Image courtesy of 8Gold.org
Originally posted on Tuesday, January 14th, 2014
The British Broadcasting Company’s World Service News Magazine recently published something of a breakthrough article by its presenter Justin Rowlatt. Rowlatt explains, with great lucidity, why gold is the optimal material on which to base a monetary system.
He commences:
Mankind’s attitude to gold is bizarre. Chemically, it is uninteresting – it barely reacts with any other element. Yet, of all the 118 elements in the periodic table, gold is the one we humans have always tended to choose to use as currency. Why?
Why not osmium or chromium, or helium, say – or maybe seaborgium?
I’m not the first to ask the question, but I like to think I’m asking it in one of the most compelling locations possible – the extraordinary exhibition of pre-Columbian gold artefacts at the British Museum?
Mr. Rowlatt goes on to inventory the unique properties of gold that qualify it — far better than, say, seaborgium, as uniquely qualified as to play the roll of money. Among these properties, as he browses the periodic table of the elements are that it is solid (as opposed to gaseous or liquid, both of which would make for an impractical currency); it is nonreactive (e.g. does not rust), non-poisonous, and non-radioactive; easily distinguished by color (as the only yellow metal among many silvery ones); relatively easy to extract; easily smelted; not flimsy…. Rowlatt:
Of the 118 elements we are now down to just eight contenders: platinum, palladium, rhodium, iridium, osmium and ruthenium, along with the old familiars, gold and silver.
These are known as the noble metals, “noble” because they stand apart, barely reacting with the other elements.
They are also all pretty rare, another important criterion for a currency.
Even if iron didn’t rust, it wouldn’t make a good basis for money because there’s just too much of it around. You would end up having to carry some very big coins about.
With all the noble metals except silver and gold, you have the opposite problem. They are so rare that you would have to cast some very tiny coins, which you might easily lose.
They are also very hard to extract. The melting point of platinum is 1,768C.
That leaves just two elements – silver and gold.
Both are scarce but not impossibly rare. Both also have a relatively low melting point, and are therefore easy to turn into coins, ingots or jewellery.
Silver tarnishes – it reacts with minute amounts of sulphur in the air. That’s why we place particular value on gold.
It turns out then, that the reason gold is precious is precisely that it is so chemically uninteresting.
And Rowlatt’s expert source makes another astute point: “”That’s the other secret of gold’s success as a currency,” says Sella. “Gold is unbelievably beautiful.” Gold’s intrinsic and natural aesthetic popular appeal is dismissed, naively, by elitist theoreticians at peril to their own credibility.
Rowlatt then enumerates the political damages inflicted upon the gold standard and its lapses from perfection. Rowlatt expresses a sentiment identical to one often made by Lehrman Institute founder and chairman Lewis E. Lehrman: the classical gold standard is the “least imperfect” of all monetary systems. Rowlatt concludes: “So, to paraphrase Churchill, out of all the elements, gold makes the worst possible currency. Apart from all the others.”
When the very respected, very respectable BBC presents an elegant argument for the desirability of the gold standard it is clear that the gold standard’s reputation is well along the road to full rehabilitation.
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