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THE POWER OF GOLD

THE HISTORY OF AN OBSESSION

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Peter L. Bernstein

Foreword by Paul A. Volcker

John Wiley & Sons, Inc.

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Copyright © 2000, 2012 by Peter L. Bernstein. All rights reserved.

Published by John Wiley & Sons, Inc.Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted inany form or by any means, electronic, mechanical, photocopying, recording, scanning, orotherwise, except as permitted under Section 107 or 108 of the 1976 United States CopyrightAct, without either the prior written permission of the Publisher, or authorization throughpayment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Webat www.copyright.com. Requests to the Publisher for permission should be addressed to thePermissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030,(201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have usedtheir best efforts in preparing this book, they make no representations or warranties withrespect to the accuracy or completeness of the contents of this book and specificallydisclaim any implied warranties of merchantability or fitness for a particular purpose. Nowarranty may be created or extended by sales representatives or written sales materials.The advice and strategies contained herein may not be suitable for your situation. Youshould consult with a professional where appropriate. Neither the publisher nor authorshall be liable for any loss of profit or any other commercial damages, including but notlimited to special, incidental, consequential, or other damages.

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Library of Congress Cataloging-in-Publication Data:

Bernstein, Peter L.The power of gold : the history of an obsession / Peter L. Bernstein.

p. cm.Includes bibliographical references and index.ISBN 0-471-25210-7 (cloth); ISBN 978-1-118-27010-3 (paper);

ISBN 978-1-118-28269-4 (ebk.); ISBN 978-1-118-28414-8 (ebk.); ISBN 978-1-118-28522-0 (ebk.)

1. Gold—Folklore. 2. Gold—History. 3. Gold—Social aspects. I. Title.

GR810.B47 2000398�.365—dc21 00-036647

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

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For Barbara, once again and always.

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They wonder much to hear that gold, which in itself is so useless a thing, shouldbe everywhere so much esteemed, that even men for whom it was made, and bywhom it has its value, should yet be thought of less value than it is.

Sir Thomas More (1478–1535). Utopia of Jewels and Wealth

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Contents

Foreword ixAcknowledgments xiii

PROLOGUE: The Supreme Possession 1

A METAL FOR ALL SEASONS

1. Get Gold at All Hazards 92. Midas’s Wish and the Creatures of

Pure Chance 183. Darius’s Bathtub and the Cackling

of the Geese 384. The Symbol and the Faith 525. Gold, Salt, and the Blessed Town 666. The Legacy of Eoba, Babba, and Udd 747. The Great Chain Reaction 858. The Disintegrating Age and the

Kings’ Ransoms 969. The Sacred Thirst 114

THE PATH TO TRIUMPH

10. The Fatal Poison and Private Money 13511. The Asian Necropolis and Hien

Tsung’s Inadvertent Innovation 15812. The Great Recoinage and the Last

of the Magicians 17513. The True Doctrine and the Great Evil 198

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14. The New Mistress and the Cursed Discovery 219

15. The Badge of Honor 23916. The Most Stupendous Conspiracy

and the Endless Chain 260

THE DESCENT FROM GLORY

17. The Norman Conquest 28318. The End of the Epoch 30619. The Transcending Value 32820. World War Eight and the Thirty

Ounces of Gold 346

EPILOGUE: The Supreme Possession? 367

Notes 373Bibliography 397Index 409

v i i i Contents

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Foreword

What could be timelier than a new release of Peter Bernstein’sauthoritative book The Power of Gold? Bernstein wrote at the turn of the century—only a decade

ago, but what a contrast from today in the world of business and finance.Economic growth in the economically developed world had been sus-tained for a decade. Reasonable price stability had been achieved. Hugegains in the world’s stock markets exceeded past experience.

Almost everywhere, central bankers were esteemed and trusted.Central bank independence came to be taken as the indispensable guar-antor of stability. The mood was epitomized by the creation of a brand-new central bank to manage the European common currency, itself akey initiative toward closer European union. With its independencefrom the sovereign states of the “Eurozone” embodied in a solemntreaty, the new central bank reached a virtually unprecedented state,freed of direct accountability to a political government.

For decades, no central bank or government had maintained con-vertibility of its currencies into gold. For the most part, major curren-cies were “floated” in exchange markets. In one of Bernstein’s aptphrases, gold had been “emasculated.” With its enduring luster, itsmalleability, its resistance to wear and corrosion, it could remain usefulfor adornment and jewelry and to a limited exchange as a tiny compo-nent of some electronic devices. Yet it had been shorn of monetary sig-nificance. In the 1990s, central banks, the custodians of national financial

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resources, were tending to sell from their golden hoards acquired overthe decades, even at declining prices.

