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Humans for as long as there are records have been infatuated with gold and silver. The first discoverer of gold is lost in the mists of time. A human, perhaps a child, and probably before the evolution of modern man. It was found as shiny nugget in a creek, washed down from rocks buried in the earth. This occurred thousands of years ago, and the humanity was immediately attracted to it. Gold is found around the world. Gold was discovered in its natural state, in numerable streams. Eventually humans would go up some those streams to discover the source of the gold. Discovering gold in streams occured in the stone age. Gold was surely the first metal known not only to modern humanity, but to early hominids. Every culture has seen gold as something very special. Every known culture treasured gold in one form or the other. Gold unlike many metals is dispersed widely over the earth's surface. Thus it was discovered by countless different peoples. And all of these societies which found it were awed by it and wanted more. There are various reasons that humans were attracted to gold. There is the allure of the color, luster and sparkle. And the fact that it is so stable, the pure element and not compounds are found it nature. That is rare among the natural elements. And it is easily worked, extraordinarily malleable and had a low melting point (vital to early civilizations) , and unlike silver is resistant to tarnish. Thus it can be worked with the most basic technology. The gold-silver ratio has varied over time. It formally dates back to 3100 B.C. The code of the first pharaoh, Menes, set the ratio at "one part of gold is equal to 2 1/2 parts silver in value." The emergence of gold as physical money took place in the form of the Lydian merchants' electrum coins -- 63 percent gold and 27 percent silver (about 700 BC). There are few valuables that have sustained their value for as long as money made out of precious metals have.
Humans for as long as there are records have been infatuated with gold and silver. And even primitive people who have survived in the modern world show an interest in gold. Every culture has seen gold as something very special. Every known culture treasured gold in one form or the other. And all of these societies which found it were awed by it and wanted more.
Gold unlike many metals is dispersed widely over the earth's surface. Thus it was discovered by countless different peoples. The first discoverer of gold is lost in the mists of time. A human, perhaps a child, and probably before the evolution of modern man. It was found as shiny nugget in a creek, washed down from rocks buried in the earth. This occurred thousands of years ago, and the humanity was immediately attracted to it. Gold is found around the world. Gold was discovered in its natural state because it is known for its unreactivity and often found in its elemental form. This is rare among the natural elements. It does form compounds, but much less so than other elements. The gold atom is the most stable of all the metals. Gold is classified as a noble metal, meaning resistant to corrosion and oxidation. Through out history gold was mostly found in innumerable streams. No one really knew where it came from. Eventually humans would go up those streams to discover the source of the gold. Discovering gold in streams occured in the stone age. Europe was not rich n precious metals, especially gold. Neither Egypt or Mesopotamia had much gold to speak of. The primary source of gold was Africa. But during ancient and early modern times, the slender trickle of African gold was the Nile. The source of gold for the Egyptians was Nubia. There was also gold in West Africa. But trade was blocked by the Sahara Desert until camels were introduced (about 300 AD). And this mean that only small amounts reached Europe. Gold was one of the draws that bought Portuguese navigators south along the coast of Africa (15th century). It would not be until the conquest of the Americas that really large quantities of gold and silver would reach Europe (16th century).
There are various reasons that humans were attracted to gold. There is the alure of the color, luster and sparkle.
Metallurgy began with gold. Gold was surely the first metal and element known not only to humanity, but to early hominids. Gold is extremely stable. It is the pure element and not compounds that humans found it nature. Which is why unlike silver is resistant to tarnish. And it is easily worked, extraordinarily malleable and has a low melting points. Thus it can be worked with the most basic technology of any stable metal. The timeline for metal working varies geographically. The earliest evidence of gold working in mainland Europe is found in Bulgaria (4500 BC). Only gradually did metal worker master other metals, most importantly copper, silver, tin, and then iron. The degree to which this defines human progress can be see in the name of two major eras--the Bronze (copper and tin) and Iron Ages. Historical progress of technology strongly related to the development of metallurgy. Along with agriculture, this is certainly the greatest contributions to our species' economic and cultural progress. We think here of bronze and iron, but gold came first.
