The Power of Gold: The History of an Obsession

by Peter L. Bernstein, Paul A. Volcker (Foreword by)

Overview

"The need for realism in reform of its monetary system is what makes Bernstein’s story of the Power of Gold so timely. It is a compelling reminder that maintaining a fixed price for gold and fixed exchange rates were difficult even in a simpler financial environment….Peter Bernstein was reluctant to project the story of gold into the future. But to me his message was clear. Yes, gold will be with us, valued not only for its intrinsic qualities but as a last refuge and store of value in turbulent times. But its days as money, as a means of payment and a fixed unit of account are gone."
—From the New Foreword by Paul Volcker

This bestselling book reveals a record of human nature in the ubiquity of gold with a new foreword by Paul Volcker

In this exciting book, the late Peter L. Bernstein tells the story of history's most coveted, celebrated, and inglorious asset: gold. From the ancient fascinations of Moses and Midas through the modern convulsions caused by the gold standard and its aftermath, gold has led many of its most eager and proud possessors to a bad end. And while the same cycle of obsession and desperation may reverberate in today's fast-moving, electronically-driven markets, the role of gold in shaping human history is the striking feature of this tumultuous tale. Such is the power of gold.

Whether it is Egyptian pharaohs with depraved tastes, the luxury-mad survivors of the Black Death, the Chinese inventor of paper money, the pirates on the Spanish Main, or the hardnosed believers in the international gold standard, gold has been the supreme possession. It has been an icon for greed and an emblem of rectitude, as well as a vehicle for vanity and a badge of power that has shaped the destiny of humanity through the ages.

• Discusses the beginnings of gold as something with magical, religious, and artistic qualities and follows its trail as we progress to the invention of coinage, the transformation of gold into money, and the gold standard
• Other bestselling books by the late Peter Bernstein: Against the Gods, Capital Ideas, and Capital Ideas Evolving
• Contemplates gold from the diverse perspectives of monarchs and moneyers, potentates and politicians, men of legendary wealth and others of more plebeian beginnings

Far more than a tale of romantic myths, daring explorations, and the history of money and power struggles, The Power of Gold suggests that the true significance of this infamous element may lie in the timeless passions it continues to evoke, and what this reveals about ourselves.

Product Details

ISBN-13:	9781118270103
Publisher:	Wiley
Publication date:	04/10/2012
Edition description:	Reprint
Pages:	448
Sales rank:	632,273
Product dimensions:	5.90(w) x 9.00(h) x 1.40(d)

About the Author

The late Peter L. Bernstein was President of Peter L. Bernstein, Inc., an economic consulting firm for institutional investors he founded in 1973, after many years of managing billions of dollars in individual and institutional portfolios. Bernstein was also the author of ten books on economics and finance, including the bestselling Capital Ideas, Capital Ideas Evolving, and Against the Gods: The Remarkable Story of Risk. His writing combines the zest of a historian with the meticulous analytical powers of an economist.

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Table of Contents

Foreword ix

Acknowledgments xiii

Prologue: The Supreme Possession 1

A Metal for All Seasons

1. Get Gold at All Hazards 9

2. Midas’s Wish and the Creatures of Pure Chance 18

3. Darius’s Bathtub and the Cackling of the Geese 38

4. The Symbol and the Faith 52

5. Gold, Salt, and the Blessed Town 66

6. The Legacy of Eoba, Babba, and Udd 74

7. The Great Chain Reaction 85

8. The Disintegrating Age and the Kings’ Ransoms 96

9. The Sacred Thirst 114

The Path to Triumph

10. The Fatal Poison and Private Money 135

11. The Asian Necropolis and Hien Tsung’s Inadvertent Innovation 158

12. The Great Recoinage and the Last of the Magicians 175

13. The True Doctrine and the Great Evil 198

14. The New Mistress and the Cursed Discovery 219

15. The Badge of Honor 239

16. The Most Stupendous Conspiracy and the Endless Chain 260

The Descent From Glory

17. The Norman Conquest 283

18. The End of the Epoch 306

19. The Transcending Value 328

20. World War Eight and the Thirty Ounces of Gold 346

Epilogue: The Supreme Possession? 367

Notes 373

Bibliography 397

Index 409

What People are Saying About This

Steve Jones

This book is a noble treatment of the most noble of elements. The Power of Gold is a brilliant and unexpected tale of three thousand years of a metal as virtual reality.
—(Steve Jones author, Darwin's Ghost: The Origin of Species Updated)

