In DS9 Quark makes a throwaway line about the Great Monetary Collapse that happened during his early lifetime. He describes it as a period caused by “rampant inflation and currency devaluation.”
This description might seem puzzling at first, because the Ferengi have always been shown to use hard currency. Hard currencies are generally deflationary currencies, with a fixed or at least limited supply and a growing (and hoarding) population. The only way a currency can rapidly inflate is to increase the supply of the currency, or alternately for there to be a shortage of things to buy.
In short, inflation requires too much money chasing too few goods.
I hypothesize here that the Ferengi experienced an economic collapse caused by replicator technology, specifically the point at which replicators became able to create gold. The Ferengi experienced this shock more severely than most other cultures, not only because they use hard currency, but also because they revere it.
What happens to an economy when replicators show up? The answer is not inflation. A replicator makes goods for cheap. If you can conjure up your Raktajino out of thin air and energy, the price of a Raktajino is going to plummet to the cost of that energy. As long as you are not on board a ship which needs to ration energy, cheap becomes functionally free.
This is the apparent engine behind the Federation’s economy. In Federation space, everyone gets a protein resequencer, and there is no more hunger. Then later, everyone gets a more replicator, and clothing is free too. Every year a new advancement, and every advancement brings a new thing that the citizens can conjure up.
But the Ferengi do not think like that. If your religion is based on making a profit, you do not give away the source of free goods. The Ferengi likely had a small number of early entrepreneurs with a monopoly on replicators, setting their prices to what the market would bear.
Even under this system, the prices must fall. As long as the Ferengi compete, seek profits, and can produce goods indistinguishable from one another, prices must fall. Cartels can form to prop prices up, but a cartel only lasts until someone new gets a replicator. Sooner or later, everyone will get a replicator, and the Ferengi will have to find other ways to make a profit.
The shock of cheap goods can collapse economic sectors. Yet progress marches on. Where the Ferengi ran into problems wasn’t the production of goods, but of their reverence for hard currency.
The Ferengi relationship with currency is not like other cultures. At the start of TNG: The Outpost Ferengi did value gold, to a point of finding it offensive that the Federation officers would wear it brazenly.
Now Ferengi are not unique in finding value in gold. Everyone used to value gold. During TOS: Devil In The Dark, they were willing to risk the lives of workers despite deaths just to get access to the gold and platinum, and when they finally made peace with the Horta they were quite happy. Archer uses gold bars to negotiate with the Ferengi, who accept this even after it is made clear they are gold, not gold-pressed latinum.
But by the events of DS9: Who Mourns for Morn, a distraught Quark makes clear, gold is absolutely worthless. This is a radical change, but the evidence suggests it is not merely a continuity change.
We must then ask, when did gold become worthless? Quark does seem to value it only a few seasons earlier, in DS9: Little Green Men, but this happened when Quark was far in the past, and knew he was in the past.
The best example I can find of worthlessness comes from TNG: The Price. While some details are lost on-screen, the original script has some stage direction which I think is instructive.
[Goss] turns the sack upside down and a pile of gold bars spills out across the tabletop.
GOSS: I’ll match anyone’s best offer… and add the gold on top of it.
He holds out his hands in a fait accomplit motion. Sits back in his chair, with a confident grin. Bhavani reacts, nonplussed. Picard EXITS…
So from the script it’s clear, Goss thought gold was useful, and no one else in the room did.
We can then assume that at this point in time (2366) the Ferengi (or some subset of them) were behind in replicator technology, and it resulted in Goss making a fool of himself, bargaining with someone he valued, and no one else did.
This is a society on the brink of collapse. In fact the collapse may already be happening behind the scenes.
Why didn’t the Ferengi see this coming? I believe the Ferengi religion left them blind to the danger. Ferengi do not merely value gold as a good. In fact, they do not merely value it as a currency. The existence of the Blessed Exchequer paints an interesting picture of the Ferengi relationship with their currency. Every Ferengi believes that their afterlife is determined by their ability to make a profit. Thus, every gold bar held by a Ferengi is their spiritual salvation.
The destructiveness of a currency collapse cannot be understated. Quark comparing it to war trauma is played for laughs, but it was not funny to him. If he has any belief in the afterlife, it was was an existential threat to him.
Replicators didn’t just crash the economy of the Ferengi. It threatened to damn their very souls.
