Mine is an honest question - why is a gold standard a good idea?
I get that tying a currency to a real commodity imparts natural value and forces more immediate inflation/deflation economic responses with regard to the currency value. That can be good or bad, particularly good if it limits the speed the printing presses run. Potentially bad if a situation requires short term debt to resolve (e.g., funding WWII).
But why gold? Why not multiple precious metals or materials? Why not high quality steel? Why not grains?
I need educated on how picking a specific metal as a standard is a good idea economically. Why not Rhodium, or platinum, etc.?
Why Gold? Because its easy to verify and very rare. Only a few elements have greater density and they are even more rare. The exception is Tungsten which is very hard to work with although fakes using it have been done. Coins made with Tungsten will not have the Golden ring you get when a balanced 1 oz piece is tapped lightly.
“I need [to be] educated on how picking a specific metal as a standard is a good idea economically. Why not Rhodium, or platinum, etc.?”
You ask a great question, and while I’ll not try to provide the fully comprehensive answer, I will point out two things, presented as questions:
The US was on the gold standard until 1971. Did it prevent the Great Depression? Did it prevent the vicious recession of 1920? Did it prevent the panic of 1907? Did it prevent the panic of 1873? Answer to all: No.
Suppose we go on a gold standard. Does anyone really think that Goldman Sachs and JPM would not immediately move to manipulate that market as they have done with virtually everything else they have touched? And, does anyone genuinely think they would not succeed?
And for the record, I own and am modestly bullish on PMs.
“But why gold? Why not multiple precious metals or materials? Why not high quality steel? Why not grains?”
Well, potentially, you can back a currency with nearly any commodity. However, certain commodities lend themselves to that function better than others.
The standard qualities that matter most are scarcity and durability. Portability is an additional standard, that was more important when the commodities were being used for currency themselves, rather than sitting in a bank vault backing the currency. Now, it’s probably not a big factor.
When it comes to durability, any perishable commodity such as grain fails the test immediately. Sure, grains can be preserved for a long time, under the right conditions, but they are still vastly inferior in terms of durability to precious metals. You don’t want something like a burst pipe ruining all the backing commodity in your vaults, and precious metals provide that security.
Scarcity is important because it allows the commodity to have a stable value. The commodity must be reliably scarce, but not so scarce that an insufficient quantity is available to back the currency. Any manufactured commodity, such as grain, steel, microchips, etc, would not be reliably scarce, and therefore, wouldn’t have any reliable value. Precious metals, barring discovery of significant new deposits (such as happened during the Gold Rush), are reliably scarce enough to hold their value, but not too scarce. There are some complications since precious metals are also subject to industrial demand, which can affect the rate of production, availabilty, and the value of the metals, but they are still probably the best fit for a currency backing commodity.
One thing to note is that gold isn’t the only metal that has been used to back currency. In the US, we used a bimetal standard (gold & silver) for a long time. So, other metals can be used, even in combination. Some metals, like Rhodium, are probably too scarce to be considered viable though.
The Gold Standard is a terrible idea for many reasons not the least of which is its actual operation.
Basically the superstitious love affair with gold money is based on ignorance of the actual history and operation of the gold standard. It is preferred because it is not elastic (its advocates are more concerned about it as a store of value not a medium of exchange) and that is also the reason it will never be returned to outside of some kind of dictatorship. As a money supply gold cannot expand quickly enough to accommodate economic growth and is not a guarantee against inflation in any case.
New strikes and discoveries expand the money supply often enough to produce inflation. When the metals from the New World were imported into Europe they set off a multi-century wave of inflation which ruined Spain’s economy and raised the price level throughout Europe.
Gold was initially selected for metaphysical reasons as much as any practicality. Its beauty makes it always valuable. There were also silver standards (Athens). The other metals you mentioned were not available.
However, who would want to make our money supply subject to the whims of suitors across the world or women’s love of fine jewelry? Ideally the Medium of Exchange has no intrinsic value and is useful only as a MoE. Gold is far from that with multitudinous uses. It is supremely durable and divisible but that is not enough.