[Politics Thread]

On 8/12/2020 at 8:38 AM, ruraljuror said:

Agreed, those things would be more practical for daily living.  But I also think you are correct in the first part of that sentence where you said people would continue to place value on gold because of the historical precedent.  It's an infallible characteristic of modern human behavior.  If something is rare and a person believes that it will be prized by other humans, then they will also ascribe value to it.   Diamonds.  Works of art.  Pokemon cards.  Whatever.  Gold has a special place in human culture, but it's value as a currency lies in it's very fixed supply.  Easy to divide into smaller pieces and re-combine into larger pieces.  Can be stamped into coins with denominations and national symbols.  So many attributes that give it a "leg-up" over other materials.  Can you eat it?  No.  Can you trade it for food?  Depends on how much extra food is laying around and available for sale.  If food becomes incredibly scarce then its price, denominated in gold, will go up - so gold would loose value in relation to food.  Gold's value is not constant in relation to the goods you purchase with it.  However, you cannot easily degrade it's value by creating a whole lot more of it and increasing the money supply.  This results in an incredibly efficient and accurate pricing mechanism in the market.  Is it efficient to carry around?  Not really.  Does it result in the market finding the best equilibrium for all asset prices in aggregate?  Absolutely.  So economic decision making is super precise - means less waste - means faster accumulation of wealth by a society - means rising standard of living for everyone.   That's what you give up when you abandon gold.  You doom your self to an ever-lasting cycle of credit booms and busts built upon a background of continually degrading standards of living for average people. You may use this tool to use pokemon card value finder.

 

While it may not be practical for daily use, gold's historical precedent and rarity contribute to its perceived value. The efficient pricing mechanism it provides in the market makes it a useful currency and abandoning it may result in economic instability with credit booms and busts.