What would happen to the world economy if a million ton gold meteor hits the earth?

Answer: It ….would entirely change the world economy , or NOT !

(Reading time: 3 mins)

In July 1324, something big appeared on the horizon that would have a startling effect on the Cairo’s economy, and the Mediterranean world!

Yes, I think to some extent, that the potential impact of a million ton of gold meteor in our modern economy could be considered as quite similar as the economic impact of Mansa Mousa in Cairo in the 14th century, but maybe not!

But who is this guy? Mansa Mousa is regarded as the richest man who ever lived on earth. Mousa also called KanKan Musa was ruler of the great West African Empire of Mali in the early 14th century. At this time, Mali was an African El Dorado, the most of the world knew nothing about it. After adjusting for inflation, the wealth of Mousa is roughly $400 billion in today's currency. To give you an idea, that’s more than Bill Gates, Warren Buffet, Mark Zuckerberg , Jeff Bezos, Amancio Ortega, and Carlos Slim combined ($338 B in 2016). Yes, you are right, that’s ridiculous;) With such a wealth he could have built about 400 Burj Kalifas, or created 400.000 rolls of pure gold toilet paper. I am not sure what is the most useful !!! haha.
Mousa is mostly remembered for his flamboyant pilgrimage to Mecca which destroyed the economies of the Middle East world for decades. Let’s imagine. Mansa Musa was accompanied by an impressive caravan with 60.000 men. He had a baggage train of 80 camels, each carrying 135 kilos of gold. When he stopped off at Cairo, on its way to Mecca, it was like a gold meteor impact, economically speaking. Cairo at this period of history was the world's biggest gold market and played a key role in the east-west spice trade. Let’s say Cairo was the most flourished city in the middle age. Now I think you guess where I want to go ;) During his 3 months of visit he spent and gave so much gold that the price of gold plummeted, led to the collapse of the gold market. The historian, al O Umari who visited Cairo 12 years after the visit of Musa wrote:

“He flooded the Cairo market with gold, thereby causing such a decline in its value that, some 12 years later, the market had still not fully recovered."

From then on you do understand my theory. The coming of Musa, with tones of Gold, that the world was not aware about, had a huge negative impact on the world economy at that time. Somehow we can consider as similar as the economic impact of a today Meteor of 1 million ton of Gold.

But the world had changed!! I presume the coming of 1 million ton of gold would not impact the world economy for a long. Let me develop my thinking. Indeed from the end Bretton Woods agreement, our modern currencies are not any longer linked to the price of Gold. The today value of gold reserve is estimated at 183.600 tonnes by the World Gold Council. Using $1.200 as spot price, the world gold is today around $ 7.8 trillion. So Yes, if you add suddenly 1 million tones of gold, it would crash the Gold market for a while, mainly because the new volume of gold would be around $50 trillions. And mathematically, the price of gold should plummet to 186 USD per once. A bit like the gold price collapse after the Mousa stop in Cairo!! But wait. Let’s look at the big picture !
According to the Money Project we have today roughly $80.9 trillion of digital money ( what the economists call “broad money”). But it is nothing compare with the global stock markets and the global debt which are worth respectively $70 trillion and $199 trillion. Eventually, the total value of derivatives is estimated around $1.2 quadrillion. Whaaouh! That’s a lot! All that to say, that even this meteor is 1 million ton of gold with roughly a current value of $42 trillion, I don’t think the economic impact would be that big in a modern economy where the value of digital asset are so ridiculous. Yes because everything relies on the trust we are ready to give !!! So maybe during the first 2 months, the markets would crashed for a while, but after we would think twice and figure out that it doesn’t change anything to our modern economy and our currency exchanges. And we would simply think that cool for our ladies because the price of jewelry would be cheaper ;)

http://money.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization/

Eventually, I think that the impact of such a meteor would not change anything over the long term for our economy. With our digital money and digital assets, this meteor would affect less than Mousa impacted Cairo in the 14th century !

I hope you had a good time and this answer was informative! Anyway I've enjoyed writing it and looking forward to your comments, upvotes and wisdom!

Speculating and debating is the beauty of my latin origins.

Wish you all a “golden” day,

Stan