What is the gold standard?
In an era where most transactions take place without cash and a new cryptocurrency is being introduced every day, it’s fun to look back at a much different time when gold was king. How we came to use gold is a matter of practicality and science. Read on to learn more about this precious currency and civilizations have been using it for thousands of years.
The science behind gold as currency
To use an element as a currency, it must meet four qualities. The first is that it can’t be a gas. We can’t use gas because it simply isn’t practical. This narrows down our options by quite a bit. Next, it can’t be reactive or corrosive. Lithium, for example, will ignite when it is exposed to air or water. Iron on the other hand rusts. This qualification takes 38 other elements out of the running for potential currencies. Third, an element can’t be radioactive. This one is a problem for obvious reasons. First, your money would disappear by radiating into extinction. Next, the radiation would kill you. With these eliminated, we’re left with around 30 remaining elements. These last 30 are knocked out due to the fact that they aren’t valuable enough. The last qualification is that the element needs to be rare. Not so rare, however, that you won’t be able to find it. This only leaves five remaining elements. These five are rhodium, palladium, platinum, silver, and gold. Silver has been used as currency in the past but it can tarnish very easily so it wasn’t ideal. Rhodium and palladium were only discovered in the 1800s. Because of this, they weren’t even an option for early civilizations. Aside from gold, we’re only left with platinum. Platinum has one major problem. It takes a lot of heat to melt. By a lot, we are talking 3,000 degrees. We’ve only been able to create a furnace that can melt it, in recent times. This left early civilizations without much use for it. Last but not least, we’re left with gold. Not only is gold safe to touch, but it’s also solid, rare…and it won’t kill you.
The periodic table
The periodic table organizes elements into rows. The 118 elements are separated by increasing atomic number or periods as well as groups with similar electron configurations. As discussed above, elements were ruled out as currencies by the process of elimination. We know that gases and liquids are ruled out because they are highly impractical. Lanthanides and actinides are radioactive and decay. Alkali and alkaline-earth metals are highly reactive even at room temperature so they can burst into flames. Transition metals, post-transition metals, and metalloids are far too rare or hard to retrieve. Copper and metal, for example, are abundant in the Earth’s crust but there aren’t too many people lined up to go get it. Super are and synthetic elements only exist in the Earth’s crust and rutherfordium and nihonium have to be created in a lab. This is why as a currency, we really only have the gold standard.
The gold standard
The gold standard refers back to a monetary system where dollars were backed by gold. You could exchange money for a fixed amount of gold. In August of 1971, President Nixon eliminated the gold standard. Today, the dollar is valuable only because the United States government says it is. There is a small sect of people who feel that we should consider going back to the gold standard. Most mainstream economists are overwhelmingly against this idea for a couple of reasons. For one, there is too much inflation and deflation. Second, the demand for gold has highs and lows. Lastly, people tend to hold onto their gold during hard economic times. This leads to less money in circulation and falling prices. In a nutshell, the gold standard could intensify problems when times are tough for the economy.