Quotes On Gold
After careful thought is given to some of the following notable quotes on gold, be sure to also read the relevant articles on our Notable Articles page and the information on our What Is Money page.
Some insightful quotes:
John Locke in his 1718 Essay on Money and Bullion: “Observe well these rules: It is a very common mistake to say that money is a commodity. . . .Bullion is valued by its weight. . . money is valued by its stamp.”
Ben Franklin in his Modest Inquiry into the Nature and Necessity of a Paper Currency: “Silver and gold . . .[are] of no certain permanent value. . .We must distinguish between money as it is bullion, which is merchandise, and as by being coined it is made a currency; for its value as merchandise, and its value as a currency are two different things.”
Hamilton, echoing the argument set forth by Franklin: “It is immaterial what serves the purpose of money, whether paper or gold and silver; that the effect of both upon industry is the same; and that the intrinsic wealth of a nation is to be measured, not by the abundance of the precious metals contained in it, but by the quantity of the productions of its labor and industry.”
John Taylor of Caroline, perhaps harking back to the 16th century Potosi disaster, writes in 1814 “. . . Specie can transfer wealth from one country to another. If the United States could at pleasure create specie, they might, by a prudent use of such a monopoly, enrich themselves considerably at the expense of the world. . . Overflowing mines of these precious metals, would destroy their utility as a medium of exchange; and confined to one nation, would diminish rather than increase its happiness.”
Niall Ferguson, in his contemporary book The Ascent of Money discusses in grim detail the Potosi disaster and concludes that: "Like King Midas, the Spanish monarchs of the 16th century found that an abundance of precious metal could be as much a curse as a blessing. The reason? They dug up so much silver to pay for their wars of conquest that the metal itself dramatically declined in value. . . What the Spaniards failed to understand was that the value of precious metal is not absolute. . ."
Ferguson then writes: “The intangible character of most money today is perhaps the best evidence of its true nature. What the conquistadors failed to understand is that money is a matter of belief, even faith: belief in the person issuing the money he uses or the institution that honors his cheques or transfers. Money is not metal. It is trust inscribed. And it does not seem to matter much where it is inscribed: on silver, clay, on paper, on a liquid crystal display. Anything can serve as money, from the cowrie shells of the Maldives to the huge stone discs used on the Pacific islands of Yap. . .”
Stephen Zarlenga cites two ancient cases of monetary science from Greece and Rome that supports this idea that "money is not metal, it is trust inscribed":
''Plutarch describes Lycurgus 8th century BC monetary reform when Sparta’s wealth became overly concentrated. He banned using gold and silver and used iron slugs for money. Furthermore those iron pieces were dipped in vinegar while hot, to render them brittle and purposely destroy any commodity value that they had as iron! They received their value through legal sanction. This nomisma system lasted over 3 centuries and Sparta became a premier power. Polybius tells it faltered when Sparta's involvement in empire regressed her back to gold and silver money and they lost the science of money.
''REPUBLICAN ROME based her money on copper, isolating herself from the East and “disenfranchising” the gold/silver hoards and therefore much of the power of the East. Gold could be traded as merchandise; but without the monetary power, the ability of the East to control Rome’s money was reduced and she had a better chance to control her destiny. Roman Nomisma, were bronze discs legally valued far above their commodity content through the law.
On the question of whether gold is money, Alexander DelMar relates the following in his book The Science of Money:
. . .The Mixt Moneys case [of 1604] decided that Money was a Public Measure, a measure of value, and that, like other measures, it was necessary in the public welfare that its dimensions of volume should be limited, defined and regulated by the State. The whole body of learning left us by the ancient and renascent world was invoked in this celebrated dictum: Aristotle, Paulus, Bodin and Budelius were summoned to its support; the Roman law, the common law and the statutes all upheld it; "the State alone had the right to issue money and to decide of what substances its symbols should be made, whether of gold, silver, brass, or paper. Whatever the State declared to be money, was money” . . . and observes that By monopolizing this [gold] commodity the moneyed classes have got Nature by the throat and the community under their heels. . . Compared with this process, usury is mere child's play.
