The Power of Gold Read online

  P. L. B.

  * “A New History of Rome,” Spectator 102 (January 2, 1909), pp. 20–21.

  Prologue

  The Supreme Possession

  About one hundred years ago, John Ruskin told the story of a man who boarded a ship carrying his entire wealth in a large bag of gold coins. A terrible storm came up a few days into the voyage and the alarm went off to abandon ship. Strapping the bag around his waist, the man went up on deck, jumped overboard, and promptly sank to the bottom of the sea. Asks Ruskin: “Now, as he was sinking, had he the gold? Or had the gold him?”1

  This book tells the story of how people have become intoxicated, obsessed, haunted, humbled, and exalted over pieces of metal called gold. Gold has motivated entire societies, torn economies to shreds, determined the fate of kings and emperors, inspired the most beautiful works of art, provoked horrible acts by one people against another, and driven men to endure intense hardship in the hope of finding instant wealth and annihilating uncertainty.

  “Oh, most excellent gold!” observed Columbus while on his first voyage to America. “Who has gold has a treasure [that] even helps souls to paradise.”2 As gold’s unquenchable beauty shines like the sun, people have turned to it to protect themselves against the darkness ahead. Yet we shall see at every point that Ruskin’s paradox arises and challenges us anew. Whether it is Jason in search of the Golden Fleece, the Jews dancing around the golden calf, Croesus fingering his golden coins, Crassus murdered by molten gold poured down his throat, Basil Bulgaroctonus with over two hundred thousand pounds of gold, Pizarro surrounded by gold when slain by his henchmen, Sutter whose millstream launched the California gold rush, or modern leaders such as Charles de Gaulle who deluded themselves with a vision of an economy made stable, sure, and superior by the ownership of gold—they all had gold, but the gold had them all.

  When Pindar in the fifth century BC described gold as “a child of Zeus, neither moth or rust devoureth it, but the mind of man is devoured by this supreme possession,” he set forth the whole story in one sentence.3 John Stuart Mill nicely paraphrased this view in 1848, when he wrote “Gold thou mayst safely touch; but if it stick/Unto thy hands, it woundeth to the quick.”4 Indeed, gold is a mass of contradictions. People believe that gold is a refuge until it is taken seriously; then it becomes a curse.

  Nations have scoured the earth for gold in order to control others only to find that gold has controlled their own fate. The gold at the end of the rainbow is ultimate happiness, but the gold at the bottom of the mine emerges from hell. Gold has inspired some of humanity’s greatest achievements and provoked some of its worst crimes. When we use gold to symbolize eternity, it elevates people to greater dignity—royalty, religion, formality; when gold is regarded as life everlasting, it drives people to death.

  Gold’s most mysterious incongruity is within the metal itself. It is so malleable that you can shape it in any way you wish; even the most primitive of people were able to create beautiful objects out of gold. Moreover, gold is imperishable. You can do anything you want with it and to it, but you cannot make it disappear. Iron ore, cow’s milk, sand, and even computer blips are all convertible into something so different from their original state as to be unrecognizable. This is not the case with gold. Every piece of gold reflects the same qualities. The gold in the earring, the gold applied to the halo in a fresco, the gold on the dome of the Massachusetts State House, the gold flecks on Notre Dame’s football helmets, and the gold bars hidden away in America’s official cookie jar at Fort Knox are all made of the same stuff.

  Despite the complex obsessions it has created, gold is wonderfully simple in its essence. Its chemical symbol AU derives from aurora, which means “shining dawn,” but despite the glamorous suggestion of AU, gold is chemically inert. That explains why its radiance is forever. In Cairo, you will find a tooth bridge made of gold for an Egyptian 4500 years ago, its condition good enough to go into your mouth today. Gold is extraordinarily dense; a cubic foot of it weighs half a ton. In 1875, the English economist Stanley Jevons observed that the £20 million in transactions that cleared the London Bankers’ Clearing House each day would weigh about 157 tons if paid in gold coin “and would require eighty horses for conveyance.”5 The density of gold means that even very small amounts can function as money of large denominations.

