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FRED
05-27-09, 02:31 PM
On this thread we post iTulip's official positions on key economics topics.

FRED
05-27-09, 02:32 PM
The official iTulip position on the idea that "gold is natural money": historically false.


A History of Gold Coins (http://goldinfo.net/goldhistory1.html)

Gold and silver were an integral part of business and trade as far back as the early civilizations of Sumer (the land between the rivers Euphrates and Tigris in what is now Iraq) and Egypt.

The great French historian Fernand Braudel saw these precious metals as the "lifeblood of Mediterranean trade in the 2nd millennium BC". Initially, however, they were traded simply by weight in the form of ingots, which could then be cut up into small chunks or drawn into wire. And the metals, particularly silver, were regarded more as a standard of accounting or for taxes to rulers or temples, rather than for general circulation among the population.

The first real coins were not struck until the 6th century BC in Lydia (Western Turkey). They were made from electrum, natural alloy of gold and silver found in the rivers of the region. They usually had a lion or a bull on one face and a punch mark or seal on the other, and weighed from 17.2 grams (0.55 troy oz) to as little as 0.2 grams (.006 troy oz). Their introduction is attributed to the Lydian king Croesus (561-547 BC). Improvements in refining soon led to the distinct minting of gold and silver coins.
Governments needed to standardize on a medium of exchange and store of value for tax collection and chose gold and silver for the following three qualities:


Accepted: Already in use as in international trade although not as currency
Rarity: Governments could control the source, quantity, and quality
Fungibility: Could be divided into units of account

Once governments made gold money, they as they usually do, to inflate it. They did so by clipping--literally clipping pieces off of the coins, melting down the clippings, and making more coins out of them--and diluting the gold and silver with cheaper metals. The result was exactly the same as today when governments print more money without a corresponding increase in the economy: inflation.

We will do our part to not propagate this popular yet historically inaccurate "gold is money" belief. Future references to it on iTulip will be corrected, and this post referenced.