Gold is not money and gold is not valuable. What do you think about that?
Bayard1908
Posts: 4,046 ✭✭✭✭
There's absolutely nothing magical about gold. It is not immutable money, and as a metal it has very few uses. I'd argue that our perception of gold being valuable is outdated and illusory.
The ancients thought gold was valuable. In some ways this is understandable. Gold was intrinsically useful at the time when one considers the crude metalworking ability of the ancients. If you wanted an ornate and relatively durable metallic object 2000 years ago, gold was just about your only choice since it can pounded into complex shapes unlike any other metal. Today we have steel, titanium, aluminum, and engineered plastics that are all superior to gold in just about any application regardless of cost. Gold is very heavy (dense) and not very strong (soft), exactly the opposite of the public desire for strong and lightweight products. Other than gold's beauty, the properties that made gold valuable to the ancients are irrelevant to modern society.
The ancients went a step further in their appreciation of gold and started using gold as money. Using gold as money was an arbitrary choice, not bad as far as arbitrary choices go, but arbitrary none the less. Gold is durable, doesn't spoil, can be divided, and is somewhat difficult to obtain. These properties all made gold useful as money. It was difficult to debase the money supply because gold cannot usually be mined without significant labor and expense.
However, the fact that gold was used as money for centuries doesn't mean that gold is money. As a concept, money is a store of labor. A gold standard merely serves as a regulator on the quantity or supply of money. In an honest gold standard, money cannot be created in a quantity that outstrips the gold supply. Any other mechanism that regulates the money supply such that it doesn't grow faster than economic activity would provide the same advantage of a gold standard without the absurd notion that human progress is constrained by how much soft yellow metal can be dug from the ground.
Ingenuity and productive labor create real wealth, not the piling up of useless gold. When a big tree is turned into a new house, society becomes wealthier by the difference in utility between a tree and a house regardless of how much gold exists in the world. The same kind of wealth creation occurs when oil is turned into tires or useful plastic products. The quantity of gold available, even the very existence of gold, is irrelevant to this wealth creation.
When society was largely agrarian, and the stock of real wealth in the world remained relatively constant, the use of a relatively fixed stock of gold as money was not absurd. In the modern era, where wealth creation is limited less by physical resources and more by ingenuity in using those resources, the use of gold as money makes no sense.
Fiat money is really the only realistic alternative I see. There's nothing wrong with fiat money in and of itself. The potential problem with fiat money is the over creation of it. A fiat money system that grew in supply no faster than actual economic activity would remain viable as long as it were run honestly.
The ancients thought gold was valuable. In some ways this is understandable. Gold was intrinsically useful at the time when one considers the crude metalworking ability of the ancients. If you wanted an ornate and relatively durable metallic object 2000 years ago, gold was just about your only choice since it can pounded into complex shapes unlike any other metal. Today we have steel, titanium, aluminum, and engineered plastics that are all superior to gold in just about any application regardless of cost. Gold is very heavy (dense) and not very strong (soft), exactly the opposite of the public desire for strong and lightweight products. Other than gold's beauty, the properties that made gold valuable to the ancients are irrelevant to modern society.
The ancients went a step further in their appreciation of gold and started using gold as money. Using gold as money was an arbitrary choice, not bad as far as arbitrary choices go, but arbitrary none the less. Gold is durable, doesn't spoil, can be divided, and is somewhat difficult to obtain. These properties all made gold useful as money. It was difficult to debase the money supply because gold cannot usually be mined without significant labor and expense.
However, the fact that gold was used as money for centuries doesn't mean that gold is money. As a concept, money is a store of labor. A gold standard merely serves as a regulator on the quantity or supply of money. In an honest gold standard, money cannot be created in a quantity that outstrips the gold supply. Any other mechanism that regulates the money supply such that it doesn't grow faster than economic activity would provide the same advantage of a gold standard without the absurd notion that human progress is constrained by how much soft yellow metal can be dug from the ground.
