Aristotle on Gold: A Time-Tested Money with 5 Practical Qualities

Over 2,300 years ago, Aristotle, the renowned Greek philosopher, identified the practical qualities that make an object suitable for use as money.

He wasn’t specifically arguing for gold, but that’s the way it turned out. I n the Politics, Aristotle explains why societies adopted a commodity such as metal for exchange. The underlying requirements can be summarized as:

1. Durability
2. Portability
3. Divisibility
4. Uniformity
5. Desirability / Intrinsic value

Gold performs extraordinarily well on all five. Let’s take them one by one.

1. Durability

This may be gold’s greatest monetary advantage.

Gold does not rust or oxidize under ordinary conditions. A gold coin buried for 2,000 years can emerge essentially unchanged. Iron rusts; copper corrodes. Paper deteriorates. Digital entries depend upon an institutional and technological system.

That gives gold an extraordinary characteristic for money: time does not consume it.

A gold coin can pass from one generation to another without the underlying commodity disappearing.

2. Portability

Money must compress substantial economic value into something that can be transported.

Gold has extraordinarily high value density. A relatively small quantity can represent substantial purchasing power.

This is one reason gold historically became preferable to bulky commodities such as grain, cattle or other goods. You don’t need a wagonload of gold to settle a large transaction.

3. Divisibility

Money must work for both large and small transactions.

Gold can be divided into ounces, grams, grains, coins, bars, etc., without destroying its essential character. Unlike a cow, for example, you can divide gold into smaller units while preserving the value of the resulting pieces.

And importantly, melting gold does not destroy it. It merely changes its form.

4. Uniformity

This is an especially important monetary property.

One ounce of pure gold is essentially the same commodity as another ounce of pure gold. Its origin doesn’t fundamentally alter its chemical identity.

That makes gold particularly suitable for fungibility: one standardized unit can substitute for another.

This is why coinage was such a tremendous advance. The government could certify a particular weight and purity, reducing the need to assay every transaction.

4. Desirability / Intrinsic Value

This is where gold has an enormous advantage over virtually every other commodity.

Money must be scarce enough that people cannot produce unlimited quantities of it at negligible cost.

If everybody could manufacture money effortlessly, money would cease to perform its function as a reliable store and medium of exchange.

Gold requires enormous effort, capital, energy and geological luck to extract. And its supply grows only slowly relative to the enormous stock accumulated throughout human history.

This produces one of gold’s most important monetary properties. Gold is quite different from fiat currency, whose supply can be increased by administrative decision.

Gold did not become money merely because governments stamped coins with kings’ faces. Governments stamped coins with gold because people already recognized gold’s monetary qualities.

Government abandon gold from time to time so they can spend money without restraint, fleecing their own citizens by steal the currency’s purchasing power bit by bit.

Find out why gold is crucial for profit and protection at today’s monetary crossroads. Speak with a Republic Monetary Exchange gold and silver specialist today.