All Commentary
Friday, September 1, 1972

A Closer Look at Gold

Dr. Charles E. Weber received his Ph.D. from the University of Cincinnati in ¹954 on the basis of a dissertation on the incunabula (books printed prior to ¹5º1 A.D.) in the German language. After military service in World War II, at times as a member of intelligence units, he resumed his education and started his teaching career at the University of Missouri and the University of Tulsa, where he has been teaching since ¹956 except for four years at Louisiana State University (¹962-¹966).

Dr. Weber is the author of numerous articles on literature, history and monetary questions.

When we contemplate the gold coins from previous centuries we are painfully reminded to what extent modern man has lost his monetary freedom and hence an important aspect of his economic freedom. For thousands of years, with only relatively few and brief exceptions prior to 1915 (or 1934 in the case of the United States) nearly all nations in the main stream of human progress have enjoyed the advantages of the use of gold coinage as a monetary medium. Cowrie shells, stone wheels, rolls of bright bird feathers, salt, bronze ingots and the like were generally the monetary media of only the least advanced peoples. Restraints on the use of gold as a monetary medium were rare in previous centuries, so rare, in fact, that we are tempted to speculate that many of the social and economic problems besetting the world in recent decades might not simply be concomitant phenomena of the decline of the public monetary use of gold, but even the results of this decline. In our own case, it is probably not a mere coincidence that since 1934, when the monetary use of gold was prohibited to U.S. citizens, the public debt has climbed to levels that could scarcely have been imagined forty years ago, the purchasing power of the national monetary unit has deteriorated so badly that this decline has become a major national problem, export trade has declined, the centers of large cities have been rotting at an accelerated pace and the problem of overpopulation has begun to threaten the very quality of life to which we had become accustomed.

Prior to 1934 the use of gold as a monetary medium had been deeply rooted in our economic and legal traditions. Undoubtedly as a reaction to the chaos caused by excessive issues of paper money¹ before and during the Revolution, the Constitution provided in Article I, Section 10, that “No state shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.”2 A handsome U.S. gold coinage was commenced in 1795 to supplement the foreign gold in circulation, which continued to have the status of legal tender until 1857 on the basis of laws of 1793, 1816, 1834 and 1843. It was this sort of legal precedent that was the basis for the monetary stability of the country (and probably its economic progress) down to recent years.

Fiat Money in France

There is an interesting parallel in French monetary history. When the revolutionary government of France at the end of the 18th century tried to substitute paper money (assignats) supposedly based on the value of confiscated church properties, economic chaos resulted.3 Later on, Napoleon I saw the need of a reform to overcome the paralysis and reinstated the use of the precious metals. His introduction of the twenty franc piece (the “napoleon”) in 1803 was an act of far-reaching consequences, as we shall see below. Russia had also tried paper money, likewise designated by a similar word, assignashii.4

Although a number of governments make every desperate attempt to suppress the monetary use of gold, faith in the sun metal as a store of value is deeply ingrained in the economic common sense of human beings all over the world. When I was in Russia in the summer of 1970, a young man explained to me that the old five rouble pieces struck on the standard used beginning with 1897 are now fetching about 90 paper roubles, nearly a typical month’s wages in the present Soviet State. The grimly strict monetary laws and energetic propaganda of the Soviet State5 had not been able to eradicate a desire for and a trust in gold. During and immediately after World War II many a family was able to avoid starvation by gradually giving up one gold piece after the other to purchase food that could otherwise not be obtained in economies paralyzed by war and postwar controls.

A Coin at Work

Let us contemplate a half eagle struck by the young United States in 1800. As in the case of the vast majority of gold coins struck in the world before 1800, there is also no designation of value or weight on this piece. Gold coins need no designation of value or legal tender status to function well. The piece we are contemplating is worn, so badly worn that its designs are only slightly above the level of the fields, but its weight is 8.50 grams, only about 3 per cent below its legal weight of 135 grains (8.748 grams).

