By Peter L. Bernstein. New York, NY: John Wiley & Sons, Inc. 2000. 432 Pp. $27.95 hardcover.
Peter Bernstein, author of Capital Ideas: The Improbable Origins of Modern Wall Street and Against the Gods: The Remark able Story of Risk, has done it again. His latest book, The Power of Gold: The History of an Obsession, is fascinating to read, broad in concept, and highly informative. The author states at the outset: "...the story is neither a complete history of gold nor a systematic analysis of its role in economics and culture....Instead I explore those events and stories involving gold that most appealed to me because they display the desperation and ultimate frustrations that have inflamed human behavior."
Why is gold so desirable, initially as adornment and then as a form of money and then back to a status symbol or a store of value? Some of the reasons are the qualities of gold: malleable, imperishable, chemically inert, extraordinarily dense, soft as putty--and relatively scarce. Almost all the gold ever mined is still around, if you include shipwrecks at the bottom of the seas. Bernstein notes that, if you piled all this gold in one solid cube, you could fit it aboard any of today's great oil tankers; it would weigh about 125,000 tons, compared with the U.S. steel industry's ability to produce 120 million tons a year!
With that as background, Bernstein traces the uses of gold through history--and a broad sweep it is! He starts with the Bible, which includes the use of gold as adornment, the golden calf, and the detailed description of use of gold in sanctuary and tabernacle. He then shifts to the use of gold in Greece, Rome, and Byzantium, initially as adornment but later as a medium of exchange. Gold coins and bars were developed as a standard with a known fineness and weight to facilitate trade and commerce, as described by the historian Herodotus. But a society that uses metal for money is constrained by the supply of that metal, which, Bernstein points out, can be resolved in one of three ways: suffer downward pressure on prices, import gold by plunder or trade, or debase the coin by using the same amount of metal to produce a greater supply. All three methods have been used, with greater or lesser degrees of sophistication, and these developments are described in broad strokes.
Then Bernstein describes the effects on European economies of the discovery of gold in the New World and massive gold imports by Spain, which enabled that country to wage a series of wars against their European neighbors. While this was going on, international trade was growing rapidly and economic relationships were developing with trading partners thousands of miles apart. Price inflation characterized this period, caused by rapid increase in the population and a slower growth in the supply of food. This increased the demand for gold but also led to the use of private money, or bills of exchange, to facilitate trade. …