I've NEVER been able to understand how our monetary systems is based upon gold.
you can't eat it, breath it, drink it, drive your car with it,..... its a freak'n hunk of metal worth nothing more than decorating yourself if you're over 50 and extremely vain, and various electrical conductor work.
never got it.
I've NEVER been able to understand how our monetary systems is based upon gold.
IT'S NOT! HASN'T BEEN SINCE '71!!
In my view, its primary virtue is the inability of the FedGov to create it out of thin air. Its also compact,chemically stable and subdividable.
And this differs from paper currency (or account balances at a bank) in some way?
Here's the difference: Price is a function of supply versus demand. Increasing the supply of gold takes a lot of resources; increasing the supply of fiat currency requires a few keystrokes at a computer console. That makes gold a far better store of value, and far better unit of account, and a far better way for price to serve as the signalling mechanism in a free market economy. Why? Because value is determined by the marginal utility of adding or removing one more unit of whatever is being priced (which is why air is essentially free, and gold isn't, even though you can't live without air for more than a few minutes, but can live a whole lifetime without gold.)
Gold and silver are rare. I believe gold comes out to around 5 grams per billion in the earth's crust. And it can't be grown or printed at will (ad the greenbacks in your pocket can). That is why it will always have value, even when our government fails us.