Real Money - The Monetary History of Gold and Silver

Gold and silver are well-known and valued today as they have been for more than 5000 years. Despite the fact that civilization has turned to using fiat money, both gold and silver have retained their value even though they are not used as official monetary instruments.

Before the concept of money was discovered, people bartered by trading their goods and services directly for other goods and services. However, without a medium of exchange, trade could only be done if both parties had something that the other wanted. For example one farmer might sell wheat to another farmer selling apples. But what if you don't want any apples? A medium of exchange that acts as a store of value, such as gold, could be traded instead. The farmer could accept the gold as payment and trade his gold for steak at a later time.

No one knows exactly how gold was discovered as there are only records of gold being used as ornaments and as forms of payment for other goods. However, it is known that multiple civilizations independently cam to the same conclusion - that precious metals are valuable - and began using gold and silver as money.

Gold and silver retained their value as a form of payment for thousands of years. People also found other uses for the metals as well. Ancient silver chalice, spoons and plates have been found. Silver was even used on the battlefield in the form of arrow tips and blades. While gold was also used in warfare, it was usually used as plates in shields and hilt of swords, more as ornaments than as weapons of war.

Until recently in history, gold and silver were used as the main form of payment. The dollar was originally a promissory note that they could be exchanged for gold as outlined in the Constitution. US dollars were valued in gold until 1933, and silver was used in coinage until 1964. Since the relationship between precious metals and fiat currency have been severed, the value of the dollar and virtually all other currencies have declined drastically. In a sense, gold and silver are the only real form of money in this world as they act as a medium of exchange and store of value.

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