With the rise in the price of gold, it’s not surprising that those who revere gold as money are saying, “I told you so.” Gold has a long history as a trade medium, and an interesting one. One of the neatest books I read this past year was a 19th century banking manual that had a chapter on how bankers should handle gold coins. While we think of the metal as fairly sturdy, portable and easy to use, according to a banker with lots of experience, handling gold coins was a pain in the neck.

For instance, bags had to be tied for quick opening, because every bag taken in by a bank had to be opened for counting and weighing. The weight had to come within a half percent of expectations for the quantity of coins in the bag or the poor bank clerk had to search the whole bag, piece by piece, to find which coins were light. Also, tying a bag too tightly increased the wear on the coins.

As for whether our dollars, euros, francs and pounds should be backed by gold, it’s an interesting proposition.

I keep imagining gold-rich countries like Russia nationalizing mines and creating instant wealth and power to lord over us. Then again, that’s the story of oil. It was also the story of Spain in the 16th century. At least we have a fair amount of gold here.

But I’ll leave the money angle for another time. Over the years in reading about gold, I’ve collected some interesting tidbits. So in the spirit of a Harper’s list, here are a few of the good ones, plus some other money history trivia.

• Gold’s abundance: relatively rare. Of the 92 natural elements in the earth’s crust, gold ranks 58th in rarity.

• But it’s not exceedingly rare. Every state in the U.S. has some gold deposits.

• The word pecuniary comes from pecunia in Latin, referring to the pecus—cattle—that were used literally and as a unit of value in the Roman republic (800 B.C.) from its earliest days.

• The first known metallic money outside China originated with Phoenician traders in 650 B.C. Made in Lydia, now part of Turkey, these were bronze pieces, sometimes shaped like cattle. It’s unknown whether the first tokens were used for trade or religion, had value themselves or were strictly tools for accounting. Gold coins from Lydia were created about a century later by King Croesus.

• The “talent” that the master paid his servants in the well-known Biblical story was a bronze ingot.

• The earliest Roman pieces were lumps of bronze called “aes rude.” Marks for weight were added about 300 B.C. These were divided into different valuations, with the “as,” which weighed about ¾ of a pound, serving as the basic monetary unit.

• Because of trade with the Greeks, Romans adopted silver coins about 269 B.C. Silver and bronze were their main monetary metals for the next 100 years.

• The Punic Wars had decreased the value of the as and it depreciated again, in or about 130 B.C., to approximately 16 per denarius. The as and the denarius (the silver coin) remained the most common coins and were used throughout the remainder of Roman civilization. Soldiers were paid in denarius.

• Gold coins in Rome were largely commemorative and meant for higher-level trade, annual salaries and tributes to emperors on important occasions. The first Roman gold coin, the aureus, was introduced in the Second Punic War against Carthage, 216-202 B.C.

• If the U.S.’s pile of gold in Ft. Knox (147.3 million troy ounces according to the U.S. Mint) were to back the U.S. M1 money supply on an even basis, the gold would be worth $940 an ounce. Gives one pause, doesn’t it?

• When gold is legal tender, governments try to regulate or manipulate its value, and that’s always a difficult… when Roosevelt raised gold from $20.67 to $35 in 1934, it immediately devalued the dollar by 40%.

• But from 1786 to 1933, the U.S. government only allowed the price of gold to rise from $17.92 to $20.67. A 15% increase in the official price of gold in 141 years. In the same span, U.S. GDP grew about 28,000%.

• Among the worst debasers of gold coins: Henry VIII, Diocletian and Nero. Debasement is a hidden tax. Henry added base metals to coins. Nero reduced silver content and made the gold coins smaller.

• In 1542, Francisco Pizarro took more gold from the Inca in a week than European miners produced in a year. The conquistadors brought so much gold from the New World to Europe that they increased supply by 500% and started the first gold-induced inflation. Other inflations caused by sudden gold supplies happened during the U.S. and Australian gold rushes in the 19th century.

• Despite gold’s long history as currency, only a small portion of domestic commerce was ever conducted in gold before modern times. After the Norman Conquest in England, peasants paid their feudal taxes to their lord in terms of labor, usually three days a year. In feudal Japan, peasants paid in rice and labor. They often owed as much as two-thirds of their crops and families starved in order to pay the tax.

• In the early U.S., coinage was so scarce, taxes were often paid in commodities such as wheat and cattle (Vermont) or tobacco (Maryland and Virginia). This caused a problem it took gold to solve. Farmers raised too much tobacco and caused tobacco devaluation. Virginia regulated production to protect tobacco’s monetary value, but it was a failure.

• Other commodities valued for commerce and tax transactions in the American colonies included cereal, corn, rice, beaver skins, wampum (shells) and milk pails.

• Colonials didn’t like paying taxes either. They tended to send their worst produce to the tax collector.

• Much of the specie (gold and silver coins) used in Colonial America came from Spain. The piece of eight was the forerunner of the dollar. The coins were earned in trade when barter did not suffice, but colonists were inclined to send them home to England and France to pay bills. To thwart that drain, Colonial legislatures overvalued the gold coins hoping colonists would keep them in the colonies where they were worth more than their value in Europe.

• When used in trade, gold coins wear out in about 18 years.

• It is believed that most of the gold coins used in trade between the U.S. and the West Indies before the U.S. Revolution were 15-20% “light.” Crooks and traders put coins in a coarse bag and shook them to create gold dust—called sweating the coins. They traded the coins at full value and made money on the dust.

• For years, banks sent gold coins to England from the U.S. and back again to maintain trade balances. In each trip, $178 in value from every $1 million in gold shipped, rubbed off during transport, according to an 1894 book on banking practices.

• The value of gold to silver has fluctuated widely. Among the ancient Greeks, Herodotus gives a 13 (silver) to 1 (gold) ratio. Plato says 12:1. For the Romans, Levy claims 10:1 and Julius Cesar once put it at 9:1. In the United States, the value has varied from 14:1 to 1.7:1.

Lynn Carpenter

Source: Notes on a Fragmented History of Money and Gold