  Gold is almost as soft as putty. The gold on Venetian glasses was hammered down to as little as five-millionths of an inch—a process known as gilding. In an unusually creative use of gilding, King Ptolemy II of Egypt (285–246 BC) had a polar bear from his zoo lead festive processions in which the bear was preceded by a group of men carrying a gilded phallus 180 feet tall.*6 You could draw an ounce of gold into a wire fifty miles in length, or, if you prefer, you could beat that ounce into a sheet that would cover one hundred square feet.7

  Unlike any other element on earth, almost all the gold ever mined is still around, much of it now in museums bedecking statues of the ancient gods and their furniture or in numismatic displays, some on the pages of illustrated manuscripts, some in gleaming bars buried in the dark cellars of central banks, a lot of it on fingers, ears, and teeth. There is a residue that rests quietly in shipwrecks at the bottom of the seas. If you piled all this gold in one solid cube, you could fit it aboard any of today’s great oil tankers;8 its total weight would amount to approximately 125,000 tons,9 an insignificant volume that the U.S. steel industry turns out in just a few hours; the industry has the capacity to turn out 120 million tons a year. The ton of steel commands $550—2¢ an ounce—but the 125,000 tons or so of gold would be worth a trillion dollars at today’s prices.*

  Is that not strange? Out of steel, we can build office towers, ships, automobiles, containers, and machinery of all types; out of gold, we can build nothing. And yet it is gold that we call the precious metal. We yearn for gold and yawn at steel. When all the steel has rusted and rotted, and forever after that, your great cube of gold will still look like new. That is the kind of longevity we all dream of.

  Stubborn resistance to oxidation, unusual density, and ready malleability—these simple natural attributes explain all there is to the romance of gold (even the word gold is nothing fancy: it derives from the Old English gelo, the word for “yellow”). This uncomplicated chemistry reveals that gold is so beautiful it was Jehovah’s first choice for the decoration of his tabernacle: “Thou shalt overlay it with pure gold,” He instructs Moses on Mount Sinai, “within and without shalt thou overlay it, and shalt make upon it a crown of gold round about.”10 That was just the beginning: God ordered that even the furniture, the fixtures, and all decorative items such as cherubs were also to be covered in pure gold.

  God issued those orders many thousands of years ago. What is the place of gold in the modern world of abstract art, designer jeans, complex insurance strategies, computerized money, and the labyrinths of the Internet? Does gold carry any significance in an era where traditions and formality are constantly crumbling beyond recognition? In a global economy managed increasingly by central bankers and international institutions, does gold matter at all?

  Only time can tell whether gold as a store of monetary value is truly dead and buried, but one thing is certain: the motivations of greed and fear, as well as the longings for power and for beauty, that drive the stories that follow are alive and well at this very moment. Consequently, the story of gold is as much the story of our own time as it is a tale out of the past. From poor King Midas who was overwhelmed by it to the Aly Khan who gave away his weight in gold every year, from the dank mines of South Africa to the antiseptic cellars at Fort Knox, from the gorgeous artworks of the Scythians to the Corichancha of the Incas, from the street markets of Bengal to the financial markets in the City of London, gold reflects the universal quest for eternal life—the ultimate certainty and escape from risk.

  The key to the whole tale is the irony that even gold cannot fulfill that quest. Like Ruskin’s traveler jumping off the boat, people take the sy
mbolism of gold too seriously. Blinded by its light, they cashier themselves for an illusion.

  The following chapters proceed in roughly chronological order, but the story is neither a complete history of gold nor a systematic analysis of its role in economics and culture; detailed histories of money and banking abound. 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. Beginning with the magical and religious attributes of gold, the history proceeds to the transformation of gold into money. As that transformation progresses, however, we shall never lose sight of the magical qualities of gold or the ironies of its impact on humanity.

  My hope is that what I have chosen to include will illuminate and occasionally infuriate the reader about how the fascination, obsession, and aggression provoked by this strange and unique metal have shaped the destiny of humanity through the ages.

