Customer Reviews

The Power of Gold: The History of an Obsession

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And an intersting read, but basically no more than a damnation of Gold itself.
The author delights, toward the end of the book , how wonderful it is to have been liberated from the shackles of the yellow metal. But one can't help but wonder if he sees the irony in the statement. The book itself is a collection of historical lessons that show the very same pattern he praises. Hard currency , perverted to fractional , inevitably fiat. The result is always the same. Massive increase in currency and punishing inflationary consequences. The author offers absolutely no argument as to why it should end differently this time. In fact , the author's tone is almost condescending as he reviews the history of Gold as money. Oh! Our generation and our economists and leaders are just ever so much smarter than their predecessors! Metal-backed currencies are characterized by the author as some quaint, antiquated ideal that constrained mankind. Yet I note in almost all cases where civilization deviated from the practice , the reason was War , and the consequence was inflation , speculation and eventually ruination. To see people, especially economists , ignore history , certainly a history as oft-repeated and essentially resulting in the same effect, is cringe-inducing.
The brave new world of Gold-as-jewlery and jewelry only remains to be seen. The price of both Gold and Silver have outperformed almost all other asset classes since the publication of the book , and there are rumblings of going back to a monetization of Silver in Mexico as I type.
It is easy for the economist to see, in hindsight, the folly of mankind. But I'll wager that Human nature has not changed as much as the author thinks. There is no mathematical formula for them to use to determine the "value" of Gold , and so I think they are confused, skeptical and mistrusting of it. I'll offer a single number for them though , based on history. Positive one. That is the correlation coefficient between the price of Gold... and fear. Bad times will come again as they inevitably do , and Gold and Silver will again see value as both a store of wealth, protection against inflation, and method of transacting commerce.

It appears from the obvious publisher-placed comments that I may be one of the few people who has actually READ this book. With his no-doubt legions of researchers, Peter Bernstein obviously has his facts at hand, and they are plentifully strewn throughout the book. But this is not a business book, it is a history book about the enduring lure of the element Au. It took me about a week to finish this, and I found much of it interesting. But overall, I thought that it read like a well-researched thesis that will probably stand the test of time. There are some truly fascinating stories in it, and it is well written, but don't expect this book to tell you how to find gold or how to make enough money to buy gold. It is what it is: the history of a metal that has never lost its lustre.

The older edition (Aug 30, 2000) has more pages (448 instead of 304) but costs more ($39.00). Comparing the table of contents between the 2 editions, it appears that the first 14 chapters and 207 pages are identical between the two editions but the new 2004 illustrated edition may have discarded or condensed some of the later chapters. The older 2000 edition is still available from Amazon if you look further down in search results for this title.

Peter Bernstein has written an overview of the relationship between money and gold throughout the centuries. This book serves up many interesting stories of gold and its service as money or as a financing instrument. In this, the book entertains. However, I found it to be somewhat disjointed as it moved from place to place and time to time chasing the illustrious metal as it assumed its different forms in kingdoms and nations far and wide.

My sense after finishing the book was that it was somewhat incomplete -- and that the author could not precisely focus on what the books focus was. While he mentions the twin uses of gold -- both as money and adornment throughout the book, almost all of the tales and statistics are relating to monetary gold. Also, for much of the latter half of the book, his focus is on the development of banking and financial instruments -- and their replacement of gold as a medium of exchange and a source of finance. Perhaps a better title would have been "Money through the Ages" or something that reflected the breadth of the journey the reader takes while stopping briefly at various historical events involving gold, coin, money, banking, minting and finance.

Not to say that the book isn't informative or interesting for the most part -- it is. I learned many new anecdotes and information from the author -- much of it fascinating. For example, the "Great" Kublai Kahn printed money that was backed by his will only, centuries ago. And it worked; apparently fear of not accepting the Kahn's paper was enough to make it a working medium of exchange. The Bank of England resisted machine minting with raised edges for years after the technology was available, even though the country was losing a fortune to clippers and shavers of hand stamped coin. West Africa was long a source of gold to Europe across the Sahara via long camel caravans and in barter on the coast (where the local custom was that Europeans would bring goods they thought appropriate to a place and then leave. The Africans would then take the goods and leave an amount of gold -- neither side ever seeing the other in the ultimate "hand-shake" deal). For centuries, Europe was frustrated in not discovering the location of the mines. One also reads of the Spanish gold caravans, the California and Klondike Gold Rushes, the era of nations moving gold from one vault to the next in the same New York bank to settle balance of payments and Nixon's abandonment of a gold tie to the dollar in the early 1970's.

