If you really stop to think about the world (which most people tend not to do on a regular basis), you might realize that the way every single place on the planet operates (save for the jungle homes of those few aboriginal tribes still running around in loincloths in small pockets of Brazil and New Guinea or wherever) is based on such fragile and ridiculously arbitrary principles that, if not just making you scratch your head, might cause you to actually tear your hair out entire.
Think about the world economy.
What is ‘the greatest invention of all time’ is a debate that would certainly raise a lot of different possibilities – you’ve got fire, the wheel, the printing press, electronics etc. The worldwide economic system would also garner some support for inclusion on that list, though; think of the massive interconnectedness and complexity with which the world’s stock markets, banks and corporations filter and transfer wealth around second by second. Despite the obvious flaws in the system (as evidenced by the recent Financial Crisis), it is this system which has created, and is the foundation of, the day-to-day capitalistic workings of the entire world as we know it. Even people who are completely ignorant of the system are still basically controlled and ordered by it, in the way that everything percolates up and down from one extreme to the other, from buying a bottle of water at the local 7-11 to the creation of giant, multi-national conglomerates.
As an invention, this didn’t just happen overnight; there was no ‘eureka!’ moment. It evolved over hundreds of years. But just like any other invention, any other machine that humans put to their various uses every day, it needed something to fuel it, to sustain it, to make possible its slow but seemingly inevitable evolution into the facilitator of all human activity on earth.
That fuel, of course, is gold.
Have you heard of the Gold Standard? Very briefly:
The gold standard is a monetary system in which the standard economic unit of account is a fixed weight of gold. Three distinct kinds of gold standard can be identified. The gold specie standard is a system in which the monetary unit is associated with circulating gold coins, or with the unit of value defined in terms of one particular circulating gold coin in conjunction with subsidiary coinage made from a lesser valuable metal. The gold exchange standard may involve only the circulation of silver coins, or coins made of other metals, but the authorities will have guaranteed a fixed exchange rate with another country that is on the gold standard, hence creating a de facto gold standard, in that the value of the silver coins has a fixed external value in terms of gold that is independent of the inherent silver value. The gold bullion standard is a system in which gold coins do not actually circulate as such, but in which the authorities have agreed to sell gold bullion on demand at a fixed price in exchange for the circulating currency.
You can easily trace the evolution of the world economic system through those three forms of the standard; first came the specie standard – gold coins – which were in use as far back as antiquity; then came the exchange standard, where lesser metals were used for the actual minting and the gold was kept in storage, but everything was guaranteed; and then the bullion standard, which worked basically in the same way as the exchange standard, but with paper currency (at least that’s my read of it – I have to admit not knowing all that much about economic theory). If you look at the Wiki article, you’ll see that there were times when this system was abandoned temporarily and then re-instituted, and at the moment, as far as I can tell, we’re not using it (although I’m not exactly sure what goes on in its place . . . what do governments use now for equity – bonds?), though there are some economists who want to go back to it. But the point of this is not to discuss the pros and cons of the gold standard; its simply to point out that for thousands of years, gold has been the most important thing on earth, and the thing on which the entire economy – all transactions of equity and goods – has been pegged. But why?
Because it’s shiny.
Ask anyone what the most precious thing on earth is and most will say gold (if someone says ‘love’ feel free to smack them in the face). It’s a simple, intrinsically understood fact about the world. Gold is the most valuable substance (even though platinum and the ‘rare earths’ may garner more per ounce, most people don’t know that and would say gold). But what actually makes it valuable? The whole thing started thousands of years ago, of course, with kings and emperors hoarding gold and making fabulous treasures from it, so in a way, we just inherited the notion from them. But why did they like it so much? Because, I guess, to the human eye, it has a more pleasing colour and texture than any other metal. It’s ‘pretty.’ That appearance came to be associated with the notions of ‘goodness’ and ‘wealth,’ and we regurgitate it all without even thinking about it. Central banks today are really nothing more than the Kublai-Khan– or Pachacuti-esque treasure troves of nations.
Its relative rarity also plays a big part; if gold grew on trees it wouldn’t have the cachet it does, but then you’d have to assume that some other metal would simply have been used in its place (to wit, for a time in the 19th c, aluminum overtook gold and silver as the ‘it’ metal in the world until scientists figured out how to easily extract it from its ore – now it’s just plain old aluminum). Platinum is actually the most expensive of the precious metals today because of its rarity (they didn’t have or care about platinum back in ancient times, or if they did maybe they didn’t care about it because it would have just looked like sliver to them); but the question really becomes, I suppose, why this sort of behaviour? Why do we constantly see the need to make ‘precious’ these elements and use them like this as the basis for all financial transaction? I suppose it’s the simple notion of equity, the idea that you need to have something which guarantees your currency is actually worth something; and I’m not arguing with that idea. But I do want to point out just how incredibly and ridiculously arbitrary it is. There is a logic to it, but it’s a twisted logic, based entirely on fancy. And it’s fragile as hell; the minute that any large catastrophe hit the earth, this whole system would instantly fall by the wayside and people would return to the hoarding, theft and bartering of individual items. Water and food would instantly become more valuable than gold or silver, because of course if there’s no one around to exchange your precious metals with for goods, they might as well be dirt.
And if you believe the apocalyptic-minded folks, ether religious or scientific, it’s quite possible we’ll be seeing these ideas put to the test sometime in the next fifty years or so. Won’t that be interesting . . .