The Dual Nature of Money Creates Cities of Gold

I put forth that the dual nature of money readily explains the creation of the world’s legendary cities of gold, such as El Dorado.

More specifically, I claim that cities of gold predictably emerge where the most portable commodity seeks out and is exchanged for the most hoardable commodity.

Consider the following excerpt from Whither Gold?, by Antal Fekete, 1996.

The Dual Nature of Money

The evolution of a dual monetary standard involving both silver and gold was no accident. In every treatise on money, in one form or another the proposition is advanced that money (whatever else it may be) is a transmitter of value through space and time. Thus the concept of money is directly linked to these two absolute categories of human thought. The space/time dichotomy explains the dualistic nature of money — explicitly observable throughout the ages, right up to the demise of bimetallism.

In its first capacity money must be able to transfer value through space, over great distances, with the smallest possible loss. In antiquity, cattle were especially suitable for this purpose, and became money. In its second capacity money must be able to transfer value through time with the smallest possible loss. Cattle-money was scarcely suitable for this second task.

This explains the emergence of another kind of money, suitable for hoarding and dishoarding with the greatest ease, in order to facilitate the transfer of value over time. Originally this other kind of money was salt. Not only was it less perishable than other marketable goods, but salt was also the most important agent of food preservation. As the threat of periodic food shortages loomed large in antiquity, the agent of food preservation was destined to have a monetary role.

To people of the antique world it appeared natural that two vastly different commodities answered their money-needs, and they took the coexistence of cattle-money and salt-money for granted. Our linguistic heritage clearly reflects this fact. The English adjective pecuniary and noun salary were derived from the Latin words pecus (cattle) and sal (salt). Even though gold and silver which later replaced cattle and salt were far more similar to one another, the dual nature of money persisted throughout the ages.

[…] The dualism of monetary systems is the central theme of this essay, as we explore the two sources of man’s need for money. The first, man’s need to transfer value over space, was used by Carl Menger to build his theory of value on it. The second, man’s need to transfer value over time (or as we shall more specifically describe it, man’s need to convert income into wealth and wealth into income) is used here to build a new theory of interest on it.

Cattle were highly valued, and that value, due to cattles’ self-mobility, was portable. Cattle were ideal for transmitting value through space. Portability meant cattle could be driven to where they were in greatest demand. Portability relates to marketability in the large, or salability, or liquidity.  Gold has taken over the function of cattle-money. Gold is mooney.

Salt was highly valued, and that value, due to salt’s nonperishability and divisibility, was hoardable. Salt was ideal for transmitting value through time. Hoardability meant salt could be accumulated (hoarded) and decummulated (dishoarded) in ever smaller amounts with minimum losses. Hoardability relates to most marketable in the small. Silver has taken over the role of salt-money.

Cattle and salt; gold and silver: dual monetary systems past and present reflect the inescapable reality of the human condition that we are embedded in space-time. (Even Max Photon — light itself — is perceived as electro-magnetic waves in space-time.)

Cities of gold, such as El Dorado, are readily explained — even predicted — by the dual nature of money.

El Dorado; Spanish for “the golden one”, originally El Hombre Dorado (the golden man), El Índio Dorado (the golden native), or El Rey Dorado (the golden king), is the term used by Europeans to describe a tribal chief of the Muisca native people of Colombia who as an initiation rite covered himself with gold dust and dove into Lake Guatavita.

Starving, disease-ridden conquistadors discovered that Muisca at all levels of society were plump, happy, and had so much gold that they could fashion exquisite golden offerings to their gods and — as it seemed to the gold-hunters — just throw them away. Needless to say, the conquistadors were hungry to find the source gold deposit. They never did. There was none.

People see what they expect to see, not what is really there. What the conquistadors could not see was that the Muisca had access to a salt spring, in a location far from the ocean, and far from any other salt sources. The Muisca had plenty of fuel to heat the brine, evaporate away the water, and produce salt for trade. Salt, relatively nonperishable, was essential as a nutrient and as an agent of food preservation. Salt meant survival. People would come from far and wide to trade with the Muisca for salt. And what would they bring to trade? The most portable commodity. In this case, not cattle, but gold!

Just as cattle will walk great distances to seek out a salt-lick, at El Dorado traders with the most portable commodity sought out the most hoardable commodity. Gold sought out salt, so to speak, and not the other way around. Why? Because while salt may have been the most hoardable commodity, it was not the most portable.

So, cities of gold emerge where regional salt monopolies result in the accumulation over time of gold brought in over great spatial distances. Cities of gold emerge where marketability in the large converges on marketability in the small. Cities of gold emerge where the human transmission of value through space intersects with the human transmission of value through time. Cities of gold emerge where portability and hoardability collide.

Glittering cities of gold reflect the dual nature of money.

Gold is mooney,
Silver, salt.
That there are two types of marketability
Is hardly a fault!

~ Max Photon

This post is warmly dedicated to Victor and his golden enthusiasm.