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The Power of Gold: The History of an Obsession Hardcover – Sept. 13 2000
by
Peter L. Bernstein
(Author)
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In this exciting new book, Peter L. Bernstein, who chronicled the evolution of risk in his recent bestseller, Against the Gods, tells the story of history's most coveted, celebrated, and inglorious asset: gold. From the ancient fascinations of Moses and Midas through the modern convulsions caused by the gold standard and its aftermath, gold has led many of its most eager and proud possessors to a bad end. Gold had them, rather than the other way around. And while the same cycle of obsession and desperation may reverberate in today's fast-moving, electronically-driven stock markets, the role of gold in shaping human history is the striking feature of this tumultuous tale. Such is the power of gold.
This fascinating account begins with the magical, religious, and artistic qualities of gold and progresses to the invention of coinage, the transformation of gold into money, and the gold standard. The more important gold becomes as money, the more loudly it speaks of power--even more loudly than when it served as an entry to Heaven or a symbol of omnipotence. Ultimately, the book confronts the future of gold in a world where it appears to have been relegated to the periphery of global finance.
From the Bible to the Gold Rush era to modern day Fort Knox and beyond, unforgettable characters stride through these pages. Contemplate gold from the diverse perspectives of monarchs and moneyers, potentates and politicians, men of legendary wealth and others of more plebeian beginnings; from Asia Minor's King Croesus to Rome's noted speculator Crassus, to Byzantine emperors and humble miners, Venice's Marco Polo and Spain's Francisco Pizarro, to Charlemagne and Charles de Gaulle, Richard I and Richard Nixon, Isaac Newton and Winston Churchill, Britain's economists David Ricardo and John Maynard Keynes, and Christopher Columbus and the Forty-Niners. Perhaps most remarkable are the frantic speculators who pushed gold to $850.00 an ounce in 1980 just as their counterparts twenty years later drove Internet stocks to exorbitant heights.
Whether it is Egyptian pharaohs with depraved tastes, the luxury-mad survivors of the Black Death, the Chinese inventor of paper money, the pirates on the Spanish Main, or the hardnosed believers in the international gold standard like the United States' President Herbert Hoover, gold has been the supreme possession. It has been an icon for greed and an emblem of rectitude, as well as a vehicle for vanity and a badge of power that has shaped the destiny of humanity through the ages. As Bernstein muses, "The joke is that nothing is as useless and useful all at the same time."
Far more than a tale of romantic myths, daring explorations, and the history of money and power struggles, The Power of Gold suggests that the true significance of this infamous element may lie in the timeless passions it continues to evoke, and what this reveals about ourselves.
- Print length448 pages
- LanguageEnglish
- PublisherWiley
- Publication dateSept. 13 2000
- Dimensions15.88 x 5.72 x 26.04 cm
- ISBN-100471252107
- ISBN-13978-0471252108
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Product description
From Amazon
Any business book with a testimonial on its cover from one Paul Volcker deserves at least a second glance. Not that the former chairman of the US Federal Reserve says much ("The story of gold--in all its splendour and mythology") but it's better than a poke in the eye with a sharp stick. Still, gold is a fascinating subject and one that most of us would probably agree we'd like to see a bit more of. They did in ancient times, according to Peter Bernstein. It was more plentiful then, and its use was "for adornment and decoration and not for coinage or hoarding". This is underlined by a swift retelling of Moses' descent from Mount Sinai with the newly minted Ten Commandments to find a golden calf being worshipped. Even as slaves, the chosen people had ample amounts of gold on their person. "It never occurred to them to use their gold to bribe their way out of captivity in Egypt, they would have found few takers." O tempora, o mores, one might think. From Moses in the desert to Montagu Norman at the Bank of England. From Kubla Khan to Maynard Keynes, The Power of Gold describes itself as the history of an obsession. There's more to it than that. Peter Bernstein's sequel to Against the Gods, The Remarkable Story of Risk is a highly readable potted history of modern mankind, told through the development of money and modern economics. --Brian Bollen
From Publishers Weekly
"[T]he quest for gold" has been "gluttonous," says Bernstein, tracing the metal's impact on human myth and history: gold has inspired art, battles, conquests and discoveries, including Columbus's trip to the New World, where he hoped to secure enough gold to buy back the Holy Sepulcher from the Muslims. Bernstein makes clear the metal's virtues: it's so malleable that one ounce can be stretched into a 50-foot wire or pounded into 100 square feet, and it lasts forever (4,500-year-old Egyptian dental work, he notes, is good enough for today's mouths). Bernstein's gift for storytellingAwith just the right touch of acerbic wit (on the myth of Jason and the Golden Fleece, he summarizes, "The story does not have a happy ending, because Jason was a compulsive social climber")Aand his presentation of the paradox of how and why such a soft and simple metal has been afforded such value help make this work a winning account of human obsession, comprehensive, entertaining and enlightening. A knowledge of economics might help during the last third of the book, when Bernstein moves from ancient times to modern day and describes the economic chaos that followed WWI. By then gold was no longer the domain of legend; it had become a commodity, the standard against which powerful nations measure their wealth. But Bernstein, author of the bestselling Against the Gods: The Remarkable Story of Risk, livens up his intricate economic discussion with tales such as the one about the Harvard Business School professor who got into trouble with his dean for withdrawing his gold from the Harvard Trust Company during a gold standard-related panic in 1933. As the title promises, Bernstein does deliver a page-turning history of the not-so-heavy metal and its influence on people through the ages. $250,000 ad/promo; first serial to Worth. (Oct.)
Copyright 2000 Reed Business Information, Inc.
Copyright 2000 Reed Business Information, Inc.
From Library Journal
A master historian at the peak of his art here recounts the timeless story of our obsession with gold. Mixing myth, legend, and historical fact, Bernstein (Against the Gods presents an enthralling look at the people, places, and events that have evoked desperation and frustration in human behavior. Starting with a broad palette of colorful characters, Pharaoh Hatshepsut, King Midas, Alexander the Great, Emperor Justinian, the Inca Emperor Atahualpa, Martin Luther, Kublai Khan, Sir Isaac Newton, and Charles De Gaulle, the author recounts the sequence of events that led to gold becoming the international monetary standard in the 19th Century only to fall to obscurity amid the collapse of the Bretton Woods System in 1971. At its root, this is the story of people so blinded in their pursuit of gold that they could not comprehend the difference between useless metal and real wealth. Recommended for both public and academic libraries.
Copyright 2000 Reed Business Information, Inc.
Copyright 2000 Reed Business Information, Inc.
From Booklist
If all the gold ever mined in the history of the world were collected in one place, it would weigh about 125,000 tons. That's not a whole lot, when you consider that people have been mining gold as long as there has been civilization (there are more than 400 references to gold in the Bible). Gold is not very plentiful (it costs a small fortune just to mine the stuff), it's incredibly heavy (a cubic foot weighs half a ton), and it's so soft that you can't do anything practical with it. How, then, did it get to be so darn popular? That's the question Bernstein addresses in this utterly fascinating book. It's not a history of gold itself--there are histories of banking for that, he tells us--but a chronicle of the power and the mystique of gold. What is it about human beings that makes us turn a useless, hard-to-come-by metal into the object of desire, into something we wear, into a symbol of power and wealth? Is it our ability to make gold do anything we want that makes us do anything we can to get it? Never has there been a more enlightening, instructive, and entertaining look at the power of this most precious of metals. David Pitt
Copyright © American Library Association. All rights reserved
Copyright © American Library Association. All rights reserved
Review
History of gold
It defileth not
WHAT is the eternal lure of gold? Peter Bernstein is rather unpoetic on the Subject. He tell us of its "stubborn resistance to oxidation, unusual density, and ready malleability", claiming that these simple physical attributes explain everything we would want to know about the element's romance. Perhaps he is right. But consider the words of an early 17th-century English merchant, Gerard de Malynes, saying more or less the same, but in quite different tones:
"Such is the qualitie of fine Gold that the fire doth not consume it...neither is it subject to any other Element...it is easily spread in leaves of marvellous thinnesse; in colour it resembleth the Celestiall bodies, it defileth not the thing it toucheth; it is not stinking in smell; the spirit of it can by art be extracted."
Malynes had the bug, Mr Bernstein doesn't. Because gold's allure is rather lost on him, the author underplays the universality of its attraction, dwelling instead on the curse that has frequently befallen its admirers-from Crassus, a Roman plutocrat who died when Parthians poured molten gold down his throat, to Montagu Norman, the highly-strung governor of the Bank of England at the time of Britain's return to the gold standard in 1925.
