Corporations, Mining Stocks and Speculation
By Anthony Wile - September 03, 2011

Congressman Ron Paul (R-Tex) has had a good deal to say recently about corporations and corporatism. He detailed his views most recently on several radio programs and the points he made, especially about the lack of corporate accountability, are important ones.

We've run several articles on the evolution of corporations here at the DB, though not specifically from a mining angle. The trouble is when writing about the evils of corporations, it's easy to end up sounding like a 1960s hippy railing about the establishment.

But corporations as a manifestation of power elite societal control are an undeniable resource, a powerful instrument. They are surely NOT a manifestation of the free market, for they have been developed judicially and would not exist within a true free market. (Murray Rothbard and others make a cogent argument that in a truly free-market, corporations would evolve anyway, but realistically speaking throughout history, especially modern history, corporations have partaken of state power at every level of their formation and operation.)

Using the current corporate configuration, those who make the decisions and benefit from them are able to hide behind the corporate veil, often obscured via state enabling from the results of their decisions and the ramifications. More than many other manifestations of the regulatory democracies in which we now live, the establishment of corporations and their privileges has buttressed the bureaucracy of law enforcement and government intrusiveness. Corporations act as a powerful shield against civil and criminal prosecution – or even the ability to determine responsibility.

As someone who believes in common law justice (the ability of injured parties to pursue judicial remedies and punishment on their own as they did for thousands of years) I am not advocating state action against those who are perceived as doing wrong. In fact, the impermeability of corporations only further encourages what I call "state justice" in which the prosecutor, judge and legislature are all paid by the taxpayer to create a kind of prison-industrial complex.

The corporate veil and the challenges it offers have given rise to this complex, for without state involvement – and even more laws – there would be little accountability.

This is often the case with mining stocks. As someone who has had experience in the mining industry, I am not exempting junior mining firms from the criticism. Over the past several years we have seen impressive gains in the purchasing power of gold. Yet mining companies, and here I am referring to those that actually produce gold, have seen relatively little price appreciation on shares when viewed on a comparative basis with the price move of gold.

One reason, of course, is that mining stocks as a group are the last to move in any metals bull market. That's because people would rather own the physical and will not begin to buy the mining companies until gold and silver are priced too high for most investors.

But another reason for the lag may be the distrust people have of mining stocks and junior miners in particular. While occasionally there are prosecutions for mining manipulations, these are inevitably brought by the authorities and are often inconsistent and even malicious.

There is little that people can do to protect themselves except wait for the end-of-times euphoria to sweep all mining stocks higher. This is a window of opportunity that renders many manipulations moot, though it can be quite nerve-wracking to wait out a gold bull market (that might run a decade or longer) to finally reach sizable mining stock returns.

In any event, it's worth remembering – and regularly reminding oneself – that corporations are artificial entities, constructed by law; they are Trojan Horses for power elite societal, economic and political abuses.

Masquerading as laissez faire constructs they are nothing of the sort. Absent various court decisions, industrial efforts would revolve around transparent partnerships as they have in the past. People would know well who was involved in what industrial gambit and responsibility would be apportioned accordingly. The rise of corporations – the corporate state – has all sorts of ramifications, none of them especially good for freedom.

Thanks to Ron Paul and the Internet generally, people are waking up to the reality that a corporate structure is a facilitating vehicle for the transference of wealth more so than the creation of it.

Mining companies are no different than any other corporations. Having said that, however, there are discoveries that are made, including big ones. And in such cases, the share prices of junior explorers can really take off. That is what keeps people hunting for gold deposits and places small, nimble, exploratory companies in the position to find them.

My advice is that if you are going to invest in junior explorers, you are better waiting until a discovery has been made and then buying. You'll pay more but face somewhat lower risks – unless the whole thing is a fraud, like Bre-X turned out to be in the 1990s. Just recognize that buying shares of exploration companies is not the same as owning gold (or silver) and thus is far more speculative in nature.

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