The more contemporary problem that allows the myth that money must be based on some commodity such as gold or other type of collateral to persist is discussed in brief by Alexander Del Mar: “As a rule political economists . . don’t take the trouble to study the history of money; it is much easier to imagine it and to deduce the principles of this imaginary knowledge.”
1935 statement by Frank Vanderlip, former President of the National City Bank of New York, and one of the seven original authors of Federal Reserve Act:
What is it we want of our currency? . . . We want a dollar that will, in the language of the President, “not change its purchasing and debt paying power during the succeeding generation” . . . What are the points to be taken into consideration? First and foremost, that Congress should assume the responsibility laid on it by the Constitution of regulating the value of money. We now know that a given weight of gold is not an unchanging standard of value. That fact is dawning slowly on the most conservative and obstinate minds.
In his 1913 book Banking, Currency and the Money Trust, then Congressman Charles A. Lindbergh (Sr.) puts the issue of tying gold to money this way:
Creating money out of commodities like gold and silver and legislating value into them by making them legal tender is the worst possible policy and the greatest limitation placed upon advancing civilization. It would be the same principle, though not in degree, as would be the printing and giving of legal tender paper money by the government to persons who give no consideration in return. Neither gold nor any other metal or commodity should be stamped with a value and made legal tender. Commodities may properly be stamped with their quality and weight so that stamp may be accepted as proof thereof. After that they may be used as exchange in commerce on their own commercial merits. Neither person nor property is entitled to any specially conferred governmental privileges. To coin metal and make it legal tender gives a special value to metal which enables those possessing it to take undue advantage of the rest of us. . . If gold is worth all they claim for it, it needs no extra function. If, on the other hand, it is not able to retain its present relative value without being legal tender, then that is positive proof that it should not be made legal tender. In the one case it is unnecessary, in the other case it is unjust.
From The Two Faces of Money:
In addition to relatively limited supplies of gold when compared to goods and services within an economy, we have the fluctuating purchasing power of gold. Thoren and Warner provide some historical insight using U.S. government and other official statistics to measure the purchasing power of gold as measured against U.S. wholesale prices. For example, they show that the actual purchasing power of gold went from $100 in 1896 – when its market price per troy ounce was $20.67 - to $30.10 in 1920, just 24 years later – when its market price remained at $20.67 per troy ounce. In 1933 the purchasing power of gold jumped from $70.40 to $100.40 in just one year. By 1970 it had reached a low of $36.70, then jumped - in ten short years - to $386.30 in 1980, at which time gold's market price reached an all time high of $850. One short year later in 1981, gold's purchasing power dropped again to $197.60 and its market price went to $501. Hardly a stable unit for measuring the value of goods and services OR for storing savings, unless you are enlightened enough to know when to buy on the lows.
Selected quotes from Money: Whence It Came, Where It Went by John Kenneth Galbraith:
[After a discussion of the manner in which the Coinage Act of 1873 demonetized silver and made gold the de facto money standard, Galbraith says. . .] In 1900 cosmetic regulation affecting coinage and notes further affirmed the commitment to gold. In consequence, some purists date the adoption of the gold standard to this year. In fact, its victory was already won.
Inflation could occur on a gold standard.
As noted, between the end of 1914 and the end of 1917, the gold stock in the United States almost doubled. . . The United States faced an inflation caused by gold.
The First World War marked the beginning of the end of the international gold standard - of the single world currency that, at whatever pain, gold had been. Not again was there a reasonably workable distribution of gold stocks between the industrial countries - mostly, and for many years, there was a plethora in the United States and paucity everywhere else. Efforts at revival were made in the decade of the twenties in Britain, France and the other industrial countries. Except in the United States and briefly in France no major country again looked at its gold and felt secure. None more than briefly allowed citizens to exchange their paper or bank deposits into gold.
