The best known form of money among the native Americans north of Mexico was wampum, made out of the shells of a type of clam. However its use was not confined to the coastal states but spread far inland, e.g. the powerful Iroquois amassed large quantities by way of tribute. Wampum’s use as money undoubtedly came about as an extension of its desirability for ornamentation. Beads of it were strung together in short lengths of about 18 inches or much longer ones of about 6 feet.
Wampum came to be used extensively for trade by the colonists as well as the natives, e.g. in 1664 Stuyvesant arranged a loan in wampum worth over 5,000 guilders for paying the wages of workers constructing the New York citadel (page 458). Like more modern forms of money, wampum could be affected by inflation. Some tribes such as the Narragansetts specialized in manufacturing wampum (by drilling holes in the shells so that the beads could be strung together) but their original craft skills were made redundant when the spread of steel drills enabled unskilled workers, including the colonists themselves, to increase the supply of wampum a hundredfold thus causing a massive decrease in its value. A factory for drilling and assembling wampum was started by J.W. Campbell in New Jersey in 1760 and remained in production for a hundred years.~Money in North American History
On the Differing Demands for Gold
For many people the debate about whether or not bitcoin can become a relevant world money boils down to the idea that bitcoin isn’t backed by a real world non-monetary use case.
Gold is often given as an example of a non-government sanctioned historical money and savings medium that derives the base line of its market valuation from its non-monetary use cases.
However if we break down the consumption cases for gold we can see something interesting in regard to accusations of bitcoin being ponzi-like because of its lack of non-monetary use cases. Take a look at this chart from gold.org:
This chart supports wiki sentiments that “[t]he world consumption of new gold produced is about 50% in jewelry, 40% in investments, and 10% in industry.[9]”.
Considerations of the effect of the Price of Gold on the Demand for it as Jewelry
Its interesting to think of the effects that radically different gold value trends might have on the demand for it as a jewelry (for certain functions and applications). If the worth of gold skyrocketed such that a $200 gold necklace rose to $5,000 or $20,000 we can imagine scenarios where someone wanting to wear a shiny necklace for an occasion would not feel comfortable wearing the same necklace at such a high valuation (security concerns come to mind for example).
Similarly if the price of gold suddenly dropped radically then what is said to be worn because of its shininess might conceivably be replaced by a more valuable shiny (perhaps shinier!) equivalent.
The Great Gold Bubble
I always found it interesting one could assert that the lust for the shininess for gold was a prehistorically born survival mechanism. It seems to me that Occam's razor would favor a more natural explanation such as the accidental production of gold as a byproduct of some other more useful process.
This would support production of gold before having a strong (ie cost-worthy) use case to produce gold for in the first place.
Thinking about how much gold in the world is used for jewelry versus its non monetary and non jewelry use cases it seems the gold industry (and therefore price) is very dependent on the demand for gold as a jewelry.
Most of the rest of the demand for gold is made up of investors that are counting on gold’s demand as a jewelry (its major use-case besides speculation/savings).
This seems dangerously unstable for the long term stability of gold’s market valuation.
