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Society: a looking glass into the history of Gold

In order to look ahead, we first must take an investigative look into our past.  How did gold become such a powerful commodity among civilizations and society?  Primitive society’s that dotted the landscape of the world, would use the yield of their labor to trade and barter with other members of their society in order to obtain assets that would benefit the individual and their family.  A farmer would produce wheat which he could trade to the blacksmith, who in turn, forge a new plow for the upcoming farm season.  Each had a commodity and skill that the other could benefit from.  Therefore, creating an equal trade.

However, if wheat is scarce and iron plentiful each item would have a different value rendering an even trade to seem, to the unknowing, an unfair trade of volume.  The supply and demand system was never dismissed only, complicated by larger societies such as cities, counties, states and ultimately on a national level.   The workforce needed to agree on an item to purchase that each held in high regard as a form of currency trade throughout the course of the year.   Gold would find its way into the limelight.

The gold standard was adopted, allowing banks to loan money out to citizens in which each note that was produced and granted was backed by the precious metal commodity, that had to be answered for.  A one-hundred-dollar note would be the equivalent to one hundred dollars in gold (which the bank was harboring) and the debt must be answered for.  This system allowed for fair trade with inflation being solely dependent on the supply and demand for goods being traded in the system.

Society needed to choose an item that all valued with relative equity.  This would show itself in the form of gold.  Being a luxury commodity with the relative ease of trade, banks were able to loan out gold in the form of notes.  After many years of barter and trade, world communities would come to value gold with similar ideas of its monetary contribution to the economy. Unlike wheat, gold could not be grown for the next year harvest.  The beauty and ease of exchange, among many of its physical properties, rendered it the best option for society to base trade from.

This system worked for some time allowing the citizens to privately control the value of gold, that is until the banks started to over lend the gold they had stocked away.  Over-lending set society on a crash course with an economic depression.  The government’s ability to step in was supposed to be limited, yet once faced with adversity, the printing of unbacked bank notes became rapid.  President Lincoln is the first to start printing money without the backing of gold as he attempted to keep the country unified and President Roosevelt took it a step further forcefully stripping Americans of the privately held gold.

The government is currently printing money at an exponential rate that few can ever see being recuperated back to the honest value of the dollar backed by gold.  Gold has rendered itself a commodity that is valued on a world scale and the value depended on the world citizen rather than an individual countries government.  The United States government is the only authority now that gives value to our dollar, therefore allowing them to create what Alan Greenspan refers to as a welfare state.

The hard-working contributor to society is taxed and that wealth redistributed to the noncontributors creating a dependency on an ever-expanding financially reckless government.  Greenspan refers to the exit of the gold standard in his 1966 article which appeared for the first time in a newsletter The Objectivist published, “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.” (Greenspan, The Objectivist) The message he is sending is clear. We the people no longer have the ability to control the supply and demand aspect of the trade, rather we must rely on our government to deem the worth of the money they print, and we use.

This leads us to the conclusion that our money is a credit that we no longer control.  Having gold will protect the average citizen when history repeats itself and our economy starts to take a turn for the worst.

Picture Dave driving a car, ultimately crashing the car and not have insurance to replace that car.  The smart move would be for Dave to go out and buy a second car and get car insurance, yet Dave does not get insurance, based on the idea that he already crashed once, and he personally will never allow it to happen again. Yet, Dave buys his second car with no car insurance.  Some of the factors for crashing a car are out of his control and it would be foolish to continue driving without insurance.  To equate Dave to a citizen and the crashing of the car to the economy we can understand why someone would invest in gold as a form of financial portfolio insurance.

Don’t be like Dave, get insurance before you crash!

Bibliography

Greenspan, Alan. “Gold and Economic Freedom” 321gold.com.  1966.

May, 10th, 2019

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