The tendency, indeed a principal purpose, of the gold standard was to unite the economic performance and policies of nations. p148
Galbraith also explains that Gresham's Law applied to more than just gold or silver -with some surprising results (and lessons?). Thus,
In both Britain and Germany as [World War II] proceeded, the ration coupons became the decisive currency. Everyone or almost everyone could obtain the requisite pounds or marks; it was the availability of a ration ticket that determined whether or not a purchase, almost any purchase, could be made. [NOTABLY and] . . .In contrast with the more traditional means of exchange, the ration ticket is, with privileged exceptions, available to all in equal amounts. p254
(For more on Gresham's law see Chapter IX of the 1894 book by Arthru Kitson The Money Problem).
This excerpt from the conclusion of The Money Problem by Arthur Kitson provides further insight:
Evidence of the use of ideal money is furnished from experience, in this and other countries, by the inconvertible note currency. 'Governments,'says Francis Walker, 'have frequently issued paper money without adequate provision for its redemption in gold and in silver, without such redemption, in fact, taking place, and sometimes without redemption being promised, and yet that paper money has circulated as rapidly as gold or silver would have done, has been taken as freely in exchange for commodities and services, and even in some instances has maintained an actual value equal to that of the amount of the precious metals to which it was nominally equivalent.
The paper money of Massachusetts, for the greater part of the period 1690 to 1710; the paper money of Russia for the twenty years following 1768; the so-called continental currency of the American Revolution, for a year and more after the first emission; the paper money of Prussia for no inconsiderable period of time, all circulated freely, even without discount in specie.
And again he says: 'The so-called greenbacks of the American Civil War, never, from 1862 to the close of 1878, lost their currency in the smallest degree. At their price they were always taken readily, eagerly. Men never sought to avoid their use by taking gold at a premium, or by resorting to barter or credit.' This last statement is remarkable, owing to the fact that the United States Government dishonoured this currency by the famous or rather infamous exception clause, refusing to accept it in payment for duties and customs.
Also this excerpt from another book by Arthur Kitson, published in 1917 called Trade Fallacies, beginning on page 22:
The supreme economic factor is production, not finance. Finance is merely the artificial aid to production and exchange.
The Financial Factor presents itself from two distinct and entirely opposite and conflicting standpoints. The one is the bankers and moneylenders, and the other is the producers. To the banker, money presents itself as a valuable commodity from which he must needs draw dividends in the shape of interest. Hence cheapness in money is as hateful to the moneylender as cheap clothing is to the sweater.
For this reason the banking interests have waged unceasing warfare against State Banking and what they term 'cheap money expedients'. Moreover, the histories of cheap currency experiments have mostly been written by bankers, their employees, or hired professors, who have invariably presented the subject from this interested class's point of view. It is for this reason that so much importance has been attached to gold for currency purposes. Its scarcity, its dearness, gives weight to the demand for high interest charges.
On the other hand, the producer regards money more from the standpoint of its utility - his interests require the cheapest form obtainable - consistent with its ability to perform its work.
Finally, Galbraith offers a telling quote attributed to Churchill by Arthur M. Schlesinger, Jr. in his book The Coming of the New Deal:
Now out of office . . .Churchill said it was wrong to tie policies to the 'rarity or abundance of any commodity [such as gold]' and 'quite beyond human comprehension' that this should be done out of love for France. p210
For an important discussion of "Standard of Value" in terms of gold, silver and other commodities see Chapter VI of the 1894 book The Money Problem by Arthur Kitson.
For important insight into the manner in which gold and silver have been used to manipulate and create war-based empires read Stephen Zarlenga's Lost Science of Money. For example he writes: "From the time of Alexander the Great, whoever controlled the gold/silver ratio trade with the East was paramount in the West. We have seen how it consecutively benefited the Ptolemies, Rome, Constantinople, Venice, the Jews, and the Knights Templar."