Now let us reconstruct the tremendous economic task that this gold piece performed so well and so long. The wear on this piece would suggest that it was in circulation at least until the weight reduction of 1834 and perhaps quite a bit longer. If it changed hands on the average of just once a week over a period of 50 years, it changed hands more than 2,500 times and was thus involved in an exchange of more than $12,500. However, the really remarkable aspect of this performance lies in the fact that every time it changed its owner, the new owner was guaranteed a stable value as long as he wished to keep the piece. What were the costs of this remarkable performance? About 15 cents’ worth of gold lost through wear and the very modest cost of striking the piece. To have printed paper money for this period of circulation would have approached or exceeded the minting and gold loss costs. Far more important, however, is the fact that the costs of the gold loss and minting were a very trivial consideration in relation to the social and economic benefits of the gold piece. Modern paper money, without a connection with the precious metals, simply cannot fulfill the traditional capacity of gold coinage to function both as a medium of exchange and a store of value.

Not only does gold coinage go back to the early days of the American Republic, but it covers some twenty-seven centuries of Western Civilization. It was, in turn, antedated by an even earlier, specifically monetary use of gold, a use that can be readily documented. Thus, a mural painting from Thebes, Egypt, assigned to the reign of Thutmosis III, 15011447 B.C., shows the weighing of gold rings and holed disks.” Details of this painting reveal the status that gold had attained as a monetary medium. The weights on the balance pan are in the form of bovine heads and sheep! This illustrates the fact that a transition had been made from an economy in which cattle were used as exchange to one in which the precious metals had taken their place, but the tradition of the cattle exchange is preserved in the very shape of the weights. To mention a later parallel, the earlier Latin word for money, petunia, developed from pecus, meaning “cattle.” In the case of the Teutonic languages, the German word for cattle, Vieh, is a cognate of English fee.

American Indian civilizations never developed a gold coinage as did the Europeans, but gold was used as a medium of exchange in the form of quills filled with gold dust. Undoubtedly, too, the many pre-Columbian gold ornaments, often of considerable artistic merit, played some sort of monetary role.

Coinage in Ancient Greece

The very beginnings of Greek gold (or more specifically, electrum) coinage are nebulous. One type with two confronted lions’ heads is actually inscribed “Alyas,” a variant form of the name of King Alyattes, fourth of the Mermnad kings of Lydia, who reigned 610-561 B.C. Far more abundantly preserved, however, are the electrum pieces of various weights (1/12, 1/6 and 1/3 staters) bearing the head of a lion with a radiate knob on the forehead. The weights of these pieces are astonishingly consistent. Six specimens of the 1/3 stater preserved in the Boston Museum of Fine Arts have the narrow range of 4.66 grams to 4.71 grams, with fractional pieces in a close proportion.7 Other very important early series of electrum coins were those of Kyzikos in Mysia (started before 550 B.C.), Mytilene on the island of Lesbos (ca. 500 B.C. ff.) and Phokaia in Ionia (started before 500 B.C.). These early gold series consisted of electrum, a more or less natural mixture of gold and silver, such as was mined in what is now western Turkey. Later on, more sophisticated refining methods were used to prepare the planchets. The huge gold coinages of the kings of Macedonia, Philip II (359-336 B.C.) and Alexander the Great (336-323 B.C.), are notable for the fact that they consisted of nearly pure gold, with specific gravities ranging around 19 (pure gold: 19.3 times the weight of water). By the time the autonomy of the Greek states had been extinguished by the expanding Roman Empire, no less than fifty of them had struck gold coins.

The Roman Republic and subsequently the Roman Empire had as a gold unit the aureus, which was first struck in quantity around 46 B.C. At that time it had a weight of 1/40 of a Roman pound (8.19 g). Its high purity persisted but its weight gradually sank over a period of nearly four centuries.

