Could Precious Stones Be Used as Currency?

 

file0001887558234Q: What about gems and precious stones – couldn’t they be considered money?

A: Precious stones are indeed scarce, portable, and durable. But they are not in any way fungible or easy to identify. No two precious stones are alike and equal in value, as opposed to the equality of one ounce of gold compared to another. This alone eliminates stones from serving as a useful money option.

They’re also not divisible. Breaking a diamond in half does not reduce its value exactly in half, but rather reduces its worth dramatically. Plus, it’s impossible to easily identity a stone’s qualities without being an expert. Even the common man can recognize a silver eagle or gold eagle without trouble.

The value of diamonds, pearls, rubies, and other precious stones is highly subjective. There’s little to no consistency from one diamond to the next. They have value, but without being an expert or having a GIA (Gemological Institute of America) appraisal, the lay person would have no ideas of the precise or even ballpark value of the stone.

In this way, art is very similar to gem stones. Each piece is unique, and the value is extremely subjective, totally based off of opinions. Both can be rare, beautiful, and super valuable, but how—without being a trained and certified expert—can you tell the value of one piece compared to the next? In addition, most art lacks portability, divisibility and fungibility, making it useless as money. On the other hand, the combination of scarcity, usefulness, and human psychology all contribute to gold’s and silver’s value as money.