Ingenuity and productive labor create real wealth, not the piling up of useless gold. When a big tree is turned into a new house, society becomes wealthier by the difference in utility between a tree and a house regardless of how much gold exists in the world. The same kind of wealth creation occurs when oil is turned into tires or useful plastic products. The quantity of gold available, even the very existence of gold, is irrelevant to this wealth creation.
When society was largely agrarian, and the stock of real wealth in the world remained relatively constant, the use of a relatively fixed stock of gold as money was not absurd. In the modern era, where wealth creation is limited less by physical resources and more by ingenuity in using those resources, the use of gold as money makes no sense.
Fiat money is really the only realistic alternative I see. There's nothing wrong with fiat money in and of itself. The potential problem with fiat money is the over creation of it. A fiat money system that grew in supply no faster than actual economic activity would remain viable as long as it were run honestly.
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Thats a mighty big "IF" when applied to soveriegn national governments worldwide! And because there are no physical restraints on the money supply, there can never be an honest fiat system. All....and im talking in the history of mankind....ALL forms of paper fiat currency have been rendered obsolete.....with the exception of what is currently in use. It is estimated that some 3,500 distinctly different fiat currency systems are now extinct.
The USD, as well as all currently used/accepted fiat systems will eventually meet the same fate. Its simply a matter of time. However, while fiat system after fiat system has gone the way of the dodo, gold has always been highly valued. A track record of 5,000+ years man has held the metal in high regard....even today...moreso in fact today!
Your point about gold being basically useless is absolutely correct. However, because pure bartering for goods and services can never be efficient enough to facilitate business, there will ALWAYS be some form of "money" to keep track of transactions. I cannot see anything as widely accepted....worldwide....or as stable as gold is to fill that demand for a useable money. I can guarantee to you with 100% certainty that the world will shun the USD long before it turns its back on the "barbarous yellow metal". When this will happen is anyone's guess, but once China decides to stop buying our debt, its GAME OVER!
<< <i>"as long as it were run honestly".
Thats a mighty big "IF" when applied to soveriegn national governments worldwide! >>
Perhaps issuing money will not be a government function in the future. Perhaps private currencies will compete with government money.
In any event, I agree that this country has been mismanaged for decades, and the game can't go on much longer without some harsh consequences.
fiat currency however doesnt have a great track record ..infact is pretty bad.
Groucho Marx
Fred, Las Vegas, NV
As the OP states, it has just the right amount of supply, or rarity that seems to keep up with global expansion without an overabundance
Its durability and malleability, doesn't tarnish and easy to form to shapes
It is available worldwide, so every country has a stake in it and can mine their own-- no "have nots". For instance, palladium is for the most part only mined in Russia
Its weight and beauty and glow
Its conductivity, etc.
Thank about it, no other metals or "things" really fit as well----------------------------------BigE
<< <i>If that is how you feel, feel free not to purchase any. I know printed pieces of paper are far more valuable. >>
I'd rather own food, guns, tools, income property, rare coins, etc. than gold or dollars.
<< <i>
<< <i>If that is how you feel, feel free not to purchase any. I know printed pieces of paper are far more valuable. >>
I'd rather own food, guns, tools, income property, rare coins, etc. than gold or dollars. >>
What are you going to party with? Boring
–John Adams, 1826
When society was largely agrarian, and the stock of real wealth in the world remained relatively constant, the use of a relatively fixed stock of gold as money was not absurd. In the modern era, where wealth creation is limited less by physical resources and more by ingenuity in using those resources, the use of gold as money makes no sense.
Feteke might beg to differ with that. In the pre-Fed era, the way that business was conducted over distance and over time was with promisory notes, based on gold, that expired after a specified time, usually 90 days. This allowed for the financing of business deals and temporary expansion of the money supply without creating a bogus supply of money controlled by a corrupt bank. If either party defaulted, then the matter had to be cleared up between them. If your promise was not honored, your reputation got nailed and nobody would ever back you. Seems like a good idea to me.
