Why Do We Use Gold and Silver as Money Principally?
There are a good many reasons why gold and silver have become almost universal materials for use as money. Perhaps this will be better understood if these reasons are set down in order.
1st. It is necessary that the material out of which money is made should be valuable, but nothing was ever used as money that had not first become desirable and, therefore, valuable as money. This is only one of the incidental reasons for taking gold and silver for coining money.
2nd. To serve its purpose best, money should be easy to carry around—in other words, its value should be high in proportion to its weight.
The absence of this quality made the early forms of money such as skins, corn, tobacco, etc., undesirable. It was difficult to carry very much money about. Imagine the skin of a sheep worth a dollar, say, and having to carry ten of them down to pay the grocer. To a certain extent this difficulty occurred with iron and copper money and in times when they used live cattle it was a pretty expensive job to pay your debts because, while the cattle could move, it was still expensive to drive them from place to place. A man who accepted a thousand cattle in payment had to go to some expense in getting them home. Then it was expensive to have money when live cattle were used because the cattle, of course, had to be fed and from that point of view the poor man who had no money was better off than the rich man who had money. When cattle were used as money it cost a lot to keep it. Our kind of money doesn’t eat anything; in fact, if you put it in a savings bank, it will earn interest money for you. But when cattle were used as money it cost a great deal to keep them and so it was worse than not earning any interest.
3rd. Another quality that money should possess is divisibility without damage and also the quality of being united again. This quality is possessed by the metals in every sense because they can be fused, while skins and precious stones suffer in value greatly when they are divided.
4th. The material out of which money is made should be the same throughout in quality and weight so that one unit of money should be worth as much as any other unit. This could never be true of skins or cattle as the difference in the size of skins is very great sometimes, and a small skin from the same animal could not be worth as much as a large one, or a skin of an animal of inferior quality so valuable as a very fine one.
5th. Another quality which money should possess is durability. This requirement made it necessary to use something else besides animals or vegetable substances. Animals die and vegetables will not keep and so lose their value. Even iron is apt to rust and through that process lose more or less of its value.
6th. The materials out of which money is made should be easy to distinguish and their value easy to determine. For this reason such things as precious stones are not good to use as money because it takes an expert to determine their value and even they are not always certain to be correct.
7th. Then a very important quality that the material out of which money is made is that its value should be steady. The value of cattle varies very greatly and, in fact, most of the materials out of which the first currencies were made were subject to quick change in value in a short time. The value of gold and silver does not change excepting at long intervals. Gold and silver are both durable and easily recognizable. They can be melted, divided and united. The same is true of other metallic substances, but iron as stated is subject to rust and its value is low; lead is too soft. Tin will break, and both of them and copper also are of low value. Gold and silver change only slowly in value when the change at all; they do not lose any of their value by age, rust or other cause; they are hard metals and do not, therefore, wear. Their value in proportion to the bulk of the pieces used for money is so large that the money made from them can be carried without discomfort and it is almost impossible to imitate them.