Thursday, April 7, 2011

The History of Money - Part One

Over the next few days, I will comment on a display I saw at the British Museum in London.

It’s a display about the history of money, and it explains what money is, why we need it, and why we need it to be a reliable weight and measure of our labour.

But I’m going to start by using an excerpt from a newsletter describing why gold is money; especially with reference to the paper money (or fiat currency) system that we have now.

This may seem a bit back-to-front, but if you keep the reasons below in mind, while money is explained over the next few days, the reason why gold (and then silver) is money may become clear.

Gold is the opposite of paper money.

• Gold requires no government to prove it’s valuable. It has been the “Money of Kings” for thousands of years of human history.
• When people start to realize that paper money is devaluing (usually by noticing price increases in such things as food in the grocery store), history shows that people always trend back to Gold and Silver.
• Gold retains buying power. Unlike fiat currency, Gold retains its ability to purchase goods over time.
• Gold can never go to zero. While “paper” relies on a government or financial institution to give it value, Gold has intrinsic value, and Gold has no counter-party risk. Regardless of what happens as financial institutions, financial systems, and even governments fail, Gold retains its value internationally.
• Gold is liquid and easily traded.
• Gold makes large amounts of wealth easily transportable, because it has a high value for its weight.
• Gold has served as money because it is divisible; you can divide it into coins or re-melt it into bars without destroying it or reducing its value.
• Gold is nearly impossible to counterfeit, as genuine Gold is easily recognizable.
• When measured by weight, Gold is easily countable and verifiable.
• Gold is not subject to decay, rot or rust.
• Gold is no one’s liability.
• Gold depends on no one’s promise to pay.
• Gold cannot be inflated (you can’t print more of it).
• Gold is scarce. There is less than one ounce of Gold per person on the planet.

(excerpt taken from “The Global Insider’ Newsletter. See here

No comments:

Post a Comment