In this modern era you support, wealth creation is not limited by anything, let alone physical resources. As long as you are the Fed, you can give yourself a huge fking bonus, eliminate all accounting standards, and pretty much live like a king while the peons have to keep paying you interest for your efforts. Nevermind that the peons are doing the "work" while the bankers "create" the money without actually DOING anything. Now, THAT's bizzare. It's a scam.
Fiat money is really the only realistic alternative I see. There's nothing wrong with fiat money in and of itself. The potential problem with fiat money is the over creation of it. A fiat money system that grew in supply no faster than actual economic activity would remain viable as long as it were run honestly.
Fiat money is realistic for no one. It allows bankers to manipulate the whole economy by putting "money" into existance where there is no justification for doing so. Ron Paul speaks of mal-investment, and that should become clear to everyone when you stop to consider it. Mal-investment means things like subsidies for alcohol fuels while corn skyrockets in price, causing a food shortage. This would not happen if alcohol fuels had to survive based on simple P&L - a project wouldn't go forward unless it's relative profitability was justifiable in relation to the price of corn. Tough decisions would have to be made on the facts, instead of as political gifts for special interests.
The Al Gores and Clair McCaskills of the world wouldn't be able to sell global warming as a way to reap hundreds of millions of $$$s by scaming the public on things like huge subsidies for his own biofuels projects and free public money for windfarms owned by McCaskill's brother, unless they were economically-justified with honest accounting standards based on physical realities. Same goes for solar energy. That's another whole industry that cannot make it without subsidies.
When we actually run out of fossil fuels, there is no doubt that the economics will change, but as of now - these "greenie" projects are nothing more than mal-investments that cannot make it on their own economics, and they only serve to enrich political insiders. In the meantime, much more economically-viable projects like nuclear and natural gas get back-burnered and drilling in the Gulf and Alaska are stupidly prohibited. These moves don't prevent 20 or so of our international competitors from drilling off our shores. It's motivated purely by the political profiteering for the topdogs in government, and it DOES NOT benefit the public in anyway. Big O can't wait to make coal prohibitively-expensive by jacking up taxes on it. No benefits there for anyone except the scammers.
Fiat money is used for social engineering and to support those on top, and not much more. Gold as money and as a store of wealth prevents that by forcing the system to be based on physical reality. "Show me the money" would be the phrase to describe it. Accounting would have to be honest if someone had to open up a safe to prove that their assets were real in order to secure a loan, wouldn't it? Without some verification of someone's honesty, how much money would you lend anyone? Well, our system gives away our hard-earned "money" to scammers all day long. Social engineering. Bad deal.
There is a BIG difference between Fractional Reserve Banking and Fiat Money. They are two different things. When you combine the two, you get a system that designates paper notes (instead of gold or anything else) as money by legal declaration, and a banking system that can easily be corrupted and spin out of control if the bankers have no ethics. Since our bankers have had no ethics now for decades, what we have now is a total mess with no apparent fixes.
I knew it would happen.
<< <i>If I were hungry, I'd prefer bread to gold. >>
If you were storing wealth, would you prefer a warehouse full of bread or a safe full of gold?
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
<< <i>
<< <i>If I were hungry, I'd prefer bread to gold. >>
If you were storing wealth, would you prefer a warehouse full of bread or a safe full of gold? >>
Portability is one of the key points for gold. When times really get bad, about half the time, staying put is a poor option. This could be due to disease, famine, radiation, or revolution. Hauling a garage full of food, guns and ammo isn't a good option. Taking your gold and getting out is.
As for not being magical, I disagree. There is even science behind the magical allure of gold. Add to that the cultural and societal values, especially in Asia (where most of the retail demand is), and that is one reason gold is moving up while inflation and wages do not.
To Americans the lure of gold is mostly from the romance of gold rush stories, not so much watching their currency go to flat zero. Other countries have seen that happen and other citizens understand that paper money is just that paper. If another person wants to hitch their horse only to paper assets, have at it, but in my view it is naive, and something that mostly Americans that lack a historical perspective would try. Most other countries have seen more economic history, and most people know that the paper assets (stocks, bonds, deeds to real estate) may or may not have value when times get truly bad.
issue put before the forum.
