implications indicated that the sector has a long way to go with regards to ensuring that necessary precautions are in place. Also worth mentioning is the concern about the specific roles that different institutions and parties play in the financial operations and deals. Perhaps the most important aspects pertain to the policy implications and the purpose of different parties in relative formulation, implementation and enforcement of policies that are employed in regulating the financial operations in this sector.
Goldman Sachs fraud case filed by the Securities and Exchange Commission (SEC) is barely easy to follow for most individuals; nevertheless it is a concept affecting every individual in the society. Uncertainties about the fraud charges against Goldman Sachs have rattled stock markets globally and have forced investors to search for less speculative international currencies (Allen 22). Goldman Sachs in this case has experienced immense losses as its client base has increasingly grown skeptical about its operations. These have had negative spillover effects on the employees and other sectors that either directly or indirectly depend on this organization or and partner with it for different businesses. Being one of the main financial institutions in the country, it is worth noting that this had negative effects on the entire financial and economic status of the country. In his review, Baker posits that it plunged the country in an economic recession (Baker 78).
The case has also contributed to the wave of risk aversion across financial and securities markets. More than ever, institutions and organizations are taking precautionary measures with regard to financial security. Statistical evidence shows that client preferences are shifting towards more credible organizations with respect to financial security and stability. The level of criticism according to recent research has increased profoundly in line with the market standards and regulations. The suit have made world stocks hit a new year high since the impact of global recession. The MSCI’s all-country world index fell down by about 0.78 percent, and more unstable emerging market component .MSCIEF closed at 2.98 percent (Jennings 49).
Another lasting impact of fraud include global economic decline due to weak dollar. In this regard, LeClaire, Ferrel and Fraedrich indicate that the entire nations of the globe have suffered devastating effects with regard to financial markets (LeClaire, Ferrel and Fraedrich 2). The relative impacts have also adversely affected the economic wellbeing especially of developing economies. Then, investors and prominent corporations are also cited to have experienced immense economic losses. According to Ellis, the losses culminate in not only curtail economic growth and development through incidences of unemployment and low productivity but they also impact upon the credibility of the renowned organizations (Ellis 66). The resultant reduction in the rate of investment has negative impacts on populations and respective organizations that depend in various ways to the contribution of the investors to effective organizational operations.
Of great reference however are the emotional and psychological implications of the fraud to the victims. Loss of significant financial resources can lead to incidences of stress and depression. The inherent loss of trust can impact negatively on the overall performance of financial institutions. In most circumstances, the emotional and psychological effects fraud can have on a victim are perhaps the most troubling (LeClair et al 67). Unethical behavior in part of the management has established the company as corrupt and most of investors would not want to be associated with it. This implies that the company is likely to suffer losses in future as clients, investors and credible professional are likely to refrain with associating with the company in any way. At this point, Lange and Powell note that employees from this company may also suffer defamation and are likely to experience difficulty in alternative employment (Lange & Powell 72).
4.0 ConclusionAs it has come out from the preceding analysis, the financial institutions have suffered various shortcomings that are related to incidences of fraud. In sum, fraud impacts negatively on the performance of an organization. It increases employee turnover and reduces investment and overall productivity of the affected organization. Good ethical conduct is important to the success of any organization. Definitely, there are many organizations that still believe that unethical business practices will not be revealed and there will be no negative business repercussions.
With the swift action of Securities and Exchange Commission (SEC) in fact, we will most likely see more ethical lapses among key organizations in the future. A company that behaves ethically and practice good business techniques encourages other organizations and associates to behave the same. If the company was not faced by few greedy executives, the organization could have moved forward establishing a massive business entity. The following recommendations offer useful insights with respect to how the issue can be resolved in a sustainable manner and prevented from reoccurring in future.
5.0 RecommendationsIn future, this type of fraud can be prevented by giving the Securities and Exchange Commission (SEC) more powers and teeth. This would be instrumental in empowering it to undertake stringent measures against organizations that engage in similar malpractices. Most importantly, this would enable it to undertake timely measures in partnership with other institutions in order to counter similar incidences and prevent relative losses. If the institution is given a chance to formulate important policies and implement them, this would ensure that all dimensions of financial fraud are addressed accordingly. In order to enhance performance after empowerment, the institution needs to be allowed to run its operations autonomously; without the interference of other institutions.