It is interesting to see how completely wedded to gold some governments became, particularly in the late 1800's early 1900's. England, and other nations, were willing to see millions become unemployed rather than change the exchange rate - a position that sent Winston Churchill into his period of dormancy in the 1920's. FDR shocked the establishment - particularly if unsurprisingly Herbert Hoover, by setting gold at $35 dollars and ounce. In fact, the last third of the book relates story after story of smart men who were thought to absolutely understand the crucial relationship of gold to the money of their nation - and how almost all of them saw their policies produce completely the reverse of what they desired. For more than 100 years, the money men of Europe and the United States believed an unchangeable gold standard was the only route to growth and prosperity. The one astute observer, if contrarian, was Benjamin Disraeli, who observed in 1895 that "Our gold standard is not the cause, but the consequence of our commercial prosperity." His observation fell on deaf ears, only to be illustrated as possibly the right relationship after the turmoil of the 1920's and the Great Depression forced countries to begin to unhitch their currencies from absolute and unchanging values as measured in gold.

All of the information and stories are somewhat loosely tied together. Although it is apparent to the reader that the central point to the book is how money developed and gold's role in the various systems, I don't think the author traced the development as well as one might have or drew conclusions that would have made this interesting collection of stories into one story. Maybe I expected to much from an author who developed the story of insurance and risk better in his work "Against the Gods," but I thought this had a more thrown together feel.

Most of the information is interesting and even fascinating in some places. All in all, it is a decent survey of gold, money and the development of finance if one is interested in the topic.

Mr. Bernstein skeptically sees gold as overrated and as potentially harmful. Think of this book as "The Tragedy of Obsession with Gold" as the story line. As Mr. Bernstein puts it, "This book tells the story of how people have become intoxicated, obsessed, haunted, and humbled over pieces of metal called gold."

To make that point, the book begins with a story that Ruskin told about a man who is on a sinking ship with his gold. He gets the gold and jumps overboard, and drowns from the weight of the gold. Mr. Bernstein cites the analogy throughout the book for the fate that awaits those who are committed to their gold. The gold has them, rather than vice versa.

Mr. Bernstein does a nice job of creating an on-going story line to put the role of gold in perspective. Gold first makes its appearance as an adornment for religious or personal purposes. This application leads to gold becoming used as money. Then gold helps create trade that only money can provide. From the trade comes power, and that power expands influence. Then as the world economy outgrows the supply of gold as a monetary stock, gold becomes a brake on economic growth. At the end of the book, gold is again turning into an adornment having been cut loose from being a reserve for the monetary stock. In this context, the book is about the rise and fall of the gold-based empire. That tale is best captured in the story of how little the gold from the Americas helped Spain economically. If a shortage of gold as money can slow down economic growth, an excess of gold can create inflation in general prices. That's the essence of Mr. Bernstein's argument about gold as a mercantile asset.

Economic history is rarely so interestingly told, and Mr. Bernstein deserves a lot of credit for taking something that could have been dull and making it lively. He is an excellent story teller, and you will find what he has to say contains many new and interesting points.

I was fascinated by the number of times that the fate of countries was affected by gold. Ransoms paid in gold for French Kings beggered that country on more than one occasion. The failure of worldwide wheat crops allowed the U.S. economic expansion to continue after the Civil War, as the U.S. was threatened with a shortage of gold needed for industrial goods. The Byzantine Empire lived on much longer than it would otherwise have by being able to buy defenders with gold. The Arab expansion was aided by access to gold. After World War I, the gold standard contributed to the Depression.

Mr. Bernstein leaves us out on a limb about where our system of floating rate currencies will end. Without some form of global currency, we should see rapid distortions in economic results whenever such shifts in currency values occur. We are in the middle of one of those shifts right now between the dollar and the euro. Certainly, the universal government preference to debase the value of currencies will continue to plague us. Mr. Bernstein leaves us with no answer to the problem, except to be certain that returning to the strait-jacket of the gold standard is not it. I wonder if it is really that simple, or if we are facing a severe future disruption that will make gold look good by comparison. Certainly, a world currency seems inevitable, whatever its nature is.

