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Gold is Freedom
By Patrick A. Heller
February 13, 2014

Throughout history, politicians and bureaucrats have regularly broken their promises, changed laws, and inflicted other harm on the citizenry. For example, the average government-issued fiat currency fails within 40 years.

Such behavior is virtually guaranteed to continue into the future.

In contrast, the trading of physical gold (and silver) by weight and purity has never failed over thousands of years of history. Sure, governments could debase their coinage (study the history of Roman Empire coinage for multiple examples) or try other tricks such as clipping metal from coins originally issued at full weight. But a troy ounce of pure gold today is still worth a pure troy ounce of gold from 2,500 years ago.

Take the history of the gold ducat. Ducat roughly translates into “relating to the duke or dukedom” or “duke’s or duchy’s coin.” Norman king Roger II of Sicily is considered to have issued the first gold coins called ducats. Around 1200, Venice began issuing a silver coin called a ducat, which was later renamed the grossi. The late numismatic researcher Richard Doty considered the grossi to be one of the four most important coin issues of history because silver coins of this weight and purity swept across Europe over the next century.

However, once Venice began issuing gold ducats, which were modeled after the gold florins issued by the city of Florence, the term ducat then only applied to gold coins. Beginning production in 1284, the Venetian ducat weighed 3.545 grams with a purity of 99.47 percent, being the highest purity that medieval technology could create. Venice continued to strike ducats until it was conquered by Napoleon in 1797.

After Charles I became king of Hungary and Croatia in 1308, he introduced coinage matching the weight and purity of the Venetian ducat. Holy Roman Emperor Charles V declared ducats of the Venetian standard to be the standard of the entire Empire in 1524. Not long thereafter, though, the standard content was changed to 3.5 grams gross weight with 98-2/3 percent purity. This standard was maintained for ducats struck by a number of countries up into the early 1900s.

The term ducat referred to a weight and purity of gold, not to a currency such as dollars, francs, or pesos. Since the coins were traded for their intrinsic value rather than the “full faith and credit” of the issuing government, they were readily accepted worldwide.

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Ducats were so popular that they were issued across Europe. Issuing governments included Austria, Croatia, Czechoslovakia, Czech Republic, Denmark, Germany and the Holy Roman Empire (including many cities that were part of the Hanseatic League), Hungary, Italy (including the Duchy of Milan, Papal States, Duchy of Savoy, Kingdom of the Two Sicilies, Duchy of Urbino, Republic of Venice, and Republic of Genoa), the Netherlands, Poland, Romania (including Transylvania and Wallachia), Russia, Scotland, Serbia, Spain (including its domains in Belgium, the Kingdom of Naples, and in the Americas), Sweden, Switzerland, and Yugoslavia. Gold ducats are still struck today for sale as bullion products in Austria, the Czech Republic, Hungary, and the Netherlands.

From time to time, there were attempts to produce ducat-like coins of a lesser gold content. Such issues invariably ended up trading for their actual value, which was lower than for genuine ducats.

Like the ducat, U.S. gold coins maintained their value for so long because they contained a consistent gold content. Starting with the $5 Liberty in 1839 through the last gold coins struck for circulation in 1933, U.S. gold coins contained 100 percent face value of gold content valued at $20.67 per troy ounce. They became popular, especially the large $20 double eagle denomination, for reserves held by banks in Europe and South America. Their popularity was a result of the trust in the weight and purity of the coins, not because they were issued by the United States of America.

Possession of physical gold (and silver) gives the owners the freedom to protect their financial well-being from the broken promises and changing laws of governments. In owning physical gold, citizens no longer have to worry whether any particular government has a track record of sound finances, a stable currency, respect for civil liberties and private property, and the rule of law.

Unfortunately, it is these very freedoms and self-control that gold ownership provides that also makes politicians and bureaucrats largely anti-gold.

Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He owns Liberty Coin Service in Lansing, Mich., and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects.

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