  Notes

  1. Ruskin, 1862, p. 86.

  2. Crosby, 1997, p. 71, citing Journals and Other Documents on the Life and Voyages of Christopher Columbus, Samuel Eliot Morison, trans. New York: Heritage Press, 1963, p. 383.

  3. Pindar, 1927, p. 613.

  4. See Ruskin, 1982, p. 86.

  5. Jevons, 1875, p. 202.

  6. International Wildlife Magazine, May–June 1998.

  7. Marx, 1978, pp. 8–9.

  8. Green, 1993, p. 14.

  9. Herrington et al., p. 28.

  10. Exodus, 25, 11.

  * Where in the world did the Pharaoh of Egypt obtain a bear, much less a polar bear, over two hundred years before the birth of Christ? My source cites “the contemporary Greek writer Athenaeus, who grew up in Egypt.”

  * In most instances, I have calibrated weights of gold in metric tons, even though convention more frequently uses millions of ounces. It is not difficult to conceive of a few thousand tons—about as large as the numbers get—whereas millions of ounces convey little meaning.

  A METAL FOR ALL SEASONS

  Chapter 1

  Get Gold at All Hazards

  If gold were more plentiful on earth—say, as abundant as salt—it would be far less valuable and interesting, despite its unique physical attributes and beauty. Yet gold has been discovered on every continent on earth. That sounds like a contradiction, but it is not. Although gold deposits are widespread, in one form or another, no one area has yielded its gold easily. Finding and producing gold demands immense effort relative to the amount of glittering yellow metal that makes its appearance at the end of the process.

  For example, in order to extract South Africa’s annual output of around five hundred tons of gold, some seventy million tons of earth must be raised and milled—an amount greater than all the material in the pyramid of Cheops.1 The South African mines are the worst, but we are all familiar with the tales of the Forty-Niners panning day after day in the waters of California and ending up with nothing but a few driblets of gold. As Will Rogers put it after returning from a visit to the Klondike, “There is a big difference between prospecting for gold and prospecting for spinach.”2

  This radically distorted ratio of effort to output appears to have done little to discourage people from pursuing the worldwide search for gold—perhaps the most telling evidence of how highly prized, vital, essential, and irresistible gold has been from the earliest of times. Even in myths, as this chapter relates, the quest for gold was gluttonous.

  Although gold does not mix with other metals, thin veins of it are scattered throughout the mountains where granite and quartz have filled in cracks in the earth’s crust and have been pressed together by fierce heat over millions of years. The elements have washed, blown, and scattered these deposits over the years, but gold has retained most of its purity even as it has suffered the ravages of nature’s dynamics. Much of this gold has flowed downward in mountain streams. Gold’s high density and weight tend to separate it from the other material in the waters, where it drifts to the bottom as nuggets or flows along as fine as dust.

  Relative to the needs for it, gold does appear to have been more plentiful in ancient times, especially in Egypt and the Near East, than it has been since the Roman era. A little bit of gold goes a very long way when it is used only for adornment and decoration and not for coinage or hoarding: mining by the Egyptians produced only about one ton annually.3 Until the development of coinage, which put gold into the hands of the masses and greatly expanded the need for it, most of the available gold was owned by monarchs and priests. Its use was ceremonial in large part, a medium for advertising power, wealth, eminence, and proximity to the gods. Whatever was left over was used for jewelry and other forms of personal adornment.

  When Moses came down from Mount Sinai to deliver the Ten Commandments to his people, he found the Jews in a delirium worshipping a golden calf. He was so enraged to see them bowing to an icon like those worshipped by the hated Egyptians that he smashed the tablets inscribed with the Word of God—the Ten Commandments—which he had just brought down from Mount Sinai. The story reveals that the Jews, even as slaves, had ample amounts of gold on their persons. It never occurred to them to use their gold to bribe themselves out of captivity in Egypt; as gold was not yet perceived as money, they would have found few takers. Until they melted their gold into the golden calf, they adorned their ears, arms, and necks with it.

