What Were Gold Coins For?

[John Savard]

Back when nearly every country in the world was minting gold coins, like in the
19th century, those countries also had paper money.
And paper money was what people usually used.
Due to the loss of gold from the coins due to handling, and the value of the
gold tied up in them, it's understandable that the government preferred people
to usually use paper money.
Given that, why did they even mint gold coins at all?

At present, some countries make gold coins mostly as items to sell to
collectors.

Another possible use would be for internal banking transactions - particularly
when exchange balances are being reconciled internationally.

But surely there must be something more to it, because the gold coins
were available to the general public.

I thought about this question after seeing a reference to the famous
chess game in 1912 between Marshall and Levitsky in Wroclaw, then
known as Breslau, where a stunning Queen sacrifice is alleged to have
inspired the spectators to shower the board with gold coins.

Why would they have had gold coins in their pockets?

Thinking about it caused a light to dawn in my head.

Back then, they didn't have credit cards or travellers' cheques. One way
for a tourist to have spending money in a foreign country would be
to go to a bank and change his money over; of course, there would be
a fee for that, and a fee to convert back whatever wasn't used.

Perhaps there was a simpler way that people normally used then.

After all, while a foreign merchant might not know the worth of
a foreign banknote - or be able to tell if it was genuine - when it comes
to a gold coin, you basically just have to *weigh* it.

And in those days, books listing foreign gold coins, their weight, fineness, and value, were common - as something someone in business would
find of practical use.

So we have this chess game in Germany, and a lot of the spectators
would be tourists from Russia or the United States, since this was
where the two players were from - and it was because they were
travelling in a foreign country that they happened to have gold coins
in their pockets!

I'm sure that if I'm right about this, it's something that will be very obvious
to many of the people on this forum, even if it took time to dawn on me.

On the other hand, I could also be wrong, or maybe partly wrong.

John Savard

[Slime Lowlife]

In article <b7773fbb-a992-45ee...@googlegroups.com>,

John Savard <jsa...@ecn.ab.ca> wrote:

> Back when nearly every country in the world was minting gold coins, like in
> the
> 19th century, those countries also had paper money.
> And paper money was what people usually used.
> Due to the loss of gold from the coins due to handling, and the value of the
> gold tied up in them, it's understandable that the government preferred
> people
> to usually use paper money.
> Given that, why did they even mint gold coins at all?
>

One major reason gold coins persisted was that paper money evolved out
of things like checks, bills of credit, or receipts that were stand-ins
for the "real thing". The bulk of currency issues till World War I
were backed by gold reserves, & in many countries you could take your
note to a bank & legally demand the requisite gold money backing the
note (which, at that point, had to be retired).
This was seen as the only way to keep governments from simply printing
up paper money without any backing. And, even before WWI this happened
often enough (usually from carelessly-run private banks) that it was
always on peoples' minds.

(Gold backing also took the form of ingots, as most people never
demanded to redeem their notes, & it was a hassle to mint a bunch of
little coins that would never go anywhere. In the late 19th century
the US Treasury was requireed to keep about 70% of its gold reserves as
coin, the rest in ingots or bars; in the early 20th century they asked
to reverse the percentages, as so few people were actually demanding
the coins for their notes.)