All of that was a very long way from the pleading of General deGaulle in the 1960s for the world to return to a full-blooded gold stan-dard. Bernstein recalled his eloquence: “There can be no other crite-rion, no other standard, than gold—gold that never changes, that canbe shipped in ingots, bars, coins, that has no nationality, and that is eter-nally and universally accepted as the unalterable fiduciary value parexcellence.” Somehow, in his lament for the gold standard, de Gaulleneglected to note that while gold may be immutable as a metal, its pricecould and did change—change in the marketplace or by governmentdecision, as he himself strongly advocated at the time.

Here we are, only a decade or so after Bernstein wrote, in the midstof demonstrable—perhaps unprecedented—volatility in the price of gold.Neither de Gaulle nor Bernstein could have envisaged the level of thegold price as I write, 50 times the value in the 1960s and 5 times the price10 years ago. Yet before his death, Peter had seen enough of the marketturmoil to confirm his parting conclusion: in the midst of economic fearsand financial uncertainty, gold would be back in demand.

Peter Bernstein was an anomaly in the modern world of investment,a man with a deep understanding of finance in all of its up-to-date math-ematical and theoretical manifestations but also a student of history. Thestory of gold is filled with the foibles and vulnerabilities of kings andpresidents and indeed of all human judgments. More than that, Peter canwrite—write in a way that the arcane becomes understandable, that thehistory of gold becomes a fascinating story of the rise and fall of nationsand civilizations.

Now, only a few years after Bernstein’s death, our capitalist civi-lization is being challenged. Most of the so-called developed world issuffering through an extended recession and high unemployment. Theeuro and the European Central Bank so confidently launched a decadeago are in possibly even mortal crisis. Governments and central banksseem to have lost their established bearings. Distrust is rife.

There is a yearning for solidity and stability. So, it is not entirelysurprising that we hear some urging that a monetary role for gold berestored. At the very least, gold remains for some a kind of last resort,a safeguard against threats seen and unseen. If gold has lost the essentialelements of money, it at least remains for some people a store of value.

x Foreword

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That is a very long way from restoring any approximation of theclassic gold standard, including the residual role of gold in the BrettonWoods system. We have been left with a continuing, elusive challengeof combining needed discipline in our monetary and fiscal affairs witha degree of flexibility in exchange rates.

The need for realism in the reform of our monetary system is whatmakes Bernstein’s story The Power of Gold so timely. It is a compellingreminder that maintaining a fixed price for gold and fixed exchangerates was difficult even in a simpler financial environment.

There was a time when faith in a gold standard and maintenance ofthe fixed parities had, in Bernstein’s words, “developed all the trappings ofa full fledged religion, shared beliefs, high priests, strict codes of behavior,creed and faith.” Yet even then, the classic gold standard could be main-tained for fewer than 50 years, ended by force majeure: World War I.

Persistent and valiant efforts to restore the system after that warfailed when seemingly on the brink of success. By 1925, Great Britainhad finally restored the gold parity for sterling that had been establishedmore than 100 years earlier. Under the pressure of continued recession,however, sterling convertibility was ended only five years later.Bernstein reported that John Maynard Keynes, then growing in repu-tation and influence, was exultant: “There are few Englishmen who donot rejoice in the breaking of the gold fetters. We feel that at least wehave a free hand to do what is sensible!”

The Bretton Woods system put in place after World War II was bornin an effort to restore a more workable version of a fixed exchange rateregime, gold related but dollar dominated. That system was doggedlydefended by a succession of governments and financial officials in the1950s and 1960s. I was there, a participant in the effort to maintain afixed dollar price for gold as the pivot for the monetary system.

Imaginative financial mechanisms such as the central bank gold pooland central bank currency swaps were developed to that end, ultimatelyincluding the creation of “paper gold”—the SDR (Special DrawingRights). Increasingly intrusive actions, such as exchange and capital con-trols, were put in place even in the home of free markets, the UnitedStates. Yet the mystique was gone. Gold failed to induce needed disci-pline. The need for greater flexibility could not be denied.

The concerns about the breakdown were not entirely misplaced.The felt need for greater flexibility shortly gave way to extreme volatility.

