Going back many millenia, to the days when civilization was in its infancy, there originally was no “money” being spent. Everything originally was bartered, trading goods and services for other goods and services. Problems arose from this, as sometimes the goods or services one person had to offer weren’t necessarily wanted or needed by the other party. It was also impractical to carry some goods (Ex: Cattle) everywhere in order to trade for something. A better system was needed that would be universally valued. It needed to be something rare, that the average person couldn’t gather themselves. It also needed to be durable and impervious to corrosion, the elements and regular handling. This is a role gold and silver filled perfectly.
The average person couldn’t just go into a field or the hills, dig a hole and pull out gold or silver. Gold and silver were certainly rare. They also are impervious to rust, corrosion and fire. They also have an eye appeal other metals and materials don’t possess. Because of this the world agreed both metals have inherent value. By adopting gold and silver as money, it became easier for commerce to happen locally and worldwide. If someone offered a good or service but didn’t have a good or service that was wanted, they could instead pay with gold or silver. The person being paid could then find someone with the good or service they want and pay them with their newly-acquired gold or silver.
The Introdution of Paper Notes
As civilization progressed, many nations began introducing paper notes. These were redeemable at any time for their equivalent of gold or silver. While not as durable as the metals themselves, it was much more convenient to carry larger sums of money and travel lightly.
Paper Notes Become Worthless
Eventually many countries stopped backing their paper notes with anything. If you wanted to redeem the notes with the government or bank for gold and silver, you would be denied. These notes became an IOU from the government, but wasn’t redeemable for anything. So long as everyone had confidence in the paper notes, they could at least be redeemed for goods and services. If confidence were to erode, however, then the paper was worthless and people rushed to convert it into anything useful: food, commodities, tools, real estate, land, cattle, etc.
Inflation Begins
The problem with this situation is that since the paper notes aren’t backed by anything, nations could print as much as they wanted. You then had inflation caused by too many paper notes being offered to pay for far fewer goods and services. People and businesses started to realize the paper notes aren’t worth what they were and began to charge more for the same goods and services as they realized their own paper notes weren’t covering the bills and purchasing as much as they did in the past.
Nations and Banks Still Hold Gold and Silver
If you pay attention to the news and government/bank reports, you’ll notice they’re all still buying gold and silver. Very few are selling, as the vast majority continue purchasing and holding what they have. Why? Because gold and silver have always been “top tier assets” that are much more liquid than real estate, land and other commodities. These assets keep their value through times of economic uncertainty. They are what will preserve your wealth regardless of what my happen in the future. It’s never too late to start storing some of your wealth in gold and silver as a form of savings and preparation for possible uncertain times in the future.