Mr. Bernstein's sympathies lie rather with John Maynard Keynes, who famously denounced gold as the "barbarous relic", and with Benjamin Disraeli, who once declared that the "gold standard is not the cause, but the consequence of our commercial prosperity." Mr. Bernstein cites this comment more than once. But is it true? Could the credit and trade of the British empire have been established on any other monetary standard? The answer is probably not. Once gold protected people against the depredations of tyrants. However, the age of democracy has legitimised flat currencies. This explains why John Law failed to impose a paper currency in France in the early 18th century (this key moment in the history of gold is strangely overlooked by Mr. Bernstein). By the 20th century, gold had become an anachronism, as Keynes correctly recognised. It took others longer to release themselves intellectually from their "golden fetters". The populace of Britain suffered for this in the 1920s, as did the Americans in the early years of the 1930s depression. Today gold is simply an adornment. Long may it remain so.
--The Economist, October 14-20th, 2000 Edition
It defileth not
WHAT is the eternal lure of gold? Peter Bernstein is rather unpoetic on the Subject. He tell us of its "stubborn resistance to oxidation, unusual density, and ready malleability", claiming that these simple physical attributes explain everything we would want to know about the element's romance. Perhaps he is right. But consider the words of an early 17th-century English merchant, Gerard de Malynes, saying more or less the same, but in quite different tones:
"Such is the qualitie of fine Gold that the fire doth not consume it...neither is it subject to any other Element...it is easily spread in leaves of marvellous thinnesse; in colour it resembleth the Celestiall bodies, it defileth not the thing it toucheth; it is not stinking in smell; the spirit of it can by art be extracted."
Malynes had the bug, Mr Bernstein doesn't. Because gold's allure is rather lost on him, the author underplays the universality of its attraction, dwelling instead on the curse that has frequently befallen its admirers-from Crassus, a Roman plutocrat who died when Parthians poured molten gold down his throat, to Montagu Norman, the highly-strung governor of the Bank of England at the time of Britain's return to the gold standard in 1925.
Mr. Bernstein's sympathies lie rather with John Maynard Keynes, who famously denounced gold as the "barbarous relic", and with Benjamin Disraeli, who once declared that the "gold standard is not the cause, but the consequence of our commercial prosperity." Mr. Bernstein cites this comment more than once. But is it true? Could the credit and trade of the British empire have been established on any other monetary standard? The answer is probably not. Once gold protected people against the depredations of tyrants. However, the age of democracy has legitimised flat currencies. This explains why John Law failed to impose a paper currency in France in the early 18th century (this key moment in the history of gold is strangely overlooked by Mr. Bernstein). By the 20th century, gold had become an anachronism, as Keynes correctly recognised. It took others longer to release themselves intellectually from their "golden fetters". The populace of Britain suffered for this in the 1920s, as did the Americans in the early years of the 1930s depression. Today gold is simply an adornment. Long may it remain so.
--The Economist, October 14-20th, 2000 Edition
Review
"Bernstein...gives us a multifaceted depiction of the powerful pull gold has...his grasp on things financial...is firm, and he's admirably adept at explaining them."
--New York Times Book Review
From the Publisher
"Bernstein...gives us a multifaceted depiction of the powerful pull gold has...his grasp on things financial...is firm, and he's admirably adept at explaining them." (New York Times Book Review)
From the Inside Flap
In this exciting new book, Peter L. Bernstein, who chronicled the evolution of risk in his recent bestseller, Against the Gods, tells the story of history's most coveted, celebrated, and inglorious asset: gold. From the ancient fascinations of Moses and Midas through the modern convulsions caused by the gold standard and its aftermath, gold has led many of its most eager and proud possessors to a bad end. Gold had them, rather than the other way around. And while the same cycle of obsession and desperation may reverberate in today's fast-moving, electronically-driven stock markets, the role of gold in shaping human history is the striking feature of this tumultuous tale. Such is the power of gold.
This fascinating account begins with the magical, religious, and artistic qualities of gold and progresses to the invention of coinage, the transformation of gold into money, and the gold standard. The more important gold becomes as money, the more loudly it speaks of power-even more loudly than when it served as an entry to Heaven or a symbol of omnipotence. Ultimately, the book confronts the future of gold in a world where it appears to have been relegated to the periphery of global finance.
From the Bible to the Gold Rush era to modern day Fort Knox and beyond, unforgettable characters stride through these pages. Contemplate gold from the diverse perspectives of monarchs and moneyers, potentates and politicians, men of legendary wealth and others of more plebeian beginnings; from Asia Minor's King Croesus to Rome's noted speculator Crassus, to Byzantine emperors and humble miners, Venice's Marco Polo and Spain's Francisco Pizarro, to Charlemagne and Charles de Gaulle, Richard I and Richard Nixon, Isaac Newton and Winston Churchill, Britain's economists David Ricardo and John Maynard Keynes, and Christopher Columbus and the Forty-Niners. Perhaps most remarkable are the frantic speculators who pushed gold to $850.00 an ounce in 1980 just as their counterparts twenty years later drove Internet stocks to exorbitant heights.
Whether it is Egyptian pharaohs with depraved tastes, the luxury-mad survivors of the Black Death, the Chinese inventor of paper money, the pirates on the Spanish Main, or the hardnosed believers in the international gold standard like the United States' President Herbert Hoover, gold has been the supreme possession. It has been an icon for greed and an emblem of rectitude, as well as a vehicle for vanity and a badge of power that has shaped the destiny of humanity through the ages. As Bernstein muses, "The joke is that nothing is as useless and useful all at the same time."
Far more than a tale of romantic myths, daring explorations, and the history of money and power struggles, The Power of Gold suggests that the true significance of this infamous element may lie in the timeless passions it continues to evoke, and what this reveals about ourselves.
This fascinating account begins with the magical, religious, and artistic qualities of gold and progresses to the invention of coinage, the transformation of gold into money, and the gold standard. The more important gold becomes as money, the more loudly it speaks of power-even more loudly than when it served as an entry to Heaven or a symbol of omnipotence. Ultimately, the book confronts the future of gold in a world where it appears to have been relegated to the periphery of global finance.
From the Bible to the Gold Rush era to modern day Fort Knox and beyond, unforgettable characters stride through these pages. Contemplate gold from the diverse perspectives of monarchs and moneyers, potentates and politicians, men of legendary wealth and others of more plebeian beginnings; from Asia Minor's King Croesus to Rome's noted speculator Crassus, to Byzantine emperors and humble miners, Venice's Marco Polo and Spain's Francisco Pizarro, to Charlemagne and Charles de Gaulle, Richard I and Richard Nixon, Isaac Newton and Winston Churchill, Britain's economists David Ricardo and John Maynard Keynes, and Christopher Columbus and the Forty-Niners. Perhaps most remarkable are the frantic speculators who pushed gold to $850.00 an ounce in 1980 just as their counterparts twenty years later drove Internet stocks to exorbitant heights.
Whether it is Egyptian pharaohs with depraved tastes, the luxury-mad survivors of the Black Death, the Chinese inventor of paper money, the pirates on the Spanish Main, or the hardnosed believers in the international gold standard like the United States' President Herbert Hoover, gold has been the supreme possession. It has been an icon for greed and an emblem of rectitude, as well as a vehicle for vanity and a badge of power that has shaped the destiny of humanity through the ages. As Bernstein muses, "The joke is that nothing is as useless and useful all at the same time."
Far more than a tale of romantic myths, daring explorations, and the history of money and power struggles, The Power of Gold suggests that the true significance of this infamous element may lie in the timeless passions it continues to evoke, and what this reveals about ourselves.
From the Back Cover
Praise for Peter Bernstein and the power of Gold
"The story of gold-in all its splendor and mythology, its fascinationfor individuals and nations alike. . . . Peter Bernstein is up to the challenge. His spritely exposition is a fine read even as it makes us think and reflect." --Paul A. Volcker, Former Chairman of the Federal Reserve
"Admirably written...a wonderfully interesting view;-not alone of gold but of the greater economic history. Like other of his work, it is assured of a wide readership." --John Kenneth Galbraith Professor of Economics Emeritus, Harvard University
"This book is a noble treatment of the most noble of elements.The Power of Gold is a brilliant and unexpected taleof three thousand years of a metal as virtual reality." --Steve Jones author, Darwin's Ghost: The Origin of Species Updated
"Hats off! We are in the presence of a master...to read with such delight in its manner as to pass too quickly over the subtlety of its understanding and the astonishing width and depth of Bernstein's knowledge." --Roger G. Kennedy Director Emeritus, National Museum of American History
"...a fascinating story...wittily written, and full of original insights...Peter Bernstein has once more written a brilliant book, both highly instructive and entertaining." --Pierre Keller former senior partner, Lombard Odier & Cie, Geneva
"The story of gold-in all its splendor and mythology, its fascinationfor individuals and nations alike. . . . Peter Bernstein is up to the challenge. His spritely exposition is a fine read even as it makes us think and reflect." --Paul A. Volcker, Former Chairman of the Federal Reserve
"Admirably written...a wonderfully interesting view;-not alone of gold but of the greater economic history. Like other of his work, it is assured of a wide readership." --John Kenneth Galbraith Professor of Economics Emeritus, Harvard University
"This book is a noble treatment of the most noble of elements.The Power of Gold is a brilliant and unexpected taleof three thousand years of a metal as virtual reality." --Steve Jones author, Darwin's Ghost: The Origin of Species Updated
"Hats off! We are in the presence of a master...to read with such delight in its manner as to pass too quickly over the subtlety of its understanding and the astonishing width and depth of Bernstein's knowledge." --Roger G. Kennedy Director Emeritus, National Museum of American History
"...a fascinating story...wittily written, and full of original insights...Peter Bernstein has once more written a brilliant book, both highly instructive and entertaining." --Pierre Keller former senior partner, Lombard Odier & Cie, Geneva
About the Author
PETER L. BERNSTEIN combines the zest of a historian with the meticulous analytical powers of an economist. He is the author of seven books in economics and finance, including Against the Gods: The Remarkable Story of Risk and Capital Ideas: The Improbable Origins of Modern Wall Street. He is also President of Peter L. Bernstein, Inc., an economic consultancy to institutional investors, which he founded in 1973 after many years of managing billions of dollars in individual and institutional portfolios. He has lectured widely throughout the U.S. and abroad and has received the highest honors from his peers in the investment profession.