The Solidus

The next great gold series, the solidus, got its start in the early fourth century under Constantine the Great (reigned 306-337 A.D.). The solidus was one of the most remarkable and enduring of all gold coins. Its weight and fineness were maintained with only occasional variations for over seven centuries, in spite of all the military, economic and political vicissitudes of the late Roman Empire and its continuation in the east (the “Byzantine” Empire). During this very long period the solidus had little competition in the world except for the gold of the Islamic dynasties which originally started as imitations of the Byzantine solidus during the seventh century. The Ostrogoths in Italy also imitated the solidus in great quantities during the fifth and sixth centuries, but unlike the Islamic imitations, the Ostrogothic solidi bore the name and portraits of the Byzantine emperor and can be distinguished from the Byzantine pieces only by subtle stylistic differences. So familiar was the world with the solidus that we seldom find specimens with cuts to test the authenticity of the pieces; forgeries of them were evidently rare. Hoards of them have been found as far away as Scandinavia. Although we have no exact mint records from the Byzantine Empire, the mintage of the solidus was certainly enormous. As late as about 1950, common, worn solidi could be had for as little as about $12., not much more than twice their bullion value.8

After the decline of the solidus in the later medieval period it was supplanted by several important Italian, Hungarian and German series. Florence struck the fiorino d’oro (gold florin) beginning with the year 1252. It was imitated in a land with big gold mines, Hungary, in the 14th century and later. In Germany and the Netherlands, in turn, large quantities of florins were struck in the 15th and early 16th centuries, but they declined in weight and fineness when the German gold mines began to be so badly depleted that the gold became too dear in relation to the huge supplies of silver flowing from Saxony and Bohemia. (The first large-scale coinage of the predecessor of the silver dollar was done in Saxony, 1500 ff.) The Rhenish gold florin was struck in enormous quantities in such towns as Frankfurt, Cologne, Nuremberg and Utrecht. A quarter million of them were struck in 1418 in Frankfurt alone and Basel struck 126,020 during the years 1434-5.

The Gold Ducat

On 31 October, 1284, the Maggior Consiglio of Venice decided to mint the gold ducat, one of the most important gold coins of all times. It is still being struck from dies dated 1915 in the Vienna Mint nearly 700 years later. In Venice itself, the ducat was struck with the same design (St. Mark and Doge) down to the end of the 18th century. The ducat weight and fineness became a favorite in Germany, the Netherlands, Poland, Scandinavia and Russia. It was even crudely imitated as far away as India, where the Venetian originals were also in use.

England, France, Spain and Portugal had many gold coinages in the later middle ages, but they were of great variety. An outstandingly successful English coin of the late medieval period was the noble, which was imitated to some extent in the Netherlands, but the English and French kings changed their standards too often to establish gold coins of the great success and influence of the solidus and the ducat. The Spanish exploitation of the large deposits in Mexico, Bolivia and Peru resulted in the huge escudo coinage of the 16th to 19th centuries. Its multiple of eight is familiar to us as the doubloon.

As noted above, the gold coinage of the United States was started in 1795, with a modest weight decrease in 1834, after which U.S. gold coinage was continued for almost exactly a century on the same standard. About 3/4 of the enormous U.S. gold coinage was in the form of double eagles (1850 ff.).

The Latin Monetary Union

In France a new gold coinage was introduced in 1803 that continued to be of great importance until 1914. Denominations of 5, 10, 20, 40, 50 and 100 franc pieces were struck at various times but the most important was the 20 franc piece. The French standard was copied in Italy, Switzerland, Belgium, Spain, Greece, Serbia, Bulgaria, Romania and other lands, in some cases with different names. Some gold coinage on the franc standard continued even after World War I, especially in Switzerland. In recent years the French government has struck considerable quantities of gold using dies with older dates. The prosperous German Empire struck large quantities of gold on the mark standard (18711915), while the huge English sovereign coinage (1816 ff.) still dominates the trade in coined gold.

India had a long tradition of monetary gold use before the establishment of the present Republic of India with its socialistic orientation and hence hostility to private ownership of gold. Gold coinage of the European type was introduced to India no later than the time when the Bactrian Empire struck gold in a quite Greek form and with Greek inscriptions (ca. 250 B.C. ff.). Later on there were other very important Indian gold series. The Kushan gold coins were fairly close imitations of the Roman aureus, many hoards of which have also been found in India. The very abundant Kushan gold coinage was at first of high purity, like the Roman aureus, and it is even assumed that the planchets for it were prepared from remelted Roman gold. During the first and second centuries the Roman Empire had a severe balance of trade problem with India because of the commerce in spices, gems and other Indian goods desired by the luxury-loving Romans.

