Gold In Our Society

Gold’s place in our world

Since the beginning of civilization men have sought to accumulate wealth and power.

This is the time of mystics and brutes. Tribal leaders ascended to power through superior fighting and or hunting ability. Mystics created what was often a superior position in tribal society by leveraging fear of the unknown. Trade was accomplished with food, tools, seashells whatever was expedient for the parties involved.

As tribes consolidated into societies and trade expanded. Early societies were organized around natural resources. The sea for fishing. In the desert a city-state might be centered around water.

The group near the sea might trade fish to the group that has a well for water. The problem with perishable goods as coin for trade is that it is perishable. A tremendous week of fishing might not yield much more benefit than an average week because the wealth created by a good day fishing had to be used within a short time frame. Frustrations like this can lead to the invention of things like lutefisk.

People needed a way to store accrued wealth long term

As early as 3000bc Egypt gold was used as money to purchase goods held by one and desired by another. Gold fulfilled the key tenets of the invention known as money:

Gold is rare commodity that can only be mined or panned. (As opposed to created)
Gold is a luxury item which humans desire to possess.
Gold is elemental and homogeneous. Every unit of pure gold has the same chemical structure.
Gold is infinitely divisible. It can be scaled objectively to suit every exchange.
Gold is not perishable.

I feel like I should mention that silver and other precious metals also fulfill the above criteria as and in fact have been used as money.

In contemporary society gold still functions as money. Though *fractional reserve banking in it’s modern incarnation has eliminated gold as the primary asset of deposit. For accuracy in perception note that the USA **gold standard or Bretton Woods was abandoned in 1971.

*Banking method that deems a bank need only hold a small percentage of assets on premise. This is because in theory only a fraction of depositors will demand their deposit back at any one time.

** Bretton Woods, New Hampshire was the site of the Allied powers meeting in summer of 1944 during which the Federal Reserve Note was deemed to be the worlds reserve currency. This currency was backed by gold at a fixed rate of $35 to the ounce. Note that only foreign banks could exchange Fed notes for gold as bullion ownership was outlawed in 1933.

During the 1970’s inflation was out of control. Money spent overseas poured back into the U.S. economy as foreign nations holding Fed Notes desperately tried to get anything tangible in exchange for the paper money they held. Golds inherent value stands in stark contrast to a paper currency with no tangible asset behind it. This economic disaster was not rectified until the Petro Dollar came into existence beginning with Saudi Arabia in 1973 and later the entire membership of OPEC. The details of the Petro Dollar monetary scheme are beyond the scope of this article but I encourage the reader to Google it!

Looking back from 2015 to 1971 shows gold to be volatile at casual observance. However if we look at the motivations for ownership of gold it makes perfect sense to describe gold as a reliable way to store wealth and protect it from inflation. Volatile moments such as 1979 – 1981 when gold went up to $800 an ounce from around $150 in the space of 18 months. The motivation was fear surrounding the Soviet invasion of Afghanistan. People feared the privations that accompany a massive scale war (WWIII loomed in the minds of many). Among these fears were economic collapse, seizure of wealth for the good of the state and variations of the two. After fear of immanent full scale war subsided. Other fears fell away as well. Gold settled back to a fairly stable valuation fluctuating between $250 – $450 per ounce. Various factors go into this stability among them are:

The amount of paper currency in world wide circulation(more paper higher price).
Controls implemented on how gold may be purchased.
Industrial demands such as electronics used in high energy machines.

This stability was followed by a peak of $2000+ per ounce after the financial crisis of 2008.

The gold market in the wake of 2008 was driven by several factors: Fear of total monetary collapse, quantitative easing(creation of Fed Note currency) as well as international efforts at artificially capping the price with controls on how gold might be purchased(No credit cards in many countries for example). For the last year or so gold has been floating around $1100 an ounce. Depending on your view of world politics you can expect gold to move up or down. The middle east conflicts which are playing out right now are directly connected to the control of the oil in the middle east. As long as nations are required to have Fed Notes to buy oil the price of gold will not go up too rapidly. However if the Petrol Dollar scheme fails and the world is not obliterated in the war preceding the failure, gold will not only skyrocket, it will be the only money available.

I myself believe that gold plays a key role in ones financial portfolio protecting against both increases in deficit spending(inflation tax) and currency crisis-collapse.

However you can you should find a way to hold at least a couple ounces of gold to protect yourself and your family from the worst case scenario.

https://youtu.be/50hjj6zl6z8