Bob Cook <frobertc...@hotmail.com> wrote: Jed-- > > What about gold? >
That's a complicated subject! First, gold has considerable intrinsic value, for electronics, fillings and other medical uses, and so on, plus aesthetic value in jewelry. Second, in ancient times gold was an excellent means of exchange because amounts were limited by mining technology, and because it could not be faked. You can test for gold by primitive methods. You can measure gold density with Archimedes' principle, which was invented for that very purpose. Nowadays, I believe most economists consider the gold standard barbaric. I do not know enough about economics to comment in detail, but their arguments make sense to me. See, for example: http://www.nytimes.com/2013/12/23/opinion/krugman-bits-and-barbarism.html The section from "General Theory of Employment, Interest, and Money," by Keynes that Krugman refers to is copied below. It is amusing. Keynes sure knew how to write. Let me add something from my point of view, which is that of a man who has only a hammer to whom all problems look like nails. I see this and most other issues in terms of technology. It is said that gold is available in limited amounts. This will supposedly prevent inflation, which is why "goldbugs" who do not trust the government are enamored of gold. Unfortunately the gold standard also limits the money supply which means the economy cannot expand. More to the point, nowadays, I doubt that the amount of gold is really all that limited. Suppose we had some desperate need to get lots of gold, say, to keep the sun from exploding (somehow). I'm pretty sure we could find lots more. Gold is available at very low concentrate in the ocean, but there are probably millions of tons and we could find a way to filter the water. It is probably available elsewhere in the solar system. If that does not work out, I expect we could find a way to transmute other elements into gold in industrial quantities. If we really needed to, we could find a way to get so much gold we could pave the roads with it. As Arthur Clarke said, the only resource that is truly in short supply is brains. With enough intelligence and science, you can have anything you want, in unlimited quantities. Here is the text from Keynes: It is curious how common sense, wriggling for an escape from absurd conclusions, has been apt to reach a preference for *wholly* 'wasteful' forms of loan expenditure rather than for *partly* wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict 'business' principles. For example, unemployment relief financed by loans is more readily accepted than the financing of improvements at a charge below the current rate of interest; whilst the form of digging holes in the ground known as gold-mining, which not only adds nothing whatever to the real wealth of the world but involves the disutility of labour, is the most acceptable of all solutions. If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of *laissez-faire* to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing. The analogy between this expedient and the goldmines of the real world is complete. At periods when gold is available at suitable depths experience shows that the real wealth of the world increases rapidly; and when but little of it is so available our wealth suffers stagnation or decline. Thus gold-mines are of the greatest value and importance to civilisation. Just as wars have been the only form of large-scale loan expenditure which statesmen have thought justifiable, so gold-mining is the only pretext for digging holes in the ground which has recommended itself to bankers as sound finance; and each of these activities has played its part in progress -- failing something better. To mention a detail, the tendency in slumps for the price of gold to rise in terms of labour and materials aids eventual recovery, because it increases the depth at which gold-digging pays and lowers the minimum grade of ore which is payable.