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The absence of discipline was reflected in the inflationary 1980s.Exchange markets had calmed down by the time Bernstein wrote, butwhat was not apparent then became real after the turn of the century.Economic imbalances grew unchecked between nations and withinnations. Financial excesses were untamed. The end came in 2008, with afinancial and institutional collapse.

In my mind, the situation cries out for reconsidering reform of theinternational monetary system, just as events are forcing a rethinking ofthe euro, its central bank, and greater European economic integration.We do need a sense of greater financial and budgetary discipline moregenerally, of enforceable rules of the international monetary road, andof greater exchange rate stability, all accompanied by reinforcement ofa collective commitment to price stability.

So, some will ask, isn’t there still an important role for gold?Peter Bernstein was reluctant to project the story of gold into the

future, but to me his message was clear.Yes, gold will be with us, valued not only for its intrinsic qualities

but as a last refuge and store of value in turbulent times. Yet its days asmoney, as a means of payment and a fixed unit of account, are gone.

To maintain a fixed price of gold as the center of a monetary sys-tem requires a strong sense of commitment, a commitment extendingbeyond central banks and governments to the populations at large. Canwe any longer believe that our citizenry will, in fair weather and foul,support giving priority to a fixed price of gold?

If the gold standard once took on the nature of a religion, we havelong since left the Garden of Eden. We can’t return. It’s not just thegreater complexity of our financial markets, the new fashions in eco-nomic policies, or even the restlessness of the citizenry. It is the fact thatonce the golden bond has been broken, it can no longer realistically beset out as unbreakable. And once the necessary sense of commitment togold is lost, then we need to seek other approaches.

Paul A. VolckerJanuary 2012

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Acknowledgments

Ninety-one years ago, Lytton Strachey observed that “Everyhistory worthy of the name is, in its own way, as personal aspoetry, and its value ultimately depends upon the force and

the quality of the character behind it.”* True enough, but writing his-tory is also hard work. It involves organizing masses of facts—many ofthem unfamiliar—into a coherent story, developing ideas that bearsome logical relationship to the facts, and communicating the results ina fashion that will interest more people than just the writer. As a result,the task cannot be a solitary one. I know whereof I speak.

The first of my acknowledgments goes to my wife, Barbara, who isalso my business partner. Her contribution to this book was significant onall levels. Her many positive suggestions, her equally valuable criticisms,her diligent editing, and her unfailing inspiration were all essential to thecompletion of the task. It never would have happened without her.

This book was my third partnership with my editor, Peter Dougherty.Peter creates a unique intellectual adventure that is challenging, exciting,and great fun. He has once again showed me how to transform a heap ofjumbled ideas into a coherent whole. His brilliant insights, his ready graspof the subject matter, and his total commitment as friend and guide to thisproject are visible on every page. He is the editor that all writers wish for,and I can only hope that the future holds many more of these stimulatingand rewarding opportunities to work with him.

x i i i

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

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Charles Kindleberger, my great friend and comrade-at-arms inWorld War II, became indefatigably engaged in this work from the verybeginning. His generosity to me was boundless. He provided inestimableguidance to research sources and shared his own research materials andnotes without stint. He was tireless in supplying suggestions, criticisms,and fresh viewpoints. He showered the full benefit of his extraordinaryknowledge of economic and financial history upon every part of themanuscript. It was a rare privilege to have him as mentor and intellectualcompanion.

I was also most fortunate in having Richard Sylla’s bountiful assis-tance from beginning to end. Dick’s authoritative criticisms and rec-ommendations provided many significant improvements to the bookby protecting me from oversimplifications in interpretation and omis-sions of essential facts.

Throughout the entire process, Edward Klagsbrun’s counsel andsupport were essential in enabling Barbara and me to keep our eye onthe ball.

Myles Thompson deserves my gratitude for his unremitting enthu-siasm, editorial assistance, and important support, as well as many valu-able suggestions about the content and development of the undertaking.

Three friends and colleagues were also kind enough to read the fullmanuscript. My two-time co-author and great friend, Robert Heilbroner,as so often in the past, gave me the benefit of his historical expertise, hisdeep understanding of economics, and his great talent for literary qual-ity. Peter Brodsky led me to important clarifications in areas that suf-fered from undue fuzziness in the early drafts. Elliott Howard drew myattention to a long list of flaws and offered helpful comments on thesubject of gold.

