Up until the last century, coins were worth something in their own right thanks to their precious metal content whereas today they simply have a token value. While the use of precious metals in backing western institutes has long-since ceased, the qualities that made it so functional are still deeply ingrained in the human psyche. Despised for two decades by many in the investment community, gold is making a serious come back.
It is no coincidence that it has been a symbol of wealth for thousands of years and not just as a decorative item. The combination of durability, purity and portability has been an overriding factor for its monetary use, as has its physical qualities of malleability and ductility that allow for easy division. Its relevancy in the modern financial world is more significant than ever, given its resistance to mass production. Unlike other commodities, it is not subject to the substitution effect when prices get too high.
There are many useful lessons from the history of the Roman Empire which used gold and silver coins as part of their currency. Following a build up of deficiencies by a series of lavish emperors, Nero used the excuse of the Great Fire of Rome to reduce the gold and silver content of coins, thenby creating a greater number of them, starting with the same amount of precious metal. By the time the empire folded, its percentage inclusion was close to naught. While it took the Romans several percentages to achieve the dubious honor of total devaluation, the fast-moving Americans are doing their best to beat them.
After Rome's descent and departure from Britain, the country lived a prolonged period without an organized national currency although foreign coins were widely used. This was partly a reflection of the decentralized culture of the Saxon invaders which depended more on local trade and coinage rather than national. As England emerged from the Dark Ages she associated the unwanted attention of marauding Vikings including one of their later descendants, William the Conqueror. Their imposing castles and cathedrals were soon thereafter to be found through England after the invasion of 1066. Just as unflinching Roman roads scarred their trail over the Celtic land and culture, so the Normans stamped their authority on the defeated Saxon foe with their constructions. One of the earliest examples is the Tower of London which is of course still standing today.
Next in the series Gold History coming soon.
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