Excerpt. © Reprinted by permission. All rights reserved.
The Supreme Possession
About one hundred years ago, John Ruskin told the story of a man who boarded a ship carrying his entire wealth in a large bag of gold coins. A terrible storm came up a few days into the voyage and the alarm went off to abandon ship. Strapping the bag around his waist, the man went up on deck, jumped overboard, and promptly sank to the bottom of the sea. Asks Ruskin: "Now, as he was sinking, had he the gold? Or had the gold him?"
This book tells the story of how people have become intoxicated, obsessed, haunted, humbled, and exalted over pieces of metal called gold. Gold has motivated entire societies, torn economies to shreds, determined the fate of kings and emperors, inspired the most beautiful works of art, provoked horrible acts by one people against another, and driven men to endure intense hardship in the hope of finding instant wealth and annihilating uncertainty.
"Oh, most excellent gold!" observed Columbus while on his first voyage to America. "Who has gold has a treasure [that] even helps souls to paradise." As gold's unquenchable beauty shines like the sun, people have turned to it to protect themselves against the darkness ahead. Yet we shall see at every point that Ruskin's paradox arises and challenges us anew. Whether it is Perseus in search of the Golden Fleece, the Jews dancing around the golden calf, Croesus fingering his golden coins, Crassus murdered by molten gold poured down his throat, Basil Bulgaroctonus with over two hundred thousand pounds of gold, Pizarro surrounded by gold when slain by his henchmen, Sutter whose millstream launched the California gold rush, or modern leaders such as Charles de Gaulle who deluded themselves with a vision of an economy made stable, sure, and superior by the ownership of gold--they all had gold, but the gold had them all.
When Pindar in the fifth century BC described gold as "a child of Zeus, neither moth or rust devoureth it, but the mind of man is devoured by this supreme possession," he set forth the whole story in one sentence. John Stuart Mill nicely paraphrased this view in 1848, when he wrote "Gold thou mayst safely touch; but if it stick/Unto thy hands, it woundeth to the quick." Indeed, gold is a mass of contradictions. People believe that gold is a refuge until it is taken seriously; then it becomes a curse.
Nations have scoured the earth for gold in order to control others only to find that gold has controlled their own fate. The gold at the end of the rainbow is ultimate happiness, but the gold at the bottom of the mine emerges from hell. Gold has inspired some of humanity's greatest achievements and provoked some of its worst crimes. When we use gold to symbolize eternity, it elevates people to greater dignity--royalty, religion, formality; when gold is regarded as life everlasting, it drives people to death.
Gold's most mysterious incongruity is within the metal itself. It is so malleable that you can shape it in any way you wish; even the most primitive of people were able to create beautiful objects out of gold. Moreover, gold is imperishable. You can do anything you want with it and to it, but you cannot make it disappear. Iron ore, cow's milk, sand, and even computer blips are all convertible into something so different from their original state as to be unrecognizable. This is not the case with gold. Every piece of gold reflects the same qualities. The gold in the earring, the gold applied to the halo in a fresco, the gold on the dome of the Massachusetts State House, the gold flecks on Notre Dame's football helmets, and the gold bars hidden away in America's official cookie jar at Fort Knox are all made of the same stuff.
Despite the complex obsessions it has created, gold is wonderfully simple in its essence. Its chemical symbol AU derives from aurora, which means "shining dawn," but despite the glamorous suggestion of AU, gold is chemically inert. That explains why its radiance is forever. In Cairo, you will find a tooth bridge made of gold for an Egyptian 4500 years ago, its condition good enough to go into your mouth today. Gold is extraordinarily dense; a cubic foot of it weighs half a ton. In 1875, the English economist Stanley Jevons observed that the #20 million in transactions that cleared the London Bankers' Clearing House each day would weigh about 157 tons if paid in gold coin "and would require eighty horses for conveyance." The density of gold means that even very small amounts can function as money of large denominations.
Gold is almost as soft as putty. The gold on Venetian glasses was hammered down to as little as five-millionths of an inch--a process known as gilding. In an unusually creative use of gilding, King Ptolemy II of Egypt (285-246 BC) had a polar bear from his zoo lead festive processions in which the bear was preceded by a group of men carrying a gilded phallus 180 feet tall. You could draw an ounce of gold into a wire fifty miles in length, or, if you prefer, you could beat that ounce into a sheet that would cover one hundred square feet.
Unlike any other element on earth, almost all the gold ever mined is still around, much of it now in museums bedecking statues of the ancient gods and their furniture or in numismatic displays, some on the pages of illustrated manuscripts, some in gleaming bars buried in the dark cellars of central banks, a lot of it on fingers, ears, and teeth. There is a residue that rests quietly in shipwrecks at the bottom of the seas. If you piled all this gold in one solid cube, you could fit it aboard any of today's great oil tankers; 8 its total weight would amount to approximately 125,000 tons...
Product details
- Publisher : Wiley; 1st edition (Sept. 13 2000)
- Language : English
- Hardcover : 448 pages
- ISBN-10 : 0471252107
- ISBN-13 : 978-0471252108
- Item weight : 771 g
- Dimensions : 15.88 x 5.72 x 26.04 cm
- Best Sellers Rank: #1,225,408 in Books (See Top 100 in Books)
- #1,200 in Social Customs & Traditions (Books)
- #3,032 in Folklore & Mythology (Books)
- #4,982 in Finance in Accounting
- Customer Reviews:
About the author
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Peter L. Bernstein's nine books include the worldwide bestseller Against the Gods: The Remarkable Story of Risk. Bernstein is also an economic consultant and publisher of Economics and Portfolio Strategy, a semimonthly letter for institutional investors.
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Reviewed in Canada on February 12, 2021
Verified Purchase
EXcellent!
Reviewed in Canada on May 6, 2016
Verified Purchase
Excellent book, Full of information about the economy, with respect to Gold.
Reviewed in Canada on January 1, 2002
I enjoyed reading this book as much as the author's other book "Against the Gods". However, I also have to wonder about Mr. Bernstein's editor or about whether I can really believe all the "facts" in the book. For example, on page 364 he mentions William Duisberg, ECB president, when I believe the correct name is Wim Duisenberg. Given that the other book was also full of glaring errors I have to be careful believing everything in the book, especially the more entertaining stories. Of course anybody can make mistakes. That's why I wonder if the editor really read through the book carefully.
But you don't stop listening to your friends or relatives tell stories just because they might not be the historical truth, so go ahead and enjoy reading this book.
But you don't stop listening to your friends or relatives tell stories just because they might not be the historical truth, so go ahead and enjoy reading this book.
Reviewed in Canada on October 14, 2000
Mr. Bernstein skeptically sees gold as overrated and as potentially harmful. Think of this book as "The Tragedy of Obsession with Gold" as the story line. As Mr. Bernstein puts it, "This book tells the story of how people have become intoxicated, obsessed, haunted, and humbled over pieces of metal called gold."
To make that point, the book begins with a story that Ruskin told about a man who is on a sinking ship with his gold. He gets the gold and jumps overboard, and drowns from the weight of the gold. Mr. Bernstein cites the analogy throughout the book for the fate that awaits those who are committed to their gold. The gold has them, rather than vice versa.
Mr. Bernstein does a nice job of creating an on-going story line to put the role of gold in perspective. Gold first makes its appearance as an adornment for religious or personal purposes. This application leads to gold becoming used as money. Then gold helps create trade that only money can provide. From the trade comes power, and that power expands influence. Then as the world economy outgrows the supply of gold as a monetary stock, gold becomes a brake on economic growth. At the end of the book, gold is again turning into an adornment having been cut loose from being a reserve for the monetary stock. In this context, the book is about the rise and fall of the gold-based empire. That tale is best captured in the story of how little the gold from the Americas helped Spain economically. If a shortage of gold as money can slow down economic growth, an excess of gold can create inflation in general prices. That's the essence of Mr. Bernstein's argument about gold as a mercantile asset.
