I, and probably many of you, have at times come across the following two arguments against using gold as money:
#1) Gold is de facto a fiat money because gold would be useless if it wasn't money. People have agreed to use gold as money, or states have decided so. Only therefor does gold have value. So there would be no real difference if the same was agreed upon by people, or decided by government, about PAPER instead of gold. Before Gutenberg, kings printed their faces on gold coins. After Gutenberg they print their faces on paper. Fiat as fiat. Same same.
#2) Using gold as money imposes on society the alternative cost of not being able to use gold industriously. With gold being money, gold metal would be laying around in bank valves instead of doing good use out in the factories. Therefor, a society which could replace gold with paper money would be better off. The GDP would increase by the industrial productivity of gold metal.
I'd say that argument #1 is basically correct. One only needs to be aware of the vast difference between government commandos, and the choice of free individuals. And the huge risk of paper being mass produced by commando, which would be impossible with gold, being as it is a basic element. But indeed, if people really prefered paper over gold on a free market, then so be it, no Austrian would argue about that. I basically brought up anti-gold argument #1 because it states that "gold is useless" in contrast to the next anti-gold argument.
Argument #2 is basically true, I'd say. But one must understand the PROPORTIONS here. Gold IS actually almost totally useless from an industrious point of view! It is not chemically reactive (there cannot exist any molecules with gold in them), so that leaves electric applications. But there both silver and copper are better conductors, and since they exist in thousands of times greater quantity, a total withdrawal of gold from the market of conductive metals would give negligable impact (actually, none at all). Sure, gold doesn't oxidize, so there are some applications for switches in corrosive environments. But there are alternative technologies for that and human kind doesn't really stand and fall with the maintenance costs of outdoors electric switches. And yes, there are some exotic atomic nucleous properties of gold which accounts for the kilogram or so demand a year for research laboratory uses.
What about jewelry then? I'd say that gold is jewelry BECAUSE gold is money! The purpose of jewelry is to symbolize wealth. A gold painted iron ring won't make your bride very happy on the wedding day! Why? It LOOKS exactly like a solid gold ring? Well, precisely because it isn't solid money, and that is what your bride wants (no offense meant for you and your wife though, it's cultural, you know!) But sure, if gold wasn't money, it would still have some artistic value. Just like some "artists" collect funny looking stones and roots today.
I would like to suggest that the uselessness of gold was a key competitive advantage for it becoming money on a free market! Because gold is useless, there are no alternative costs for withdrawing it from industrial uses. Gold as a substance not only have the famous practical "money properties" (homogenous, recognizable, dividable, portable, indestructable et cetera), but gold is also THE CHEAPEST METAL!
I never saw this argument being made before (does anyone have a refernce to it?). Do you think it is valid? Should "uselessness" be added to the traditional list of "competitive properties which made gold money" in the text books?
It's not fascism when the government does it.
“We must spend now as an investment for the future.” - President Obama
JParker:As to your arguments, they only hold water in modern times
I disagree! Gold was pretty useless in the iron age too, since iron weapons and protections were superior. Gold was too soft. Have you ever heard of a gold sword which wasn't only meant as decoration, but as a real weapon? I read somewhere that gold might have been the first metal humans used. But we never had a "gold age" with weapons and tools made out of gold. Because even stones and bones are more useful than gold is!!!
As I said in my last post that you seemingly ignored, gold is valued because of its histortical worth. We have something in our minds that looks at gold and say 'wow so pretty' and makes us want it.
We have something in our minds that looks at gold and say 'wow so pretty' and makes us want it.
I think that is a very mystical explanaition. I'd prefer an economic explanaition, such that gold became money because it had no other potential uses.
If you want it to be iron (Completely finite, as it cannot be produced on earth, only comes from asteroids) then thats just fine. The reason gold is chosen is historical preference.
I agree that iron would be better than fiat. But gold would be even better. And the reason is not than humans have a genetic hard-on for gold. With iron money, many kinds of industries would see their materal costs vary with the savings- and loans business. But with gold as money, we could use iron for swords and plows, instead of locking it up in bank vaults or carrying iron coins in our pockets. With gold as money, you can have both an iron knife, and a money coin in your pocket. With iron as money, you'd have to choose only one of those.
I think that people started to like gold estetically only AFTER it became money.
ladyattis:pretty much makes gold the best choice for currency exchange. That doesn't mean it's useless, rather it means it's useless for most things of industry besides currency exchange, which it does damn well
Ah, finally someone here who has read and understood my point!
The competitve advantage of gold use lies in it being money. There is very vast gap down to the next best use of gold (such as heat conductor or substitute for a porcelain tooth). And that chiefly depends on it not being chemically reactive (unless that it can form some toxic salt together with chlore). Its indestructability is therefor the same property which makes it industrially useless.
Concerning estetics. Silver is also used as jewelry and decoration, although it has the same grayish colour like so many other metals, like tin which is much cheaper and easier to shape. But silver is prefered BECAUSE IT TOO IS MONEY! And what about white gold??? Certainly, gold became money before it was valued estetically.
