In this article, I am hoping to search a psychological understanding, between money spending and our daily expenses, will we manage it or reduce it, if our wealth, money were to be in gold!!
So firstly, when did people started to use gold as a currency?
Somewhere around 1500 B.C., Egypt began to trade gold and created the Shekel as a result. However, the Shekel was not a pure gold coin. It was also minted with silver and used as currency for international trade.
History records that the first minting of pure gold coins was issued by order of King Croesus in or around 560 B.C. By then, countries all over the world had realized the value of this precious metal and were also using it as currency in their own budding and independent markets. However, as there was no real standard or regulation and people were literally able to craft their own individual coins for trade, you can easily imagine how quickly and easily that system was corrupted.
The use of gold and silver as currency began in 600 BC with the creation of Lydian coins, which were used as a store of value in trade. Over the past 2500 years, these precious metals have established themselves as the supreme form of money.
Ancient Egypt did use gold and silver as the first currency for exchanging or bartering. In approximately 3,100 BC, the Egyptian leader Menes established the use of gold in the Egyptian economy by declaring its value. It was said that “one part of gold is equal to two and one-half parts of silver in value”.
Other civilizations also quickly adopted this practice. Darius I of Persia issued an 8.4g gold coin with 95.83% purity, which was equivalent in value to 20 silver coins. Like modern centralized monetary systems, Darius considered the production of currency a royal privilege and imposed the death penalty on Persian governors who attempted to mint their own coins
Gold arrived in Europe through different civilizations, such as Ancient Greece, Carthage, and Rome. Although Roman society had been using gold and silver coins as a form of currency for up to 100 years, the Republic officially adopted gold and silver as money in 300 BC, which resulted in the creation of the well-known Aureus coin 250 years later. Gold coins became a fixture in European culture, and even after the fall of Rome, the Byzantine Empire continued to use them until the Middle Ages.
https://tavexbullion.co.uk/the-evolution-of-silver-and-gold-as-currency/
For further knowledge https://www.hardmoneyhistory.com/history-of-gold/
Okay so after knowing that! When did they stop and why?
Here’s a timeline of paper currency
https://www.jpmorgan.com/payments/payments-unbound/volume-2/how-paper-money-evolved
So basically, people started inventing paper money, because the expansion of humanity and the world emerging together by expanding globally, so for that a lot had thought that it would be easier and less trouble to travel with paper money than a bag of gold, in order to exchange and do trading, also, let us not forget that by the expansion of humanity, trading and a lot of new coming businesses being introduced, the amount of hard work to produce gold coins was unbearable, by which they started thinking to invent a paper money that had a relation agreed on with gold.
So when did the connection between gold and paper money got disconnected?
The Initial Move Away from Gold: The Gold Reserve Act of 1934
The gold standard in the United States began to erode during the Great Depression. In 1933, President Franklin D. Roosevelt sought to stabilize the economy by increasing the money supply, which was restricted under the gold standard. He issued Executive Order 6102, which banned private ownership of gold coins, bullion, and certificates (except for jewellery and specific industrial uses). This move aimed to increase the Treasury’s gold reserves by requiring individuals to sell their gold to the government at a fixed price.
In 1934, the Gold Reserve Act further cemented this shift by prohibiting private ownership of gold in most forms, including currency. It also devalued the dollar by increasing the price of gold from $20.67 to $35 per ounce. This allowed the Federal Reserve to issue more currency relative to the gold held in reserve, effectively expanding the money supply. The U.S. Department of the Treasury provides historical insights into the Gold Reserve Act and Roosevelt’s monetary policies.
The Bretton Woods Agreement and the International Gold Exchange Standard
While domestic transactions were no longer backed by gold after 1933, international transactions remained connected to gold through the Bretton Woods Agreement established in 1944. This agreement created a system where the U.S. dollar was directly convertible to gold at $35 per ounce, while other countries pegged their currencies to the dollar rather than gold. The Bretton Woods System was designed to stabilize exchange rates post-World War II and prevent competitive devaluations. Nations agreed to maintain their currency values within a narrow band of the dollar’s value, creating a de facto gold-backed standard since the dollar was convertible to gold. The International Monetary Fund (IMF)offers extensive information on the Bretton Woods Agreement and its impact on global finance.
The Collapse of Bretton Woods and the Final End of the Gold Standard in 1971
By the 1960s, the United States was experiencing increasing fiscal pressure due to the costs of the Vietnam War and domestic spending. With more dollars circulating globally, countries began to doubt the U.S. Treasury’s ability to uphold its promise to exchange dollars for gold at $35 per ounce. Foreign governments started redeeming large quantities of their dollar holdings for gold, depleting U.S. gold reserves.
In response, President Richard Nixon announced in August 1971 what became known as the Nixon Shock: ,The United States would no longer exchange dollars for gold. This effectively ended the Bretton Woods system and marked the official end of the gold standard. By “closing the gold window,” Nixon allowed the dollar’s value to float freely, determined by market demand rather than a fixed gold price. The Federal Reserve provides detailed accounts of this period, including the economic implications of the Nixon Shock.
Transition to Fiat Currency: The Modern Monetary System
Since the end of the gold standard in 1971, the United States has operated on a fiat currency system, meaning that the U.S. dollar is not backed by any physical commodity but rather by the government’s authority and the public’s trust. Fiat currency enables central banks to exert greater control over monetary policy, adjusting the money supply and interest rates to influence economic conditions. Without the limitations of gold backing, central banks can respond more flexibly to financial crises and economic fluctuations.
For the global economy, the end of the gold standard represented a shift toward free-floating exchange rates, where currencies are traded on open markets, and their values fluctuate based on demand, supply, and economic conditions. This approach allows countries to implement independent monetary policies to address inflation, unemployment, and growth without fixed gold price constraints.
https://www.gold-traders.co.uk/gold-information/when-did-the-gold-standard-end/
Common sense and many studies suggests that people spent way more with paper money than gold, since it does not have a real value and could easily be printed, unlike gold which they had to have extract it, then mint it.
So coming to the conclusion, would people spend less if all the currencies were in gold?
Yes, seen by the past that they had spent less, but this only came to a fact that it would have been much more difficult to obtain a gold coin or currency.
My question is, does it have any psychological relation to it?
I think on a random scenario if it will happen, yes people will spend less because the circle of gold is very limited so in order to regain gold or let’s say your salary, then the transaction have to go in a circular movement, because at the end, if it will stay in one hand or approximately one hand, then people will not have the opportunity to get paid or righteously paid, since there will be no gold reserve.
So for example, if this, let us call city have only a certain amount of gold, then if the coin keep decreasing by money being spent and held with certain people then these people will control the city, so for the city to stay healthy, then if I go to buy groceries, then the one who sold me, needs also, and I say here is a must, needs to do some form of purchasing to any object no matter what, just to keep the movement of the gold flowing and not controlled in one hand.
Does it have any psychological relation? Could be, a little bit, but at the end it will remain purchasing, but yes, you probably won’t spend a bag of gold on a car, just for luxury, if you already have a good one, since not just knowing that you are spending actual gold but also, that gold you have, is limited.
Write as you Breathe 