In fact I would speculate there is a reason why the Ferengi use gold trappings around latinum. The shape, the weight, the feel of currency matters to them. Visiting the Nagus requires the paying of respects, literally. Pressing latinum into a metal was convenient. Pressing latinum into gold was an important symbolic transition.
Leaning into some apocryphal sources now, a little beautiful tidbit emerges. In DS9: Ferengi Love Songs we learn that the Grant Negus who preceded Zek, called Smeet, presided over one of the largest market slides in recent Ferengi history, and was assassinated in office. Thus he likely saw the effects of free gold. According to the Legends of the Ferengi, Smeet was credited with writing the 89th, 202nd, and 218th Ferengi Rules of Acquisition. The 218th rule, according the the DS9 Comic Baby on Board reads as follows:
Sometimes what you get free costs entirely too much.
It could also be that while the Federation (and maybe the Ferengi) have replicator technology, others do not, and he was hoping to exploit that fact.
It’s possible that on Ferenginar (at least for a while), a replicator, like warp drive, is something that you could only get your hands on if you had that kind of wealth. If you didn’t, you just had to buy things the normal way.
For a Ferengi, having a replicator where others do not would be a dream scenario, since it would be cheap and easy for them to obtain gold, being something they can replicate, and it could also be something of value to a lot of others, which makes it ideal for trade
Don’t forget that at the time, they weren’t negotiating with the Federation directly, but with the Barzans, a neutral third party. We don’t know much about them, but it is not implausible that the Ferengi did not believe that they had replicator technology. Even if the Federation did, they very publicly do not operate with currency, so the idea that they might be able to just replicate gold as a trade good to the Barzans might be outside of their realm of conception.
I don’t know if it would equal damnation, exactly. It logically follows that the Ferengi must have changed currencies before, without damning the others (or causing a splinter in the religion based on that kind of event). Presumably, the definition and nature of “profit”, like Klingon “honour” is fluid, and can change with the times. If someone discovers that a way to replicate latinum, and the Ferengi change their currencies, then they would almost certainly redefine what they consider profit/value, as necessary.
We also know that not all Ferengi subscribe to the same profit system. It’s a major religion, but we know that not all Ferengi are adherents to it (Nog/Rom), and if the real world is anything to go by, there are almost certainly a bunch of minor and variant religions that other Ferengi would believe in.
It could also be cultural to a degree. The Ferengi used to use gold as a currency, and even if they no longer use it, having replaced it with latinum contained in gold pieces, gold might have a cultural value, that carried over into the material choice for the latinum.
Similar to the Sycee. China no longer uses it as a currency, but it has cultural relevance just from those ties, as opposed to anything to do with the physical properties of the material itself.
It probably ties into this. Even if gold had little physical value to the Ferengi, it had considerable cultural value, and wearing it openly would be gauche. If we take Quark’s explanation on the Ferengi afterlife as an indicator, profits and earnings might have been something that you kept to yourself privately, with you only showing your wealth in assets, and actions.
Speculating on that a little, maybe the Ferengi had issues with piracy in their past, so they ended up with a cultural taboo where you don’t flaunt your wealth directly, but only through actions and assets. You don’t show the gold itself, but the fancy crystalline entity that you purchased with it, let alone wear it like a decoration.
Maybe for the Ferengi, a replicator was something that only wealthy Ferengi could afford to import and modify for their own use? It only took later iterations and developments of it for it to become cheap enough that anyone and everyone could afford one (similar to warp drive and FTL-capable starships).
The Orville TV show touches on this a bit in a discussion about their version of the Prime Directive, suggesting that if they gave a planet advanced technology prematurely, it could be used to perpetuate and amplify social issues/inequality. Maybe that is what happened to the Ferengi.
They could have avoided an economic collapse, but before their regulations caught up, it is likely that they would have had to deal with a major economic restructure due to an uneven introduction of replicators. A wealthy Ferengi who had a replicator would suddenly be able to outcompete regular Ferengi in cost, at least until the FCA stepped in to stop them monopolising the economy. (Or at least, not without their own cut)
But, that doesn’t mean that an enterprising Ferengi can’t have learned from that, and tried to replicate that when working with other economies. If they can offer something that the Federation would not have thought to bring to the table, like a stack of gold, they might have been able to secure a potentially lucrative deal with very little actual expenditure on their end. Should the ruse be discovered at a later date, they could have already used it to break even, or turn a profit.