Realizing that gold can be harmful, does it seem any less beautiful to you? I found that my aesthetic preference for gold was unaffected by reading this book. I think you can appreciate gold without being greedy for it. Perhaps that's the lesson here.

After you have finished enjoying this fun book, think about where else overreliance on something or some idea can be harmful. My favorite example is the desire to be popular. Most people will do foolish and harmful things that debase quality (much as they did with gold coins) to achieve popularity. One of my favorite examples is in a recent book where a CEO went on CNBC almost naked as a publicity stunt for his company's latest advertising campaign.

Enjoy all things in proper perspective and moderation!

Except for a brief explanation of what gold is, and a few of the major gold rushes, "The Power of Gold" is essentially the economic history of gold. That isn't neccessarily a bad thing, the only major flaw with the book in my opinion is when the Europeans/Americans wrangle over the gold standard. The last section involving how much gold is a dollar or a pound is just plain dull. However, most of the book a fascinating look at our fascination with the magic metal. My favorite history books are written by novices, since the author usually enjoys his subject enough to write about it, and Bernstein does have an enthusiasm over his subject that is infectious. So, I would definitely recommend this book to anyone interested in the history of gold or even modern money.

The Power of Gold was lent to me by a colleague at work, a fellow market analyst. He and I talk monetary policy on a fairly regular basis, so he thought I'd like to give this book a read. Indeed, he was correct.

In brief, this is a book which tracks the use of gold from a monetary perspective through most of human civilization. If you're at all interested in history, then this book is definitely right up your alley. It takes a look at world events from a perspective that you won't find in many other sources. Primarily that means focusing on how gold was (or was not) the main focal point of money and trade. I personally didn't care for the author's occassional forays into discussions of the decor of various palaces and whatnot, but they weren't too distracting. Beyond that, it was a very well written book, and a pleasant read.

The really interesting stuff from a my perspective as a trader and analyst, of course, is the latter part of the book where it gets to modern times. I personally found the whole discussion of the 20th century, which was probably the last third or more of the book, to be the most meaningful. The author really presents an excellent discussion of various perspectives and efforts related to different countries being on or off the gold standard and how that all played out in both domestic and global economies.

One of the things which has come up in modern political, social, and economic discussions is the idea of going back on the gold standard. There have been some very prominent proponents. If you want to get an idea of what that might look like, how that might play out in the global trade and economic modern environment, you'll definitely want to give The Power of Gold a read. It will really have you thinking about the complexity of it all, and the implications.

If you have read Bernstein's "Against the Gods" you might be somewhat disappointed. "Power of Gold" reads more like a loose collection of anecdotes than a complete and unbiased history of that fascinating metal.

History of gold in modern times is too US centric for my taste. According to Bernstein, paper money is in - metal is out. Now watching that crazy built up of dept by the current US administration (how many trillions are it today?) you have to ask yourself: who will repay these debts one day? Watching the dramatic decline of the US Dollar and the stellar rise of today's gold prices Bernstein seems to bet on the wrong horse.

Don't get me wrong: "The Power of Gold" is an excellent source about the history of _money_. But in my opinion it's not an unbiased view of the power of gold in today's world.

As Bernstein says in its epilogue to "The Power of Gold":
"The most striking feature of this long history is that gold led most of the protagonists of the drama into the ditch". Could it be that Mr. Bernstein was misled by it too?

Since "The story of gold has a deeper message, one that has none of the transitory qualities of what we choose as money. Seen in this broader sense, the story of gold has no ending".

Q.E.D.

Having expected this book to be more about the get rich schemes or preparing for the collapse of the world economy, I found this book to be more like a world history lesson on gold instead. The book provides an interesting look at gold from a historical perspective, and how it has dominated civilizations around the world in both the past and present. Gold has, as few would doubt, stood the test of time akin to a financial Rock of Gibraltar, and this book presents why that has been so and why it will continue to be so.

Bernstein is one of the great contemporary business writers, having produced books about risk and market theory. So when he takes on gold, he doesn't write about jewelry -- he writes about gold as currency, which leads him to write about monetary policy and the gold standard. He does this pretty well, so if you're interested in those topics (as I am), then you'll have a hard time finding a better account than this book.