Gold is an element, but early gold smiths did not have the technology to produce pure gold. Lead isotope and major element analysis (copper, tin, and silver) can used to create elemental signatures. This can be helpful in establishing the source of the gold used in the ancient gold artifacts found by archeologists.
The relative value of gold and silver (th gold-silver) ratio has varied over time. It formally dates back to 3100 B.C. The code of the first pharaoh, Menes, set the ratio at "one part of gold is equal to 2 1/2 parts silver in value."
The emergence of gold as physical money took place in the form of the Lydian merchants' electrum coins -- 63 percent gold and 27 percent silver (about 700 BC). There are few valubles that have sustained their value for as long as money made out of precious metals have.
Africa was seen by Mediterranean cultures and later Europeans as the major source of of gold. This fixation began when the Egyptians found that the Nubians (people of modern Sudan) to the south had gold. There was also gold in West Africa, but this did not begin to reach Europeans until the camel was introduced (about 1300 AD). As a result, East Africa (Sudan) and West Africa (Burkina Faso, Ghana, and Mali) are sill among the top gold-producing countries. Gold would not be discovered in South Africa until modern times (mid-19th century). No one in the ancient world knew where the gold found in rivers an streams came from. So imaginative stories were created like King Solomon's mines. A Biblical passage (I Kings, chaps. 4 through 10) reports 1,086 talents, or about 34 tons of gold were brought to Jerusalem from Ophir by King Solomon's workers. If accurate, it would have been an enormous quantity for ancient times. It gave rise to the legend of King Solomon's mines. No one knows where Ophir is or why any ancient civilization would have sent Solomon so much gold. There is no evidence that Solomon had large gold mines, although he may have had copper mines. African gold seem to have come from countless panning stations in East Africa (the Nile) and West Africa (especially the Niger) which cuts a swath though several African countries. The Nubian gold came from the Arabian-Nubian Shield, a geological feature with import mineral deposits including gold. It is an exposure of Precambrian crystalline rocks on the flanks of the Red Sea. Most of West Africa's gold is found within the West African craton formed by volcanic and tectonic processes. The craton is one of the world’s oldest geological formations, including ancient, continental crust that has remained largely unchanged for billions of years. Gold has played a major role in African history and trade. Rain and river flow had driven bits of gold from the craton into the Niger and other rivers. Many of the powerful and richest African empires in West Africa were if not based on gold, strongly supported by it. The ancient and long lasting Ghana Empire (4th-13th centuries) became known as the 'Land of Gold' because of its gold production and extensive trade network. This was at the time in which European had a limited understanding of geography and especially Africa. The Malian Empire (13th-17th centuries) existed as Europe began to expand. The Songhay Empire (15th cemetery) had an important but shorter history. It also had a strong gold component.
Mercantilism was the governing economic policy pursued by European countries during the 15th-18th centuries. This included the Renaissance, Reformation, and Enlightenment. It was an era of government (meaning royal) control of foreign trade. This led to frequent if limited wars. It was during the mercantilist era that the economies of the East and West began to come together. Through most of the era the West had trouble finding trade goods the Indians and Chinese wanted in exchange for the silk, porcelain, and spices that the West coveted. Gold and silver from the Americas helped finance the trade. Perhaps this was one of the reasons that the evolving trade was western merchants reaching the East and not the reverse. There was no great spokesman for mercantilism like Adam Smith for capitalism (The Wealth of Nations) and Karl Marx for Communism (Das Kapital). Mercantilism was essentially the attempt of pre-industrial European leaders to gain control over the increasingly complex economies that emerged from the late-Medieval era. The primary goal of the European rulers was to acquire as much bullion (gold and silver) as possible. This affected the policies pursued. Important topics include the voyages of discovery, American gold and sliver, guilds, royal monopolies, the highland clearances, the potato, and slavery.
