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In our world, gold became a currency for a variety of reasons. Gold was used as a money standard and then it was eventually abandoned. There are still gold reserves around the world for countries to use as a backing or as a way to say "look, we're rich, give us money". Fell free to correct if I'm way off-base.

In my world, Element 79,AU (aka Gold) also became a standard for currency for the exact same reasons. The key difference is that Gold was discovered to be a valid power source. The Gold engine was developed about the same time as the combustion engine, and quickly became ubiquitous. As a result Gold became the most used fuel.

Edit: more info, bis

  • Gold is a much more common occurrence than on Earth. It isn't easier to obtain (you have to mine and refine it), but there's more of it. Think crude oil.

  • The Gold engine just works, and it works great. In-universe, very little is known except for a few of the best scientists in the galaxy. Even then, there is some mystery to it. The process is borderline magic. To clarify, the process is: gold goes in, gold is consumed, electricity goes out. The physics of the world allow it. If you need to visualise it, think petrol except all solid and shiny.

  • Uses include: power plants, naval, air and space ships, large portable electronics.


TL;DR

Appetizer: What was the currency system used around the industrial era (Western Europe/North America) and more specifically what was the place of gold in it? Let's try to keep that one simple.

Main course: How would said currency system evolve if gold became far more valuable as a fuel?

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  • $\begingroup$ Seeing how rare Gold is I don't understand how it could become a source of fuel. Tell us more about these engines. How much "fuel" do they consume? Why are they so much better than combustion engines? It simply makes no sense for a cheap fuel to be abandoned in favor of one that's valuable and difficult to come by. $\endgroup$ – AndreiROM Mar 16 '16 at 17:43
  • $\begingroup$ @AndreiROM I've edited my post to answer some of your questions. I can't really tell how much gold you'd need to power X or Y, it depends. The question isn't really about the how, the baseline is Gold is so effective that it outweighs any drawbacks. $\endgroup$ – AmiralPatate Mar 16 '16 at 18:21
  • $\begingroup$ I still see a serious difficulty here, which is that gold doesn't require much in the way of refinement. As was known already in ancient Egypt, all you have to do with gold is expose it to very high heat. The impurities will separate out, leaving pure gold. This is called cupellation. A smaller difficulty: if the gold engine works so well, does it not actually burn up the gold, or do so fantastically slowly? $\endgroup$ – CAgrippa Mar 16 '16 at 18:34
  • $\begingroup$ At the point where gold was discovered to be a good power source, was the economy still gold backed? E.g. as of 1971 US economy is no longer a gold standard (may be an inspirational read, by the way); it was a relatively recent development. Many modern Earth currencies have evolved to no longer be defined by gold; a lot of them are flat currencies, backed by nothing at all except a definition that they have value. Perhaps your civilization could find a way to transition. $\endgroup$ – Jason C Mar 16 '16 at 18:52
  • $\begingroup$ @JasonC From what I understand, gold was used as a standard in the industrial era, so the answer would be yes. I guess the question now would be how do you transition? $\endgroup$ – AmiralPatate Mar 16 '16 at 19:07
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The only way I can see for this to work requires a pre-condition that you have not specified.

  • The gold is not significantly burnt up in the engine

Assuming this to be the case, all you've really done is to increase the value of gold by a considerable margin. A parallel is diamonds: once industry figured out how to use ugly diamonds for their incredible hardness, diamond mining increased, because it was no longer simply a luxury item. The same goes for platinum.

Now that you have greatly increased the value of gold, I would think the obvious shift in currency is away from a single-resource standard. You say that the gold has become ubiquitous, so it's going to be pretty widely distributed (again, cf. platinum and its use in things like catalytic converters).

This makes it problematic to use gold as a currency standard. So everyone just starts moving off the gold standard, leaving your currency basis something a lot more like what you see today.

The Wikipedia article on the gold standard is an excellent beginning resource, discussing varieties, history, advantages, and disadvantages. A careful perusal might help you to develop your currency issues effectively.

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  • $\begingroup$ Diamonds aren't used as a standard though, so that's a major difference. $\endgroup$ – AmiralPatate Mar 16 '16 at 19:11
  • $\begingroup$ Oh sure, and neither is platinum, as far as I know. I'm just saying that the situation--a valuable decorative material becomes far more valuable because of industrial usage--is pretty well-known. And I think the OP's setup does lead to getting off the gold standard, which is supported by your point: you don't see people wanting to get onto a diamond or platinum standard these days! $\endgroup$ – CAgrippa Mar 16 '16 at 19:17
  • $\begingroup$ "Now that you have greatly increased the value of gold" - Well, no you haven't. Gold is still common as dirt (well, common as oil), and as long as the Gold Engine is widely used, gold is only practical as long as its price (and therefor its value in currency) is very low. The problem is not the Gold Engine at all - it's the widespread availability of gold in the first place. $\endgroup$ – WhatRoughBeast Dec 25 '18 at 5:36
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With a fabulous magical gold energy technology, and gold hard to extract, It's clear that a gold engine would have to be fantastically efficient, and that is bad news for gold.

Start by comparing your gold engine to a gasoline IC engine. Yeah, yeah, diesel is more economical, but not that much more. Gasoline has an energy content of about 46 MJ/kg. Assuming that a gas engine has a thermodynamic efficiency of 30%, that's an effective energy content of 13.8 MJ/kg, or 37.6 MJ/US gal (you can tell I'm American, right?) With current automobile gas efficiencies in the neighborhood of 1 gal/hr, assuming 30 mpg at 30 mph, that suggests a nominal automobile power of 10,444 J/sec, or about an average of 14 hp, which is not clearly wrong by an order of magnitude. At 2 dollars/gallon, this gives an energy price for gasoline of about (roughly) 5 cents per MJ. With gold prices currently at about 1200/oz (troy), it would take about 50 mg of gold to buy a gallon of gasoline.

