The History Of Gold As Money

The History Of Gold As Money

The History Of Gold As Money
Turning Gold Into Money
Gold is​ one of​ the​ most dynamic elements of​ the​ modern economy and some might find it​ funny that the​ oldest form of​ valuing physical commodities is​ still thriving today .​
The first gold coins were produced in​ 700 BC and since then the​ precious metal has been used as​ the​ primary exchange element .​
The fact that gold was scarce and highly valued made it​ the​ perfect means of​ exchange,​ regardless of​ what the​ exchanged items were .​
The history of​ gold turning into money spans over a​ period of​ 2600 years and the​ turning point in​ gold’s history is​ the​ year 1971 .​
How Did Gold Become Paper?
Throughout history,​ gold and silver coins went through a​ process of​ debauching .​
Such coins began to​ be created out of​ gold and other metals,​ thus making the​ values of​ the​ actual coinage fluctuate in​ time .​
The process of​ turning physical gold into money began when goldsmiths,​ who used to​ store gold for other society members for a​ fee,​ started to​ issue receipts for their storage .​
The receipts idea spread quickly as​ it​ was more convenient than carrying the​ actual metal with them,​ so people began to​ get accustomed to​ the​ idea of​ paper money .​
Goldsmiths gradually turned into bankers and the​ currency evolutionary process continued developing .​
Why Did the​ Gold Window Close?
The 15th of​ August 1971 is​ the​ day when the​ Gold window was closed by the​ American president Richard Nixon .​
From that moment on,​ paper money could no longer be converted to​ gold,​ a​ fact that took the​ precious metal out of​ currency exchanges .​
In order to​ understand why the​ situation with gold in​ the​ economy reached this point,​ let’s travel back in​ time to​ the​ moment when bankers saw the​ opportunity of​ replacing metal with paper money .​
Since they had the​ power of​ issuing the​ receipts for gold,​ bankers thought of​ producing more receipts than the​ amount of​ gold they held .​
But,​ as​ you would expect,​ this practice also became popular and bankers soon started lending these receipts to​ the​ early governments and to​ the​ monarchs of​ the​ epoch .​
New Acts And Regulations Concerning the​ Use Of Gold
England was the​ country where bankers created the​ first central bank .​
The main purpose of​ such a​ bank was to​ lend money to​ monarchs,​ but it​ also served as​ protection for those bankers who issued more money than they could redeem in​ gold .​
However,​ it​ became obvious that this practice had a​ negative impact on​ the​ country’s economy .​
This lead to​ the​ apparition of​ the​ Peel’s Bank Act,​ which stated that banks are not allowed to​ issue more paper money than the​ gold they actually had in​ reserves .​
Thus,​ the​ importance of​ gold as​ a​ decisive factor in​ the​ global economy remained high all throughout modern financial history .​

What Do You Know About Modern Gold?
An interesting evolution of​ gold prices began in​ 1934,​ when gold was priced at​ $ 20 .​
In the​ period until 1971,​ the​ gold price remained around $35 .​
However,​ with the​ changes that occurred in​ the​ global economy,​ gold prices reached $300 and they remained above or​ very near this threshold .​
Various factors in​ the​ geopolitical world had their influences on​ the​ evolution of​ modern gold prices.
Can Gold be Controlled?
Do you ever think about gold when you are going to​ work or​ while shopping? Even though our modern society perceives gold more as​ a​ fashion item,​ nations still rely on​ the​ power of​ the​ precious metal in​ order to​ keep their economies balanced .​
We might not see gold in​ stores,​ while paying our taxes,​ or​ while taking credits from a​ bank,​ but it​ is​ an​ element profoundly involved in​ all these actions .​
It is​ fair to​ say that,​ throughout human history,​ we​ were often the​ ones being controlled by this precious metal,​ and not vice versa,​ as​ most people believe.

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