For some reason one of my first thoughts after reading through this thread
is the amazing impact that those in a position of power can with the help of the press
can have on a population. It has only taken those at the top and the government 77 years
to convince the population that gold is no longer money, but the paper they print with nothing to back
it is. essentially wiping out 5000 years of monetary history that gold was and in the higher circles
still is the default currency of the world.
Executive Order 6102 signed on April 5, 1933 by Franklin Roosevelt was the beginning of the
the end for gold as money. Since gold is a rare metal and difficult to to find those very rich
wanted more gold. What better way to get access to more gold than make it illegal for the
general population to own in large amounts.
<< <i>
Fiat money is really the only realistic alternative I see. There's nothing wrong with fiat money in and of itself. The potential problem with fiat money is the over creation of it. A fiat money system that grew in supply no faster than actual economic activity would remain viable as long as it were run honestly. >>
so it seems that in conclusion you ARE saying that a fiat money sytem works as long as it is yoked to something? (economic activity) Now that is a safe and sane environment!
it was yoked to gold, what would be better? i'm prety sure countires can make something out of nothing with the banking and money system in any fiat currency.
anything in any situation could be bartered, unless both parties involved are doomed, then the bread is shared.
Welcome to the pm forum. Please elaborate on your statement.
I knew it would happen.
Let them collect their paper, their Bonds, their Citibank stock.
Gold is the one natural element of Earth that has historically been accepted as the best form of Money.
History also shows that Paper money has NEVER withstood the test of Time.
As for the people who say 'I'd rather have bread than gold' doesn't really matter, because if the Apocolypse came, what would Paper (or Gold) do for you? It wouldn't matter what investments you had.
On a lighter note...Happy Holidays to everyone!!
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
first aid supplies, warm clothing, emergency hand crank radios and flash lights, candles.
That is what modern man needs to survive the unexpected that comes in many forms.
Camelot
I think i have a pile of paper fed money i'll trade for your gold anytime , if prefered i can swap bread though , hell i'll even make it cinnemon raisen bread.
Security in Diversity
Words to live by
Terry
lots of things could represent work and have various liquidity and relative demand as currency: food, water, medicine, bricks, wire, etc.
but gold don't spoil, it's infinitely divisible, it's universally recognized, it's small and portable.
on the great bell curve, gold is far to the right of average as an effecient medium of exchange.
very few things are more liquid than gold: only the dollar(in paper, coin, or electronic form) , the euro, the yen, and now the yuan can come close to competing
Liberty: Parent of Science & Industry
Every now and then people write about gold being worthless. Wasn't it Marx who wrote that Communists would make toilet seats of the stuff? Yet when the Revolution came gold is what paid the Latvian Rifles who kept the Bolshies in power, and gold is what made it possible for the USSR to buy goods abroad when nothing else was accepted.
(Just think of city streets clogged with a hundred thousand horses each generating 15 lbs of manure every day...)
<< <i>Using gold as money is almost as absurd as using pieces of paper with pictures of dead guys printed on it.
Welcome to the pm forum. Please elaborate on your statement.
I prefer to read rather than get involved in the discussions that happen on here because I have more to learn than I have to say about the precious metals market. However, I couldn't resist the opportunity to point out (in a rather tongue-in-cheek way) that this conversation seems to be about the social construction of value. Considering that neither fiat currency nor precious metals can, by themselves, meet our basic survival or comfort needs, their intrinsic value is only that which we believe them to possess, and on a certain level the answer to the question being asked (why do we give gold value at all?) is simply "we always have." With that in mind, it seems to me that using a disc made from yellow metal to buy a loaf of bread is neither more nor less absurd of a concept than using a piece of paper with George Washington's face printed on it. The topic raised by the OP could easily be reversed into "Money is not gold and money is not valuable. What do you think about that?" without really altering the substance of the discussion.
