Why gold?

Why we use gold as money, from Gizmodo:

Right off the bat, Kumar [a chemical engineer] explains to NPR, the rightmost column of the table of the gets X’d out—they’re gasses, which would be problematic for obvious reasons. 38 more elements get the boot for being too reactive—corroding or igniting when they’re exposed to air. The two rows hanging at the bottom are radioactive, so those are no good either. We’re already down from 118 elements to 30. That was quick.

After that, Kumar says you want the metal to be rare but not too rare. That leaves five precious metals: rhodium, palladium, silver, platinum and gold.

Silver is good, but it tarnishes. Rhodium and palladium weren’t discovered until the early 1800s, so they’re out. Platinum’s melting point is over 3,000 degrees Fahrenheit, so you’d need a serious furnace to melt and shape it into coins, a furnace more advanced than one developed by ancient civilizations.

So that leaves us with good old gold, and Kumar says that if we had to replay history from the start, we’d probably end up with gold again today: "For the earth, with every parameter we have, gold is the sweet spot…It would come out no other way."

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2 Responses to Why gold?

  1. Vincent Ignatius says:

    What I don’t understand is how a gold standard could back all the value in the world today. The value of all the gold in the world is less than the value of all the other currency in the world. We’d have to declare the value of gold to be greater than it really is, and that would be just like fiat money.

  2. Jehu says:

    Vincent,
    The answer to that is simple—the price of gold relative to other commodities and currencies would increase a lot. That’s not such a bad thing for gold since it’s not used for much industrially.

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