Also, investors should be careful and knowledgeable of any transaction they engage in. Investors should not trust banks whole heartedly as they are liable to financial fraud. Since Financial institutions have the obligation to proper and broader financial system. Fraud can be prevented by creating a healthy, well functioning System. Changes should also be made that collectively raise neglected questions about whether some of the market trends really serve the investors and public’s long-term interests (Jennings, 45). Meaningful changes and effective reform are very important and should naturally emanate from the lessons learned. Regulatory guideposts should be implemented to help improve the broader systemic management of risks, and increase the level of company accountability in order to enhance investor and public confidence.
By all means, risk and control functions needs should be totally independent from the business units. There should be clarity as to who risk and control managers report to and what channel of command is followed to avoid blame games as well as maintaining that independence. The monetary, investment and underwriting standards should be subject to more dynamic regulation. Supervisory bodies should critically consider the regulatory inputs and outputs required in order to ensure a market regime that is nimble and strong just as the Federal government controls interest rates to prevent economic frenzy, various standards and ratios should be well and appropriately calibrated. Finally there should be increased transparency in all investment banks dealing to ensure customer satisfaction (Jones Clark, Macdonald Parker, et al, 234).
Finally, future research regarding the aspects of the fraud cases in financial markets and ways in which they affect institutional operations and entrepreneurial performance, productivity, and global trading need to be undertaken in a comprehensive manner. The findings should then be employed in devising suitable practical measures that can effectively bridge the intrinsic gaps. In order to attain optimal output, all, stakeholders need to be allowed to actively participate in decision making at the end of the study. This would ensure that the final deductions and decisions are informed and sustainable in nature.
6.0 ReferencesAllen John R.L. ‘Act Responsibly: Corporate good deeds help communities and build long term business’, Nation’s Restaurant News, 38(36), 22. Purchased and Retrieved 4th June, 2010 from: HYPERLINK “http://archives.lf.com/preview.cfm?ID=2004250169922&SC=Act+Responsibly&CFID=34 42278&CFTOKEN=41845483” http://archives.lf.com/preview.cfm?ID=2004250169922&SC=Act+Responsibly&CFID=34 42278&CFTOKEN=41845483
Baker George. ‘From a pioneer to a pariah as Golden Arches celebrates 50 years’, Times Online, April 16. Retrieved 9th June, 2010 from: HYPERLINK “http://www.timesonline.co.uk/article/0,,11069-%091571623,00.html” hhttp://www.timesonline.co.uk/article/0,,11069-1571623,00.html.
Ellis Charles. The Partnership: The Making of Goldman Sachs. USA: Penguin (Non-Classics), 2009.
Jennings Mckenna. Business: its legal, ethical, and global environment. New York: Cengage, 2006
Jones Clark and Macdonald Parker. For Business Ethics: A Critical Text. London, Routledge, 2005.
LeClair Debbie , Ferrel.O.C., Fraedrich John. Integrity Management. Florida: University of Tampa Press, 2009.
Lange David and Powell Jefferson. No Law: Intellectual Property in the Image of an Absolute First Amendment. California, Stanford Law Book, 2010.
McEwan, Tom. Managing Values and Beliefs in Organizations. New York: Prentice Hall, 2001.
McGee Suzanne. Chasing Goldman Sachs: How the Masters of the Universe Melted wall Street Down and why They’ll Take us to Brink Again. USA: Crown Business, 2010.
Robb John. Global HYPERLINK “http://globalguerrillas.typepad.com/globalguerrillas/2010/04/journal-goldman-sachs-charged-with-fraud.html” hJOURNAL: Goldman Sachs Charged with Fraud. Retived on June 9, 2010 from: HYPERLINK “http://www.typepad.com/services/trackback/6a00d83451576d69e201347fecac0a970c” hhttp://www.typepad.com/services/trackback/6a00d83451576d69e201347fecac0a970c.
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Gold as resource and commodity
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Gold as resource and commodity
Introduction
Gold is a yellow shiny metallic element that is extracted from earth’s surface. Gold is the most precious metal on earth as recorded in history. This shiny metal occurs in rocks and alluvial deposits. Since time in memorial, gold has been used as a symbol of wealth and as a store of value for many years. More so, gold has been used in monetary laws. It has been estimated that around 160,000 tones of gold has been mined up to the year two thousand and nine. In addition, gold is preferred because of its resistance to oxidative corrosion and its ability to conduct electricity thus it has been used in industries in producing electronics.
