The Gold Standard

The largest solid piece of gold ever discovered in recorded history, was found a mere 1.2 inches beneath the dirt in Australia. After pulling it out of the ground with crowbars. Seeing how much gold they had discovered, the two men immediately put it back in the ground. It was a Friday. Banks wouldn’t open for two full days. Getting paid wasn't the concern. It was being killed. After two long, restless nights, they unburied it, put it on a cart, snuck into town where the bank, not having a scale large enough to weigh it, broke it into pieces, determined it weighed 172 pounds and gave the men 9,534 pounds sterling.

Within two days, the pieces had been melted down and cast into five gold bars. Within three weeks they were in the gold vault beneath the Bank of England in London. In this story are all the answers to why what is a relatively useless rock quickly became accepted as the pinnacle form of money, giving birth to the gold standard, and why it's widely misunderstood that leaving the gold standard wasn't a choice. It was an inevitability forced by the laws of nature.

This video is sponsored by public.com. More on them later. One day, 34 U.S. dollars could be redeemed for one of these one ounce of pure gold. Just two days later, they could not. People were shocked, even today, many think it was a mistake that you should be able to walk into any bank, hand over cash, get gold back. That one day, one year or one century from now, the same amount of cash should get you the same amount of gold, because for millennia it had been the unquestioned, universally agreed upon form of money.

It didn't need to be melted out of ore. You could just see it. Like the men who happened onto the world's largest gold nugget. Whoever the first human was to discover gold, that's how they found it. What is that shiny lump in the ground? Ooh, check out those shiny flakes in the river. Shiny, yellow, obvious, eye catching. Nothing else on the periodic table has what gold has. Silver dulls in a few weeks, gold never does.

Leave it right here, come back in a thousand years. Blow off the dust and it will look just like this. Walking along the river What is that? Pick it up. You're not going to put it back down. By 1000 BCE, every continent was working with gold less than 1% of all gold had been mined. By 1500 that had grown to 5%, by 1900, 12%. Gold is spread so remarkably even over Earth's surface that during the period where it was easily found on or near the surface, everyone started using it.

No one put it back down. Aztecs to the Egyptians. China. India. Africa. Everyone had discovered gold all on their own, and that, with a relatively small amount of heat, you could make stuff out of it. If you didn't like how that stuff turned out, throw it back in the furnace and make something new. All you needed was clay to build the furnace and the container, to put the gold in a couple of people to blow air on the fire.

And after a few minutes out would come a puddle of gold, a puddle of gold that could be shaped or poured into molds that had all the impurities burned out, making it impossible to determine where it came from. Untraceable. Here's this thing that everyone agrees is money. You could go out and find it. Or exactly like the men who found that big gold nugget knew a thief could just steal it, melt it into a new shape, and voila!