  The more than four hundred additional references to gold in the Bible confirm how plentiful gold was at that time. Poor Job declaims, “If I have made gold my hope, or have said to the fine gold, ‘Thou art my confidence’; If I rejoiced because . . . my hand had gotten much. . . . This also were an iniquity to be punished by the judge; for I should have denied the God that is above.”4 Abraham, the founder of the Jewish nation, is described in Genesis 13 as “rich in cattle, and in silver, and in gold.” He furnished the servant who went to fetch Rebecca with vessels of gold, including a nose ring.

  When Moses climbed Mount Sinai to receive the Word from God, God gave him a lot more to do than just transmit the Ten Commandments and many associated rules and obligations. God also issued precise directions for the construction of a sanctuary where the Jews were to worship Him, together with a tabernacle to go inside the sanctuary. God began right off by specifying that “thou shalt overlay it with pure gold, within and without shalt thou overlay it, and shalt make upon it a crown of gold round about.” That is just the beginning: God even ordered that the furniture, fixtures, and all the decorative items such as cherubs were to be covered in pure gold. The instructions, as they appear in Chapters 25–28 of Exodus, persevere for some eighty paragraphs of painstakingly detailed measurements and designs.

  Once settled in the Promised Land, the Jews must have accumulated masses of gold, primarily from plundering the tribes they had defeated in battle. Moses and his troops took over three hundred pounds of gold from the Midianites, “jewels of gold, ankle-chains and bracelets, signet-rings, earrings, and armlets.”5 Gold gleamed from the walls of the interior of Solomon’s great temple (located near the Wailing Wall of modern Jerusalem), which was 135 feet long, 35 feet wide, 50 feet high, and divided into three chambers. Solomon enjoyed lavishing gold on his personal possessions as well: his shields were made of gold, his ivory throne was overlaid with gold, and he sipped his wine from golden vessels.6 When the queen of Sheba came to visit Solomon, she brought him an amount of gold (coals to Newcastle?) that has been estimated at as much as three tons—worth over $20 million at today’s prices.7

  The sanctuary and tabernacle that Moses built to God’s protracted specifications have disappeared, and Solomon’s massive gold-encrusted temple has been defaced. But in ad 532, after ten thousand men working for six years had used more than twelve metric tons of gold in building the church of Saint Sophia in Constantinople, the Byzantine emperor Justinian—who supervised the entire operation—could exclaim, “Solomon, I have surpassed thee!”8 Justinian was well versed in the uses of gold. He inherited 320,000 pou
nds of gold, used it all up, and then taxed his subjects to pay mercenary armies, to finance public works, and, most of all, to bribe his enemies to refrain from invading his domains. The process of using gold to proclaim the power of the church would be repeated in gleaming golden mosaics and decoration throughout Italy, in Spain, and even on the wildest steppes of Russia.

  Neither Solomon nor Jehovah himself were the first to use gold to inspire reverence. The ancient Egyptians probably set the style for later religions, including the Jews, to emulate. The Jews, with one god, had it easy compared with the Egyptians, who had two thousand deities to worry about, many of whom bore some relation to the all-powerful Sun God. You can consume a lot of gold convincing everyone how powerful and all-knowing two thousand deities are. Christians, with only one god to worship but several thousand saints to pray to, have faced similar problems.

  The use of gold in Egypt was a royal prerogative, unavailable to anyone but the pharaohs. That constraint facilitated the way that the pharaohs assumed god-like roles and authenticated their heavenly character by adorning themselves with the same substance that embellished their gods. Creating gold jewelry in Egypt was a high art, lavished upon dead monarchs as well as live ones.

  An impressive demonstration of the use of gold to project power was carried out by a fascinating pharaoh who happened to be a woman, described by the Egyptologist James Henry Breasted as “the first great lady of the world.” Hatshepsut was the daughter of Thutmose I, who was the first pharaoh to be buried, about 1482 bc, in the Valley of the Tombs of the Kings at Thebes. After Hatshepsut seized power from her nephew-stepson around 1470 bc, she sat on the throne as king until her death about 1458 BC and was known by approximately eighty titles, including Son of the Sun and Golden Horus (the Egyptian god of light). Although she passed up the opportunity to add the traditional royal title of Mighty Bull, she was nevertheless depicted in most contemporary art as a man.9