Where gold is found and it s history
Gold is a valuable mineral that has a great impact on our lives and it is the less abundant mineral that is found on earth thus making it more precious commodity for people globally but the main question we wonder where gold is found. For most of the time in history, gold has been found at wit waters rand basin that is found in South Africa. In early nineties, South Africa was the world’s largest producer of gold. South Africa has produced nearly forty percent of global gold (Robert, 56-67). In addition, it is believed that a large amount of gold has been unmined at this place with a total estimation of about a third. Apart from South Africa, gold is mined in the United States of America specifically at a place called Nevada that has a large portion of gold output although other states like Alaska, Colorado and California has produced gold (Joseph, 78-81).
However, gold is also found in Asia and Europe where it is mined at large scale production. Gold deposits have also been found in Australia at Ophir and gold fields regions. Australia, South Africa and United States are the largest producer of gold worldwide, which has led to enormous economic growth in these regions. China has also produced gold at large scale. The main gold reserve in china is a place called Shandong. These gold producing reserves is on the spot regarding the manner in which changes that are taking place, mines have been depleted while new ones have been discovered (Tyler & scot, 74-83).
How to mine gold
Mining refers to removal of minerals and other precious materials from the surface of the earth mostly from an ore or a mineral seam. Mining of precious minerals like gold has been thee since time in memorial. What differs is the method of mining because of advanced technology that has led to development of new mining equipments and tools. Modern mining has applied the use of prospecting method for gold seams. More so, it analyses the place to be mined, how the finally extraction should occur and the most important part reclamation of the land in order to make it ready for other purposes once mining has come to an end. Kind of mining activities have created negative results on the environment when mining is taking place and when it has been closed down. This has made gold producing countries to impose safety regulation policies making modern mining somehow safe (Michael, 35-47).
Previously, when people discovered gold at any place, they wanted to have a taste of it. Gold usually existed in beds of rivers people used panning method to clean the gravel until they got accesses to the heavy gold that remained after washing. As time passed by, a more improved technique was used to extract gold from the rocks. They crashed the rocks sifting out the materials that were light thus leaving gold on top.
Mining is a tedious process that undergoes so many steps from the time of discovery of the gold field to final stages of land reclamation. Exploration is commonly used to define the place where gold is found, how deep it is entrenched in the surface and techniques needed to extract the gold. It is important to know the size of the gold deposit this enables economists to easily come up with pre feasibility knowledge in order to know the theoretical economic importance of the gold deposit. The gold miners also find it necessary to determine the financial abilities, and technical risks of mining gold before the actual mining takes place.
There are several techniques used to mine gold from the earth surface. These methods have been divided into surface and sub surface mining. Surface mining is the most commonly used method to extract gold. It aims at placer deposits which contain the precious minerals that are found in river gravels, sands found on beaches and other materials. More so, lode deposits are also another targets where precious minerals are found aligned in layers veins and grains that are widely spread across the rock that contain the mineral. However, both the lode and placer deposits are extracted using the surface and underground techniques.
The placer deposits are then processed using the gravity dependant technique that includes the use of sluice boxes. Washing is necessary to sift the real pure gold from dirt or gravel before final processing is done. The lode deposit is will require the rock to be crashed to enable the extraction of valuable mineral to start. After the rock has been crashed, chemicals are applied to separate pre gold from sands and real gold is retained.
Surface mining is another method used in gold extraction, it involves the elimination of vegetation, any dirt, and bedrock layers were buried deep in the ore deposits. A method commonly used in surface mining includes the use of open pit mining that applies recovery of materials from a pit or collection of building materials from a mine pit. Also strip mining is commonly used and it involves removing of materials from surface layers to expose the hidden seams and bring them out for processing. Most placer deposits are exploited by surface mining because they are not deeply buried underneath like the lode deposits.
Sub surface mining entails the digging of tunnels o the earth’s surface in order to get accessed to the deeply buried gold ore deposits. Waste rocks are excavated to the surface of the earth for processing through the tunnels that have been dug. Drift mining is common method used to extract gold from its deposits as it calls for the digging of horizontal shafts where gold deposits are reached at easily.
During the process of mining, heavy machinery are used for the extraction of gold. Machines help in removal of gold ore from the earth surface and reduce the work force by making work easier than it has been before. Machines are applied to process the ore that has been mined and help a great deal during the time of land reclamation when mining has ended.