Gold is there to grease the wheels of economic movement
Using a substitute is sure to gum up "the machine"
Using paper to transfer ownership of gold is OK as a convenience, the mistake is in using it as the actual "grease"
------------BigE
you cant carry gallons of water, posessions, hundreds of pounds of food, etc if you have to leave in a hurry.....
but when you get to your destination, you can convert gold back to everyday staples - food, water, shelter.
Would gold circulate in America if not for the Law? I wonder what else besides FRN would 'circulate' outside the barter system.
Mises on Money
<< <i>A little gold, a little cash, a stock of food and clean water, some ammo, extra medicine,
first aid supplies, warm clothing, emergency hand crank radios and flash lights, candles.
That is what modern man needs to survive the unexpected that comes in many forms. >>
As always you are a wise old bear. Don't go over board, but be prepared for what ever life is going to throw at you.
Fred, Las Vegas, NV
I couldn't resist the opportunity to point out (in a rather tongue-in-cheek way) that this conversation seems to be about the social construction of value. Considering that neither fiat currency nor precious metals can, by themselves, meet our basic survival or comfort needs, their intrinsic value is only that which we believe them to possess, and on a certain level the answer to the question being asked (why do we give gold value at all?) is simply "we always have." With that in mind, it seems to me that using a disc made from yellow metal to buy a loaf of bread is neither more nor less absurd of a concept than using a piece of paper with George Washington's face printed on it.
Good post.
You give a good account of your statement. For me, with the reliability of paper fiat in doubt I revert back to the 2 basic constructs - money is a medium of exchange, and gold is a store of value. Those two concepts seem to me to be more basic and more true than any other social constructs of value that I've ever encountered. As you move into first and second derivatives of either of these, it seems to me that the message becomes more garbled.
I knew it would happen.
<< <i>gold is very transportable, much more transportable wealth and is recognized throughout the world.
you cant carry gallons of water, posessions, hundreds of pounds of food, etc if you have to leave in a hurry.....
but when you get to your destination, you can convert gold back to everyday staples - food, water, shelter. >>
How true.
We here in North America trust our Governments, the banks and the Institutions (for their 'viability') because we have had a very stable Political environment in all our History.
Europeans however, as a whole, do not trust banks and have a lot more of their wealth in 'portable' commodities, such as Gold and Diamonds.
We have no idea what it's like to leave your home in a moments notice and struggle to carry with you as much of your wealth as possible.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
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Try giving your sweetie a ring or necklace made out of steel, titanium, aluminum or engineered plastics.
As DR. Phil would say,,,,,,, let me know how that works out for you
Precious metals have value and hence are money because people value & desire them. They are rare / scarce. There is always someone willing to buy them at a value far above zero. Granted that value changes daily but Gold or Silver have never been worth ZERO. Can the same be said for all currencies of the world?
It takes much effort to remove these metals from the earth. This adds to the preceived value of them. If you could just walk down the road and pick up a hand full of them the value would not be as great. Gold and silver are not located everywhere. Actually there are very few productive mines in the world so that adds to the scarity,, limited supply.
Noone can just go out and go to the rock quarry and bring home a half dozen dump trucks full of gold. It has been stated that all the gold that has been mined since the beginning of time would fit in to 2 olympic sized swimming pools.
Therefore Gold IS money because the people of the world value it as such.
One more point,,,,, Gold can not be man made. Steel, titanium, aluminum or engineered plastics can be so anything that can be easily manufactured will NEVER be able to replace Gold or Silver or Platinum as a guarantor of wealth.
JMHO, GrandAm
<< <i>If I were hungry, I'd prefer bread to gold. >>
If I were hungry, I'd prefer some of those Gold Coast Coconut Shrimp from Outback. Which, coincidentally, costs about
the same per oz. as Gold, hence the name...
"having money's not everything and not having it is."
-Kanye West
Believe whatever you wish and stack whatever you want.