Roger G. Kennedy

Hats off! We are in the presence of a master . . . to read with such delight in its manner as to pass too quickly over the subtlety of its understanding and the astonishing width and depth of Bernstein's knowledge.
—(Roger G. Kennedy Director Emeritus, National Museum of American History)

David Pitt

If all the gold ever mined in the history of the world were collected in one place, it would weigh about 125,000 tons. That's not a whole lot, when you consider that people have been mining gold as long as there has been civilization (there are more than 400 references to gold in the Bible). Gold is not very plentiful (it costs a small fortune just to mine the stuff), it's incredibly heavy (a cubic foot weighs half a ton), and it's so soft that you can't do anything practical with it. How, then, did it get to be so darn popular? That's the question Bernstein addresses in this utterly fascinating book. Its not a history of gold itself-there are histories of banking for that, he tells us-but a chronicle of the power and the mystique of gold. What is it about human beings that makes us turn a useless, hard-to- come-by metal into the object of desire, into some- thing we wear, into a symbol of power and wealth? Is it our ability to make gold do anything we want that makes us do anything we can to get it? Never has there been a more enlightening, instructive, and entertaining look at the power of this most precious of metals.

From the Publisher

"Bernstein...gives us a multifaceted depiction of the powerful pull gold has...his grasp on things financial...is firm, and he's admirably adept at explaining them."
—New York Times Book Review

Pierre Keller

. . . a fascinating story . . . wittily written, and full of original insights . . . Peter Bernstein has once more written a brilliant book, both highly instructive and entertaining.
—(Pierre Keller former senior partner, Lombard Odier & Cie, Geneva)

John Kenneth Galbraith

Admirably written . . . a wonderfully interesting view—not alone of gold but of the greater economic history. Like other of his work, it is assured of a wide readership.
—(John Kenneth Galbraith Professor of Economics Emeritus, Harvard University)

Paul A. Volcker

The story of gold-in all its splendor and mythology, its fascination for individuals and nations alike. . . . Peter Bernstein is up to the challenge. His spritely exposition is a fine read even as it makes us think and reflect.
—(Paul A. Volcker, Former Chairman of the Federal Reserve)

Interviews

Exclusive Author Essay
Gold: The Passionate Journey by Peter L. Bernstein

Ask somebody today how they feel about gold, and the response is likely to be a yawn. In 1996, when a friend suggested that I should write a book about gold, I also reacted with a yawn. Why, I asked myself, should I spend my efforts on an asset so obsolete that even the Swiss National Bank and the Bank of England want to liquidate their holdings of it? But then I recalled it was not always thus, even in our own time. Quite the contrary.

When the gold panic climaxed in January 1980 at $850 an ounce, gold was so triumphant that the value of all the monetary gold in the world exceeded the value of all the stocks listed on the New York Stock Exchange. During the 15 years or so of economic darkness that led up to that crazy moment, politicians and central bankers appeared helpless before the onslaught of worldwide inflation, spurring more and more people to act on the old proverb, "We have gold because we cannot trust governments." Indeed, gold is unique as the only stateless money, for it is issued by no government. The cynical gold bugs were shouting that gold was the sole hedge against inflation, the gnomes of Zurich were relentlessly attacking the dollar, and President de Gaulle of France was exploiting gold -- "gold that never changes...that is eternally and universally accepted," as he put it -- to bring the United States of America to its knees before him.

That was my vivid memory about gold, and it was enough to convince me that this was a project worth pursuing. History as dramatic as this always contains valuable lessons for the present. As I pursued my research into the more distant past, however, I discovered that the story of gold was far bigger than the awful events of the recent past. Throughout history, people have become intoxicated, obsessed, haunted, humbled, and exalted over these gleaming but basically useless pieces of metal.

When the Greek poet Pindar in the 5th century B.C. described gold as "a child of Zeus, neither moth or rust devoureth it, but the mind of man is devoured by this supreme possession," he set forth the whole story in one sentence. From Egyptian pharaohs with depraved tastes to the luxury-mad survivors of the Black Death, from the Chinese inventor of paper money to the pirates on the Spanish Main, and most especially the hard-nosed believers in the international gold standard like the inscrutable Montagu Norman of the Bank of England, gold was the supreme possession.