The team at Wiley under Jeff Brown’s confident leadership went tothe limit on our behalf, with enthusiasm, skill, and gracious responsive-ness to our needs. In addition to Jeff, this group included, in alphabet-ical order, Sylvia Coates, Mary Daniello, Peter Knapp, Livia Llewellyn,Meredith McGinnis, Joan O’Neil, Lori Sayde-Mehrtens, and JenniferWilkin.

Everett Sims’s conscientious editing has added polish, grace, andclarity to many rough edges. I am also grateful to Ev for proposing thatI should write a book about gold. Although there were many moments

x i v Acknowledgments

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when I wished I had not listened to him, I am confident that no othertopic would have captured my interest as this one has.

I was fortunate to work with a group of skillful, imaginative, andindefatigable research assistants. They saved me many hours of laborand made useful contributions at the same time. Here they are, in thesequence in which they served: Michelle Lee, Susan Cohen, StevenSherrifs, Betsy Wallen, and Linda Chang. Our business associate, BarbaraFotinatos, saw to it that the project kept moving along, not least by con-tributing her expert guidance in the language and habits of the Greeks.

I am pleased to express special gratitude to Andrew Freeman, whoarranged for the staff of The Economist in London to permit Barbara andme to spend several hours in the privacy of their Directors’ Roomreading issues of their invaluable publication from the 1920s and 1930s.As readers will note in Chapters 17 and 18, this fascinating materialbrought the times to life as nothing else could have.

The following people also provided significant assistance along theway and deserve my warmest thanks: Barbara Boehm, Ulla Buchner-Howard, Mike Clowes, Barclay Douglas, Hans Falkena, Rob Ferguson,Benjamin Friedman, Milton Friedman, Alan Greenspan, James Howell,Henry Hu, Steve Jones, Dwight Keating, Leora Klapper, BenjaminLevene, Richard Rogalski, Paul Samuelson, Ronald Sobel, andGentaro Yura.

Convention dictates that the author relieves all of the above fromany responsibility for errors that may remain in the manuscript. CharlieKindleberger decries this convention, pointing out that the author, afterall, depended on the authority of these individuals in preparing the workand should not be expected to check out the accuracy of their sugges-tions. The quality of the assistance I have received on this occasionassures me that, just for once, Charlie is mistaken. All errors that remainin the manuscript are mine. May we hope that they are few and farbetween.

P. L. B.

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PrologueThe Supreme Possession

About one hundred years ago, John Ruskin told the story of aman who boarded a ship carrying his entire wealth in a largebag of gold coins. A terrible storm came up a few days into the

voyage and the alarm went off to abandon ship. Strapping the bagaround his waist, the man went up on deck, jumped overboard, andpromptly sank to the bottom of the sea. Asks Ruskin: “Now, as he wassinking, 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 calledgold. Gold has motivated entire societies, torn economies to shreds,determined the fate of kings and emperors, inspired the most beautifulworks of art, provoked horrible acts by one people against another, anddriven men to endure intense hardship in the hope of finding instantwealth and annihilating uncertainty.

“Oh, most excellent gold!” observed Columbus while on his firstvoyage to America. “Who has gold has a treasure [that] even helps soulsto paradise.”2 As gold’s unquenchable beauty shines like the sun, peo-ple have turned to it to protect themselves against the darkness ahead.Yet we shall see at every point that Ruskin’s paradox arises and chal-lenges us anew. Whether it is Jason in search of the Golden Fleece, theJews dancing around the golden calf, Croesus fingering his goldencoins, Crassus murdered by molten gold poured down his throat, Basil

1

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Bulgaroctonus with over two hundred thousand pounds of gold, Pizarrosurrounded by gold when slain by his henchmen, Sutter whose mill-stream launched the California gold rush, or modern leaders such asCharles de Gaulle who deluded themselves with a vision of an economymade stable, sure, and superior by the ownership of gold—they all hadgold, but the gold had them all.

�

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

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

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

2 Prologue

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�

Despite the complex obsessions it has created, gold is wonderfullysimple in its essence. Its chemical symbol AU derives from aurora, whichmeans “shining dawn,” but despite the glamorous suggestion of AU,gold is chemically inert. That explains why its radiance is forever. InCairo, you will find a tooth bridge made of gold for an Egyptian 4500years ago, its condition good enough to go into your mouth today.Gold is extraordinarily dense; a cubic foot of it weighs half a ton. In1875, the English economist Stanley Jevons observed that the £20 mil-lion in transactions that cleared the London Bankers’ Clearing Houseeach day would weigh about 157 tons if paid in gold coin “and wouldrequire eighty horses for conveyance.”5 The density of gold means thateven very small amounts can function as money of large denominations.

