How well does money hold its value?

The above video shows an interview between Nicky Marsh and Tom Hockenhull, curator in Room 68 of the British Museum (the Money Gallery).

Tom and Nicky talk about the ways in which money can hold and lose its value. They touch on the long history of gold that was used, until the ending of the gold standard in America in 1971, as a way of stabilising the value of money.

They then talk about the changes and potential risks to money’s value, which occurred in the modern period when gold was supplanted by paper money and became increasingly abstract as a form.

The Trillion Dollar campaign

Nicky and Tom focus on the example of the Trillion Dollar Campaign by The Zimbabwean newspaper. This newspaper was driven into exile for reporting on the Mugabe regime.

A 55% import tax was placed on paper, making it impossible to print a newspaper that ordinary residents of Zimbabwe could afford to buy. This meant that sales needed to be subsidised by people outside of the country.

The advertising agency TBWA/Hunt/Lascaris in Johannesburg was brought in to help increase sales of The Zimbabwean. Here’s what they did:

We developed a unique solution. One of the most eloquent symbols of Zimbabwe’s collapse is the Z$ trillion dollar note, a symptom of their world record inflation. This money cannot buy anything, not a loaf of bread and certainly not any advertising, but it can become the advertising. So, we turned the money into its own medium by printing our messages straight onto it.

In rush-hour traffic, at malls and at universities, millions and billions were given out one note at a time. We sent bundles of cash to captains of industry, politicians and media personalities. Wherever the Zimbabwean was sold, we put up posters made of real money. At every public place we could, we had a poster with notes that people could detach to keep the email address. We made trillion dollar wallpaper murals and even made the world’s first billboards out of real money.

Gold as a currency

Can you think about the other side of this debate though? Or some of the reasons that economies stopped using gold as a currency and moved to paper money, volatile as it is?

The economist John Maynard Keynes, for example, infamously called the gold standard a ‘barbarous relic’ in the 1920s.

He condemned it because he considered it to be a form of money that relied on scarcity. Governments can’t make more gold, and he thought it resulted in an economy that would contract rather than expand.

Gold has always aroused strong feelings for some. What place now does it have in economy? Does it still have a place in the digital age of the bitcoin and cryptocurrencies? Who uses gold and how and why do they use it?