The history of gold is in fact the history of the world as seen through the prism of this strange stuff. Over some 5,000 years, gold has motivated entire societies, torn economies to shreds, and determined the fate of governments. Gold has stirred the passion for power and glory, for beauty and security, and even for immortality. It has been an icon for greed and an emblem for rectitude, as well as a vehicle for vanity and a badge of power that shaped the destiny of humanity through the ages. No other object has commanded so much veneration over so long a period of time. Even Jehovah, according to the Book of Genesis, instructed Moses to build a tabernacle of "pure gold" in his honor.

Something that powerful deserves a lot more than a yawn.

I began The Power of Gold with an anecdote recounted by the famous Victorian art critic, John Ruskin, who tells of a man who boarded a ship carrying his entire wealth in a large bag of gold coins. When a terrible storm comes up and the order goes out to abandon ship, this man grabs his gold, jumps overboard, and promptly sinks to the bottom of the ocean. Ruskin asks, "Had he the gold, or had the gold him?" The gold had the greedy fools who paid $850 for it in January 1980, all right, but that was just one example. The big theme that runs through this history is that gold, in almost every case, shows how not to lead your personal life and how not to manage a nation's financial affairs.

Along the way to that conclusion, we meet a wide variety of colorful, admirable, hateful, pathetic, and appealing characters, all driven by the passion for gold. Early in the story, we meet Midas, whose life was a lot more interesting than the familiar fable would have it, as well as Croesus, who was in reality as rich as the Croesus of legend but not as lucky with his golden wealth as he wanted to believe. The Roman speculator Crassus was murdered by having molten gold poured down his throat, and that is just one of the bloody episodes in this history. We encounter Byzantine emperors with absolute power but obsessed by hoarding gold, as well as humble miners with no choice but to exhaust their lives by extracting it from the earth. Radical innovations in the art of transportation -- including the camel -- carried the gold from far lands into Europe. Indeed, the great explorations of the 15th century, from Africa to Asia to the New World, were primarily inspired by the unquenchable thirst for gold. Francisco Pizarro, the conqueror of the Incas of Peru, exhibited a cruelty as extraordinary as his courage and leadership, but Spain failed in spectacular fashion to capitalize on the fabulous golden wealth that Pizarro and the other conquistadores shed so much Indian blood to acquire in America. Charlemagne and Charles de Gaulle both tried to make their mark in history by accumulating gold, although Charlemagne at least launched the beautiful art of illustrated manuscripts in Europe. Richard I (the Lionhearted) was ransomed from captivity in 1192 with the largest pile of gold ever accumulated up to that moment, but the other Richard in our story -- Richard Nixon -- was the man who had the courage in 1971 to cut the umbilical cord linking the U.S. dollar to the gold standard. Asian monarchs and Arab potentates shaped their policies in relation to their stocks of gold, while Isaac Newton and Winston Churchill both tried their best to understand it and place a value upon it. The great English economist David Ricardo revered gold; the equally great English economist John Maynard Keynes considered it a barbarous relic. The Forty-niners set an example of impatient greed that was later emulated by the speculators who pushed gold to $850 an ounce in 1980. The managers of the gold standard in the 1920s and 1930s led the world into a series of disasters that read like a horror movie you watch incredulously even though you know the finale. Can you believe that doubling interest rates and slashing government spending amid a sea of bank failures and astronomical levels of unemployment was the standard method for conducting monetary and fiscal policy in those days?

In the end, the story is a morality tale. I was motivated to look into this matter at the vary beginning by the recollection of how much I hated those goldbugs of the 1960s and 1970s -- including General de Gaulle. Their obsession with gold was the rejection of everything good that organized society stands for and is capable of accomplishing. The Golden Calf that Moses found his people worshipping was the cause of the greatest temper tantrum in history, and rightly so. Anything that favors hoarding over sharing degrades morality and concern for others. The pursuit of eternity will not be satisfied by gold, or by anything else we choose to replace gold -- and that includes the stock market. Gold (or its proxies) as an end in itself is meaningless. Hoarding does not create wealth. Gold makes sense only as a means to an end: to beautify, to adorn, to exchange for what we want and need.

