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The Great Gold Standard Pt. I

September 27, 2011 - One of the most insightful statements within the White House was when President Hoover told Franklin Delano Roosevelt that gold is stored because governments cannot be confided in. This occurred in 1933 when, conversely, the Emergency Banking Act was enacted declaring that all Americans were obligated to exchange their gold coins, bullion, and certificates into the greenback. Whereas the Act effectively ceased the efflux of gold throughout the Great Depression, it did not alter the confidence of gold bugs, folks who are eternally convinced in gold's solidity as the foundation of prosperity.

Discerning gold’s history is vital before one makes the move to invest in it. It is one like no other asset enjoys, one that still maintains an exclusive power on its inherent supply and demand at present. Gold is still a mogul to gold bugs, but even monarchs have experienced collapses, as gold did which is why it is imperative to analyze so that its outlook can be weighed effectively.

Five Centuries of Adoration

Gold has always been an appealing metal with its amalgamation of radiance, manipulability, solidity, and rareness and has enthralled the human race as no other metal has. Gold is so solid that one ton of it can be crammed into a cubic foot.

Gold’s passion began as source of worship as the earliest sacred sites will reveal. Nowadays, its main purpose lies in the production of jewelry.

Its monetary utility originated as far back as 700 B.C. when it was turned into coins making it more useful, but had to be weighed and examined for purity when establishing exchanges.

There were still problems with gold coins, though, because a widespread routine was to snip these somewhat uneven coins to amass enough gold that could be then liquefied into bullion. England’s Great Recoinage in 1696 pioneered a technology that mechanized the manufacturing coins bringing to a close the snipping practice.

Given that it could not constantly depend on extra provisions from the earth, the supply of gold extended exclusively through deflation, trade, embezzlement, or debasement.

The original gold rush came during the discovery of America in the 15th century. Spain’s stolen treasures from the New World increased Europe's stock of gold over five times in the 16th century. Consequent gold rushes in the Americas, Australia, and South Africa occurred in the 19th century.

By means of debt mechanisms issued by private parties was how Europe paved the way for paper money. Whereas gold coins and bullion continued to control Europe’s monetary system, it was not until the 18th century that paper money began to lead. The scuffle between paper money and gold would ultimately incite the beginning of a gold standard.

Read more in The Great Gold Standard Pt. II

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Jonathan Monroe

Senior Staff Writer -

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