PC, it seems like you are being purposefully ignorant here, or are misunderstanding the argument. Now that gold has already been established as money, it certainly has higher demand as money than other purposes. But the only way that a market can use something as money is if it first has market prices, implying at least someone finds it valuable for something before its use as money.
No government or cult or religion or panel of experts can ordain something otherwise useless as money, without price fixing it to an existing currency. So what if some currency is legally able to pay any debt - no one would have any idea how much money they could earn, nor how much anything would cost. Furthermore, a credit market can’t even exist unless there is some measure of price stability, so legal tender would have to apply to all trade. Do you think it would be enforcible to prevent any form of barter or alternative currency use?
The ratio of gold to people in 1910 was about 0.7 troy oz per person on Earth. Today, it is about 0.7 troy oz per person. The notion that there is not enough gold is rubbish, mostly propaganda by anti-gold types.
Gold mine output adds about 1.5-2% to the “above ground” quantity of gold every year. This is SUSTAINABLE growth. If we were to adopt the gold standard once again, it would generate sustainable growth throughout the world economy just like the governor on a steam engine.
Gold is the ultimate “democratic” money. If people have gold, they have power…the power to insulate themselves from inflation imposed by governments wishing to force fiat money upon them.
Many social democrats advocate a world currency. I am in favor of a world currency…based on the gold standard! Give power back to the people!
The “problem” is that a lot of people who decry the gold standard think that we have to monetize the gold to the current fiat currency amounts. And this is their sticking point.
Of course, they ignore the historical reality, as you pointed out.
Well, I don’t exactly think gold has low industrial demand, literally speaking. Is demand the wrong word? I’m trying to say that gold’s rarity coupled with the fact that the market seems to think that it’s only slightly better than many other materials for industrial use, makes a stronger case for it’s use as currency. Real demand for any “best of class” material will always be higher than a second choice, but the market will actually use the much more abundant second choice if it makes economic sense.
I think an analogy would be making drill bits out of diamond, sure it’s better, but why bother when we have cheap alternatives? This doesn’t make diamond worthless, or lower it’s actual demand, but practially speaking the market just doesn’t want to use it industrially (much). I think we’re getting hung up on the definition of demand vs “what the market actually chooses to use”, not sure if there’s an economic term for that, but if there is I should probably be using it.
I wish I could remember where I had read about gold as a currency and it said this, I have still no idea where the original “usefulness” concept came from.
Gold is likely to have been the first ever metal which human beings came in contact with. This has to do with the basic uselessness of gold. Gold doesn’t react chemically, so it is possible to find solid lumps of it lying around on the ground just like any other useless garbage. No other metal can do that, because they oxidate. There are no solid lumps of iron or copper around to be picked up. Those metals need special ore and high heat to be extracted.
Since gold is a metal, it would be obviously different from bones, stones, woods and clay which early humans had access to as commodities for tools and weapons. Hence the one and only available ‘metal’, rather that ‘gold’ per se, became money during many centuries of human existance.
The question then is WHY DIDN’T ANY OTHER METAL SURPASS GOLD AS MONEY???
I propose that gold is superior due to it’s opportunity costs. Gold is not only the most suitable metal for being money. It is also the least suitable metal for any imaginable alternative use. Gold is even a very bad choice for jewelry. So very bad indeed, that practically all ‘golden’ jewelries are mixed with other metals to 25% to form 18 carat gold jewelries. This because the consistent (non-monetary) uselessness of gold makes it too soft to function even as a ring on a finger, without disintegrating after a couple of years of practical use as jewelry…
you are flat wrong. if gold is useless for everything no-one would accept it in trade for something that is worth something, as they would be losing out very dramtically in the trade, so it would never be adopted by the market as a money…
the reason that gold was good money because there was enough demand for it (people thinking its useful) that even the people that did not themselves have particular use for it, they could be confident that others who do demand gold could easily be found. the acceptability then built overtime, and then and now it is hard to imagine someone walking by a kilo of gold sticking out of the ground because they have other more important and useful things to do. If gold was useless it would have a low market price as other useless things have, like spit, the market price for spit is quite low.
Hmm, missed this or was confused by it. Right answer to what? The “best” currency? I dunno, maybe there is one, maybe not, but yea if I had to guess what it would be I’d guess gold. I’m no expert on this topic but gold does certainly have thousands of years of human history on it’s side.
So I dunno, do you know of anything with equal or better portability, rarity, durability, divisibility, fungibility, and ease of identification which (in general) can usually be substituted by cheaper resources for industrial (non-currency exchange) uses?
Well, for one thing, while for higher order trades gold functions quite well, I don’t know of any period of history where silver did not circulate alongside gold as money, despite the efforts of governments to fix their relative values, to base the system on gold only, or what have you.
I generally agree with the notion that there isn’t enough gold for all trades to take place in terms of gold. That’s why silver always accompanies it. And I’m not talking about “bimetallism” which inevitably suppresses the monetary utility of one or the other, but simply about both circulating as money, but being used differently, with the market determing the exchange rate.
And just as silver is used in addition to gold because there isn’t “enough” gold, if ever there isn’t enough silver (and/or the industrial demands are simply too great), something else will arise to take its place.
At any rate, please stop saying “gold standard.” That term refers not to the natural use of gold as money, but rather transitionary schemes between natural money and state money: the price of gold fixed in terms of “kuzumobooos” or whatever the brand name ends up attached to their illusiory, unbased unit of account.
I figured he was asking about the old “gold standard” in which case the term applies by definition. [;)] Not to imply it is a “correct” or “best” system, but were we to ever get away from fiat, it would probably be a good first step. This is what Rothbard suggested at the end of “The Case Against the Fed”, and he used the term “gold standard” as well.
In this sense of a gold standard, saying “there isn’t enough gold for a gold standard” is utterly absurd. We’ll never be back to the rate it used to be (we’ve created far too many dollars) but it just means the exchange ratio of gold to dollars will be different. In the book I mentioned, in 1994 (copyright date so I’m assuming it was written then) Murray seems to have calculated that ratio at $1555/ounce. If there’s not “enough” gold that ratio will simply get larger–where’s the problem? The problem is that the state will no longer be able to expand the money supply and steal from us, but they won’t admit this.