Editorial Reviews

"Bernstein's book is a fascinating read, especially in light of the recent run-up in the price of gold. Should gold once again be viewed as a currency, as so many commentators have suggested? Were he still alive, Bernstein might laconically answer, 'Read my book.'" (Seeking Alpha, May 2012)

From the Publisher

Gold. The very word conjures up a multitude of emotions, ranging from joy to despair, with some avarice and a lust for power kicked in for good measure. How did this precious metal become so historically significant, shaping the destiny of humanity from the dawn of civilization? In The Power of Gold, economic expert and bestselling author Peter L. Bernstein explores the timeless appeal and tremendous impact held by this unique element.

For insights, Bernstein begins with ancient Egypt, where gold was used exclusively for adornment, and the Old Testament, noting Jehovah's command to Moses to decorate his tabernacle with "pure gold." After probing gold's roles in matters both mystical and reverent, he traces its transformation into the practical world of real money without sacrificing any of its allure and magic.

From Midas's fabled woes to the Forty-Niners of the American Gold Rush, The Power of Gold intertwines the story of this universal phenomenon with a resounding morality tale. Spanning the centuries and continents, Bernstein reveals how gold, in its glowing beauty and endurance, offers a glimpse of immortality along with the force to inspire and destroy.

From the glorious art works of the Scythians to the alchemy-devoted Isaac Newton, from the Byzantines to Bretton Woods, The Power of Gold presents a fascinating look at how one metal has changed the world. What is the ultimate price of gold? Peter Bernstein's dazzling book will force you to ponder this question as never before.

bn.com

Mr. Bernstein has turned this story–not an obvious golden opportunity for even a writer of Mr. Bernstein's skill–into a real page-turner.

Wall Street Journal

Bernstein's volume is a tour de force with a satisfying conclusion: The characters in this drama prove themselves 'fools for gold, chasing an illusion.

Business Week

There are sugarplums throughout the book....The pleasure of the book is in its sheer number of unknown places and interesting episodes.

New York Times

The triumph of Peter Bernstein's book is that in the end you understand why and how it happened that the golden dog no longer barks. Bernstein is America's greatest living economic journalist."

Boston Globe

Bernstein . . . does full justice to his material. Almost every chapter contains some detail to surprise or delight.

Financial Times

The range of research evident throughout the book is staggering.... Bernstein's ear for the telling quote is pitch perfect.

USA Today

Gold is the ultimate in tangibility. Bright and shockingly heavy, for centuries the stuff was the physical manifestation of value. The opposite, in other words, of the Internet. Indeed, as Peter L Bernstein points out in his illuminating new book. The Power of Gold, as an exchange medium, gold isn't much different from the 4-ton stone coins famously spent by the Micronesian people of Yap. Bernstein recalls, as a young economist, being shown the basement full of bullion held by the New York Federal Reserve Bank on behalf of several European nations. When one country wanted to pay another, the Fed simply lugged a few bricks from one closet to another. Such efforts are clearly on the way out. The story of gold-and money-is one of increasing abstraction from bricks and coins to national chits, checks and now cybercash. This is just fine with the pragmatic Bernstein, author of the much- praised Against the Gods: The Remarkable Story of Risk. "The most striking feature of this long history," Bernstein writes, "is that gold led most of the protagonists of the drama into the ditch."

Bernstein vividly tells us how this happened, from the grisly death of Roman politician and bon vivant Marcus Licinius Crassus - down whose throat a vengeful (and ironic Parthian reportedly poured molten gold - to the gold-induced global economic death spiral that followed World War 1.

Along the way he treats us to interesting historical nuggets. "Cash" is the Tamil word for money, for instance, and was used to refer to some Chinese coins more than 2,000 years ago. Bernstein also reminds us that some scholars view L. Frank Baum's 1900 novel The Wizard of Oz as a parable condemning America's 1873abandonment of bimetallism-that is, a silver and gold standard - for the yellow brick road of an exclusively gold standard.

