Funny how some run from bubbles flying to gold

[Ghost of Cutten]

Quote from Martinghoul:

But it isn't it also true that you hold gold because you're implicitly assuming someone will pay you for it? I.e. you own gold, because, in your mind, it represents the world's promise to pay. So, again, it's hard to see the difference between a fiat commodity, like gold, and fiat money.

Let me be the devil's advocate for a moment. Why is it that you think that people will always be willing to sell you something you need in exchange for gold? Why can't it be that, in the future, people value some other random decorative commodity, such as seashells (yes, I know I am sounding like a broken record) more than gold?

For your first point - the supply of gold is hard to increase, whereas fiat money can have its supply increased infinitely at the whim of a government, or significantly each year by the commercial banking system. That's a major difference, given the impact that supply has on price.

As for the second point - this one is obvious. Apart from fiat currency, gold has by far the best collection of properties beneficial for a monetary substitute - it's high value per oz so relatively easy to store and transport high amounts of money, it is very durable (high melting point, low reactivity), it is relatively easy to measure its purity, it is fungible/homogenous (unlike sea shells), it is attractive and has reserve demand for jewelry, and it is time-tested as a monetary substitute. If fiat currency falls from favour, gold is the only serious monetary substitute out there at the moment.

 

[Martinghoul]

Quote from Misthos:
Maybe one day scientists will find that gene that makes us feel as we do when we hold gold? I don't know - but there is something innate to humans about the desire to hold gold. It has never left us - from the times we lived in caves, to the era of space exporation - gold has its hold on us.

Well, this is very touchy-feely, if you ask me, so the rational person in me simply refuses to accept this as a justification. However, the irrational pre-historic hoarder in me definitely agrees. So I own some...

Gold has been a medium of exchange of currencies and a store of value for millenia. It has watched its representational (and nonrepresentational) paper notes and non gold coins come and go. I hold some old drachmas, Ionian Republic coins, and Byzantine coins, I also have dollars and euros. Gold's role has not changed. The paper has - as have governments and entire nations. Gold continues... paper comes and goes.

Yep, true dat...

 

[Martinghoul]

Quote from Ghost of Cutten:
For your first point - the supply of gold is hard to increase, whereas fiat money can have its supply increased infinitely at the whim of a government, or significantly each year by the commercial banking system. That's a major difference, given the impact that supply has on price.

True that, but I am actually concentrating on the demand side. How can we blithely assume this arbitrary demand for gold continues ad infinitum? If you assume that demand for fiat money can come and go, why should we necessarily assume that the demand for gold behaves differently?

As for the second point - this one is obvious. Apart from fiat currency, gold has by far the best collection of properties beneficial for a monetary substitute - it's high value per oz so relatively easy to store and transport high amounts of money, it is very durable (high melting point, low reactivity), it is relatively easy to measure its purity, it is fungible/homogenous (unlike sea shells), it is attractive and has reserve demand for jewelry, and it is time-tested as a monetary substitute. If fiat currency falls from favour, gold is the only serious monetary substitute out there at the moment.

I am familiar with all the "nice" properties of gold. However, there are all sorts of other materials that possess similarly advantageous properties or are even better. So, ultimately, are we just saying that "we love gold, now and always, because we have always loved gold (because it's shiny)"?

 

[stock777]

Gold is a call on the basic idiocy of the human species.

As such, it is as valuable as a BP put.