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

Unlike any other element on earth, almost all the gold ever minedis still around, much of it now in museums bedecking statues of theancient gods and their furniture or in numismatic displays, some on thepages of illustrated manuscripts, some in gleaming bars buried in the darkcellars of central banks, a lot of it on fingers, ears, and teeth. There is aresidue that rests quietly in shipwrecks at the bottom of the seas. If youpiled all this gold in one solid cube, you could fit it aboard any oftoday’s great oil tankers;8 its total weight would amount to approximately125,000 tons,9 an insignificant volume that the U.S. steel industry turnsout in just a few hours; the industry has the capacity to turn out 120million tons a year. The ton of steel commands $550—2¢ an ounce—

Prologue 3

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

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but the 125,000 tons or so of gold would be worth a trillion dollars attoday’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 canbuild nothing. And yet it is gold that we call the precious metal. Weyearn for gold and yawn at steel. When all the steel has rusted and rot-ted, and forever after that, your great cube of gold will still look likenew. That is the kind of longevity we all dream of.

Stubborn resistance to oxidation, unusual density, and readymalleability—these simple natural attributes explain all there is to theromance of gold (even the word gold is nothing fancy: it derives fromthe Old English gelo, the word for “yellow”). This uncomplicatedchemistry reveals that gold is so beautiful it was Jehovah’s first choicefor the decoration of his tabernacle: “Thou shalt overlay it with puregold,” He instructs Moses on Mount Sinai, “within and without shaltthou 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, thefixtures, and all decorative items such as cherubs were also to be coveredin pure gold.

�

God issued those orders many thousands of years ago. What is theplace of gold in the modern world of abstract art, designer jeans, com-plex insurance strategies, computerized money, and the labyrinths ofthe Internet? Does gold carry any significance in an era where traditionsand formality are constantly crumbling beyond recognition? In a globaleconomy managed increasingly by central bankers and internationalinstitutions, does gold matter at all?

Only time can tell whether gold as a store of monetary value is trulydead and buried, but one thing is certain: the motivations of greed andfear, as well as the longings for power and for beauty, that drive the sto-ries that follow are alive and well at this very moment. Consequently,

4 Prologue

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

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the story of gold is as much the story of our own time as it is a tale outof the past. From poor King Midas who was overwhelmed by it to theAly Khan who gave away his weight in gold every year, from the dankmines of South Africa to the antiseptic cellars at Fort Knox, from thegorgeous artworks of the Scythians to the Corichancha of the Incas,from the street markets of Bengal to the financial markets in the City ofLondon, gold reflects the universal quest for eternal life—the ultimatecertainty and escape from risk.

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

�

The following chapters proceed in roughly chronological order,but the story is neither a complete history of gold nor a systematicanalysis of its role in economics and culture; detailed histories of moneyand banking abound. Instead, I explore those events and stories involv-ing gold that most appealed to me because they display the desperationand ultimate frustrations that have inflamed human behavior. Beginningwith the magical and religious attributes of gold, the history proceeds tothe transformation of gold into money. As that transformation pro-gresses, however, we shall never lose sight of the magical qualities ofgold or the ironies of its impact on humanity.

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

Prologue 5

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A M E TA L F O R A L LS E A S O N S

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1

Get Gold at AllHazards

If gold were more plentiful on earth—say, as abundant as salt—itwould be far less valuable and interesting, despite its unique physicalattributes and beauty. Yet gold has been discovered on every conti-

nent on earth. That sounds like a contradiction, but it is not. Althoughgold deposits are widespread, in one form or another, no one area hasyielded its gold easily. Finding and producing gold demands immenseeffort relative to the amount of glittering yellow metal that makes itsappearance at the end of the process.

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

This radically distorted ratio of effort to output appears to havedone little to discourage people from pursuing the worldwide searchfor gold—perhaps the most telling evidence of how highly prized, vital,

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essential, and irresistible gold has been from the earliest of times. Evenin myths, as this chapter relates, the quest for gold was gluttonous.