Spanish Conquistadores conquered the Aztec and Inca Empires in the first half of the 16th century. The result of the booty and the working of existing as well as new mines was a a huge influx of gold and silver bullion flowing into Europe. The impact on the European economy was immense altering the course of history that still affect us today. Columbus and other early explorers encountered small quantities of gold in the Caribbean, but fantastic accounts of a Kingdom of Gold began to circulate in Europe--the legendary El Dorado. He was a king who was so wealthy that he covered himself with gold dust every day and dove into a lake. Political factors also drove the European conquest. German Emperor and Spanish King Charles V desperately needed gold bullion. Charles had taken out large loans to bribes the electors that made him Holy Roman Emperor (1519). He also faced a costly war with the Turks. The Ottomons moving north took Belgrade (1521). Next they conquered Hungary (1526). Soon they had reached Vienna, the center of Hapsburg rule (1526). Charles not only faced the Turks, but the Protestant Reformation in Germany. This forced Charles to seek even more loans. One way in which Charles paid his loans is by granted licenses to pursue treasure in the Americas. Thus conquistadors financed by European banks descended upon the New World, scouring every corner for the legendary El Dorado. Hernán Cortez defeated the Aztec ruler Montezuma in Mexico (1520) and sent the first large shipment of gold objects back to Spain. Charles V immediately smelted them down to bullion. Francisco Pizarro demanded a ransom for Inca ruler Atahualpa and obtained a vast treasure of gold and silver objects (1532). The Spanish first simply seized gold and silver objects from the native Americans, in effect looted the religious/artistic treasures of entire civilizations. Historians estimate that about $140 million work of gold and silver objects were obtained from Peru alone between 1531 and 1540. [Hoopes] Then they used the indigenous people as slaves to produce more bullion from existing and new mines. The American treasure, however, quickly passed through Charles' treasury. It served to enable him to take out even more loans. Charles by 1551 had borrowed 14.4 million ducats at interests rates approaching 50 percent. [Hoopes] Charles army did stop the Ottomans from moving further into Christian Europe, but it could not contain the Protestant Revolution. But the impact of the gold is much larger. The American gold helped finance Renaissance art. As much of went into the pockets of bankers, it played an important role in the expanding European economy in the countries that had financed Charles. The gold also financed the ill-fated Spanish Armada unleashed on England by Charles's son Phillip II (1588). Some of the gold flowed into other European treasuries as other maritime powers (England, France, and the Netherlands) began preying upon Spanish treasure ships. Some of the gold can be seen in gold leaf and treasures of the churches across Europe. But much of the rest of the gold is difficult to trace with precision. What is known is that the American gold significantly increased the gold stock of Europe, resulting in both inflation and an expansion of economic activity.
Gold rushes were reported in ancient times. They are believed to have occurred in ancient Egypt. Actual examples were first reported in the Roman Empire. Pliny the Elder described gold mining as Diodorus Siculus. Other precious (especially silver) and base metals were involved, but gold was the greatest attraction. These ancient gold rushes were limited because as soon as any real quantity of gold was discovered, rulers acted to seize control. It was the 19th century that was the great age of gold rushes. There were two reasons for this. First was the emergence of capitalism which provided security for private individuals to hold gold. Second English law which meant that that the owners of land had rights to the mineral resources--not the monarch or state. Third, was the falling costs of transportation, especially with the the steam engine and ocean liners. The first major gold rush of modern times was the California Gold Rush (1849). This occurred in the age of sail. Gold was discovered at Sutter's Mill in California (1848). This led to the 1849 gold rush. Getting to California was a major undertaking. But thousands of individuals undertook the effort because of the allure of gold. After California, the were gold rushes Australia (1851), New Zealand (Otago-1851), Venezuela (mostly British-1871), South Africa (1886), and Canada (Yukon-1896). Smaller gold rushes took place in many other countries. News of gold finds brought in notable rushes of prospective miners to stake their claim on the the richest areas. This had a range of significant effects. Some miners made fortunes, in some cases fortunes. Most of the participants did not. Others did benefit by these rushes, including and merchants and transport concerns. The resulting increase in the world's gold supply in economies based on the gold system stimulated global trade and investment. The resulting mass migration, trade, colonization, and environmental impact had significant impacts. Gold rushes resulted in waves of immigration that in many cases led to the permanent settlement of lightly populated areas. Under Spanish and Mexican rule, the population non-Native American population of California was very small--about 8,000 people. The Native American population was much lsrger, but unknown. The California Gold Rush brought the first significant non-Native American population into the new state.