Debasement in India

With the decline of the Kushan Empire its gold coinage became severely debased, especially after about 200 A.D. After about 320 A.D. the Gupta kings also continued gold coinage in important quantities. After the decline of the Gupta realm, i.e., after about 450 A.D., a number of Hindu dynasties continued gold coinage. The famous uninscribed and enigmatic elephant pagodas of perhaps about 1300 and later are now believed to be the private products of Indian goldsmiths. In the north the Islamic rulers (the Sultans of Delhi and subsequently the Mughal Emperors) struck gold in large quantities. In the south, the Hindu Vijayanagar Empire struck large amounts of a very neat gold coinage between 1377 A.D. and the disastrous Battle of Tallikota in 1565. Beginning with the 16th century, various European powers struck gold series for their territories in India; the Portuguese, the Dutch, the French, the Danes and especially the British, who first imitated the trusted gold coinage of the moribund Mughal Empire before striking gold in the European style.

In Japan, which has gold mines that have been worked since medieval times, gold was used in the form of oval plates punched with various devices. During the 19th century base gold rectangles were produced in considerable quantities. Just as the Meiji Era brought so many other changes to Japan, its earliest years saw the introduction of a very beautiful gold coinage of occidental style based on the U.S. gold denominations. So highly prized are 20 yen pieces of 1870 (46,139 struck) that they fetch over one million yen today. With the exception of a few gold issues in this century, China has virtually no tradition of the coining of gold, although it has been prized for artistic uses for many centuries in China.

3000 Years of Gold

I have surveyed the history of gold coinage in some detail here in order to show what a great economic role it has played in nearly every civilization (with the notable exception of the Chinese) European traditions of the monetary use of gold can be traced back for nearly three millenia in the form of gold coins alone.

The decline of gold coinage we have witnessed during the last three to five decades9 thus represents a radical departure in monetary affairs. The coining of gold had hitherto been interrupted only sporadically by attempts to substitute other media for the precious metals.

It is undeniably true that many modern economists harbor a strong bias against the monetary use of gold. This bias is by no means difficult to explain, since these economists are the ones who see the most important role for themselves in governments which intervene strongly in the economy. Gold strongly restricts governmental intervention in the economy and the redistribution of wealth from the productive to the non-productive components of the population. Perhaps to some extent, too, the bias against the monetary use of gold is simply based on ignorance about the present and past monetary roles of gold. After all, a new generation has come onto the scene since 1934.

We appreciate the role of gold as an honest, constructive monetary medium when we consider the nature of its enemies. Keynes, whom Lenin lauded before the Second Congress of the Communist International, considered gold a barbarous relic. Typically, the people who are shouting most loudly that gold is a barbarous relic are the very ones who are most adamant in their demands to suppress the monetary use of gold by force. (Who, really, are the barbarians?) These “experts” must know full well just how powerful gold is in spite of their public denials that it should play a role in the monetary system and in spite of their claims that it is worthless except for filling teeth and the like.

Private Coinage

When governments have refused or have been unable to strike gold coins in sufficient quantities for commerce, private persons have provided gold coins in many instances. We need only think of the many private gold coinages in the United States alone: the Bechtler gold pieces struck in North Carolina in the 1830s and later, in addition to the massive amounts of gold struck privately in California in the 1850s and later. There have also been many private gold series in India and Germany, for example. A large private striking of gold on the ducat standard has taken place in Germany during the last two decades. In addition, many forgeries of well-known gold types with full or nearly full weight and fineness have been made in large quantities in recent decades. The American double eagle, the British sovereign and the 20 franc piece have been favorite forms of the counterfeiters, whose activities have flourished on a vast scale in recent years because of the need for gold coinage and the failure of public mints to perform their traditional duties of providing gold in convenient form.