In 2014, world production of oil was 86.8 million bpd, or 31.7 trillion barrels. A petroleum barrel contains 31.5 gallons, so world production was (assuming all petroleum is gasoline) of about 1 quadrillion gallons. At current gold prices, that's about 50 trillion grams, or 50 billion kg. or 50 million tonnes. Since estimates of total global stocks of gold run as high as 2.5 million tonnes, or 2.5 million kg, two weeks global gasoline usage provided by gold (at current prices)would exhaust the world's gold stocks.

So clearly, the price of gold would have to be much higher. How much higher? Well, if it were 20 times higher it would take a year to use up the world's gold, so let's add another factor of 1000. After all, if it were 100 times more, the world's economy would be looking at the end of the gold engine's usefulness in the forseeable future.

Increasing gold prices by a factor of 20,000 pushes current prices to about 2.5 million dollars per ounce, and that is a real problem for using gold as a reserve. The problem here is that gold is now too valuable. After all, with this factor applied to current reserve amounts, the total world monetary gold reserves, between central banks and private reserves a total of about 60,000 tonnes, would amount to 3 tonnes, which is just silly.

Another way to look at this is to equate the world petroleum production with gold production, which is about 1.5 million kg. The ratio works out to about 666,000 gallons/g of gold. At 2 dollars/gallon, that's 1.3 million dollars per gram. This presumes, essentially, that you can run a car for an hour using 1.5 micrograms of gold.

To claim that the increased demand for gold would increase production is almost certainly true, but it's not at all clear what the resulting production would be. For instance, the total gold dissolved in the world's oceans is only on the order of 20 million tonnes, or less than a decade's requirement.

The takeout of all this, I think, is that any widespread gold engine technology which outcompetes petroleum to the point of replacing it would have the effect of long-since depleting the world gold supply to nothing, or eliminating gold as a workable currency basis. Same long-term effect, really.

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  • $\begingroup$ Re quantity: maybe he's from the Counterweight Continent? $\endgroup$ – JDługosz Mar 18 '16 at 8:43
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It wouldn't.

Basically, this new world is exactly like ours, but the barrels of oil are smaller and a different color. Gold became used as a currency for the sole reason that it was rare and there wasn't much use for it (other than being pretty). You have removed both of those things by turning it into the oil substitute. In Earth-1, price of oil is all over the map, due to the supply, availability, demand, locations it's held in, et cetera. In Earth-2, the same thing would apply to Gold. Because of that, it would never be used as currency, just like we would never want the U$D going up & down in value depending on how much the Saudis and Russians drill. You can have economies "Based on" gold in Earth-2, similar to how the Saudi, Russian and Venezuelan economies are "based on" oil, but there is no 1-to-1 correlation between a certain amount of the commodity and their paper currency.

The closest thing to describe this concept in Earth-1 terms is actually aluminum and grain.

Aluminum - When it was "invented", it was difficult to produce, and thus was quite expensive, surpassing even gold in value. In the late 1880s, there was discovered a way to produce it cheaply... and suddenly the value plummeted. It wasn't rare anymore, thus it wasn't expensive. Napoleon III of France had a set of special aluminum diningware that was made for those guests so honored that gold simply would not do... and today I'm drinking soda out of a aluminum can, and tossing it in the garbage.

Grain - Before there were fiat currencies, everything was based on barter... but many things were hard to just carry around. Barley, Rice, or Grain Farmers would deposit their grain in a silo, get a series of receipts and then exchange them for goods & services, and the recipients of those receipts could exchange them again for grain. Being grain (or whatever it was), it does go bad over time, so the receipts were dated and could "go bad" and become worthless. These "Grain Dollars" were highly localized based on the location of the grain storage silos, and while they could potentially be traded further away, there was a risk for anyone receiving that currency that the amount of grain would be worthless if they waited to long to retrieve. Obviously, this system only works in a diversified economy - if everyone grew grain, that system would be useless, because everyone is just growing money. It was also nearly impossible to build coffers via taxes, because any particular amount can be used up, or go bad, at any point.

In your idea, Gold would be like grain... a commodity. Anyone can mine it, it has intrinsic value, and whoever mined it faster/cheaper could make a quicker buck than everyone else.

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  • $\begingroup$ You really ought to recycle. Don't put Al in the garbage. $\endgroup$ – JDługosz Mar 18 '16 at 8:38
  • $\begingroup$ Yeah, they kind of gave up on doing a recycling program in my section of the city. I'd prefer to recycle bottles/cans/Styrofoam, sure, but I don't have the space to hold on to a bunch of empties or time to hunt down the centers. $\endgroup$ – Vogie Mar 18 '16 at 12:36
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Gold is not used as currency, only as a backing for fiat currency.

Assume that each gram of gold is converted into X kilowatt-hours of energy. The price of gold energy per kilowatt-hour will be the price of a gram of gold, divided by X. As the process continues, the price of gold power will increase with the increasing scarcity of gold.

Currently, each unit of energy (from coal, hydroelectric, etc.) has a price that depends on the energy type, the source, and the delivery point.

Gold energy will be used where its price is less than the price of the alternatives. As the scarcity of gold increases (due to use), its price will increase, eventually making it more expensive than the cheapest alternative (if it isn't already). That alternative will supplant gold, and the rate of consumption of gold will decrease. Eventually it will cost more than all alternatives, until nobody uses it for anything.

So the overall effect will be to make gold scarcer over time, but the increase will taper off and eventually cease.

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