Economic history is rarely so interestingly told, and Mr. Bernstein deserves a lot of credit for taking something that could have been dull and making it lively. He is an excellent story teller, and you will find what he has to say contains many new and interesting points.
I was fascinated by the number of times that the fate of countries was affected by gold. Ransoms paid in gold for French Kings beggered that country on more than one occasion. The failure of worldwide wheat crops allowed the U.S. economic expansion to continue after the Civil War, as the U.S. was threatened with a shortage of gold needed for industrial goods. The Byzantine Empire lived on much longer than it would otherwise have by being able to buy defenders with gold. The Arab expansion was aided by access to gold. After World War I, the gold standard contributed to the Depression.
Mr. Bernstein leaves us out on a limb about where our system of floating rate currencies will end. Without some form of global currency, we should see rapid distortions in economic results whenever such shifts in currency values occur. We are in the middle of one of those shifts right now between the dollar and the euro. Certainly, the universal government preference to debase the value of currencies will continue to plague us. Mr. Bernstein leaves us with no answer to the problem, except to be certain that returning to the strait-jacket of the gold standard is not it. I wonder if it is really that simple, or if we are facing a severe future disruption that will make gold look good by comparison. Certainly, a world currency seems inevitable, whatever its nature is.
Realizing that gold can be harmful, does it seem any less beautiful to you? I found that my aesthetic preference for gold was unaffected by reading this book. I think you can appreciate gold without being greedy for it. Perhaps that's the lesson here.
After you have finished enjoying this fun book, think about where else overreliance on something or some idea can be harmful. My favorite example is the desire to be popular. Most people will do foolish and harmful things that debase quality (much as they did with gold coins) to achieve popularity. One of my favorite examples is in a recent book where a CEO went on CNBC almost naked as a publicity stunt for his company's latest advertising campaign.
Enjoy all things in proper perspective and moderation!
To make that point, the book begins with a story that Ruskin told about a man who is on a sinking ship with his gold. He gets the gold and jumps overboard, and drowns from the weight of the gold. Mr. Bernstein cites the analogy throughout the book for the fate that awaits those who are committed to their gold. The gold has them, rather than vice versa.
Mr. Bernstein does a nice job of creating an on-going story line to put the role of gold in perspective. Gold first makes its appearance as an adornment for religious or personal purposes. This application leads to gold becoming used as money. Then gold helps create trade that only money can provide. From the trade comes power, and that power expands influence. Then as the world economy outgrows the supply of gold as a monetary stock, gold becomes a brake on economic growth. At the end of the book, gold is again turning into an adornment having been cut loose from being a reserve for the monetary stock. In this context, the book is about the rise and fall of the gold-based empire. That tale is best captured in the story of how little the gold from the Americas helped Spain economically. If a shortage of gold as money can slow down economic growth, an excess of gold can create inflation in general prices. That's the essence of Mr. Bernstein's argument about gold as a mercantile asset.
Economic history is rarely so interestingly told, and Mr. Bernstein deserves a lot of credit for taking something that could have been dull and making it lively. He is an excellent story teller, and you will find what he has to say contains many new and interesting points.
I was fascinated by the number of times that the fate of countries was affected by gold. Ransoms paid in gold for French Kings beggered that country on more than one occasion. The failure of worldwide wheat crops allowed the U.S. economic expansion to continue after the Civil War, as the U.S. was threatened with a shortage of gold needed for industrial goods. The Byzantine Empire lived on much longer than it would otherwise have by being able to buy defenders with gold. The Arab expansion was aided by access to gold. After World War I, the gold standard contributed to the Depression.
Mr. Bernstein leaves us out on a limb about where our system of floating rate currencies will end. Without some form of global currency, we should see rapid distortions in economic results whenever such shifts in currency values occur. We are in the middle of one of those shifts right now between the dollar and the euro. Certainly, the universal government preference to debase the value of currencies will continue to plague us. Mr. Bernstein leaves us with no answer to the problem, except to be certain that returning to the strait-jacket of the gold standard is not it. I wonder if it is really that simple, or if we are facing a severe future disruption that will make gold look good by comparison. Certainly, a world currency seems inevitable, whatever its nature is.
Realizing that gold can be harmful, does it seem any less beautiful to you? I found that my aesthetic preference for gold was unaffected by reading this book. I think you can appreciate gold without being greedy for it. Perhaps that's the lesson here.
After you have finished enjoying this fun book, think about where else overreliance on something or some idea can be harmful. My favorite example is the desire to be popular. Most people will do foolish and harmful things that debase quality (much as they did with gold coins) to achieve popularity. One of my favorite examples is in a recent book where a CEO went on CNBC almost naked as a publicity stunt for his company's latest advertising campaign.
Enjoy all things in proper perspective and moderation!
Reviewed in Canada on April 19, 2008
Recently, I have noticed a decline in the value of the dollar in the market and great increase of gold. Even the gold went over one thousand dollar at one point. Then, I came to thinking: what if we might be heading to some kind of economy collapse in our near future where our dollars in the banks will disappear overnight and we will be left penniless and head into a great debt without much a warning. Then, it would be likely that gold and silver might return to being as values/standards of money for survival purposes in the event of economy collapse. At least, that is my understanding of using gold.
Before this year, I rarely take notice of gold and often thought of it as just piece of metal. And, I often wondered why gold would be such a big deal or why would gold became a driving motivation behind every nation's growth. Again, I thought, "they are pieces of metals, nothing more...geez, it sounds like everyone is obsessed with such illusion. Why do we even bother?" Then, I was recommended to this book by Peter Bernstein.
"The Power of Gold: The History of Obsession" is very intriguing and easy to read, with only twenty chapters and roughly four hundred pages. It is certainly a book that I could not put down because it answered some of my questions on the subject, or at least to my understanding. I really liked reading about the histories of gold from the ancient times to present, including the stories of Lydian and Greek as well of Johann Sutter in the time of California gold rush. Also, it was interesting to acquire an understanding about the attitude of the people towards gold in the aftermath of The Black Death during the mid-fourteenth century.
I most certainly agreed with the author when he said the following:
"Those who believed that gold was a hedge against the uncertainties of life failed to understand that the pursuit of eternity is not to be satisfied by gold, or by anything else we choose to replace gold - dollars, euros, whatever. Gold and its surrogates make sense only as a means to an end: to beautify, to adorn, to exchange for what we need and really want." (p. 372)
After reading this book, I have gained a better understanding about gold itself: how it was viewed, how it was and is being used, and why were/are people obsessed with gold. Gold may be a piece of metal, but it seems to serve mult-purposes.
I am no economist or trader, but I found this book to be an enlightening read and very informative about the gold's nature, its history, and its relationship with humanity.
Before this year, I rarely take notice of gold and often thought of it as just piece of metal. And, I often wondered why gold would be such a big deal or why would gold became a driving motivation behind every nation's growth. Again, I thought, "they are pieces of metals, nothing more...geez, it sounds like everyone is obsessed with such illusion. Why do we even bother?" Then, I was recommended to this book by Peter Bernstein.
"The Power of Gold: The History of Obsession" is very intriguing and easy to read, with only twenty chapters and roughly four hundred pages. It is certainly a book that I could not put down because it answered some of my questions on the subject, or at least to my understanding. I really liked reading about the histories of gold from the ancient times to present, including the stories of Lydian and Greek as well of Johann Sutter in the time of California gold rush. Also, it was interesting to acquire an understanding about the attitude of the people towards gold in the aftermath of The Black Death during the mid-fourteenth century.
I most certainly agreed with the author when he said the following:
"Those who believed that gold was a hedge against the uncertainties of life failed to understand that the pursuit of eternity is not to be satisfied by gold, or by anything else we choose to replace gold - dollars, euros, whatever. Gold and its surrogates make sense only as a means to an end: to beautify, to adorn, to exchange for what we need and really want." (p. 372)
After reading this book, I have gained a better understanding about gold itself: how it was viewed, how it was and is being used, and why were/are people obsessed with gold. Gold may be a piece of metal, but it seems to serve mult-purposes.
I am no economist or trader, but I found this book to be an enlightening read and very informative about the gold's nature, its history, and its relationship with humanity.
Top reviews from other countries
Liam Kelleher
5.0 out of 5 stars
A superb story that mixes fable, history and economics
Reviewed in the United Kingdom on March 9, 2021Verified Purchase
There are two interesting snippets that start Peter Bernstein's excellent book on gold. Firstly that the chemical symbol for gold "AU", derives from aurora, or "shining dawn". And the word gold itself is derived from gelo, and old English word for yellow. Such simplistic but fascinating bits of information scatter Peter Bernstein's book, which largely commences in the world of antiquity and myth.
