Ive never been able to understand the concept of gold. Why is it so valuable? How do countries know that the amount of gold being held by other countries? Who audits these gold reserves to make sure the gold isn’t fake? In the event of a major war would you trade food for gold? feel like people would trade goods for different goods in such a dramatic event. I have potatoes and trade them for fruit type stuff. Is gold the same scam as diamonds? Or how is gold any different than Bitcoin?
In: Economics
I think for gold, it helps to understand the history of it.
So pre-history, humans coveted gold. Why?
Because before we could work metals, gold was soft enough to be worked, hard enough to not be readily accidentally damaged after it was worked, and didn’t corrode like other metals did.
Those aspects of gold culturally gave it an appeal to people. Like the anti-corrosion made people think gold had anti-aging benefits. The fact it was malleable made people associate it with positive change or adaptability.
So then, over the next few thousands of years, as people wanted it, other people wanted it **just because other people wanted it**. Once it got pegged with that sort of universal value, it became a way to barter between currencies. Like today, you have an exchange rate, and people buy currencies directly with currencies. But in the early days of currency, you had to trade something people wanted to have them part with their currency, and they probably didn’t want your foreign coins. People were always happy to take gold though, because they knew they could sell.
This led into modern banking. The Knights Templar are often thought of as the grandfather of modern banking, and a lot of what they did was take someone’s assets at one branch, exchange them for a bill denoting the worth of their stores, and then to give that bill at a different branch for valuables that could be locally traded. These valuables on the back end often were gold or small jewels.
In the 20th century, gold was found to be an excellent resource for circuitry. It conducted electricity better than almost anything we could find, but critically, it didn’t conduct as much heat and had a higher melting point, so it is one of the ideal metals for small circuits. Of course uses like this made the price go up, but it’s still valuable as a bartering tool regardless.
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