Because of the strong biases of many economists against the monetary use of gold, a number of myths and erroneous conceptions have grown up about gold coinage. Even some libertarian economists are lacking in sufficient knowledge about the history of gold coinage to refute the nonsense that is often deliberately propagated.

It is an error to assume that all gold coinages were constantly being eroded in value by debasement and weight reductions. Indeed, the really important gold series were struck over long periods of time, in some instances for many centuries, without substantial reductions. One need only think of the solidus, the ducat, the escudo and the vast gold coinages of the nineteenth century; the sovereign, the double eagle and the napoleon. It is also an error to assume that the frauds committed in connection with gold coins were of very great importance. Sometimes coins were filed or sweated (friction in bags in which the gold dust was collected) and sometimes test cuts were made by which a small amount of gold was removed. However, such frauds could readily be detected by gold scales. Forgeries existed and there were printed descriptions of them as early as the 15th century. Still, such frauds are quite insignificant compared to the vast frauds carried out in connection with paper money, which is cheaper to counterfeit than gold coins. Of vastly greater importance, of course, is the fraud carried out against productive citizens by governments themselves which refuse to coin precious metals and keep issuing ever greater quantities of paper money.

It is still another error to assume that gold is the ally only of the wealthy. In this age of complicated tax laws and deceptive monetary policies it is the wealthy who can afford the best advice on taxes and investments. For the saver of modest means, a little hoard of gold and silver has often proved to be the best protection against confiscation of his savings by devaluations of currency.

There’s Plenty of Gold

The argument that there is “no longer enough gold for monetary purposes” is one of the more absurd arguments that has been made against the return to the monetary use of gold. The United States could start minting gold again within the very short time required to prepare the dies. Plenty of gold could be delivered to the mints from the mines now kept idle by governmental restrictions. Any seigniorage charged should not exceed the actual minting costs. As to the relation of the new gold coins to the huge heaps of paper money now in circulation, the problem could be easily circumvented simply by omitting any designation of value on the coins and employing the familiar weights and fineness of the quarter eagles, half eagles, eagles and double eagles. The double eagles, for example, might bear the inscription “516 GRAINS, 900 FINE” instead of the erstwhile “TWENTY DOLLARS.” As in previous generations, the deliverers of gold to be minted would be charged a small fee for minting costs and the gold pieces would be theirs to keep or put into commerce.

Striking gold coins without any designations of value on them is a procedure that was not only used in previous centuries, but also in recent decades. Consider the following examples: Beginning in 1921, Mexico had struck gold pieces somewhat larger than the U.S. double eagle. The Mexican pieces are known as the “centenario” because they originally commemorated the centennial of the Republic. For years these pieces were struck in large quantities with the designation of 50 Pesos. By 1943, however, the designation had become meaningless because of the considerable depreciation of the value of the Mexican paper and silver currency. In 1943 the centenario appeared without the usual inscription of 50 Pesos but with an inscription describing the weight and fineness, the really important factors. There are many variations on the procedure. Great Britain, for example, struck over 30 million sovereigns between 1957 and 1966 for overseas trade. These continued to bear no designation of value, just as all modern sovereigns (since 1816) had borne none.

Market Sets the Value

If the government were to resume the striking of gold pieces, as it should without delay, it would be easy to determine what designation of value, if any, were to be put on them after supply and demand had established a price in terms of other media. For purely monetary purposes, however, no designation of value would really be necessary, since gold coins need no legal tender status to work well, both as a medium of exchange and as a store of value.

The lessons of monetary history are clear. Without the resumption of gold coinage or at least a free commerce in all of the precious metals, including especially gold, inflation will go on and on and on. Even just the tolerance of a free gold market would inhibit inflation by providing a constant gauge of the value of other monetary media.

Those being hurt by inflation should bear the following in mind: The reason that governments with a redistributive economic philosophy frown on gold coins is because of the fact that inflation is a big aid if not, indeed, an essential factor in the redistributive process. If those persons in government circles who are talking about “fighting inflation” were at all sincere, they would immediately remove all restrictions on the mining and monetary use of gold and resume a governmental function which had been taken for granted for literally thousands of years in western thought, the striking of gold coins with an established weight and fineness.

