“Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants – but debt is the money of slaves.”
― Norm Franz, Money and Wealth in the New Millennium
Today I want to talk about the greatest quarterback of all time. He played in 10 titles games while winning 7 of them. Of course I am talking about Otto Graham. Otto played 10 seasons of professional football winning 7 championships. Before playing professional football, he played one year of pro basketball in the NBL which was the predecessor of the NBA, and he won a title in that sport as well. His teammates included Red Holzman who would later join the NBA Hall of Fame as one of the greatest coaches in NBA history after winning two titles with the New York Knicks while coaching and mentoring the greatest coach of the all, Phil Jackson. Another teammate was the Rifleman, not Chuck Person, but Chuck Connors from the ABC television show The Rifleman. Connors was another dual sport athlete as he played with the Boston Celtics in addition to with Otto Graham and he also played major league baseball with the Brooklyn Dodgers and Chicago Cubs. He was one of only 13 athletes to accomplish that trick. Otto’s best sport was football and after the 1946 basketball season concluded the ex-Ohio State coach Paul Brown came calling. Brown was the father of modern pro football and mentor to Bill Walsh, who would later coach Joe Montana for 3 of his 4 Super Bowl titles. Otto’s best sport was football though and he dominated like no player before or since. All told, 11 seasons, 8 championships, while playing two different sports. Keep in mind he took advantage of his athleticism; in fact his game saving interception sealed his first title in his rookie year. His Cleveland Browns won 4 straight AAFC All American Football Conference championships and then moved to the NFL where he made 6 straight title game appearances winning 3. He still holds NFL records to this day. He was versatile, reliable, and always performed at the highest level. He was and should still be the gold standard by which all quarterbacks are measured.
Speaking of the gold standard, it is time we talked about the shiny metal itself. Gold is known as god’s money. That is probably confirmed when the three wise men brought baby Jesus Gold, frankincense and myrrh. Frankincense is an aromatic resin that was chewed for digestion and myrrh was used in many skincare and cosmetic applications. They were both very expensive and befitting a king. However, I doubt they have held their value as well as the shiny metal with which they were grouped in the original baby shower care package. I can’t confirm this since I have not lately been in the market for tinctures or aromatic antioxidants. I have been keeping my eye on the gold market for seemingly my whole life.
Gold coins were first used in Lydia around 550BC which is an area of modern-day Turkey. This was far from an automated process so the coins were slightly oblong. The coins had a particular value stamped on them, but the metal also had a value itself which is where the coin’s value was derived. People would clip the coins or shave of the edges and gather bullion and try to pass the coins off as whole and representing the full value of the issued coin. If you look at a quarter, which used to be made of silver, you can see the lines or grooves on the edge. This is called reeding. This will discourage a shaver because it will become visually apparent. The reeding also helps in the handling of the coins and also helps blind people distinguish between denominations of coins. For our purposes though with precious metal, it was to discourage shaving like the modern urban female’s fascination with beards. Gold has been used for thousands of years and has been a store of value. It doesn’t spoil, it doesn’t rust, it is malleable for uses in jewelry or decoration, and it has been used as money since the ancient Greeks.
“To meet its military expenses, Athens melted down seven gold statues of Nike to mint 84,000 staters (1 gold stater = 6 silver tetradrachms). One hundred years later, gold from the shield of the chryselephantine statue of Athena in the Parthenon was used for coinage to pay foreign mercenaries. Part of the gold for the coinages of Alexander and his successors came from the vast wealth of defeated Persian rulers.” Gold has paid the bill for wars for centuries.
