How did ancient countries get richer by mining gold or diamonds?


Historically gold has been used as money. The value they had was the social acceptance behind them as a means of easing transactions. So wouldn’t mining more of it add more into circulation and lead to inflation (And with it a lower value of it’s value) back in those times? What gives?

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There is a reason we know if Timbuktu and use it daily as the middle of know where. The Mali empire is probably where you would want to start or Finish this knowledge as they were so epically rich. Think it was the 12th century and dude owned like half or more of the world’s gold at the time.

Yes it would.

The story of the King of Mali visiting Egypt illustrates it. Mansa Musa was the king of the Mali empire stretching across much of NW Africa in the 14th century. Passing through Egypt on his pilgrimage to Mecca he spent or gave away so much gold that it decreased its value in the country for a dozen years afterwards.

Using gold currency is severely limiting to economic development as a nation. Every time you wanted to expand the army, or build roads, or do anything then you needed hard currency to pay for it. You had to literally have the gold in the treasury or secure funding elsewhere. Currency is the fuel of every economy, the less fuel you have the shorter your economy can go. So mining, conquering, plundering, etc are ways to secure the currency to fund any projects you may want, even taxes have a finite amount you raise, even if you used commodities or land to pay taxes, many commodities are perishable and land requires investment to make fruitful, so you are back to gold and silver. Even paper money was backed by literal gold and silver for the vast majority of time, just look at the economic expansions in modern times by leaving the gold standard.

Let’s say there is 100lbs of gold in the world, worth 1 million dollars. You don’t have any of it.

You stumble on a mine and dig up 100lbs of gold. Now there are 200lbs of gold in the world. This influx of gold cuts the price of gold in half.

So now the 100lbs of gold that you dug up is only worth $500,000 and the gold of everyone else who owns gold is now worth $500,000 where it used to be worth $1,000,000.

You did devalue the gold in the wortlos by digging up more of it, but the value added to your personal stockpile of gold increased faster from adding additional gold than the value dropped from the overall decrease in the price caused by the inflation you induced.

You effectively transferred some wealth from other holders of gold to yourself by mining it.

The numbers in the real world are obviously not quite so clean, but the basic principle applies.

They got richer by making everyone else poorer. Mining 1 gold piece is equivalent to taxing everyone for a total value of that 1 gold piece. So if there are 100,000 people around, each of them becomes, 1/100,000th of a gold piece poorer, but the owner of the mine gets 1 gold piece.