The gold standard developed in ancient times. It was not designed, but simply developed as a result of the universal alure of the precious metal. It resulted from the psychological and not fully understood appeal of gold even before the development of civilization itself. Across culture, gold has been admired fr its beauty. Its indestructibility and rarity were all factors. Various commodities over time have been used as money in different cultures. As civilization progressed, the commodity that loses the least value over time tends to becomes the most accepted as a monetary unit. Gold was seen as valuable throughout the ancient world. The first documented use of gold as money began in Asia Minor (Anatolia). Gold was used as currency in the Roman wold, although silver was more common for everyday commerce. After the fall of the Western Empire, the Byzantine gold solidus (the bezant) was used widely throughout Europe and the Mediterranean during the early and mid-medieval period. As the Byzantine Empire and economy declined so did its ability to mint gold coins, its economic influence declined, so too did its supply of gold and ability to mint gold coins. As the European economy grew and nation states formed, the new countries began to mint their own coins. Most focused on silver which was available in greater quantities. Silver standards developed in part because there were silver mines in Europe, but few sources of gold. Here the monetary history varies from country to country. In Mercia (an British Anglo-Saxon kingdom, King Offa (c757-796 AD) minted silver pennies based on the Roman denarius. Other silver coins included the Italian denari, French deniers, and Spanish dineros circulated throughout Europe and not just in the countries here they were minted. As the pace of European commerce quickened and the economy began emerging from the medieval period, economic activity was impaired by the lack of an adequate monetary base. This began to change with Columbus' discovery of the America's. Spanish Conquistadores launched expeditions conquering Native American empires because they possessed gold and silver. And the Spanish subsequently discovered vast silver deposits in Mexico (1522) and Bolivia (1545). Potosi in Bolivia was essentially a silver mountain. Spanish galleons brought vast shipments of silver to Europe which dramatically affected the European economy. International trade came to depend on coins based on Spanish bullion especially silver. It financed trade with China as the Europeans had little the Chinese wanted. Coins such as the Spanish real de a ocho (pieces of eight) and Maria Theresa's thaler (the origin of the term dollar) became essential in international trade. Gradually because of the enormous sums involved in international trade shifted to a gold system. This began a period of bimetalism. The British along with the Dutch were becoming the centers of European finance. This shift to gold appears to have begun in the British West Indies in association with the immensely profitable sugar trade. This began with Queen Anne's proclamation as part of a money bill (1704). The resulting British West Indies gold standard was a de facto gold standard based interestingly enough on Spanish gold doubloon coins. The next move was made by none other than Sir Isaac Newton, the master of the Royal Mint. Newton established a new mint ratio between silver and gold (1717). This had the effect of driving silver out of circulation and essentially put Britain on a gold standard. The Royal Mint at Tower Hill following the Napoleonic Wars introduced a new gold sovereign (1816). The British Government then adopted a formal gold specie standard (1821). A shortage of specie impaired the development of the U.S. economy and was involved in a serious depression (1830s). This was in part alleviated by the discovery of gold in California (1848). The United Province of Canada adopted a gold standard (1853) and Newfoundland (1865). Two new industrial powerhouses, the United States and the new German Empire--de jure) adopted the gold standard (1873). The United States used the double eagle coin as its unit. Germany introduced the new gold mark. Canada adopted a dual system based on both the American gold eagle and the British gold sovereign. Australia and New Zealand followed by adopting the British gold standard as did the British West Indies which by this time was no longer of economic importance. Newfoundland which was not yet part of Canada was the only British Empire territory to introduce its own gold coin. Britain itself no longer had gold mines. Australia did. The Royal Mint opened branches in Sydney, Melbourne and Perth to mint gold sovereigns. A major political issue developed in America where Democratic political candidate wanted to increase silver coining, meaning inflation, and labeled the gold standard a 'cross of gold'. The gold specie standard came to an drupt end in Britain and the British Empire with the outbreak of World War I.
