You can trust the prolific and ever-entertaining British author Dominic Frisby to produce a most timely book on a most relevant asset class. In The Secret History of Gold: Myth, Money, Politics & Power, released last year in Britain but only available in the US from May, this excellent writer and storyteller takes us along on a truly epic journey.
From the Mongols, to probably history’s richest man, to Rome, and the lively portrayal of gold rushes in the 1800s—the California and Alaskan ones, perhaps biggest of all—we get a quick-paced, overview vision of humanity’s relationship with gold, plus ounces of historical nuggets.
The book is very reminiscent in pace and tone of the reading experience in Frisby’s 2019 Daylight Robbery—a similarly-entertaining and wide-ranging investigation into the history of taxation. About Alexander the Great—better known for his conquests than his monetary policy—Frisby writes that,
. . .[he] might have conquered with his armies, but he consolidated with money: by taking control of gold and silver supply and using it to impose his currency, the most international money the world had ever seen.
There’s a great Marco Polo quotes about seigniorage in China (“money he pays out costs him nothing at all”), and the astonishing history of touchstones (“a piece of dark stone. . .used to test the purity of gold or silver”), to which I confess having been unaware. The golden dreams of Colonial Spanish South America are vividly recounted, with the conquistador’s insatiable search for gold and the mythical El Dorado front and center: “Whenever there is lots of gold, there always seems to be a story of lost gold.”
Always following along humanity’s footsteps, gold is there either in monetary or ornamental form. Up and down the nineteenth century, we learn about how gold served as money precisely because we cannot trust governments to responsibly and appropriately govern it.
Amid stories of pieces of eight—the Spanish silver coins that were dominant money in colonial times—America’s dollar is as international as they come: “The global reserve currency of the world — built on a Bohemian name, a Spanish network and solid South and Central American silver” (p. 51).
The most thrilling and intriguing example of gold chases comes from World War II Norway and warms my Scandinavian heart. The Nazi forces infamously hunted for gold across Europe, their first stop upon invading a new country was always the central bank vault. Consequently, occupied nations scurried the national treasure away on trains, boats, and trucks in the dead of night.
The dramatic Norwegian case is worth recounting. In April 1940, the Norwegian government moved the gold to Lillehammer hours before the Nazis arrived in the capital city. In Lillehammer, ordinary Norwegians were told to bring picks and shoves to do road work, but instead packed boxes and boxes of gold to trains to go even further north. The Norwegian coastal village where they arrived next was bombed heavily, some of the gold loaded onto British ships, but most of it made it onto trucks, again bombed by Luftwaffe: “Miraculously, none took a hit,” Frisby tells us. Across fjords and unpaved backroads, sleepless drivers and fishermen ran the gold ever further away from the Germans. Via HMS Glasgow—a British cruiser—and a fleet of ordinary fishing vessels, the gold made it to Tromsø, from which it was then transported over to the UK.
The tragedy of this heroic, golden, Netflix-worthy quest—where only a single bag of gold was lost, courtesy of a greedy sailor onboard HMS Glasgow before presumably throwing a lordly party in his home port—was that none of it was “ever given to those incredible Norwegians who saved the country’s gold.” Almost all of it was eventually sold to finance the exiled Norwegian government. In the account, Frisby demonstrates his excellent writing acumen and storytelling aptitude. It’s truly a bliss to be along for the ride.
Gold, he writes in a separate World War II segment, “was silent witness to the horrors and ambitions of the Third Reich. It was a means to finance Nazi aggression, but also to escape it. The densest form of wealth there is, it was key to their pursuit of power.”
That’s a perfect illustration of how a politically-neutral monetary medium helps good and bad people alike; it’s sort of the point, having nobody entrusted to the task of ruling and regulating the money.
Fast-forward to modern times, we learn about all the ways in which Chinese gold-hoarding statistics are bogus; in all likelihood, the rising and intransparent empire holds way more gold than it publicly claims. We get the impression from Frisby that the central bank rush of recent years, which has in no small part contributed to the gold price’s outstanding run, might not go too much further in making gold the world’s go-to money once more. Because gold is physical and difficult to move, “it will always be the target of thieves and conquerors. Keeping it safe will always be a problem.”
Even the loftiest contemporary dreams of goldbugs aren’t of an actual gold standard—that ship has technologically sailed. In a system of gold backing a transfer system of exchange, Frisby points out, “the gold itself would stay in some vault somewhere and ownership of the gold would change... But this is really gold functioning as a store or wealth, as backing, with an exchange system built on top.”
We’re back to the trusted financial overlay that was once gold’s downfall a century or so ago: the 20th century already showed us how such arrangements can fall apart.
Still, gold’s long history is intimately commingled with humanity itself and with the rise and fall of empires. As always, Mr. Frisby’s musings are always worth hearing. And in The Secret History of Gold he really struck gold.