Hard Currency

It is hard enough trying to explain to American youths today what it's like being in the Army, or what's so unpleasant about inflation. Try telling them about gold. With war threatening last week in the Middle East and an attack on a US warship in the Persian Gulf, the price of gold barely twitched, climbing $4 to $277 an ounce in London last Thursday on the news. As one trader said, "Gold is the dog that no longer barks." Yet only 20 years ago the price of gold soared to S850 an ounce. Two or three pounds of it would buy a good house, and common stocks were priced so low that all the stocks listed in the New York Stock Exchange were worth no more than the sum total of all the world's monetary gold. By 1990, as paper assets boomed in value, gold had fallen to $400 an ounce; to $300 by mid-1997; and below that (though never lower than $250 ever since. Is 20 years long enough to declare the end of an epoch of several thousand years' duration in the history of the human race? That is the question at the bottom of "The Power of Gold: The History of an Obsession," a new book by Peter Bernstein. And the answer he gives is tentative. But the steady accretion of detail in this astonishing book gives the distinct impression that Bernstein thinks the epoch is ended indeed. Bernstein is America's greatest living economic journalist. He had the good fortune to take his economics courses at Harvard College (class of '40 just as the Keynesian Revolution was getting underway.

Boston Sunday Globe

History of gold It defileth not WHAT is the eternal lure of gold? Peter Bernstein is rather unpoetic on the Subject. He tell us of its "stubborn resistance to oxidation, unusual density, and ready malleability", claiming that these simple physical attributes explain everything we would want to know about the element's romance. Perhaps he is right. But consider the words of an early 17th-century English merchant, Gerard de Malynes, saying more or less the same, but in quite different tones:

"Such is the qualitie of fine Gold that the fire doth not consume it...neither is it subject to any other Element...it is easily spread in leaves of marvellous thinnesse; in colour it resembleth the Celestiall bodies, it defileth not the thing it toucheth; it is not stinking in smell; the spirit of it can by art be extracted." Malynes had the bug, Mr Bernstein doesn't. Because gold's allure is rather lost on him, the author underplays the universality of its attraction, dwelling instead on the curse that has frequently befallen its admirers-from Crassus, a Roman plutocrat who died when Parthians poured molten gold down his throat, to Montagu Norman, the highly-strung governor of the Bank of England at the time of Britain's return to the gold standard in 1925.

Mr. Bernstein's sympathies lie rather with John Maynard Keynes, who famously denounced gold as the "barbarous relic", and with Benjamin Disraeli, who once declared that the "gold standard is not the cause, but the consequence of our commercial prosperity." Mr. Bernstein cites this comment more than once. But is it true? Could the credit and trade of the British empire have been established on any other monetary standard? The answeris probably not. Once gold protected people against the depredations of tyrants. However, the age of democracy has legitimised flat currencies. This explains why John Law failed to impose a paper currency in France in the early 18th century (this key moment in the history of gold is strangely overlooked by Mr. Bernstein. By the 20th century, gold had become an anachronism, as Keynes correctly recognized. It took others longer to release themselves intellectually from their "golden fetters". The populace of Britain suffered for this in the 1920s, as did the Americans in the early years of the 1930s depression. Today gold is simply an adornment. Long may it remain so.

Economist

This book is a delight. It is informative, thought provoking and relevant...April 2001

Money Matters

This is a fascinating story. No one who even scans the pages will fail to be interested by this most fascinating of metals.

Daily Post Wales

The story of gold over the last 5,000 years is a fascinating one, which Peter Bernstein relates with verve and wit.

Nature

This is a 24-carat book on a subject close to all our hearts.

Lady

There may have been more academically rigorous histories of gold written, but few more erudite or entertaining.

Global Finance

This is a fine piece of economic history. A well-documented, authoritative read, this is also entertaining. ...will enlighten & enthrall.

Scotsman

The research is excellent.

Scotland on Sunday

Bernstein has done well to get such an exciting story together in one volume, and gold is fortunate to have such an erudite and fascinating storyteller. This book is easy to read and full of wonderful nuggets of information.

Shetland Times

This book is an eloquent, brilliantly written historical review of how gold has influenced the evolution of monetary systems and trade, from early civilizations to the present day. Bernstein succeeds in presenting an enormous amount of research in a format as easy to read and as captivating as the best murder mystery.

