Gold As Money

The very first economies functioned by way of bartering, long before Gold was used as money. I have milk and you have eggs that I need

so we agree on a fair exchange. As you can think this was not very convenient because what of a situation where I need something and cannot find a person that a re willing to exchange it for what I need. Thus arose the need for a method of payment that is universally acceptable, enter money.

At first all money consisted of coins in either Gold or Silver and there value was the value of the precious metal it was made of. This may seem like a good way of solving the problem, but of course the value of the metal could change. It is also difficult to carry around a lot of heavy metal. This gave rise to printed money.

At first all money was backed by gold and the value of the money was guaranteed by the issuing entity, the Government. So the printed money was taken at face value as guaranteed by the Reserve Bank.

During the Great Depression of the 1930's Roosevelt cut the Dollar's ties with Gold in order to pump money into the economy to relieve the financial problems. It is said it is the reason the US overcame the depression. The US Government never the less still allowed foreign governments to exchange Dollars for Gold. In 1971 Nixon stopped this practice to stop countries with a big cache of dollars from depleting the US from Gold.

This all sounds very good, but the problem is that Governments could now just print money as needed, thus "creating" money. Of course that led to inflation with the value of money going down all the time. Inflation is eating away at all your savings and you need something to protect yourself from this corrosion!

The Fascinating History Of Gold

Once again, gold enter into the picture. Through all time gold has kept it's buying power. In the short time the price of gold may fluctuate but over time you can still buy with gold what you could buy with it thirty years ago.

There must be more people of the same mind as lately the price of gold has steadily increase. More and more people are looking for a way to save for the future without inflation taking such a big toll. On Moneyweb there is an interesting article that is well worth a read. You can get it here.