Comprehensive written records of human activity go back to about 3000 BCE in Egypt, Sumer, and Mesopotamia. Undoubtedly there was writing somewhat before then but it has been lost to us on account of some kind of massive flooding event that destroyed records before this time.
The earliest records are largely of two sorts, a) cosmology and prayer/curse literature and B) transactions. From the transactional literature (this much grain was harvested and turned into this much wheat and traded for this many cows etc) we know that Gold and silver and certain base metals were used even in these early times as forms of money.
Gold was used especially for large trade inolving governments. Sophisticated units of weights were used to measure the gold which could then be traded for other valuable commodities.
It wasn't until about 700 BCE that gold (often mixed with silver to form electrum) was cut into small units of account that could be used by individual traders for smaller transactions. This practice proved to be so convenient that retail trading posts (shops) opened up all across western Asia where this practice originated. (Present day Turkey).
In about 550 BC Croesus of Lydia originated the first Bi-metallic coinage system. Within a hundred years, this system had spread thoughout the western world.
400 years later as Rome conquered the known world the system of metallic coinage, with Gold being the most valuable and sought after metal, became the standard of trade throughout the known world.
By this time there had arisen a class of private citizen that had become extremely wealth and powerful by being adept traders - rather than skilled warriors. This trade economy also necessitaed the birth of a class of lawyers and judges to draw up contracts and settle disputes - and citizen class to serve a juries. The economies of this period were quite similar to our own. Gold was thought of as the glue that held these economies together - because privately owned gold conferred a security to private wealth that could only be challenged by Emperors who controlled vast armies.
This lasted through the Byzantine Empire, through the medieval period, through the Italian Renaissance and through empires domintaed by the British, French, Dutch, and Spanish. Through two world wars and up until 1971 when Richard Nixon closed the gold window and the world converted to Dollars.
Still, after 1971 all major governments of the world kept Gold as a reserve currency of last resort in order to stabilize their wealth should their fiat currencies encounter periods of loss of faith.
This was largely unnecessary as the US economy was so dominant in the world there was no serious challenge to the hegemony of the dollar. And whatever difficulties the US ecnomy did encounter - it was the worlds' principal creditor nation which gave it the flexibity to deal with temporary setbacks.
The biggest setback occured in the late 1970's with a vicious stagflation. THe Fed Head Volker riased rates to 18 percent and crushed inflation. Gold soared from $250 to $750 and then fell back to $250 when inflation was crushed. The dollar was still King.
This is where is all started to go wrong.
With rates at 17 percent Reagan and the new Fed Head Greenspan then got the idea that the RELATIONSHIP BETWEEN THE PRICE OF MONEY AND REAL WORLD BEHAVIOR IS LINEAR. In other words if cutting taxes from 90 percent to 60 percent stimulated positive risk taking behavior, then it should follow that cutting taxes fromf 60 percent down to ZERO should be equally simulative. The same for interest rates. If cutting from 18 percent to 16 percent was stimulative, then cutting from16 percent all down to Zero AND BELOW should be equally stimulative.
This is not reflective of how humans behave. Somewhere on the way down towards zero humans stop taking risks that enhance the economy and start to take risks that are detrimental to the economy. As money becomes cheaper than the real cost of money humans begin to recklessly gamble. And as very very rich humans recklessly gamble the Fed has to bail out mistakes that are so big they affect the entire economic community.
This gambling economy becomres increasingly unstable. Because each bailout requires more and more debt. And each lowering of the cost of money below a stable equilibrium also fosters increasing debt. To the point where we find ourselves today with the cost of money anchored near ZERO and debt and the Gambling impulse supported towards infinity - with infinite bailouts for the richest strata of scoiety.
Thus we move towards maximum INSTABILITY
And as Instability reaches intolerable levels gold begins to rise towards maximum value.
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