I once worked for a man by the name of Jesse E. Bush, who pioneered and owned a number of large firms in Texas. He was the uncle of the first Pres. George Bush, the great uncle of the last (hopefully J). He once explained “money” to me (oh, he was also one of the early and wealthiest Dallas millionaires):
“There is only one thing you can buy, sell, or trade on, and that’s energy. Man’s physical and mental energy. Everything else comes out of the ground, goes back into the ground. Money, therefore, is only a symbol of that energy. Money is meaningless and has no value of itself except for its representation of certain previously agreed upon quantities of man’s production and ingenuity…his energy”
This was back in the 50’s, when the term “energy crisis” was yet to be coined – we were still buying .129 diesel fuel and .149 gasoline in Texas. And got green stamps to boot. Remember green stamps??
The greatest con game and Ponzi scheme in the history of mankind has been that acted out by those smiling, waving gangsters who devised the plan of governments authorizing a central bank, capable of printing fiat “money” and issuing “credit”.
Gold simply kept those thieves somewhat honest. Somewhat. Because banks could still (long before “The Fed”) issue duplicate and triplicate receipts for quantities of gold supposedly in storage as long as people trusted them, gambling upon the statistical likelihood that only a small fraction of the legitimate owners of the gold would demand specie at any given time. Fractional reserves.
But if confidence in the bank waned and everyone demanded his or her specie (gold, in this case; but could be silver, horseshoes -- anything of limited supply and therefore of certain value that everyone trusted and agreed upon in advance) the bank would be bankrupt quickly and abruptly. Which is how it “should” be today, except those same gangsters (or their progeny) are now “mortgaging” the energy of our great-great-great (lets see, how many greats do we need here?) grandchildren; “bailing out” their partners in crime.
"Whenever a Great Bipartisan Consensus is announced, and a compliant media assures everyone that the wondrous actions of our wise leaders are being taken for our own good, you can know with absolute certainty that disaster is about to strike."
~Ron Paul
The Second Great Depression
http://www.lewrockwell.com/paul/paul479.html
Shawn77: My real question is with your two arguments. #1 gold is useless #2 its better gold is not used as money so it can be used by industry. pretty contradictory
I tried somehting which is far too complicated for internet forums. I cited the arguments of OTHER people which I have encountered several times and who argue AGAINST a gold standard. yes, they are contradictory and both are wrong in different ways. But yes, #1 gold IS useless and therefor, no #2 there exists no opportunity costs for using gold as money. Either gold is money, or it is garbage.
Samarami:Money, therefore, is only a symbol of that energy. Money is meaningless and has no value of itself except for its representation of certain previously agreed upon quantities of man’s production and ingenuity…his energy”
Yes, I agree with him. If gold is money, gold has value only from its use as money. But if for example iron was to be used as money, iron would indeed have a substantial industrial value even apart from it being used as money.
Btw, gold mining does no good, does it? It only creates some inflation for gold money, hence somewhat reducing golds usefulness as money, and causes a redistribution of wealth from everyone to gold miners. And the miniscule industrial uses of gold wouldn't be worth the mining costs. The hundered or so thousand tons gold around, is more than enough for gold plating contacts in corrosive environments. Especially since it can so easily be recycled.
ProudCapitalist:Either gold is money, or it is garbage.
Then send me your gold. You're completely wasting everyone's time on here. You've been disproven, time and time again, about the uselesness of gold, and yet you just keep trucking on repeating yourself and your incorrect assumptions.
JParker: ProudCapitalist:Either gold is money, or it is garbage. Then send me your gold. You're completely wasting everyone's time on here. You've been disproven, time and time again, about the uselesness of gold, and yet you just keep trucking on repeating yourself and your incorrect assumptions.
seriously. read about the formation of money on the free market, and about the theory of regression which proves that gold must have had value before it was used as money, THEN challenge it. I'm sure you think you are right but you do not even understand what you are arguing against...
you are absurd:
you must hold that the first person to ever accept gold in exchange for goods he had produced did so despite the gold having no value to him, as there had been no precedent of anyone else ever accepting gold in a trade. i.e. its moneyness was not proven. and yet the first-accepter must have valued the gold more than the things he gave away, so how do you square this by saying gold has no value aside from monetary value??? furthermore how would anyone have ever come to posess gold to offer it on the other side of the trade?? someone must have taken time to collrct the gold, because they valued possessing it, and considered others might. bud dang it! its valueless!, why dont people have the same value scales you do ! oh noes!
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
JParker: ProudCapitalist: Either gold is money, or it is garbage. Then send me your gold.
ProudCapitalist: Either gold is money, or it is garbage.
February 17 - 1600 - Giordano Bruno is burnt alive by the catholic church. Aquinas : "much more reason is there for heretics, as soon as they are convicted of heresy, to be not only excommunicated but even put to death."
Well, sorry for repeating myself, BUT SO DO YOU! You and some others here meticulously refuse to even touch my arguments. That you stupidly just keep on repeating "booh, your just wrong but I refuse to tell you how and I believe that gold knifes are very useful anyway" doesn't promote this discussion at all.
Gold is the least useful of all metals to the industry today.