Explosives, drills, bulldozers and trucks are very important during gold exploration. For instance, when conducting placer mining, an alluvium is loaded on machine that has a hopper and a trammel that sifts the needed minerals from the chaffs and unwanted wastes like sand and gravel.
Huge drills are used to submerge the shafts and abstain from stopes. In addition trucks and trams are used to transport miners, waste products and minerals while the lifts on the other hand are used to move miners in and out of the mines, they also drive rocks and gold ore out and move other machines in and out of the mining place. Work done by machines in mining gold is great and it has made mining much more easily.
Politics of gold exploitation
Politics are day-to-day activities and they inevitable in human society. Postcolonial politics on gold exploitation has influenced the manner in which gold was exploited in Africa and Asia. For instance, since 1880s, Africa countries were portioned and the main reason was to exploit the natural resources especially precious minerals like gold. Gold mining in countries like South Africa had been affected by politics of the country. For example, the colonial government wanted to exploit its gold and export it to Europe with nothing left for people of South Africa. This moves led to bitter relationship between the people and the colonial power thus creating an oppressive regime. Political violence is evident in that every body in government wants to control mining activities in the country this leads to a sour relationship that eventually leads to death of some people.
Political assassinations are common as people are fighting for this scarce and precious resource. Most countries that are rich in gold deposits have implemented policies in order to protect there gold fields from illegal exploitation by foreigners. Most governments have embarked on operation to end illegal mining and destruction of forest cover a long gold reserve, for example in South Africa along the gold mines of wit waters rand. Senior government officials are denouncing the activities by stating that it a crime for any international and national merchants to pollute the environment thus there is the need to put to an end the activities of mining.
Governments want to control mining activities by ensuring that mining companies operate within legal arenas whereby after obtaining a license to carry out their activities they do so and after they have finished mining, land must be reclaimed. Debates are hot because some people claim that the environment is being affected by use of chemicals like mercury in gold extraction while other people only see it in terms of financial benefits. Furthermore, environmentalists have protested against what they call environmental damage. They have formed lobby groups to educate on the need to protect the environment (Gilbert, 99-114).
History of gold as a resource
Gold has a very rich history despite the fact that it originated from different countries. This is facilitated by the fact that gold has been known to be a common form of currency in many countries all over the world since time in pre history. Gold coins were in use since 650 B.C during the reign of a Turkish king called Gyges who smelted gold for his use as currency. In addition, the Romans too had knowledge of gold when Julius Caesar approved the use of gold coins in payment of wages and other services.
In this 21st century, gold has more value than any mineral in the world as it is used as symbol of wealth. Gold coins are marketed and purchased by anybody because they are accepted on any world market.
How the demand for gold is cultivated and sustained
When the prices of gold increased, there was an enormous increase in the demand of the commodity as a component of investment by many. In an attempt not to spend their money, people opt to pay capital at the time when gold loses popularity. Gold demand has been on the decline for the part of last three decades as compared to investment demand of gold as expressed by Anglo gold a gold producer company in Africa (Mathew,54-76).
Prices of gold on financial markets has been fluctuating a situation that has made financial investors to charge high interest rates this is so because purchases from central banks has declined hence trying to sustain the market. Private investors have been forced to look for an way on how to invest thus hey have opted to use bullion and coins that has accelerated countries to add there mints. For example, the Russians have invested in gold for many years.
Gold is the best commodity to invest in because it prices are unpredictable. Gold investment enhances solid investment therefore, it is not easy to fall a victim of bank failures since it is solid investment. The prices of gold has have had an enormous impact on social and political lives of people who produces it. More so, the economies have either boosted or declined depending on the world market. This has influenced the life of common people in that it is necessary to rely on financial institutions like banks for our investments (Joseph & Applegate, 72-86).
Geopolitics of gold mining
It is evident that geopolitical antics are about to come. For instance, the problems I middle east where Israel is threatening to bomb its neighbor Iran while Iran on other it is not ready to give up its nuclear plans. This creates tension between these two nations as the United States of America tries use diplomacy to solve the problem instead of military intervention. In addition, if this standoff continues, oil tankers will be affected because of the conflicts in Iran and Israel thus making the price of oil to hike. This will influence the prices of gold too which will shoot. More so, the gold and oil price may be worse if the militants in Nigeria decide to attack the bandwagon. The case will not be different if Venezuela imposed high prices on gold from customers who hails from the United States (Thomas, 81-97).