Those being hurt by inflation have a powerful weapon at their disposal if they would only realize it and act accordingly. They could refuse to buy all bonds, public or private, that did not contain gold clauses. While it is true that gold obligations have been repudiated in the past,’” the constant demand for gold obligations would undoubtedly have an influence on national monetary policies. Restoration of the right to own gold and make contracts in terms of gold would be a major step toward restoration of the basic principle of economic freedom, a freedom no less sacred than other freedoms. The restoration of our traditional rights with regard to gold should be vigorously supported by all those who prize economic freedom and abhor the emptiness, stagnation, decay and oppression of the omnipotent socialistic state.



1 For a thorough, lavishly illustrated history of the paper money issues of our land from 1690 to 1789 see the brilliant volume by Eric P. Newman, The Early Paper Money of America. Racine, 1967.

2 In defending this provision, James Madison (The Federalist Papers, No. 10) speaks of “A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project….” In No. 44 he continues in the same vein: “… the pestilent effects of paper money on the necessary confidence between man and man, on the necessary confidence in the public councils, on the industry and morals of the people, and on the character of republican government…”

3 For details, see Andrew D. White, Fiat Money Inflation in France (Irvington, N. Y.: Foundation for Economic Education).

4 See the well illustrated volume on Russian monetary history by I. G. Spasskii. RUSSKAIA MONETNAIA SISTEMA, “Aurora” Press, Leningrad, 1970, p. 201.

5 Strange to say, during the early years of the Soviet State, gold coins were struck with the weights of the older ten-rouble pieces struck as late as 1911. The Soviet gold gieces were dated 1923 and bore the emblem of the State and a sowing peasant. There is evidence that these pieces were struck in very large quantities, but today they are very scarce. Doubtless the bulk of them were remelted.

6 For a reproduction of this painting, see Heinrich Quiring, Geschichte des Goldes / Die Goldenen Zeitalter in ihrer kulturellen and wirtschaf tlichen Bedeutung. Ferdinand Enke Verlag, Stuttgart, 1948, page 48. This book, by the way, is an excellent source of information on the history of the mining, refining and use of gold.

7 An excellent source for the metrological aspects of the earliest electrum coinage, including the specific gravities of many specimens, is the catalogue of the holdings of the Boston Museum of Fine Arts published by Agnes Brett in 1955.

8 To illustrate the constancy of the solidus, specimens in the author’s collection weigh as follows: A solidus struck in Milan under Honorius (395-423 A.D.) weighs 4.47 grams with a specific gravity of about 18. A lightly circulated specimen of Constantine VIII (1025-1028) with an inspiring portrait of Christ weighs 4.37 grams with a specific gravity of a bit less than 19, nearly pure gold. In the subsequent decades the weight and fineness of the solidus declined sharply, but Byzantine gold coinage persisted into the 14th century. For a detailed analysis of the debasement of the solidus in the eleventh century, see Byzantinische Zeitschrift, 1954, pp. 379-394.

9 The coining of gold has by no means ceased altogether, even in the case of governmental mints. During the last 10 to 15 years or so the following govern­ments have struck gold in quantity: Austria, Republic of China, Dominican Republic, Egypt, France, Great Britain. Katanga, Mexico, Persia, Peru, South Africa, Spain and Turkey. In some cases older dies were used. Many other lands have also struck gold in token quantities.

1º But not without a loss of face. The refusal of the United States to redeem gold bonds after 1934 was perhaps the greatest breach of faith that had been committed by it as of then. The exact wording of these bonds is significant. Gold bonds dated May 9, 1918, for example, contain the following clause: “The principal and interest hereof are payable in United States gold coin of the present standard of value.” Although the bankruptcy of an individual may be, in a technical legal sense, different from the bankruptcy of a nation, the failure to redeem national obligations in precious metals has always been an act parallel to the bankruptcy or dishonesty of an individual.