Gold was already practically useless in the stone age.
This is a great argument for the gold standard, since it refutes the "opportunity cost of gold" argument against putting thousands of tons of gold in dark bank vaults.
If gold would suddenly become very useful industrially, for instance because of some exotic advancements in nuclear physics, then that would be a very serious economic argument against gold ever becoming money again.
ProudCapitalist:If gold would suddenly become very useful industrially, for instance because of some exotic advancements in nuclear physics, then that would be a very serious economic argument against gold ever becoming money again.
no it would not.
Let me (try to) make three points clear here:
1) Todays industrial uselessness of gold strengthens it position as money. If (very unrealistically) we suddenly discover how to extract huge amounts of energy from nuclear gold fission, then gold would be like uranium. Instead of storing it passively in bank vaults, we'd destroy all gold and turn it into electric power. It would no longer be attractive for money uses.
2) Historically, the regression theorem as i understand it, says that gold become money based on it having an estetic value in itself before it became money. While I think that this argument is a bit "mystic", it need not be contradictory to my proposal that gold became money because of its practical uselessness! Iron and wheat could also have become the first money good, but for some reason gold was prefered. I suppose that people wanted to eat the wheat and make tools and weapons out of their iron. Gold had no such opportunity costs, hence gold was prefered as money.
3) Lets assume that gold had no estetic value before it became money, and obviously no practical use value. Maybe iron became the first money, and only later did gold take over that role. The viking on the market place wants to buy a bear skin. It costs as much money, i.e. iron weight, which corresponds to half his sword. Since iron is so useful in the shape of weapons and tools, iron coins or bullions would have high opportunity costs, they would be a waste of iron . Does he break his sword in two and thus loose all the practical usability of his sword? Maybe one comes up with this idea: "Hey, what if I pay with the iron price's weight in this useless gold metal for the time being? I promise to exchange it back into useful iron on the next market, if you want. I'll even give you a little extra, so I don't need to destroy my sword to pay for the skin. Or else there can be no deal right now, sorry, because while your skin is indeed worth the iron in half of my sword, it isn't worthwhile for be to bear the opportunity cost of rendering my sword useless by breaking it in two."
ProudCapitalist:You and some others here meticulously refuse to even touch my arguments. That you stupidly just keep on repeating "booh, your just wrong but I refuse to tell you how and I believe that gold knifes are very useful anyway" doesn't promote this discussion at all.
You have a very narrow definition of utility. You're also applying a utility theory of value, which is so flawed I want to cry. But still, even then, you're saying that if it cannot be made into a knife, a metal has no value. All the whilie you're ignoring the uses gold has, how its used in industry (electronics) all the time due to its non-corrosive nature, and how it has always been used for jewelry and ornamental purposes.
ProudCapitalist: Gold is the least useful of all metals to the industry today.
Back it up, or shut up. You've been proven wrong on this by almost every poster in this thread.
ProudCapitalist:Gold was already practically useless in the stone age.
ProudCapitalist: If gold would suddenly become very useful industrially, for instance because of some exotic advancements in nuclear physics, then that would be a very serious economic argument against gold ever becoming money again.
Again, no it wouldn't.
ProudCapitalist:3) Lets assume that gold had no estetic value before it became money, and obviously no practical use value. Maybe iron became the first money, and only later did gold take over that role. The viking on the market place wants to buy a bear skin. It costs as much money, i.e. iron weight, which corresponds to half his sword. Since iron is so useful in the shape of weapons and tools, iron coins or bullions would have high opportunity costs, they would be a waste of iron . Does he break his sword in two and thus loose all the practical usability of his sword? Maybe one comes up with this idea: "Hey, what if I pay with the iron price's weight in this useless gold metal for the time being? I promise to exchange it back into useful iron on the next market, if you want. I'll even give you a little extra, so I don't need to destroy my sword to pay for the skin. Or else there can be no deal right now, sorry, because while your skin is indeed worth the iron in half of my sword, it isn't worthwhile for be to bear the opportunity cost of rendering my sword useless by breaking it in two."
"no, i wont take the useless gold in exchange, it has no value to me. give me something that has value."
and gold never becomes money.
get it yet?
ProudCapitalist:Lets assume that gold had no estetic value before it became money, and obviously no practical use value. Maybe iron became the first money, and only later did gold take over that role. The viking on the market place wants to buy a bear skin. It costs as much money, i.e. iron weight, which corresponds to half his sword. Since iron is so useful in the shape of weapons and tools, iron coins or bullions would have high opportunity costs, they would be a waste of iron . Does he break his sword in two and thus loose all the practical usability of his sword? Maybe one comes up with this idea: "Hey, what if I pay with the iron price's weight in this useless gold metal for the time being? I promise to exchange it back into useful iron on the next market, if you want. I'll even give you a little extra, so I don't need to destroy my sword to pay for the skin. Or else there can be no deal right now, sorry, because while your skin is indeed worth the iron in half of my sword, it isn't worthwhile for be to bear the opportunity cost of rendering my sword useless by breaking it in two."
And, once again, no matter how many times you want to say it, gold is USEFUL.
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