Risk

This is incredibly well researched and in-depth, a fascinating glimpse into the past and present of a commodity that has caused as much misery as it has happiness. This is truly a history of an obsession, and is well worth reading.

Sales Director

Bernstein's meticulous account highlights the way in which man's struggle for gold has consistently stimulated economic thought and debate.

Time Out

Bernstein has taken base elements - history, politics and economics - and created a gem. He writes with passion and a certain amount of irreverence; the numerous flippant asides keep the tone light and engaging. What could so easily have been a dreary tome in less capable hands is fascinating to the end.

Glasgow & Edinburgh List

This is altogether a fascinating read.

Eastern Daily Press

Bernstein writes with style and verve and all human life is in there. Thoroughly enjoyable.

Irish Times

...readers with an interest in history or finance will welcome Bernstein's interesting history of gold and money in the West.

Independent Friday Book

This accessible book will appeal to numismatists, economists and anyone with an interest in general history: it is both enjoyable to dip into and a good read from cover to cover.

Good Book Guide

Bernstein brings this story to life as a gripping, exciting and insightful work that combines many strands of history, politics and finance into a book of universal appeal.

Latest

...entertainingly tells the history of humankind's great obsession.

New Scientist

...History, myth and metaphor combine to produce an entertaining study of the dangers inherent in bullion worship. ... The book's real charm lies in its detail.

Sunday Times

This is incredibly well researched and in-depth, a fascinating glimpse into the past and present of a commodity that has caused as much misery as it has happiness. This is truly a history of an obsession, and well worth reading.

Business Age

The book furnishes a pleasantly glided backcloth to the current fashion for economic history.

Director

This book contains enough history, politics and finance to be of serious academic worth.

Focus

"[T]he quest for gold" has been "gluttonous," says Bernstein, tracing the metal's impact on human myth and history: gold has inspired art, battles, conquests and discoveries, including Columbus's trip to the New World, where he hoped to secure enough gold to buy back the Holy Sepulcher from the Muslims. Bernstein makes clear the metal's virtues: it's so malleable that one ounce can be stretched into a 50-foot wire or pounded into 100 square feet, and it lasts forever (4,500-year-old Egyptian dental work, he notes, is good enough for today's mouths). Bernstein's gift for storytelling--with just the right touch of acerbic wit (on the myth of Jason and the Golden Fleece, he summarizes, "The story does not have a happy ending, because Jason was a compulsive social climber")--and his presentation of the paradox of how and why such a soft and simple metal has been afforded such value help make this work a winning account of human obsession, comprehensive, entertaining and enlightening. A knowledge of economics might help during the last third of the book, when Bernstein moves from ancient times to modern day and describes the economic chaos that followed WWI. By then gold was no longer the domain of legend; it had become a commodity, the standard against which powerful nations measure their wealth. But Bernstein, author of the bestselling Against the Gods: The Remarkable Story of Risk, livens up his intricate economic discussion with tales such as the one about the Harvard Business School professor who got into trouble with his dean for withdrawing his gold from the Harvard Trust Company during a gold standard-related panic in 1933. As the title promises, Bernstein does deliver a page-turning history of the not-so-heavy metal and its influence on people through the ages. $250,000 ad/promo; first serial to Worth. (Oct.) Copyright 2000 Cahners Business Information.|

Publishers Weekly - Publisher's Weekly

A master historian at the peak of his art here recounts the timeless story of our obsession with gold. Mixing myth, legend, and historical fact, Bernstein (Against the Gods presents an enthralling look at the people, places, and events that have evoked desperation and frustration in human behavior. Starting with a broad palette of colorful characters, Pharaoh Hatshepsut, King Midas, Alexander the Great, Emperor Justinian, the Inca Emperor Atahualpa, Martin Luther, Kublai Khan, Sir Isaac Newton, and Charles De Gaulle, the author recounts the sequence of events that led to gold becoming the international monetary standard in the 19th Century only to fall to obscurity amid the collapse of the Bretton Woods System in 1971. At its root, this is the story of people so blinded in their pursuit of gold that they could not comprehend the difference between useless metal and real wealth. Recommended for both public and academic libraries.

