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Tuesday, December 1, 2015

How Did Gold as a currency help create Democracy? And why is Democracy nearly impossible without a gold currency?

The first gold currency in the form of coinage was invented by Kroisos (Croesus) of Lydia in about 545 BCE.  He created a bimetallic gold/ silver coinage with Gold Staters of 10.7 grams down to 1/48th staters of about .35 grams.  We can see from the tiny fractions that the coinage was meant to be used for every day transactions by common citizens.

The invention of coinage was preceded by a few hundred years with the invention of Alphabetic Language.  Alphabetic Language was invented by the Phonecians in about 1000 BCE, but it wasn't until about 700 BCE that we begin to see stamped images with lettering (much like those on coinage) on the handles of ewers and other earthenware goods used in trade, as well as stamps with images and lettering on signet rings used on official correspondence.

Both these innovations greatly facilitated trade.  But the salient fact is that these innovations greatly facilitated trade between private citizens.

Before then, all trade had to be sanctioned, and initiated by the Royal House.  Wealth was stored either at the Palace or in the Temple which served also as the Central Bank.  Wealth in the form of goods, as well as wealth in the form of whatever was used as money.  It was all under the direct control of the Royal Family and the Priest Class - which were most often one and the same. 

But it wasn't simply the stamp and the lettering that permitted trade to devolve into the hands of the private citizen.  It was also the unanimous selection of Gold as the substance of official coinage.

Why Gold?  Because Gold was thought by every single society on earth to have Intrinsic Value.  What value is that?  It was thought to be imbued with a natural beauty reflected in the virtues of the susbtance: it is Unchanging.  It is inert and immutable and shiny.  Like God.

I know,  This sounds primitive.  But the Unchanging is a concept that describes God that is actually extraordinarily complex as elucidated by Parmenides and Heraclitus - philosophers whose works have never been equaled in the history of thought.  So, perhaps, not so primitive.

But this concept of inherent value is exactly the mechanism that allowed Power in the Economy to move into the hands of the Private Citizen.  Because for the first time in the history of humanity, with the advent of gold coinage the Private Citizen had the power to conduct his economic affairs by Initiating and conducting his own trades without the direct sanction of the State.  And he was able to store his wealth in his own home.

Of course, silver was used too, as a proxy for, and convertible into Gold, wherever there was not enough gold to serve for common transactions.

And this wealth, in the form of gold and silver coinage, could not be confiscated,  degraded, inflated, without the State declaring war on its own citizenry. 

Thus Economic Power devolved from the State to the Private Citizen.  And within a hundred years of this movement, DEMOCRACY was born in Athens.

Gold (and silver) coinage was the principle weapon of the private citizenry against the State.  More than arms - as private citizens had always had arms.  More than laws - which are always exercised by the State.  More than constitutions - which can be changed on the whim of the state.

It was the privately owned Money of Intrinsic Value that guaranteed the Private Citizen could conduct his own affairs Independent of the State.

And without this Basic Tenet of Democracy, it is unclear how Democracy is even possible, as the State will have absolute control over all transactions.  Thus private transactions cease to exist.

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