Gold: The Least Imperfect Medium of Exchange

by Lew Lehrman

The high value but relatively low melting point of gold, compared to other precious metals, made it the most practical, readily available, monetary coin of enduring, efficient, modern, commercial utility.  A single ounce of gold is one of the most densely packed elemental values drawn from the earth’s crust.  Its relative scarcity, imperishability, and aesthetic desirability sustain it in the market as money, not least because of the cost of real factors of production required to produce it for the purpose of market exchange—or saving, or adornment (a form of durable saving).  Through a process of long-term economic evolution in tribal, interregional, and national trading markets, gold’s natural properties account for the fact that gold became universally acceptable as the optimum, long-term store of value and a uniform standard of commercial measure.  Universal acceptability is a hallmark of global money.  Silver was the sub-optimal monetary metal of civilization, exhibiting as it does many but not all of the properties of gold.

Merchants, bankers, farmers, and laborers may not have self-consciously considered these facts, but over the long run they behaved as if they did.  Desired by everyone, trading peoples observed that gold was the most marketable article of wealth in the market.  Thus, for the purpose of indirect exchange, gold emerged over the long run as the least imperfect medium of exchange.  People, even hostile nations, freely accepted gold from one another, in exchange for other goods because gold was a non-national, universally accepted money which could be held as reserves, and passed on as a store of stable future purchasing power. All who cherished the value and purchasing power of their saved labor came to rely on the gold monetary standard as a stable, long-term proxy for a standard assortment of goods and services to be purchased later, perhaps much later.

Find more at TheGoldStandardNow.org…

image: flickr.com/investingingold

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