Why? It's a shiny metal. It's got no more intrinsic value than does green inked paper. You can't eat it. It's probably got less industrial uses than paper.
"Gold cannot be inflated to worthlessness, paper currency can be.
During the California gold rush, Gold have serious inflation problems. But for the most part, you are right, short of finding a massive gold deposit, gold is largely immune to inflation. Which means using it as a basis for currency almost guaranteeds deflation, and the deflationary depressions that go with it. When we were on the gold standard we had severe business crippling depressions every 20 years. Thank goodness for fiat currency.
The inflation on our fiat currency has been well managed in the past and averaged only about 2% a year. Of course if you look at a 100 year chart that looks terrible. But it really should be scary only to idiots hoping to hoard cash for 100 years in their mattress and not even draw interest.
Gold cannot be declared worthless or "reverse split" by government fiat, paper currency can be.
Sure it can. Our own government even outlawed gold at one point and consficated it. Every time the government had a major war they came off the gold standard. So a gold standard will always exist only at the whim of Congress.
"Gold maintans its purchasing power over centuries, paper currency always goes to zero purchasing power. Gold is real money, paper currency is currency and there is a difference.
Money is whatever we say it is. Whatever facilitates the trade. There is no difference in gold, paper, or electronic blips.
“. Which means using it as a basis for currency almost guaranteeds deflation, and the deflationary depressions that go with it. “
Well not exactly. A large portion of the money supply under the gold standard was ‘bank money’ or ‘credit money’ (not to be conflated with what we think of as credit today). It was a form of fiat money issued by banks who even printed their own currency.
There were also Greenbacks (the US Notes issue) as well as Silver Certificates. This was all part of the money supply but it wasn’t convertible to gold upon demand.
It was ‘credit money’ that was susceptible to contracting during a crisis as banks pulled in their loans. During the Depression a full 30% of the US money supply vanished as banks failed and there was no FDIC to keep depositors whole.
A gold standard per se doesn’t condemn an economy to recurring deflations, there’s many other factors at work. The history of fiat money regimes isn’t exactly replete with success either.
Gold has intrinsic value, paper currency does not.
Why? It's a shiny metal. It's got no more intrinsic value than does green inked paper. You can't eat it. It's probably got less industrial uses than paper.
Yes, it is shiny, and heavy, and indestructible and easily recognizable, and easy to mould and form. That's why it pushed all the other monetary pretenders out thousands of years ago. It is also portable, scarce, divisible, a real store of value, storeable, fungible, and as a bonus it carries no counterparty risk.
Its intrinsic value comes not from any industrial use but from the energy and wealth that is inherently stored in that coin. The ore got dug up through a huge expenditure of energy and labor, it got refined processed and formed with more energy expenditure. Finally it was minted into a recognizable gold coin. All that energy is stored in that coin. That is intrinsic value. The paper in your pocket or worse yet the electronic money in your bank have zero intrinsic value. They can be infinitely produced.
Gold cannot be inflated to worthlessness, paper currency can be.
During the California gold rush, Gold have serious inflation problems. But for the most part, you are right, short of finding a massive gold deposit, gold is largely immune to inflation. Which means using it as a basis for currency almost guaranteeds deflation, and the deflationary depressions that go with it. When we were on the gold standard we had severe business crippling depressions every 20 years. Thank goodness for fiat currency. The inflation on our fiat currency has been well managed in the past and averaged only about 2% a year. Of course if you look at a 100 year chart that looks terrible. But it really should be scary only to idiots hoping to hoard cash for 100 years in their mattress and not even draw interest.
I question how well fiat currency production was managed during 1976-1982. Those were some hard economic times with lots of inflation and lots of unemployment. We are talking about a lot of purchasing power lost over a very short time. If you trust the government to manage the currency I don't have a problem with that. I do not trust them to manage the currency. The US dollar will go to zero at some point in time, just like every other fiat currency since the dawn of civilization.
Gold cannot be declared worthless or "reverse split" by government fiat, paper currency can be.
Sure it can. Our own government even outlawed gold at one point and confiscated it. Every time the government had a major war they came off the gold standard. So a gold standard will always exist only at the whim of Congress.
I love Americans but your thinking tends to be a bit insular at times. The US government can do whatever it wants within its borders but it will never be able to simply declare gold worthless. It is a big world and you live in a part of it. A beautiful, productive part, but only a part.
The US government never "outlawed" gold. They did try to confiscate all the gold in private hands and they reduced the price but they never outlawed it or made it worthless. I doubt very much that they could get away with that today. If you have gold and you feel it is at risk of confiscation, bring it to me and I will get you world price in any major currency with a small mark up for my trouble.
Furthermore, the writ of Congress as it pertains to a "gold standard" only applies to the USA and those citizens who wish to follow their strictures in this regard. How much financial repression the government can get away with is an open question. They have gotten away with a lot so far but declaring all the gold in the world worthless is beyond their power.
Gold maintans its purchasing power over centuries, paper currency always goes to zero purchasing power. Gold is real money, paper currency is currency and there is a difference.
Money is whatever we say it is. Whatever facilitates the trade. There is no difference in gold, paper, or electronic blips.
You could not be more wrong. You are conflating the difference between money and currency. There is a huge difference and it has to do with money's properties as a store of value and its scarcity. Gold is scarce, that's why it retains it value over time. "Electronic blips" or entries on a ledger can be infinitely created. So can paper currency. This destroys their use as a store of value because they can be created infinitely out of thin air. If you trust the government to maintain the purchasing power of the currency, this won't bother you.
It’s true that gold is a shiny metal, but it’s also true that it doesn’t decompose over time (think rust, corrosion, etc). This means that if you have an ounce of gold today, it will be an ounce of gold in 50 years. It is stable.
There is also a limit on the amount of gold available, and a significant cost associated with increasing that amount (on the order of $1400-1500/oz, all in). Paper money has a small production cost and electronic money has almost no production cost.
Gold price has gotten lower over the last year because it is in the best interest if the powers that be to keep the price low. Agents of the PTB can sell an unlimited quantity of gold on the Comex because they have no expectation of having to deliver it to the buyer. If push came to shove, the sellers would (and have) settled the contracts in cash.
Gold has long been a barometer for inflation. If gold remains low, the PTB can point to it and say, “Look, gold is low so there can’t be inflation.”
Printing (creating) money will eventually result in inflation for goods the money is used to buy. 40 years ago those goods were real (remember Carter), so prices of goods went up dramatically.
Today printed money is being used to prop up the stock and bond markets. The PTB can point to the markets and say, “Hey, look. The markets are strong so the economy must be good.” Actually, inflation from newly created money is showing up in stock and bond prices, not in the prices of goods.
That’s what happens when printed money goes to Wall Street and not to Main Street.