However, geopolitical interruption will affect the world market prices and result in a price hikes. The aftermaths will befall global markets that has already been inflated by debt thereby bringing down capital markets while world currency like the united states dollar and the gold increase in value.
Gold production and consumption
Three main countries are top producers of gold that is; South Africa, Australia and United States. Gold miners use modern technology to locate where the deposits are situated. Other machineries are also used to extract gold from rocks. Gold is consumed in a variety of ways either as commodity or as food. As a commodity, it has been used in stock markets and in trades. Despite, its economical value, gold has been used to prepare some delicious pizzas by different countries all over the world. For example a Japanese gold sake that is eaten when they are celebrating their New Year eve (Gail & e tal, 73-96).
Impacts of gold mining on both humans and environment
Without proper precaution, mining have negative consequences on the environments, ecosystems, water, beautiful sceneries and the landscapes. Remains from the mines can interrupt with mountains stream because of surface mining; for instance, mountaintop and acid liquid can pour from the underground mine fields it destroys the forests and cause health hazards to people. Rivers are destroyed since chemicals that were used to clean gold and drawn in rivers contaminate them. This threatens the life of the animals living in water. Methylated mercury are very poisonous and biocumulative thereby affecting the food chains of the ecosystem. Human beings and other predators end up consuming large amount of mercury thus posing health risks (Dysart & Clawson, 54-74).
Mining of gold also has adverse and harmful effects on the environment. Its effects on water are manifested during flooding days. They cause dangerous damage on housing, roads, carrying away plant activities and the mine itself. Surface mining affects the groundwater this is because of impact of the drainage of usable water from the mines; the level of water can be lowered in the surrounding areas thus making it change its course and the aftermath is the contamination of the usable water due to chemical and poor quality of water from the mine. More so, there is formation of sulphuric acid when the minerals are oxidized with air. This will lead to formation of acidic rain that may corrode the roofs of the houses in the neighborhood and also increase the acidity of the soil leading to infertility of soils. Emissions and byproducts produced after burning coal includes; nitrogen dioxide which lead to formation of photochemical smog and acid after oxidation with air, particulates that can respiratory diseases to both human beings and animals. The carbon monoxide emitted is not fit for human thereby causing respiratory problems to the workers in the mines. Mining of gold is very tedious it requires heavy labor that people are forced to provide in order to secure some revenue for their families (Ronald, 101-121).
Water that is drained in the streams affects aquatic life because this water contains harmful chemicals that contaminate streams. More over, wildlife is also affected in that when the land surface is redistributed and removed, these species are displaced from areas of mining. Those animals that move like birds, game and other animals vacate these areas while reptiles and other burrowing rodents are destroyed forever. Furthermore, since most animals depend on grass grown in drainages as food, for nesting and protection from enemies, these activities distorts their lives completely leaving them vulnerable to death.
To some extend mining activities have some positive impact on wildlife in that when these fields are broken, it creates openings, which acts as there home. Food and cover plants can be introduced to these places for the benefit of the entire wildlife.
Regulation of gold by World Bank
The World Bank and international monetary fund have regulated gold consumption because if it is left to flow in the hands of people, it will bring troubles that may affect economies of nations leading to starvation and inflation. World Bank has been actively participating in mining activities for many years through offering of grants and loans to mining companies. For instance, the multilateral investment agency provides political risk insurance cover. The World Bank has involved sponsored many projects including the funding of projects by providing mechanical and technical assistance to mining companies (Charles & Edgar, 99-117).
The World Bank came up with privatization strategy to ensure smooth exploitation of the scarce resource. This move shifted attention to the environmental aftermath that mining causes and how the local residents react to the extraction process. The main aim of this move is to promote development. World Bank has regulated the prices of gold on markets by supporting local economies of the countries that produce large quantity of gold.
Mining companies
There are many companies that are involved in gold mining therefore they are classified according to there financial stability, the major companies have annual revenue of $ 500 million with the ability to fund its own projects. We have the intermediate company that has $ 50 million revenue per year while the junior company has annual revenue of less than $50 million (Al, 45-53).
Conclusion
All in all, gold mining is a lucrative business that boosts local economies of those countries that produces it. Despite its value, gold mining activities have posed environmental risks through depletion of rain forests for extraction activities. Although it has been seen that politics affects performance of gold prices on world markets while the geopolitics are likely to negatively affect gold performance if the problems are not solved.
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