In modern times, The Great Bullion Famine struck Europe in the 15th century with the worst years from 1457 to 1464. Barter became common. Europe slowed or stopped making and issuing gold coins. This was caused by trade with the Middle East where coins, gold and silver, were traded east for things like spices, silk, and pearls. Other economists’ surmise that it was due to hoarding. Either way there was low gold coin supply in circulation due to being very few mines that could produce gold. In the 1930s in the Great Depression there was a similar problem. Money supply was low and money in circulation was low, and the exchange of money or money velocity was low. This has accompanied many periods of hard economic times. This famine led to countries exploring the seas and eventually finding and conquering the new world called the Americas. Gold was introduced back into Europe in large volumes from the New World as Portugal and Spain took heavy laden ships back to Europe with large amounts of gold found in the new world. This new supply crashed the stagnant prices as the money supply was increased. Prices rose and this inflation that hit Europe was called the Price Revolution. This inflation averaged 1.5% for about 150 years. The quickest winners, the Spanish went bankrupt 3 times due to their inability to handle the new inflation. Not very high but historically this has been maintained as it is equivalent to the amount of new ore that is mined out of the ground. Mining is the work that is required to add money to the circulation.
Gold can’t be created as many alchemists have found out. Gold must be mined, worked for, traded for, or earned through work. It is anathema to politicians and kings. They hate it. They despise it. That is probably why our brilliant founding fathers wrote this in article I Section 10 of the US Constitution. No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility. So gold and silver is money and you can’t become a king, got it. Way back in 1776, our forefathers were smart enough to ensure that we would have good money. The Coinage Act of 1792 solidified into law that 1 silver dollar was to equal one Spanish silver dollar. It was to contain 90% silver and 1 oz of gold was worth 15 oz of silver. The act authorized the building of the first US Mint in Philadelphia for the production of US money: gold and silver.
America began on a bi-metallic standard and for the first 40 years silver became overvalued with respect to gold. The mint was there for anyone to walk up with 1 oz of silver and exchange it for a silver coin and the same for gold. We have talked about Gresham’s law “good money crowds out bad money” well comparatively more people would exchange their silver for coin than gold. Gold was the better money for the values placed on it by the government at the time. This changed in 1834 when silver was revalued at 16 to 1 versus gold and became overvalued versus the rest of the world. Silver flowed out of the US and to Europe where it was valued higher, and the US was on a de facto gold standard. This all changed in the Crime of 1873 which we have discussed in episode #106. England by 1821 was already on a gold standard officially, however. Since the world would embrace and settle trade imbalances for gold, gold and the gold standard was king for most of the 19th century. America informally went off the bi-metallic standard in 1873 in what was called the Crime of 73. The mint refused to coin silver bullion brought to the mint affectively making gold the standard. People were furious because of the mining boom out west like the Comstock Lode, an increase in the silver supply was akin to inflationary increase in the money supply because that is what it was. The country was in a depression and people said silver money and inflation was needed. It was their Covid bailouts and they wanted them and they got two acts of Congress: The Bland-Allison Act over the veto by President Rutherford B. Hays and the Sherman Silver Purchase Act. The Treasury would buy millions of dollars of silver with banknotes redeemable in gold. It was like the QE of yesteryear. In the 1890’s $132M worth of gold left the treasury and President Grover Cleveland repealed the silver Purchase Act. In 1900, the Gold Standard Act was signed and the silver standard was no more.
Gold had stood the test of time as money. Like Otto Graham in a title game, gold was always there. Our money, the US dollar, as long as it was backed by gold, has also stood the test of time. Gold was the trust, the full faith and credit, and the settlement of account around the world. Otto Graham was successful every single year, and our currency was successful every single year. From a wilderness in the new land to gleaming cities with skyscrapers by 1900, America was flourishing because it had a sound money, just like the founding fathers intended.
Next week we will discover how gold fared in the second full century of the United States.
Sincerely Yours,
C Thomas Printer
On this date in history…68 years ago to be exact, the first microwave oven went on sale.
A fun factoid- gold is so pliable it can be made into sewing thread.
Also born on this date…a fellow Bygone Relic, the last man to coach a men’s NCAA basketball team to an undefeated season, Robert Montgomery Knight.
https://coinweek.com/what-do-you-call-those-lines-or-grooves-on-the-edge-or-side-of-a-coin/
https://www.investopedia.com/ask/answers/09/gold-standard.asp