The Freeman 1972 - The Ludwig von Mises Institute

1972 A CLOSER LOOK AT GOLD 535Russia in the summer of 1970, ayoung man explained to me thatthe old five rouble pieces struckon the standard used beginningwith 1897 are now fetching about90 paper roubles, nearly a typicalmonth's wages in the presentSoviet State. The grimly strictmonetary laws and energetic propagandaof the Soviet State 5 hadnot been able to eradicate a desirefor and a trust in gold. Duringand immediately after World WarII many a family was able toavoid starvation by gradually givingup one gold piece after theother to purchase food that couldotherwise not be obtained in economiesparalyzed by war and postwarcontrols.A Coin at WorkLet us contemplate a half eaglestruck by the young United Statesin 1800. As in the case of the vastmajority of gold coins struck inthe world before 1800, there isalso no designation of value orweight on this piece. Gold coinsneed no designation of value orlegal tender status to function5 Strange to say, during the earlyyears of the Soviet State, gold coins werestruck with the weights of the older tenroublepieces struck as late as 1911. TheSoviet gold gieces were dated 1923 andbore the emblem of the State and a sowingpeasant. There is evidence that thesepieces were struck in very large quantities,but today they are very scarce.Doubtless the bulk of them were remelted.·well. The piece we are contemplatingis worn, so badly worn that itsdesigns are only slightly above thelevel of the fields, but its weightis 8.50 grams, only about 3 percent below its legal weight of 135grains (8.748 grams).Now let us reconstruct the tremenq.ouseconomic task that thisgold piece performed so well' andso long. The wear on this piecewould suggest that it was in circulationat least until the weightreduction of 1834 and perhapsquite a bit longer. If it changedhands on the average of just oncea week over a period of 50 years,it changed hands more than 2,500times and was thus involved in anexchange of more than $12,500.However, the really remarkableaspect of this performance lies inthe fact that every time itchanged its owner, the new ownerwas guaranteed a stable value aslong as he wished to keep thepiece. What were the costs of thisremarkable performance? About15 cents' worth of gold lostthrough wear and the very modest·cost of striking the piece. Tohave printed paper money for thisperiod of circulation would haveapproached or exceeded the mintingand gold loss costs. Far moreimportant, however, is the factthat the costs of the gold loss andminting were a very trivial considerationin relation to the social