Many-Face
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Many-Face

Why Gold?

Photo by Jingming Pan on Unsplash

When Gold was first discovered, it was not used as money. It took hundreds and hundreds of years for us to begin using it as such. We see gold being used as money in China as early as 1091 B.C. with the Lydians creating the first precious metal coins (electrum, an alloy of gold and silver) as early as 700 B.C. Fast forward to today and it’s still seen and used as money.

So why gold?

On the surface it may seem arbitrary to us modern folk, given our technological progress, to use shiny metal as a store of value. However, it becomes less than arbitrary when looked at through a particular vein.

We are going to die. Each of us. It’s inevitable. What is equally inevitable is the fact that we don’t know when we’re going to die. Thus making our time on this planet not only scarce, but as for the individual, for whom there will never be another, immeasurably, incalculably rare.

Intuitively, we know this. Which raises an obvious conundrum. In order to give ourselves the possibility of more time, we must spend time working to provide for ourselves. This is as true for hunter-gatherers as for us modern 9–5 employees. We must eat. We must have shelter, etc. All of which takes time, which for us, is scarce and invaluable.

While trading (and perhaps even credit) was more than sufficient for our hunter-gatherer ancestors, it became less so as we began to settle, grow food, and raise animals. As we began to have a surplus of the necessary resources that keep us alive, allowing people to spend their time doing other things not directly related to their own survival.

Trade worked for some time, but as populations grew within civilization we began to experiment with intermediaries. Items that could be traded for other items in the future.

This left another conundrum and the reason so many intermediaries were tried and failed. If today I am to trade what I need to survive for something that can be traded in the future for what I need to survive, then it must hold its value.

But what does that mean, “hold its value?”

Simply put: It must physically stay the same; be durable enough to not deteriorate or decay over time. After all, I just spent time working to trade it for something which can be traded at some point in the future. It makes no sense to trade it for something that will physically deteriorate and decay (like seashells, cloth/blankets, bone) or will need me to spend even more time working to keep it alive (like livestock), only then to decay if no one wants it.

This took hundreds and hundreds of years (many generations of people) to realize that gold never decayed, disintegrated, tarnished, rusted or eroded, over time. The roughly 320 Troy ounces of gold on King Tutankhamun’s death mask created around 1323 B.C. is today, over 3,000 years later, still made of roughly 320 Troy ounces of gold. And in another 3,000 years, it will still be made of the same roughly 320 Troy ounces of gold.

So is it really that arbitrary how gold became money, a unit of exchange for our time?

Since time is scarce for everyone, and for each one, there is only and will ever be one, then it’s understandable that we would use an intermediary that is scarce and physically stays the same for an immeasurable, incalculable amount of time. Just like the value of our time on this planet.

This, of course is my own opinion distilled from books, articles, experience, and thought. Direct Sources: The Rise of America by Marin Katusa, Debt, The First 5,000 Years, by David Graeber, facts on Tutankhamun’s mask from Wikipedia, kingtutexhibition.com.

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Nick Doidge

Nick Doidge

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