The story starts in Egypt, Rome, Greece and Persia with the early mining and the early use of gold and coinage described along with some basic geology of where it is to be found. We are reminded - at length - of some of the fables of Midas. There are some interesting statistics that inflation was rampant even at around 300 AD with changes made to gold coinage. As trade with the wider world of India, China and Africa expanded, the use of gold in trade expanded, as did its mining on the Gold Coast of Africa.
There is quite a bit of information on the political figures of France, England and wider Europe between 1000-1400 AD as the various mints came into function. An interesting thought is that a growing shortage of gold in this period was a huge motivator for further travel - and the desire for Columbus to seek a passage westwards.
The book explodes into life from there as we are treated to the details of the horrors of Spanish conquests in the Americas and the gold plunder which they pilfered, most of which alas was merely smelted down. Large quantities of gold and silver flooded back to Europe, though much in turn ended in Asia, as Europeans behaved like they won the lotto. Those in China, India and Japan tended to use gold for adornment and not for money.
Of course Francis Drake and the British were acutely aware of such plunder and piracy launched an empire. The book then starts to take on a much more economic tone from thereon in as exchange rates between gold, silver and pounds start to get fixed. Isaac Newton features as he shifts career from scientist to a man of the mint.
But there are more discoveries and adventure too as the gold ruses in Klondike, South Africa and Australia are all touched upon but California gets the chunky section it deserves. I learned for example that the San Francisco 49ers are so called as the gold rush took off in 1849. But the increased output of gold did not lead to the expected inflation but - as Chevalier gets quoted - the rapid increase in population, prosperity and trade was matched by increased gold supply.
The book continues forward towards World War 1 - before a brief stop at The Wizard of Oz and its connections to the gold story. Of course the discussion on the movements on the gold standard are discussed at length before the book moves onto Breton Woods etc before finishing.
This is a great book, well written and jammed with plenty of statistics and story alike. Personally I don't care too much for all the exchange rate detail but I guess it is - or was - important. There are so many fascinating segments of the book intertwined with wider history and economic growth.
The story starts in Egypt, Rome, Greece and Persia with the early mining and the early use of gold and coinage described along with some basic geology of where it is to be found. We are reminded - at length - of some of the fables of Midas. There are some interesting statistics that inflation was rampant even at around 300 AD with changes made to gold coinage. As trade with the wider world of India, China and Africa expanded, the use of gold in trade expanded, as did its mining on the Gold Coast of Africa.
There is quite a bit of information on the political figures of France, England and wider Europe between 1000-1400 AD as the various mints came into function. An interesting thought is that a growing shortage of gold in this period was a huge motivator for further travel - and the desire for Columbus to seek a passage westwards.
The book explodes into life from there as we are treated to the details of the horrors of Spanish conquests in the Americas and the gold plunder which they pilfered, most of which alas was merely smelted down. Large quantities of gold and silver flooded back to Europe, though much in turn ended in Asia, as Europeans behaved like they won the lotto. Those in China, India and Japan tended to use gold for adornment and not for money.
Of course Francis Drake and the British were acutely aware of such plunder and piracy launched an empire. The book then starts to take on a much more economic tone from thereon in as exchange rates between gold, silver and pounds start to get fixed. Isaac Newton features as he shifts career from scientist to a man of the mint.
But there are more discoveries and adventure too as the gold ruses in Klondike, South Africa and Australia are all touched upon but California gets the chunky section it deserves. I learned for example that the San Francisco 49ers are so called as the gold rush took off in 1849. But the increased output of gold did not lead to the expected inflation but - as Chevalier gets quoted - the rapid increase in population, prosperity and trade was matched by increased gold supply.
The book continues forward towards World War 1 - before a brief stop at The Wizard of Oz and its connections to the gold story. Of course the discussion on the movements on the gold standard are discussed at length before the book moves onto Breton Woods etc before finishing.
This is a great book, well written and jammed with plenty of statistics and story alike. Personally I don't care too much for all the exchange rate detail but I guess it is - or was - important. There are so many fascinating segments of the book intertwined with wider history and economic growth.
2 people found this helpful
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Nathik
4.0 out of 5 stars
An Euro-centric Keynesian History of Gold
Reviewed in India on August 14, 2017Verified Purchase
Gold is a chemically inert, oxidation malleable and high density metal. This rare metal is paradoxically found across all continents.
Ancient World:
The Ancients(Egyptians, Jews to Romans) adored gold but as a display of wealth not as money. The demand for gold drove the demand of mining. Mining is a labor intensive process and this facilitated slavery.
Bimetallism:
King Croesus(595BC) was the first to establish gold as coin/medium of exchange via state. He annulled private issuance of electrum and called all outstanding coins and minted gold & silver coins to the old. Bimetallism is seldom stable as changing supply of metal overtime causes the values to change. Croesus maintained a ratio of 10:1.
Persians and the Romans:
Persians expanded the practice of gold coin mintage and influenced gold to be accepted as the popular form of money and collect tax in gold instead of wheat/rice. The expanding roman empire experienced the shortage of gold.Shortage lead to the below.
1. Living with insufficient supply makes demand fall short and downward pressure the price aka Depression.
2. Importing gold via plunder/trade
3. Debasing currency
Constantine (337BC) used new 98 % pure gold coins "Solidus" as his conquest eastward brought him gold. This was officially the widely accepted form of money. Made gold as the only accepted medium of exchange.
Middle-Ages:
The Arabs dominated and outsmarted their competitors in trade and established monopolies in Africa & this gave them access to West African Gold. Africans traded gold to salt. Salt was their primary money because of its scarcity.
Reconquista and Atahualpa:
Portuguese and Spaniards paved way for discovery of the new world. When the Spaniards arrived to South America, they invited The King of Incas Atahualpa to their quarters. Atahualpa naively accepted & he was taken hostage. Once the ransom for paid & the kingdom fell, the spaniards sentenced him to death for idolatry & adultery. Atahualpa was baptised in the honour of St. John for a quick and painless death. Mining became a serious business. Under the spaniards, the merciless labor was devastating to the natives. The death rate was so high that many africans slaves had to be imported.
Spain & Gold:
With Gold flowing back to Spain, Spain failed to become rich. The Expulsion of Jews & Muslims removed the merchant class & the scientific community. High consumption & no production along with rigid structure of society ultimately led to Price revolution of 16th Century.
Asians:
Asia is hardly discussed in the book which is a huge drawback. Asians understand gold was too important to be traded as money. So they used copper & brass as medium of exchange in place of gold. The word Cash for ready liquid money is Tamil word. Hien Tsung(821AD), due to severe shortage of copper, used sheet of paper for money.
Magic Mint & New Rulers:
In 1661, Charles II of England issued an order in council mandating manufacturing of coins by machinery in-place of hammer. The new coin, guinea, equal to £1 about 8 grams or 1/4 of an ounce. In 1697, Bank of England was established as the 1st private company to do business as limited liability company in exchange for £1.2 million loan with 8% interest.
New Bank system and First Crisis:
Three forms of money were used in Britain.
1. Government minted gold coins
2. Bank Notes from BoE and other private banks
3. People deposited gold to goldsmith and got receipts.
Fear of French invasion provoked citizens to encase bank notes for gold. This resulted in Bank Restriction Act of 1797 .
Gold Rush:
The 19th Century Gold rush in Australia, California and South Africa made establishment of international gold standard possible & had the opposite effect of Price Revolution from 16th Century.
WW1 & its effects:
According to the writer, Gold standard was a symptom of stability and not the cause. Post WW I ,National debt swelled by multiples of 1914 for all. Each country owed many to many of its citizens. Allies ended up in debt to the US upto $2 Billion. France, Italy, Russia owed $500 Million to UK, The total holding of UK, France and Germany in gold was $2 Billion. Gold Standard was suspended as a result, To bring to Gold standard means higher interest rate. High interest rate means subdued business activity which in turn means higher unemployment. Higher employment keeps wages in check which keeps price in check. The gold standard of 1925 was passed subsequently.
Banking Act of 1933 prohibits hoarding of gold and silver coins and required all public to surrender the gold coins/bars. The currency which broke from gold standard devalued. The price of gold went up & price of goods & services fell down substantially.
WW2 & its effect:
After WW2, many countries were in shambles & currencies debased. In Germany, cigarettes & nylon stocking were preferred payments. USD become the only currency convertible to gold(by central bankers, national treasuries and not private individuals). USD became the preferred mode of payment over gold as it was easy convertible and earned interest. Inflation was the only vulnerability of USD.
Nixon shock:
Vietnam war, budget deficit, unemployment contributed to inflation. Nixon removed the gold standard in 1971. Floating currency system was established. This soared the price of gold & made it a hedge against chaos, inflation & uncertainty.
This is an erudite account on the history of Gold. However, it has few drawbacks. Asia's role, impact & narrative conspicuously missing. The writer takes a Keynesian approach to narrate the history of the gold instead of taking views from all school of thoughts. It is implicit from his writing that he's skeptical of gold as store of value or medium of exchange. However he is very inconclusive in his take on Gold & its role(if any) in 21st century. Highly recommended still!