�

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

Relative to the needs for it, gold does appear to have been moreplentiful in ancient times, especially in Egypt and the Near East, than ithas been since the Roman era. A little bit of gold goes a very long waywhen it is used only for adornment and decoration and not for coinageor hoarding: mining by the Egyptians produced only about one ton annu-ally.3 Until the development of coinage, which put gold into the handsof the masses and greatly expanded the need for it, most of the availablegold was owned by monarchs and priests. Its use was ceremonial in largepart, a medium for advertising power, wealth, eminence, and proxim-ity to the gods. Whatever was left over was used for jewelry and otherforms of personal adornment.

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

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The more than four hundred additional references to gold in theBible 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 artmy confidence’; If I rejoiced because . . . my hand had gotten much. . . .This also were an iniquity to be punished by the judge; for I shouldhave denied the God that is above.”4 Abraham, the founder of the Jewishnation, is described in Genesis 13 as “rich in cattle, and in silver, and ingold.” He furnished the servant who went to fetch Rebecca with vesselsof 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 Command-ments and many associated rules and obligations. God also issued pre-cise directions for the construction of a sanctuary where the Jews wereto worship Him, together with a tabernacle to go inside the sanctuary.God began right off by specifying that “thou shalt overlay it with puregold, within and without shalt thou overlay it, and shalt make upon ita crown of gold round about.” That is just the beginning: God evenordered that the furniture, fixtures, and all the decorative items such ascherubs were to be covered in pure gold. The instructions, as they appearin Chapters 25–28 of Exodus, persevere for some eighty paragraphs ofpainstakingly detailed measurements and designs.

Once settled in the Promised Land, the Jews must have accumulatedmasses of gold, primarily from plundering the tribes they had defeatedin battle. Moses and his troops took over three hundred pounds of goldfrom the Midianites, “jewels of gold, ankle-chains and bracelets, signet-rings, earrings, and armlets.”5 Gold gleamed from the walls of the inte-rior of Solomon’s great temple (whose western wall is the Wailing Wallof modern Jerusalem), which was 135 feet long, 35 feet wide, 50 feethigh, and divided into three chambers. Solomon enjoyed lavishing goldon his personal possessions as well: his shields were made of gold, hisivory throne was overlaid with gold, and he sipped his wine from goldenvessels.6 When the queen of Sheba came to visit Solomon, she broughthim an amount of gold (coals to Newcastle?) that has been estimated atas much as three tons—worth over $20 million at today’s prices.7

The sanctuary and tabernacle that Moses built to God’s protractedspecifications have disappeared, and Solomon’s massive gold-encrustedtemple has been defaced. But in AD 532, after ten thousand men workingfor six years had used more than twelve metric tons of gold in building

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the church of Saint Sophia in Constantinople, the Byzantine emperorJustinian—who supervised the entire operation—could exclaim,“Solomon, I have surpassed thee!”8 Justinian was well versed in the usesof gold. He inherited 320,000 pounds of gold, used it all up, and thentaxed his subjects to pay mercenary armies, to finance public works, and,most of all, to bribe his enemies to refrain from invading his domains. Theprocess of using gold to proclaim the power of the church would berepeated in gleaming golden mosaics and decoration throughout Italy,in Spain, and even on the wildest steppes of Russia.

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Neither Solomon nor Jehovah himself were the first to use gold toinspire reverence. The ancient Egyptians probably set the style for laterreligions, including the Jews, to emulate. The Jews, with one god, hadit easy compared with the Egyptians, who had two thousand deities toworry about, many of whom bore some relation to the all-powerfulSun God. You can consume a lot of gold convincing everyone howpowerful and all-knowing two thousand deities are. Christians, with onlyone god to worship but several thousand saints to pray to, have facedsimilar problems.

The use of gold in Egypt was a royal prerogative, unavailable toanyone but the pharaohs. That constraint facilitated the way that thepharaohs assumed god-like roles and authenticated their heavenly char-acter by adorning themselves with the same substance that embellishedtheir gods. Creating gold jewelry in Egypt was a high art, lavished upondead monarchs as well as live ones.

An impressive demonstration of the use of gold to project powerwas carried out by a fascinating pharaoh who happened to be a woman,described by the Egyptologist James Henry Breasted as “the first greatlady of the world.” Hatshepsut was the daughter of Thutmose I, whowas the first pharaoh to be buried, about 1482 BC, in the Valley of theTombs of the Kings at Thebes. After Hatshepsut seized power from hernephew-stepson around 1470 BC, she sat on the throne as king untilher death about 1458 BC and was known by approximately eightytitles, including Son of the Sun and Golden Horus (the Egyptian god oflight). Although she passed up the opportunity to add the traditional

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