Library Journal

Though he proceeds in roughly chronological order, US Historian and economist Bernstein aspires neither to a complete history of the precious metal nor a systematic analysis of its role in economics and culture. Rather he explores those events and stories involving gold that most appeal to him as illustrative of the desperation and ultimate frustrations that have inflamed human behavior. Annotation c. Book News, Inc., Portland, OR (booknews.com)

Booknews

A lively, detailed account of civilization's star-crossed relationship with this most fascinating of metals. Undoubtedly the only economics book ever written that could honestly be described as fascinating.

Barrons

The book is that rarity among popularized histories that neither insults the most informed reader nor dismays the least. Even more of a rarity is its cool, agnostic and knowledgeable treatment of a subject that too often has been claimed by apocalyptic types with loony agendas. And, rarest of all, perhaps, it's a financial book that doesn’t promise to make you rich. It might make you wiser, though.—The New York Times

Alan Abelson

With the same lively writing and sharp focus that distinguished his previous work, Against the Gods: The Remarkable Story of Risk, Bernstein shows how gold emerged as the manifestation of mankind's longing for power, beauty, and immortality. This is world history on a grand scale, with gold appearing as a focal point at every major juncture.—Business Week

Eric Schine

Gold is the ultimate in tangibility. Bright and shockingly heavy, for centuries the stuff was the physical manifestation of value. The opposite, in other words, of the Internet. Indeed, as Peter L. Bernstein points out in his illuminating new book, The Power of Gold, as an exchange medium, gold isn't much different from the 4-ton stone coins famously spent by the Micronesian people of Yap. Bernstein recalls, as a young economist, being shown the basement full of bullion held by the New York Federal Reserve Bank on behalf of several European nations. When one country wanted to pay another, the Fed simply lugged a few bricks from one closet to another. Such efforts are clearly on the way out. The story of gold - and money - is one of increasing abstraction from bricks and coins to national chits, checks and now cybercash. This is just fine with the pragmatic Bernstein, author of the much-praised Against the Gods: The Remarkable Story of Risk. "The most striking feature of this long history," Bernstein writes, "is that gold led most of the protagonists of the drama into the ditch." Bernstein vividly tells us how this happened, from the grisly death of Roman politician and bon vivant Marcus Licinius Crassus - down whose throat a vengeful (and ironic) Parthian reportedly poured molten gold - to the gold-induced global economic death spiral that followed World War I. Along the way he treats us to interesting historical nuggets. "Cash" is the Tamil word for money, for instance, and was used to refer to some Chinese coins more than 2,000 years ago. Bernstein also reminds us that some scholars view L. Frank Baum's 1900 novel The Wizard of Oz as a parable condemning America's 1873 abandonment of bimetallism - that is, a silver and gold standard - for the yellow brick road of an exclusively gold standard. (The hard-money East was pro-gold, while debt-laden farmers in places like Kansas advocated the looser monetary policies associated with plentiful silver.) Interestingly, Bernstein also observes that gold itself was an early medium used to abstract worth, citing the Lydian invention of gold coins around 650 B.C. "The transformation of gold into money democratized it," he writes. "Thanks to coinage, the ownership and use of gold after Lydia was no longer a royal prerogative. It was now literally in the hands of common citizens, even if only the most wealthy." That was, of course, the beginning of the end for gold, since its weight and relative scarcity would make it grossly insufficient as currency in the technological age of mass affluence that was to come. Growth and democracy inevitably required more money and risk-taking than gold could support. As the author notes, "Financial rectitude, though much admired, has never been a sure road to prosperity." Although written with verve, The Power of Gold is not a light read. It assumes a little too much understanding on the part of the reader of the complex interplay between foreign exchange, interest rates, price levels and fiscal policy, and gets bogged down for too long in the feuds of the Middle Ages. If you want a more rounded and accessible work, try Jack Weatherford's The History of Money: From Sandstone to Cyberspace. But Bernstein has other fish to fry. Perhaps in keeping with his earlier book, his message here is that there is no real haven from uncertainty in life. Gold is no safe harbor, and in the longest of runs the dollar is unlikely to be safe, either. To Bernstein, though, abandoning gold has at least meant growing up and getting comfortable with the risks of life. Wars, plagues and economic turmoil drove people to gold in the past. The question now is whether the risks posed by networked computers, hackers, esoteric financial derivatives and the sheer velocity of money will do the same.

Michelle V. Rafter