I am heavy in gold and light in paper. Time will tell who has chosen wisely.
https://www.pcgs.com/setregistry/gold/liberty-head-2-1-gold-major-sets/liberty-head-2-1-gold-basic-set-circulation-strikes-1840-1907-cac/alltimeset/268163
<<One more point,,,,, Gold can not be man made. Steel, titanium, aluminum or engineered plastics can be so anything that can be easily manufactured will NEVER be able to replace Gold or Silver or Platinum as a guarantor of wealth.>>
GrandAm, are you sure that these can be synthetic? All metals are in a sense man-made, but I never heard of artificial aluminum or titanium or steel for that matter---------------------BigE
Let's separate fact from fiction here:
Steel, titanium and aluminum are not synthetic to my knowledge. I suppose that I could be wrong...........but probably not about that.
Engineered plastics are synthetic by virtue of the fact that they are man-made.
I knew it would happen.
–John Adams, 1826
<< <i><<One more point,,,,, Gold can not be man made. Steel, titanium, aluminum or engineered plastics can be so anything that can be easily manufactured will NEVER be able to replace Gold or Silver or Platinum as a guarantor of wealth.>>
GrandAm, are you sure that these can be synthetic? All metals are in a sense man-made, but I never heard of artificial aluminum or titanium or steel for that matter---------------------BigE >>
______________________________________________________________________________________
Maybe I didn't phrase this correctly, steel, titanium, aluminum or engineered plastics are all techanically manufactured. That is a group of componets is taken and mixed together to form steel, titanium, aluminum or engineered plastics. The componets used to make the above metals are available is such quanties that they are very affordable when compared on a basis of 1 oz of these metals to an oz of gold. While I guess you could say that techanically you have to "manufacture" Gold,,,, that is to get it out of the ground and refine it and get it into a state that is suitable for selling or for using, IE bullion form when done so the value of an oz of gold far exceeds the value of an oz of steel, titanium, aluminum or engineered plastics.
I will admit that I don't know the exact price per lb of these metals here is what a quick Google Search turned up:
Scrap Steel $0.40 / lb
Titanium $40 / lb
Aluminum $1.15 / lb
Plastic / WHO CARES
My point is that the value of an oz of gold far exceeds the value of an oz of the metals and plastic talked above. Also these items can be essentially man-made in any qty we so desire. Factories roll it out by the millions of tons daily / weekly.
We can't do that with gold,,,,,, therefore GOLD is and always will be the #1 wealth preserver / store of value. Not some man-made mass produced metal or plastic.
JMHO, GrandAm
There is a BIG difference between Fractional Reserve Banking and Fiat Money. They are two different things. When you combine the two, you get a system that designates paper notes (instead of gold or anything else) as money by legal declaration, and a banking system that can easily be corrupted and spin out of control if the bankers have no ethics. Since our bankers have had no ethics now for decades, what we have now is a total mess with no apparent fixes.
The bankers weren't happy with the 10-1 leveraged earnings that fractional reserve banking gave them. So they geared that up from 30-1 to 50-1 in otc derivative products that conveniently worked around the existing monetary system....along with zero regulation. That's having your cake, eating it too, and requiring someone else to clean up your mess following the party.
roadrunner
Most people would agree with that statement. They would also be wrong.
Golds "relative" value can be measured against all currencies 24/7. Golds "absolute" value is measured entirely in a different manner. I wouldn't lose a minutes sleep if I didn't own one rare coin. I wouldnt be able to sleep if I didn't own any gold. Gold as financial insurance can not be understated.
Gold is fungible. divisable and used as money daily. I've used it to buy tires, repair roofs and buy other precious metals. Gold is real money.
It's nice to see new faces in this thread/forum and some old ones from the US Coin Forum as well ( Baley, Bayard, etc)
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
You can't always trade cash for quick gold bullion.
I knew it would happen.
<< <i>Edited to add: Nevermind, I'm staying out of this one. >>
awe, come on, there is some pretty good philosophy to read in this thread, some of it from beloved now deceased forum members. Surely you can post something thought-provoking to add to the conversation (since many of us are going to be snowed in watching basketball games this weekend and will be looking for interesting diversions since we can't be outside in shorts and t-shirts tossing frisbees and spiking volleyballs like our friends on the west coast
Liberty: Parent of Science & Industry