Ancient World:
The Ancients(Egyptians, Jews to Romans) adored gold but as a display of wealth not as money. The demand for gold drove the demand of mining. Mining is a labor intensive process and this facilitated slavery.
Bimetallism:
King Croesus(595BC) was the first to establish gold as coin/medium of exchange via state. He annulled private issuance of electrum and called all outstanding coins and minted gold & silver coins to the old. Bimetallism is seldom stable as changing supply of metal overtime causes the values to change. Croesus maintained a ratio of 10:1.
Persians and the Romans:
Persians expanded the practice of gold coin mintage and influenced gold to be accepted as the popular form of money and collect tax in gold instead of wheat/rice. The expanding roman empire experienced the shortage of gold.Shortage lead to the below.
1. Living with insufficient supply makes demand fall short and downward pressure the price aka Depression.
2. Importing gold via plunder/trade
3. Debasing currency
Constantine (337BC) used new 98 % pure gold coins "Solidus" as his conquest eastward brought him gold. This was officially the widely accepted form of money. Made gold as the only accepted medium of exchange.
Middle-Ages:
The Arabs dominated and outsmarted their competitors in trade and established monopolies in Africa & this gave them access to West African Gold. Africans traded gold to salt. Salt was their primary money because of its scarcity.
Reconquista and Atahualpa:
Portuguese and Spaniards paved way for discovery of the new world. When the Spaniards arrived to South America, they invited The King of Incas Atahualpa to their quarters. Atahualpa naively accepted & he was taken hostage. Once the ransom for paid & the kingdom fell, the spaniards sentenced him to death for idolatry & adultery. Atahualpa was baptised in the honour of St. John for a quick and painless death. Mining became a serious business. Under the spaniards, the merciless labor was devastating to the natives. The death rate was so high that many africans slaves had to be imported.
Spain & Gold:
With Gold flowing back to Spain, Spain failed to become rich. The Expulsion of Jews & Muslims removed the merchant class & the scientific community. High consumption & no production along with rigid structure of society ultimately led to Price revolution of 16th Century.
Asians:
Asia is hardly discussed in the book which is a huge drawback. Asians understand gold was too important to be traded as money. So they used copper & brass as medium of exchange in place of gold. The word Cash for ready liquid money is Tamil word. Hien Tsung(821AD), due to severe shortage of copper, used sheet of paper for money.
Magic Mint & New Rulers:
In 1661, Charles II of England issued an order in council mandating manufacturing of coins by machinery in-place of hammer. The new coin, guinea, equal to £1 about 8 grams or 1/4 of an ounce. In 1697, Bank of England was established as the 1st private company to do business as limited liability company in exchange for £1.2 million loan with 8% interest.
New Bank system and First Crisis:
Three forms of money were used in Britain.
1. Government minted gold coins
2. Bank Notes from BoE and other private banks
3. People deposited gold to goldsmith and got receipts.
Fear of French invasion provoked citizens to encase bank notes for gold. This resulted in Bank Restriction Act of 1797 .
Gold Rush:
The 19th Century Gold rush in Australia, California and South Africa made establishment of international gold standard possible & had the opposite effect of Price Revolution from 16th Century.
WW1 & its effects:
According to the writer, Gold standard was a symptom of stability and not the cause. Post WW I ,National debt swelled by multiples of 1914 for all. Each country owed many to many of its citizens. Allies ended up in debt to the US upto $2 Billion. France, Italy, Russia owed $500 Million to UK, The total holding of UK, France and Germany in gold was $2 Billion. Gold Standard was suspended as a result, To bring to Gold standard means higher interest rate. High interest rate means subdued business activity which in turn means higher unemployment. Higher employment keeps wages in check which keeps price in check. The gold standard of 1925 was passed subsequently.
Banking Act of 1933 prohibits hoarding of gold and silver coins and required all public to surrender the gold coins/bars. The currency which broke from gold standard devalued. The price of gold went up & price of goods & services fell down substantially.
WW2 & its effect:
After WW2, many countries were in shambles & currencies debased. In Germany, cigarettes & nylon stocking were preferred payments. USD become the only currency convertible to gold(by central bankers, national treasuries and not private individuals). USD became the preferred mode of payment over gold as it was easy convertible and earned interest. Inflation was the only vulnerability of USD.
Nixon shock:
Vietnam war, budget deficit, unemployment contributed to inflation. Nixon removed the gold standard in 1971. Floating currency system was established. This soared the price of gold & made it a hedge against chaos, inflation & uncertainty.
This is an erudite account on the history of Gold. However, it has few drawbacks. Asia's role, impact & narrative conspicuously missing. The writer takes a Keynesian approach to narrate the history of the gold instead of taking views from all school of thoughts. It is implicit from his writing that he's skeptical of gold as store of value or medium of exchange. However he is very inconclusive in his take on Gold & its role(if any) in 21st century. Highly recommended still!
2 people found this helpful
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T. Graczewski
5.0 out of 5 stars
The History of Money
Reviewed in the United States on May 27, 2015Verified Purchase
God bless Peter Bernstein, may he rest in peace. No one else could make arcane and seemingly dull topics (e.g. the history of gold or of statistics) so fascinating and accessible. In 2009, the year of Bernstein’s death, the celebrated academic economist Niall Ferguson published a bestseller, “The Ascent of Money: A Financial History of the World.” In my humble opinion, it was a dud. But this book, “The Power of Gold: The History of an Obsession,” first published in 2000, is the real financial history of the world for the layman. It is brilliant, penetrating, concise, and convincing.
There is much to commend about this book. And there is a lot that it covers. Allow me to distill it down to half-a-dozen central highlights, although that is a rather arbitrary number.
First, why gold? What is it about this element that has made it such an enduring part of the world’s monetary system, regardless of time period, location, or economic system? Bernstein explains that gold, alone among natural elements, shares the following characteristics: 1) it is universal (gold has been discovered on every continent other than Antarctica); 2) it is enduring (gold never rusts or tarnishes); 3) it is malleable (gold can easily be crafted into almost any imaginable shape); and 4) it is extremely dense (an equivalent monetary weight for gold in silver is enormous).
In some historical circumstances gold was easily obtained (e.g. the chunks of pure gold in the river Pactolus or at Sutter’s mill), but historically gold is difficult to produce. For example, “To produce one ounce of fine gold [in South Africa in the late 1990s] requires thirty-eight man-hours, 1400 gallons of water, electricity to run a large house for ten days, 282 to 565 cubic feet of air under straining pressure, and quantities of chemicals including cyanide, acids, lead, borax, and lime.” Such efforts are justified because gold is…well, gold. “Unlike other forms of money,” the author writes, “gold has never lost its poetic quality. It has always been both sacred and profane.”
Second, gold has always been a store of value (i.e. used for adornment and as treasure), but it hasn’t always been “money.” Bernstein writes that gold-as-money was born in Lydia, in present-day Turkey, the home city of the fabled Midas, around 650 BC. Croesus, the Lydian leader who was defeated by Cyrus in the Persian Wars, provided the central innovation of gold coinage. For the first time in history coins of equal size, weight, and value were minted by a central government and accepted far-and-wide in the Eastern Mediterranean. Eventually, the Lydian style of uniform gold coinage was adopted by other governments, including the Byzantine empire, which introduced the famed bezant, “the Dollar of the Middle Ages,” whose stability and intrinsic value “has never been equaled or even approached by any other currency,” including the modern US dollar, according to one scholar cited by Bernstein.
Third, the author compares and contrasts the two great ages of gold discovery. Between 1492 and 1600 the stock of silver and gold in Europe is estimated to have grown fivefold, yet the primary producer (or extractor) of New World specie, Spain, did not benefit long term. Rather, “Spain acted like a poor man who makes a great windfall at the gambling tables but comes to believe that the money is his destiny rather than a nonrecurring event,” freely spending fortunes on luxury goods produced around Europe rather than investing in domestic economic development. Spain was really just a bridge for gold and silver to get to Europe and Asia, where trade flowed in a one-way direction. “Asia turned out to be a sponge for gold and silver,” according to the author. The Asians traded silks and spices for gold, which they did not spend but rather refactored into adornments, thus depleting Europe’s stock of specie.
Worse yet for Spain, 1492 also marked the beginning of the expulsion of the Jews and Moors, the country’s primary merchant classes. (The Spanish empire went on to declare bankruptcy in 1576, 1596, 1607, 1627 and 1647.) As New World specie continued to pump into the European economy via Spain, prices began to rise steadily resulting in various schemes to debase the currency, including Henry VIII’s “Great Debasement” of 1542-1547. Monetarist economists like Milton Friedman (and plain common sense) would suggest that the new specie caused this so-called “Price Revolution of the 16th Century,” but Bernstein suggests the opposite may be the case. That is, it was the extreme demand for specie that drove the extensive exploration and seizing of gold.