The major industrial nations maintained a gold standard, meaning that their currencies were pegged to the price of gold and maintained large gold reserves. The central bankers of the era were committed to the gold standard with a virtually religious devotion. 【Ahamed】 World War I had a huge impact on the international financial system. The war nearly destroyed what had been the central element in the international financial system--the gold standard. None of the belligerent countries demonetized gold or refused to buy gold at fixed prices, none continued the the basic tenets of the pre-War gold standard. With the outbreak of war, both the belligerents and the United States adopted official and unofficial actions affecting fiscal policies and the gold standard. This was seen as temporary measures given the fact that most officials believed that the War would be a short conflict, over in a few months. It almost was. No one foresaw abandoning the gold standard as a desirable permanent outcome. Wars have to be financed and the gold standard placed a brake on a country's financing.
Following World War I, the European powers which had dominated the world economy for several centuries attempted to go back to the gold standard. The Great Depression permanently destroyed the gold standard eventually the Untied States had to come off the gold standard. The United States had a fixed exchange rate relative to gold, but no way of impacting the misguided and failing policies of European countries, it was put in the place of importing the global gold deflation even before the Stick Market collapse (1929). Given the fixed exchange rate base on gold, the United States had no real domestic monetary policy options to rectify the situation. Unfortunately the Federal Reserve policy decision was to reduce the money supply. 【Bernanke】 This aggravated the e American debt and deflation problem aggregation the market decline and turning it into the Great Depression. The inevitable result was the failure of heavily leveraged banks. This had the impact of forcing bankers to protect themselves by reducing their loan exposure. Even well capitalized banks were in danger if depositors withdrew their money. The increase in the the currency/deposit ratio only worsening the economic situation. A portion of the fall in the U.S. nominal money stock was inevitable given deflationary pressures. Economists debate whether this was the impact rather than the primary cause, of the deflation. Some place great blame on Hoover. 【Ohanian】 Others emphasize the importance of the gold standard. 【Rothbard】 The protectionist policies of the Hoover Administration did not help the situation. Roosevelt's New Deal aggravated and prolonged the Depression, but there was no way of remaining on the gold standard in 1933. Nor was there any real alternative to massive relief efforts. The New Deals attacks on capitalism and capitalists and flirtation with socialism is another matter.
German financial officials before Hitler and Stalin launched World War II managed to obscure the level of the German Government's massive and growing debt. This allowed Hitler to pursue a massive rearmament program without causing a financial melt-down. Once Hitler took over Austria (April 1938) and Czechoslovakia (March 1939) he had access to new financial resources. Austria was annexed to the Reich. Czechoslovakia could be exploited ruthlessly. One of the first actions taken in both countries was to seize the Government's gold stocks. The same ruthless policies were followed with the invasion of Poland and the outbreak of the war (September 1939). Exploiting the economies of occupied countries was critical to the NAZI war economy. Seizing foreign gold stocks was an important part of the NAZI effort. This was because Hitler began the war with an economy that lacked many vital resources. And the War meant that few neutral countries wanted to accept Reich Marks to pay for imports of critical natural resources. Hitler got oil from his allies, first the Soviet Union and then Romania, neither of which required Germany to use its gold supplies. Other resources could be looted from occupied countries. But other resources such as iron ore, cobalt, tin, tungsten and other metals as well as manufactured goods had to be imported from neutral nations (Portugal, Spain, Sweden, Switzerland, and Turkey). And for this the NAZIs needed gold. Thus the Germans as they overran country after country, immediately went after each country's gold reserves. The Poles managed to get most of their gold to France, but France itself was also endangered. As a result, massive gold shipments began arriving in the United States (Spring 1940). The gold came from Belgium, Britain, France (including the Polish gold), the Netherlands, and Norway. The story of NAZI efforts to gets their hands on the gold of occupied countries is a fascinating World War II story. The NAZIs also went after gold in individual hands. Here the major target was the Jews in Germany and the occupied countries. The Japanese in Asia also needed gold, but there was less gold to be had in China and the European colonies that they occupied. There the most important Asian World War II gold story is Yamashita's gold.
Ahamed, Liaquat. Lords of Finance: The Bankers Who Broke the World.
Bernanke, Ben., “The Macroeconomics of the Great Depression: A Comparative Approach,” Journal of Money, Credit and Banking 27, No. 1 (1995).
Ohanian, Lee. "What - or who - started the Great Depression?" NBER Working Paper No. 15258 (August 2009, Revised September 2009).
Rothbard, Murray N. What Has Government Done to Our Money (1963).
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