USES OF GOLD
The physical properties of gold and the difficulties connected with obtaining it have made gold through all the ages one of the most precious of the metals. Because of its luster, its color, and its indestructibility, it was shaped by primitive man into rings, bracelets, and other ornaments. These same properties, together with its divisibility, early led to the use of gold as a trading counter, and in all but the most primitive societies it has been regarded as a measure of value and a medium of exchange. The earliest known reference to gold is a reference to its use in trade, and is contained in an edict of Menes of Egypt (perhaps 3800 B. C.) fixing the ratio of the value of gold to silver at 2¹⁄₂ to 1.
As a medium of exchange gold is used in a variety of forms. The primitive trader accepted and gave ornaments of gold in exchange for commodities. In mining camps, gold dust and nuggets have been the circulating medium. In a settled community under a government possessing the confidence of the governed, gold coined into counters of convenient denominations by the government is accepted without question in all transactions. For the settlement of balances in international trade, gold bullion is used, its value being determined by weight. Today practically all nations are on a gold standard, and even those on a silver standard in domestic trade have adopted the gold standard for foreign trade.
But gold, though it has many excellent qualities, is one of the heaviest of metals, and carrying it on the person is inconvenient, especially in amounts sufficient for large transactions. Also, through constant handling, gold wears away and coins deteriorate in value. Accordingly a large part of the coins or the gold bullion is kept in the national treasury or in the vaults of a bank, and some form of paper currency is used as the circulating medium. Upon this reserve of gold, seen only by a few employees of the government or bank, who have no ownership in it, is built an intricate system of credits and trade.
It is true that little gold is in actual circulation and that for domestic trade mediums of exchange secured only in part by gold are being used in increasing amounts. Even international exchange is no longer on the gold standard, but this situation is undoubtedly temporary and with the improvement in financial conditions in Europe gold will be restored to its position as foundation of trade and finance, national and international. The circulating medium, whatever its nature, must be freely convertible, and credit, to remain sound, must be founded upon an adequate gold reserve.
It has been officially estimated that between the years 1492 and 1894 the world’s production of gold equaled about $8,000,000,000. Of this amount a little less than $4,000,000,000 was held as gold reserve in 1894, the remainder having been lost or absorbed in the arts or in the manufacture of jewelry. Since 1894 the consumption of gold in the arts has been between $50,000,000 and $100,000,000 annually, or for the 27 years about $2,100,000,000 out of a total production of $9,000,000,000—almost 25 per cent.[158]
[158] Jennings, Hennen: “The Gold Industry and Gold Standard,” 1919.