As dramatic as the New World specie conquests were, they were dwarfed by the gold discoveries in California, Australia, the Klondike, and South Africa in the late 19th century. A few numbers make the point dramatically. The New World discoveries in the 1500s about doubled global gold production to 7 tons a year. By 1860, with Californian, Australian and Russian production in full swing, world production was 275 tons a year, a forty-fold increase! And that was before the discoveries in South Africa and the perfection of the cyanide method of efficiently separating gold from ore. Whereas California gold production peaked at 95 tons in 1853, South Africa peaked at 120 tons in 1898. So didn’t all this new gold produce inflation? Why was there not a corresponding “Price Revolution of the 19th Century”? Bernstein cites a few reasons: 1) wars during the 1500s were long lasting and total in nature, unlike the late 1800s, which only experienced a few intense wars of short duration (US Civil War, Franco-Prussian War, Crimean War); 2) economic productivity during the industrial revolution absorbed much of the money (consumption of energy in the US alone grew from 3 trillion BTUs in 1800 to 7,322 trillion BTUs in 1900); and 3) massive amounts of gold were hoarded by a new global entity, government central banks, in support of a new international monetary system, the gold standard.
Fourth, few authors do a better job explaining the classic gold standard than Bernstein does here. His main argument, echoed by many others, is that the gold standard was a symptom and not a cause of the tremendous economic expansion and relative stability of the pre-World War I global economy. Indeed, he writes that it was “…a system whose simplicity and elegance was unmatched in the history of money.” Built on experience and without any written rules, much like the British government, the gold standard nevertheless “developed all the trappings of a full-fledged religion: shared beliefs, high priests, strict codes of behavior, creed, and faith.” Moreover, it became something of a national status symbol, or as the great economist and historian Joseph Schumpeter put it, “a symbol of sound practice and a badge of honor and decency.” In this system, all national currencies adhering to gold, nearly 50 at its height, “were just names for particular weights of gold.”
Or as Bernstein succinctly puts it, “The gold discoveries in California and Australia and the Comstock Lode in Nevada, the appetite of Indians for silver, the American Civil War, and Germany’s overwhelming ambition to be a great power in effect backed the world into [a gold standard] that no one had anticipated and that many people were reluctant to accept. Once in place, however, the system displayed remarkable durability for the next half-century.”
The system worked only because all participants were committed to making it work, regardless of the domestic implications. If a national currency began to depreciate against its pegged value to gold, the primary response was to raise domestic interest rates to attract foreign investments, which would strengthen the currency but tend to produce subdued business activity, leading to higher unemployment. The high unemployment would keep wages in check, which would keep price increases in check, which would tend to strengthen the foreign exchange value of currency even more. Bernstein writes that the “system is singularly simple and effective – just so long as you ignore and/or are impervious to the human dimensions of the policy leading to unemployment and falling wages.”
Fifth, there is the tragic story of the interwar period and the Great Depression, and gold’s central role in it. Bernstein notes that the catastrophe of World War I obliterated many of the pre-war social, economic, and political norms. But that “…one paramount feature of the prewar era rose triumphantly from the ashes: gold.” National governments hastened to restore gold convertibility as soon as possible (England returned to gold in 1819, 4 years after the defeat of Napoleon and once price levels had returned to 1798 levels; it took England 7 years after WWI to return to gold and even then prices were still double what they had been in 1914). The essentialness of the gold standard became embedded in many people’s minds, Bernstein writes. In the words of Montagu Norman, Governor of the Bank of England from 1920 to 1944, a gold reserve and gold standard “were as necessary, and as dangerous to do without, as a police force and a tax collector.”
They all failed to realize that the gold standard was the symptom of their pre-war prosperity, not the cause of it. Or as the author expresses, “The notion that gold would make everything come out all right was a notion that was upside down; gold would make everything come out all right only when everything was all right in the first place.” The post-war world was “no right” in many respects necessary for a smoothly functioning gold standard. No longer was a national commitment to upholding the currency price of gold a foregone conclusion. Labor groups began to flex their political muscle against monetary policy moves certain to increase unemployment. And gone were the pre-war years of international cooperation as disputes over reparations, war debts, and national minorities undermined efforts at cross-border economic policy collaboration. Under such conditions, the prevailing gold standard was doomed to fail, especially if hit with an economic shock such as that experienced in 1929. The knee-jerk contractionary monetary and fiscal policies prescribed by the gold standard (raise interest rates and taxes while cutting government spending) turned a mild recession into a global economic catastrophe.
Roughly two-thirds of US banks folded as the Fed refused to inject liquidity into the markets for fears of destabilizing the dollar price in gold. In January 1934, FDR dropped his “bombshell” message that would raise the convertibility rate of gold to the dollar from $20.67 set in 1900 to $35.00, a 69% increase, but one that would last for 37 years. This jump in the price of gold led to a “golden avalanche” as gold production soared. By WWII, 60% of the world’s monetary gold was in the US, weighing some 15,000 tons (in contrast to the Inca ruler Atahualpa’s “Chamber of Gold” of some 6 tons in the 16th century).
Finally, there is the story of “gold unhinged,” a period in the post-Bretton Woods years when gold climbed to heights of value that would make Spain's Philip II blanche. After over thirty years of being pegged at $35 an ounce, gold was allowed to float in 1971. The US Treasury tried to adjust the price to the low $40s as inflation raged across the industrialized world, but the price of gold continued to rise steadily, almost unbelievably. By 1980, an ounce of gold peak at $850 – an annual price increase of 30% from 1968 to 1980, a period when the inflation rate averaged 7.5%. Up to that point, the best 12-year stretch for the stock market was 19%/year from 1949 to 1961. By 1981, the US gold stock had dropped from 75% of global totals in 1949 to just 25%. But this was gold’s high water mark – for a time. In 1980 the price of gold and the Dow Jones Industrial Average (DJIA) were nearly equal: 850. By 1999, gold was trading for $300 an ounce while the DJIA stood at 10,000.
This book, again published in 2000, seems to end on the note of “the death of gold.” That “barbarous relic,” as Keynes famously called it, had finally been buried. Or had it? The price of gold has risen steadily throughout the 2000s, peaking at roughly $1,700/ounce in 2011 and 2012. Today, the price of gold closed at $1,187.30. Perhaps reports of the death of gold have been greatly exaggerated after all.
In closing, Bernstein takes a rather dim view of his subject. “Disappointment, disillusion, and defeat have overcome everyone in this history who was so blinded in the pursuit of a hoard of gold that they could not comprehend the difference between a useless metal and real wealth,” he writes. I’m rather surprised he would be so cynical after chronicling so well the overwhelming power of this mysterious element. What other tangible “thing” has had such a dramatic impact on human society across time and place? He also writes “Where gold is involved, dreams seldom come true.” And perhaps that is a better way of putting it.
There is much to commend about this book. And there is a lot that it covers. Allow me to distill it down to half-a-dozen central highlights, although that is a rather arbitrary number.
First, why gold? What is it about this element that has made it such an enduring part of the world’s monetary system, regardless of time period, location, or economic system? Bernstein explains that gold, alone among natural elements, shares the following characteristics: 1) it is universal (gold has been discovered on every continent other than Antarctica); 2) it is enduring (gold never rusts or tarnishes); 3) it is malleable (gold can easily be crafted into almost any imaginable shape); and 4) it is extremely dense (an equivalent monetary weight for gold in silver is enormous).
In some historical circumstances gold was easily obtained (e.g. the chunks of pure gold in the river Pactolus or at Sutter’s mill), but historically gold is difficult to produce. For example, “To produce one ounce of fine gold [in South Africa in the late 1990s] requires thirty-eight man-hours, 1400 gallons of water, electricity to run a large house for ten days, 282 to 565 cubic feet of air under straining pressure, and quantities of chemicals including cyanide, acids, lead, borax, and lime.” Such efforts are justified because gold is…well, gold. “Unlike other forms of money,” the author writes, “gold has never lost its poetic quality. It has always been both sacred and profane.”
Second, gold has always been a store of value (i.e. used for adornment and as treasure), but it hasn’t always been “money.” Bernstein writes that gold-as-money was born in Lydia, in present-day Turkey, the home city of the fabled Midas, around 650 BC. Croesus, the Lydian leader who was defeated by Cyrus in the Persian Wars, provided the central innovation of gold coinage. For the first time in history coins of equal size, weight, and value were minted by a central government and accepted far-and-wide in the Eastern Mediterranean. Eventually, the Lydian style of uniform gold coinage was adopted by other governments, including the Byzantine empire, which introduced the famed bezant, “the Dollar of the Middle Ages,” whose stability and intrinsic value “has never been equaled or even approached by any other currency,” including the modern US dollar, according to one scholar cited by Bernstein.
