Only a Hop and a Skip to Money

James Buchan

  • The Power of Gold: The History of an Obsession by Peter Bernstein
    Wiley, 432 pp, £17.99, October 2000, ISBN 0 471 25210 7

Gold is the most metaphysical of the metals. A couple of layers of gilding, and items of everyday experience attain perfection: golden calf, golden section, golden goal. In the form of money, gold was always the currency more of heaven than of earth. As late as 1965, President de Gaulle told a press conference at the Elysée Palace that gold was ‘eternally and universally accepted as the unalterable fiduciary value par excellence’.

This universal character rescues gold from the manuals of architecture, interior decoration, jewellery, costume and specialised numismatics and makes its history of general interest. Unfortunately, the metaphysics of gold have often been mere superstition.

The fortunes of gold have sunk low. There has been no legal-tender gold coinage in Britain since 1925 and in the United States since 1933. In 1971, the US Treasury ceased to buy back dollars for gold and with that the metal lost its last outpost in the world of money. Many central banks are selling the ingots they collected in the era of the international gold standard.

Currencies that were once mere receipts for gold now lord it over the metal. Priced in dollars, gold has lost two-thirds of its value since 1980. In the intervening decades, the cost of living has at least doubled in many countries, so that gold has lost ground against almost all other species of asset. To the question our parents asked, ‘Why on earth has gold ceased to be money?’ we would add: ‘Why did gold become money in the first place?’ Or: ‘Will gold ever be money again?’ Peter Bernstein’s history of gold as money is very much better at answering the first question than the other two.

Pecuniary anthropology is very, very perilous. In the absence of evidence, both Aristotle and Adam Smith made implausible conjectures about the origin of money. Bernstein rushes right in after them. Because gold must be mined, panned or dredged and often only with great difficulty, because it throws back light, doesn’t rust at all, is easily hammered, twisted and spun, and is all but indestructible, it enjoyed great prestige even in the earliest times. It represented power, wealth and sanctity, Bernstein says. From there, it is only a hop and a skip to money: ‘The everlasting radiance of gold, together with its scarcity, suggested such exceptional value that its route from the golden calf . . . to its use as money was probably inevitable.’

It is hard to make sense of the sentence. If Bernstein means that once it is out of the ground, gold is probably bound to be used as money, he is mistaken. In the 16th century, Spaniards in the Americas reported that neither the Mexicans nor the Peruvians used their immense hoards of gold as money. ‘Imagine,’ Montaigne wrote in bewilderment after reading the Spanish chronicles, ‘that all our kings heaped up all the gold they’d been able to find over centuries and kept it immobile.’ The clash of gold as ornament and gold as money added to the elemental character of the European conquest.

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