Why is gold the “best item” to use as “money”? If Money is simply a chit to match up barter transactions over time and space, why would gold be of any particular significance?
I know that it HAS been a good proxy for money, but what is the immutable property of gold that makes it so?
My argument is that it is an illusion, and that one day the illusion could be shattered.
Gold is scarce enough that you can’t simply flood the market. But it does get mined, so there is an increasing supply. But most of the demand is because people THINK that it is a good deal.
Just as people THOUGHT they should be able to see the Emperor’s clothes, so they SAID they saw it.
If we found a new huge gold deposit, would gold prices then plummet? Not according to those who claim Gold is a stable value investment that hedges against monetary fluctuations. Not according to those who say it is the best item to be used as “money”.
You supposedly can’t print money (the government can). But you CAN print gold, you just have to find a mine, and go work it. You could spend years of unproductive effort, and be wealthy. You will have contributed nothing to the world for your effort, but if you managed to pull out a thousand pounds of gold, you’d retire wealthy.
You’d have money to burn, and could purchase the work of many years of productive labor, having done nothing of value in exchange.
That doesn’t seem like a good type of “money”.
For something to work as a medium of exchange it needs these properties.
a store of value that doesn’t fade over time like food that would rot.
small and portable
rare but not too rare
divisible, can be broken down into smaller pieces, can also be forged into bigger pieces
hard to fake
fungible, and measurable (an ounce of gold is pretty much the same as another ounce of gold)
as a bonus the supply of gold is relatively stable although it does increase a couple percent a year just like the economy does.
If a super huge amount of gold was found it would decrease the value of all gold everywhere. When large amounts of silver were discovered in South America the value of silver went down.
What you really need to do is look into the concept of money
so go read this link which I just googled
http://www.nationalgoldgroup.com/why-gold-is-the-best-money/