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
What about this point:
ProudCapitalist: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.
The regression theorem only says that SOME good could become money. But it says nothing at all about why it was gold, does it?
So the lack of opportunity costs for gold, explains why gold, and not iron, became money. Thanks to that, it became possible to make payments without destroying productive tools and weapons.
If you think about it for a moment, the argument is moot. Like one poster earlier commented: “If you think gold is valueless, then send what you have to me!” (I don’t think I quoted him accurately, but you get the point).
Gold is currently valued on the commodities exchange at from 900 to 1000 frn’s (“Federal Reserve Notes” -- counterfeit “money” designed by the most skilled gangsters known to modern man –- your “public servants”). So obviously it has value to SOMEONE. It goes up one day, down the other. I suspect in a year or so it will take approximately twice the frn’s to purchase a 1 oz gold coin as it takes today – and that’s because frn’s certainly aren’t going to go “up” in value (or usefulness to purchase stuff down at Wal-Mart).
It’s almost like arguing that gasoline is useless. It is, actually. Goin’ places has value. Gasoline is not only useless, but it’s also dangerous. It can damage your eyes and your nose and your mouth if you’re not careful, to say nothing of its combustion dangers and explosion capabilities. But if you wanta go somewhere, get yourself some gas!
Regards, Geo. Keagle
gold must have value outside of its use as money, otherwise it wouldnt be good money.
if it was as valueless as fiat money(which has use as low grade toilet paper) or worse, it could not outcompete fiat money.
so you believe if legal tender laws were repealled people would rather use fiat dollars than gold back dollars.
you are delusional.
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
Samarami:Like one poster earlier commented: “If you think gold is valueless, then send what you have to me!”
I've said that gold WOULD BE WORTHLESS if it wasn't used as money!!! The "second best use" (i.e. industrial USEFULNESS) of gold is of a very very low value compared to all other metals. And I see the estetic value of gold as a function of it being money. Just like silver is estetically higher esteemed than other gray metals such as tin, because silver too is money to some degree. And yes, I consider gold being money even today , regardless of what politicians say about it. They cannot fully control such things. They can only partially hinder the use of gold as money.
ProudCapitalist: The regression theorem only says that SOME good could become money. But it says nothing at all about why it was gold, does it? So the lack of opportunity costs for gold, explains why gold, and not iron, became money. Thanks to that, it became possible to make payments without destroying productive tools and weapons.
Except, unless I agree that gold has VALUE, i would never accept it over iron if usefulness is the judge of value. Quit using a utility theory of value. Gold had value before it was used as currency. Its ineffectiveness as a weapon is just a bonus, though completely beside the point. Regression theory wouldn't take a useless item that no one wanted (as you claim gold should be) and make it money because its useless. It has to be desired/valued first.
ProudCapitalist: And I see the estetic value of gold as a function of it being money. Just like silver is estetically higher esteemed than other gray metals such as tin, because silver too is money to some degree.
You keep making me laugh with foolish comments. You're saying I think gold is pretty because it has value. You sir, need to go to logic 101.
nirgrahamUK:gold must have value outside of its use as money, otherwise it wouldnt be good money.
Okey, for sake of discussion, lets assume that gold had estetic value before money was invented. But why was gold prefered for money use before all other commodities??? All metas are "shiny", all are homogounes, all are fairly easily divisable and so on. Gold has no competitive advantages there.
I (try to) point out that one very important advantage of gold money is that it has no opportunity costs! You don't need to break a sword in half in order to make a payment in gold, because it would be silly to make a sword out of such a soft metal as gold to begin with. Gold could be shaped into standard diameter strings to be cut or standard sized coins, and still you will have your iron tools and your wheat to eat.
if gold was like medicine that made the bearer fight off disease better, the value of gold would be greater, and it would be perfectly good money. if by having some gold in your car you magically made your car more fuel efficient, gold would be more valuable, and would still make great money. it would not be worse money because it has other uses ! money needs , be liquid (easy to trade), easy to store, easy to quantify, must have some value on the market. gold does all these things, and more so at higher value. lessening the value of gold, would make it inferior money to other possible moneys.
ProudCapitalist:All metas are "shiny", all are homogounes, all are fairly easily divisable and so on. Gold has no competitive advantages there.
Because we think gold is pretty and other metals arent! Because, as with all symbols of wealth, it demonstrated that you were powerful/wealthy enough to have time to aquire something not essential to survival. Just as the swords you seem to think everyone had were status symbols. (Hardly anyone had metal weaponry, hence why only nobility fought in battles, because they were rich enough to afford weapons) Please just drop your argument and read the links people gave you.
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."
in some prisons; rather than cigarretes, cans of tuna are currency.
i read it.
ProudCapitalist: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."
I believe this is how copper (lesser extent), silver, and gold came into use beyond religious/aesthetic justifications from what I've read. Bauxite ore was also used this way as Bauxite, even though very useful today, wasn't of much use to the Romans beyond currency (and if they could, salt rock was the next best thing, which is where the word Salary derives its meaning as it was relatively useless, easy to extract and make portable). So, I think this point is moot at least for me. It's not hard to see why gold works out the way it does.
Another modern justification for gold as money is the fact that it can be traced. How? Each lump of gold will have a trace amount of other isotopes from its source rock (sometimes very small traces of radium or uranium), so it becomes pretty easy to track where it came from, and possible when (via radiometric dating). So the supply can be more easily tracked than paper money by comparison (which even though can be radiometrically dated, you can't really trace it with the same degree of certainty as a unit of gold as certain parts of the planet have certain rare/geographically-fixed isotopes).
"The power of liberty going forward is in decentralization. Not in leaders, but in decentralized activism. In a market process." -- liberty student
nirgrahamUK: if gold was like medicine that made the bearer fight off disease better, the value of gold would be greater, and it would be perfectly good money. if by having some gold in your car you magically made your car more fuel efficient, gold would be more valuable, and would still make great money. it would not be worse money because it has other uses ! money needs , be liquid (easy to trade), easy to store, easy to quantify, must have some value on the market. gold does all these things, and more so at higher value. lessening the value of gold, would make it inferior money to other possible moneys.
So you have no clue whatsoever as to why gold became money instead of for example iron? It is just a huge mystery, isn't? Iron has all that which you describe, plus it has all those alternative uses, which you claim are an advantage for a money metal. It's very very practical to instead of having an iron plow, having an iron bullion in your bag, isn't it? It's very practical to having to break your knife in order to buy som butter, isn't?
Why do you REFUSE to even consider the OPPORTUNITY COSTS of money use of different metals???
ProudCapitalist:Why do you REFUSE to even consider the OPPORTUNITY COSTS of money use of different metals???
Why do you refuse to admit that a utility theory of value is FALSE. Where's LibertyStudent when you need him to beat someone over the head....
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