If Xenophon (430-354BC), the historian and pupil of Socrates, were
alive today he would scarcely have raised an eyebrow at yesterday's
astonishing rise in the gold price (and perhaps also today's for all
I know, as I begin to write this piece). As the first author of the
'hidden hand' of the market place (with apologies to Adam Smith!)
he'd have understood the coming restoration of a gold standard
currency. "After all," he would have said, as one of his slaves
poured him another horn of wine on his patio in Athens and offered
him more grapes, "we've seen it all before".
In fact, Xenophon could almost physically see the place of origin of
the first gold coin. It was already known by a predecessor historian,
Herodotus, that it was first invented in Lydia, little more than 200
years previously. As he looked out across the Aegean Sea to the coast
of Lydia just over the horizon (about 150 miles away), and by way of
being an economist as well as an historian, Xenophon would probably
have guessed that it was a Lydian sea merchant who had the first
brainwave. In the years following, Lydian, Thracian, Macedonian,
Thessalonian, Laconian and, above all, Athenian merchants, would have
found gold coins indispensable as they settled up balances between
them in the port cafes of their own fully 'globalized' world (the
Mediterranean Sea).
Gold coins would never have been used for ordinary purposes, of
course. Gold was much too rare and valuable for that. There were all
sorts of other tokens for daily use in the city market places where
common folk bought their food and trinkets. Even comfortably-off
middle-class folk in Ephesus or Athens probably never saw a gold coin
from one year's end to another. Xenophon, being an aristocrat,
probably had a few safely tucked away under a marble slab in his
house. Yet gold was still the basic, background currency even though
it was seldom used. Even in 19th century, gold-standard England, when
a lot more gold had been mined in the world, particularly from the
Californian gold rush of 1849, and when most of it ended up as the
ultimate reserve (for most of Europe and America) in the Bank of
England, most ordinary folk never saw a gold coin in the whole of their lives.
But back to Xenophon. Yes, he knew the power of the market. He knew
all the basics as taught in A-level Economics in school today. For
example, he also knew about the 'division of labour' because
Athenian-made sandals were bought throughout the Mediterranean as
being the cheapest as well as the best. All other sandals around the
Mediterranean were made by hundreds of individual sandal makers here
and there. However, Athenian sandals were made by specialists --
those who tanned and cut out the upper straps, those who cut the
soles, those who made the buckles, those who stitched them all
together. No doubt these methods were kept as secret as possible for
as long as possible by its entrepreneurial factory owner as he
proceeded to mop up.
During the course of writing this piece this morning, gold has risen
$30 an ounce, an acceleration of yesterday's acceleration. This is a
rise that would have been normal in any month of the last 11 years
when European central banks stopped selling gold (against America's
'diplomatic' instructions) and started buying it. The price might
check later his morning, or it might proceed further as more central
banks, more recently of emergent countries, continue to buy. The
stock markets of London and New York and many others might slide
today as they did yesterday. Movements of both may become panics.
One thing is for sure, the price of gold won't come down as it did in
1980 when it last had a try for acceptance. But then we have no
central banker today who would dare raise interest rates for money to
over 20% as Paul Volcker did then in order to restore confidence in
the badly inflating dollar. All central bankers today are in a state
of paralysis. They have no ammunition with which to fight the free
market of gold. Bernard Bernanke, the central banker of America,
might already be ruing the day about two months ago when he told a
Congressional finance committee [I paraphrase], "I don't know much
about the history of gold". I've suggested once before that Bernanke
ought to read Macaulay to find out about how central banks were first
started. It would better if he read Xenophon and understood the power
of gold in the market place.
Keith
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/08/
_______________________________________________
Futurework mailing list
[email protected]
https://lists.uwaterloo.ca/mailman/listinfo/futurework