Third, the author compares and contrasts the two great ages of gold discovery. Between 1492 and 1600 the stock of silver and gold in Europe is estimated to have grown fivefold, yet the primary producer (or extractor) of New World specie, Spain, did not benefit long term. Rather, “Spain acted like a poor man who makes a great windfall at the gambling tables but comes to believe that the money is his destiny rather than a nonrecurring event,” freely spending fortunes on luxury goods produced around Europe rather than investing in domestic economic development. Spain was really just a bridge for gold and silver to get to Europe and Asia, where trade flowed in a one-way direction. “Asia turned out to be a sponge for gold and silver,” according to the author. The Asians traded silks and spices for gold, which they did not spend but rather refactored into adornments, thus depleting Europe’s stock of specie.
Worse yet for Spain, 1492 also marked the beginning of the expulsion of the Jews and Moors, the country’s primary merchant classes. (The Spanish empire went on to declare bankruptcy in 1576, 1596, 1607, 1627 and 1647.) As New World specie continued to pump into the European economy via Spain, prices began to rise steadily resulting in various schemes to debase the currency, including Henry VIII’s “Great Debasement” of 1542-1547. Monetarist economists like Milton Friedman (and plain common sense) would suggest that the new specie caused this so-called “Price Revolution of the 16th Century,” but Bernstein suggests the opposite may be the case. That is, it was the extreme demand for specie that drove the extensive exploration and seizing of gold.
As dramatic as the New World specie conquests were, they were dwarfed by the gold discoveries in California, Australia, the Klondike, and South Africa in the late 19th century. A few numbers make the point dramatically. The New World discoveries in the 1500s about doubled global gold production to 7 tons a year. By 1860, with Californian, Australian and Russian production in full swing, world production was 275 tons a year, a forty-fold increase! And that was before the discoveries in South Africa and the perfection of the cyanide method of efficiently separating gold from ore. Whereas California gold production peaked at 95 tons in 1853, South Africa peaked at 120 tons in 1898. So didn’t all this new gold produce inflation? Why was there not a corresponding “Price Revolution of the 19th Century”? Bernstein cites a few reasons: 1) wars during the 1500s were long lasting and total in nature, unlike the late 1800s, which only experienced a few intense wars of short duration (US Civil War, Franco-Prussian War, Crimean War); 2) economic productivity during the industrial revolution absorbed much of the money (consumption of energy in the US alone grew from 3 trillion BTUs in 1800 to 7,322 trillion BTUs in 1900); and 3) massive amounts of gold were hoarded by a new global entity, government central banks, in support of a new international monetary system, the gold standard.
Fourth, few authors do a better job explaining the classic gold standard than Bernstein does here. His main argument, echoed by many others, is that the gold standard was a symptom and not a cause of the tremendous economic expansion and relative stability of the pre-World War I global economy. Indeed, he writes that it was “…a system whose simplicity and elegance was unmatched in the history of money.” Built on experience and without any written rules, much like the British government, the gold standard nevertheless “developed all the trappings of a full-fledged religion: shared beliefs, high priests, strict codes of behavior, creed, and faith.” Moreover, it became something of a national status symbol, or as the great economist and historian Joseph Schumpeter put it, “a symbol of sound practice and a badge of honor and decency.” In this system, all national currencies adhering to gold, nearly 50 at its height, “were just names for particular weights of gold.”
Or as Bernstein succinctly puts it, “The gold discoveries in California and Australia and the Comstock Lode in Nevada, the appetite of Indians for silver, the American Civil War, and Germany’s overwhelming ambition to be a great power in effect backed the world into [a gold standard] that no one had anticipated and that many people were reluctant to accept. Once in place, however, the system displayed remarkable durability for the next half-century.”
The system worked only because all participants were committed to making it work, regardless of the domestic implications. If a national currency began to depreciate against its pegged value to gold, the primary response was to raise domestic interest rates to attract foreign investments, which would strengthen the currency but tend to produce subdued business activity, leading to higher unemployment. The high unemployment would keep wages in check, which would keep price increases in check, which would tend to strengthen the foreign exchange value of currency even more. Bernstein writes that the “system is singularly simple and effective – just so long as you ignore and/or are impervious to the human dimensions of the policy leading to unemployment and falling wages.”
Fifth, there is the tragic story of the interwar period and the Great Depression, and gold’s central role in it. Bernstein notes that the catastrophe of World War I obliterated many of the pre-war social, economic, and political norms. But that “…one paramount feature of the prewar era rose triumphantly from the ashes: gold.” National governments hastened to restore gold convertibility as soon as possible (England returned to gold in 1819, 4 years after the defeat of Napoleon and once price levels had returned to 1798 levels; it took England 7 years after WWI to return to gold and even then prices were still double what they had been in 1914). The essentialness of the gold standard became embedded in many people’s minds, Bernstein writes. In the words of Montagu Norman, Governor of the Bank of England from 1920 to 1944, a gold reserve and gold standard “were as necessary, and as dangerous to do without, as a police force and a tax collector.”
They all failed to realize that the gold standard was the symptom of their pre-war prosperity, not the cause of it. Or as the author expresses, “The notion that gold would make everything come out all right was a notion that was upside down; gold would make everything come out all right only when everything was all right in the first place.” The post-war world was “no right” in many respects necessary for a smoothly functioning gold standard. No longer was a national commitment to upholding the currency price of gold a foregone conclusion. Labor groups began to flex their political muscle against monetary policy moves certain to increase unemployment. And gone were the pre-war years of international cooperation as disputes over reparations, war debts, and national minorities undermined efforts at cross-border economic policy collaboration. Under such conditions, the prevailing gold standard was doomed to fail, especially if hit with an economic shock such as that experienced in 1929. The knee-jerk contractionary monetary and fiscal policies prescribed by the gold standard (raise interest rates and taxes while cutting government spending) turned a mild recession into a global economic catastrophe.
Roughly two-thirds of US banks folded as the Fed refused to inject liquidity into the markets for fears of destabilizing the dollar price in gold. In January 1934, FDR dropped his “bombshell” message that would raise the convertibility rate of gold to the dollar from $20.67 set in 1900 to $35.00, a 69% increase, but one that would last for 37 years. This jump in the price of gold led to a “golden avalanche” as gold production soared. By WWII, 60% of the world’s monetary gold was in the US, weighing some 15,000 tons (in contrast to the Inca ruler Atahualpa’s “Chamber of Gold” of some 6 tons in the 16th century).
Finally, there is the story of “gold unhinged,” a period in the post-Bretton Woods years when gold climbed to heights of value that would make Spain's Philip II blanche. After over thirty years of being pegged at $35 an ounce, gold was allowed to float in 1971. The US Treasury tried to adjust the price to the low $40s as inflation raged across the industrialized world, but the price of gold continued to rise steadily, almost unbelievably. By 1980, an ounce of gold peak at $850 – an annual price increase of 30% from 1968 to 1980, a period when the inflation rate averaged 7.5%. Up to that point, the best 12-year stretch for the stock market was 19%/year from 1949 to 1961. By 1981, the US gold stock had dropped from 75% of global totals in 1949 to just 25%. But this was gold’s high water mark – for a time. In 1980 the price of gold and the Dow Jones Industrial Average (DJIA) were nearly equal: 850. By 1999, gold was trading for $300 an ounce while the DJIA stood at 10,000.
This book, again published in 2000, seems to end on the note of “the death of gold.” That “barbarous relic,” as Keynes famously called it, had finally been buried. Or had it? The price of gold has risen steadily throughout the 2000s, peaking at roughly $1,700/ounce in 2011 and 2012. Today, the price of gold closed at $1,187.30. Perhaps reports of the death of gold have been greatly exaggerated after all.
In closing, Bernstein takes a rather dim view of his subject. “Disappointment, disillusion, and defeat have overcome everyone in this history who was so blinded in the pursuit of a hoard of gold that they could not comprehend the difference between a useless metal and real wealth,” he writes. I’m rather surprised he would be so cynical after chronicling so well the overwhelming power of this mysterious element. What other tangible “thing” has had such a dramatic impact on human society across time and place? He also writes “Where gold is involved, dreams seldom come true.” And perhaps that is a better way of putting it.
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Tiernan
5.0 out of 5 stars
Great read, a history on the yellow glittering metal
Reviewed in the United Kingdom on September 6, 2013Verified Purchase
Great book, the author explains in detail how this metal, Gold, has influenced humanity since the beginning, from Ancient Lydian's (the first people to use coins) to The Royal Mint in London under management of the genius Sir Isaac Newton to the dispute over the Gold Standard more recently. Its obviously not a FULL history of Gold because such a book would take a century to write and weight around a ton but it does give great insights into how Gold has lead many great men, women and indeed even Empires to their doom due to their obsession with Gold and its power and the image it gives to those who obtain and display it, an image that continues to provoke admiration and, of course, envy, even to this present day. This glittering, rare, yellow metal has driven tens of millions to their deaths due to slavery, wars, conflicts and battles in order for it to be obtained and there's more to it than meets the eye. Highly recommend this book, great read.
