Why Did the World Choose a Gold Standard Instead of a Silver Standard?
https://mises.org/mises-wire/why-did-world-choose-gold-standard-instead-silver-standard
Among those who support the end of government fiat money, it’s not uncommon to hear and see claims that gold is “the best money” or “natural money” or the only substance that’s really suited to be commodity money. In many of these cases, when they say “gold” they mean gold, and not silver, platinum, or any other precious metal.
Naturally, one can expect to encounter these claims among those who have made a living out of promoting gold and gold-related investments for commercial purposes.
For example, consider Nathan Lewis’s 2020 article at Forbes titled “Gold Has Always Been the Best Money.” Lewis contends that gold and not silver is obviously the best money and that its adoption as the metal behind the nineteenth-century gold standard was more or less inevitable and based on the alleged intrinsic superiority of gold as money. He writes:
< In the late 19th century, a final decision had to be made between gold and silver. People chose gold; and silver, which had for thousands of years traded in a stable ratio with gold, lost its monetary quality and became volatile.
Lewis presents this as an event that was as natural as people choosing to ride in automobiles rather than on the backs of donkeys. Choosing gold over silver is progress, just like getting rid of the horse and buggy!
Lewis insists that “a final decision had to be made” between gold and silver and that “people” chose gold.
This leaves a lot unsaid, to say the least. Why, exactly, did this decision have to be made? Couldn’t both metals serve as money? Moreover, who made this decision? Lewis says it was “people” who made the decision. Which people?
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There’s Nothing “Natural” about the Triumph of Gold
With the demise of silver, gold-supporting pundits and scholars immediately began to paint silver as somehow less civilized than gold and the gold standard as a sign of progress. The reality, however, is that the monometallic gold standard was a result of historical circumstances, interest-group pressures, and great-power politics. It was not an inherent part of some alleged march toward “progress” or “civilization.“
If “the people” chose gold as a sole metallic standard, it was because governments had created an untenable situation with fixed exchange ratios. Moreover, the embrace by regimes of either a gold standard or a silver standard over time had led to network effects in international trade that induced governments to embrace the same “standard” as their trading partners.
In all this, we find no natural law or market law that points to gold as the “best” money within an unhampered market. Instead we see the fingerprints of government intervention everywhere. All this moved the world ever more toward a system in which the world’s regimes gained even more control over defining, controlling, and manipulating currency. If a government could demonetize silver, it could demonetize gold as well. This is exactly what happened, of course, and it’s not a coincidence that the era of the state-imposed monometallic gold standard was followed by the era of Bretton Woods and fiat currencies.