The Story of When Gold Caused Inflation

Mansa of Mali – The richest man in the world was known to have caused inflation in Cairo due to his giveaway of gold. Mansa of Mali is believed to have been the richest man that ever lived, with his wealth estimated at almost twice that of Elon Musk’s current wealth. So with Elon Musk giving away US$1 million per day, is this another sign of the decline of the USD? Going back 700 years the story seems similar where, during Mansa's trip to Mecca he gave away so much gold (50,000 dinar just to the Egyptian ruler), he collapsed the Cairo economy with inflation of 20% of silver compared to gold. You see it doesn’t matter what the money is made of gold or paper, if there’s too much made or printed, it becomes worth a lot less. In today's day and age gold is unlikely to cause inflation because it is no longer used as currency, is a tangible object, and modern economies are regulated by central banks that control the money supply. Unfortunately, those same central banks can still digitally 'print' more fiat, devaluing the cost of modern-day currencies. 

How did Mansa become so wealthy?

The Mali Empire was founded in 1240 by Sundiata Keita, and it stands today as the largest and richest empire ever seen in West Africa. The Capital was Niani, but the most important city was Timbuktu near the River Niger, taking advantage of the major waterways and land routes converging. Timbuktu became the primary trading hub between the interior, the southern coast of West Africa, and North Africa, facilitating the trade of gold, copper, salt, and ivory sourced from Africa.

Mansa of Musa was arguably their greatest ruler (1307 – 1337), extending the empire from Ghana, Walata and Tadmekka spreading Islam across the top of West Africa. The leaders of the empire driven by their religion often undertook pilgrimages to Islamic holy sites including Mecca.

The Pilgrimage to Mecca

In 1324 Mansa undertook a pilgrimage to Mecca, he left Niani on the upper Niger River and on to Tuat (now Algeria) before making his way to Cairo. His caravan was impressive, with 60,000 men, and 12,000 slaves, 500 of them carrying gold staffs and 80 camels carrying 300 pounds of gold each. To put just the camel's gold in context that equates to around 11 tonnes of gold – which in today’s value is worth around US$1 billion.

During his pilgrimage, Mansa gave away so much gold, and his entourage spent so much shopping in local markets, that the value of the gold dinar depreciated 20% against the silver dirham. It took 12 years for the flooded gold market to equalise again. His giveaway included 50,000 dinar (0.1347 gold oz each) to the Egyptian ruler – around 7,000oz or $28 million equivalent Australian dollars.

When gold was the reserve currency, giving away too much of it destroyed Cairos’s economy. There is some conjecture that Mansa gave away that much gold to destroy the Egyptian economy. Was it deliberate or just an act of grandeur? The question that should be asked is what the U.S. is doing deliberately, it is certainly not for show, maybe government naivety? Either way unlike in 1324, gold is now the scarcity and too much USD has been printed. It took 12 years for Cairo to return to normal, it’s only been 4 years since the Covid printing – how long till the world recovers this time?

The similarity to today is the concentration of wealth—the wealthiest man in the world sees millions like they were gold dinar spare change—is this the start of the end of the current empire?