The concept of money has been around since the existence of human society. Gold was the first-ever currency, however, money has experienced many changes and modifications over the years. These changes were attempts to find a better store of value and means of payment. Despite the evolution money has undergone, many proponents of the gold standard, like Josip Heit, who is the Chairman of the Board at GSB Gold Standard Banking Corporation AG, believe that the gold standard is still the best fit for modern economies.
This article will take a closer look at whether gold, silver, or diamond is the resource that is best fit for use as currency in this modern time.
The earliest known use of gold can be traced back to 643 BC in Lydia, present-day Turkey. Gold was part of a naturally occurring compound known as electrum, which the Lydians used to make coins.
Gold coins were first minted around 550 BC on the order of King Croesus of Lydia. From there, the adoption curve of gold as a currency was on a steady upward path until the gold standard was introduced. Due to the stability associated with gold and its relative scarceness, many world currencies were fully backed by gold, at least theoretically.
Next to gold is silver. In ancient times, it was the world’s most commonly used precious metal as a medium of exchange. Even though silver’s popularity and value have rallied behind gold for a long time, most civilized countries issued silver as a standard form of currency at some point.
Lydia still holds the credit in prehistorical times as the first to start minting coins using silver, far back in 600 BC. It is important to mention that the adoption rates of silver and gold were almost moving side by side for a long time, even though most countries, like the United States, tilted more towards the adoption of gold.
Diamond, on the flip side, hasn’t served much as a standalone currency, even though most proponents would like to have you believe that diamonds are money.
A currency should be divisible
One good trait of money is divisibility. Money won’t meet its functions if it can’t be “changed” in order to complete a trade. Silver and gold are highly divisible, but diamonds are not really divisible, and this makes sense, seeing as diamond ranks among the hardest element in existence. Cleaving a diamond in half greatly alters both the cut of the diamond as well as the appearance of the diamond. This makes the divisibility of diamonds very questionable.
Currencies should be fungible
Fungibility is a fancy word. It implies that a currency should at least be indistinguishable and interchangeable. Gold and silver are fungible. Because gold is an element, gold is pure. An ounce of pure gold is just like any other ounce of pure gold.
Diamonds, on the other hand, are non-fungible because each diamond is extremely unique. Someone could possess two diamonds with the exact same size and weight and they may vary drastically in value. One could be yellow and feathered but the other clear and flawless.
A currency should be portable
Silver, gold, and diamond are relatively portable. At least gold and silver are moderately portable in small quantities, but their prices limit their portability. However, diamonds are very expensive, so it’s easy to carry around diamonds worth millions unnoticed. This makes them extremely portable and is exactly what we may not want in a currency.
Now, you might think, “wait a second, I thought a currency should be portable?” And you would be right to think this. However, too much portability isn’t a good thing.
When a million-dollar diamond heist happens, diamonds can conveniently be concealed and carried away from the crime scene. Whereas carrying the same value in gold would probably require the thieves to get a forklift and a well-planned escape route.
According to the Chairman of the Board of GSB, Josip Heit,
“a combination of these three properties – portability, fungibility, and divisibility, makes a great currency, this is exactly why gold has had a longstanding history as a reliable store of value and as a transactional currency.”
Gold makes the top choice as a currency, nonetheless, silver can also be considered as a good candidate. Diamonds, on the other hand, don’t make such a good choice, they are more of an investment than a currency.