Gold has a limited supply, though. While you can continue to issue new $1 bills every day from here to eternity, at any one moment there is only X atoms of gold on the planet to be split among all humans.
I’d put down the definition that fiat money is purely representative of the amount of service for which it can be traded. That is to say, it has value because others are willing to do things for you in trade for it.
Gold, traditionally, had value because the chieftan of the village would always be willing to accept it as something to make himself look grandiose with. If all else failed, you could always get him to back you on whatever problem you were having by trading him this one thing. It was backed by the implicit understanding that while it had zero value to most people (and was hence valueless on its own), to the people who could get shit done, it did have intrinsic value.
Gold has value on it’s own. It’s one of the best metals for making things of long lasting value. The reason it isn’t used more is that it is so rare. A gold tooth is far better than a porcelain tooth, but not as cosmetically looking. And that is just one of the many examples where gold has a worth all of its own
Basically fiat money is defined as “It is what it is, because the government says so.” Gold is not because regardless of what any government says, it has a worth for it’s use alone in addition to what world markets say. World markets are based on demand.
If the US government says a dollar is a dollar, it is that because the US government says so. If the US government says an ounce of gold is $5,000/ounce, it wouldn’t hold water.
Gold has value on the ‘greater fool’ principle
- you value it because you reckon someone else will value it
- a bit like buying a dodgy share
In itself gold is not that useful, although it is good for dentistry and decorating the missus if you are in India
There’s a limited supply of everything. I don’t see anyone raving about moving to the rhodium standard though. Or the land standard for that matter - they sure ain’t making more or that, and it’s pretty useful in many standing or walking applications.
ETA: except in Holland, of course. Fiat land !
I suspect that if the US government wanted to, they could find a printer to work up the $∞ bill.
I thought FIAT land was in Italy.
Absolutely incorrect. Gold has a litany of useful industrial purposes. It conducts electricity very well, it is very resistant to oxidation & corrosion, it is extremely malleable.
Fiat money has value because people accept it, not because the government backs it. During hyperinflation the Zimbabwean dollar quit being money in any meaningful sense, even though the government backed it. Tokens at a state fair are fiat money–you can use them to buy everything available, if you want to sell them for other currency as you leave, you can always find buyers–but you certainly can’t use them to pay your taxes.
Question needs reframing:
First, one should ask how long has any money system run before devaluation caught up with it, since reading things like (Ascent of Money one gets a clear idea that gold or metallic based currencies suffered devaluations as well. That’s because unless you’re going to go back to direct gold barter
Second, if the questioner is asking how long a pure fiat system has held out, one has to benchmark that (I think we need to look up the Chinese paper money system, I believe it ran quite a long time, pre scientific management, pre macro economic data, etc). I don’t know that this would tell us much about the modern monetary systems, any more than asking how long any medieval bank functioned, as a way to criticize modern banking (since the question seems loaded).
Third, let’s not forget that there are other money systems out there, in Africa, the Americas, Asia, that were not Gold based. Not sure the data exists for them, but writing above as if gold was a universal primitive money is wrong; very European & West Asian phenomena.
But the historical track record is pretty good. Even if “gold standard” currency is technically fiat money, in that the nominal value in a particular society at a particular time is set by government decree–history suggests that even what that government and its banks have gone to dust, people will still trade useful things for the gold the money was actually made of.
It is?
Mmmm, well my reading of the history says that outside Europe this isn’t the history, and in Europe the record says that pure barter actually replaced gold and silver when the Roman system broke down (itself having been massively devalued over the years).
I’d say touting gold as a monetary system that intrinsicly holds value comes from a highly selective reading of history.
I thought that fiat money ultimately gets its value by government fiat. Otherwise, what’s the “fiat”?
I always run into these discussions knowing that people are confusing the concepts of ‘wealth’ and ‘money’.
Money is differentiated from the other two simply because it is an accounting system. Whether it’s gold, or dollars or big round rocks it’s a symbol for ‘wealth’.
‘Wealth’, on the other hand, denotes items and services in hand. The laptop on which I type these words is wealth. The $20 bill in my wallet is merely money and has no intrinsic value.
Money, again regardless of its form, only has value due to a perceived agreement among users that it does so. A goldbug could have all the gold on Earth but would starve if others didn’t want to trade for it. A person with arable land, on the other hand, can grow food whether or not he has any form of money.
Or, in short, the goldbugs are horrifically wrong and are approaching the problem from an astonishingly weak grasp of economics and wealth.
Are you really saying that during the “Dark Ages” in Europe gold and silver were not perceived as a repository of wealth and valuable trading currency?
Agreed on the value of arable land, of course.
Are standardized units of intrinsically valuable things, used as trading currency, not “money”? When prices and taxes are set in koku of rice, for example, is the koku not effectively a unit of money? When actual koku aren’t physically transported, but rather promissory notes, is that when it becomes money on the rice standard?
Apologies for multiposting.
My understanding was that the devaluation of Roman coinage had to do with the debasing of the metal content, not a general loss of interest in genuine silver. If anything, it seems to suggest that the perceived value was tied more to actual metal than to fiat.
I am not an aurophile, but some of the “aurophobic” comments here seem quite incorrect to me. 
In 1933 Americans were required to sell much of their gold at $20.67 to the government, which then moved to the price toward $35. If that action wasn’t “fiat” I’ll need a new dictionary. Indeed since nothing stopped the Federal authority from doing this, one could correctly argue that the dollar was already “fiat money” prior to 1933.
This has been asked and answered many times in many threads. I’ll just post a simple reductio ad absurdem: is not the nitrogen-oxygen mixture you’re respirating right now the most “inherently valuable” substance? What did you pay for it?
Cite? IIRC, the problem in Europe wasn’t gold coins, it was gold coins that did not pass Archimedes’ density test.
No, I am saying that all the records available, as I read the history, was that gold and silver as money in the West of Europe virtually disappeared from circulation.
Yes, any standardised unit can be money. Salt. Cowri beads, whatever.
Yes, the metallic content was debased, that is the whole point. a monetary system based on metals is still debasable, that is it can still lose value through manipulation of content, as well as to the variation of the underlying demand (value) of the metal content.
Unless you are in a primitive metallic barter system (weighing out actual content of pure gold or silver), you are operating under a fiat system, some authority is by its fiat saying this coin = X value. That is disguised slightly, but the essence is the same.
Of course the reasons for debasement are strikingly similar to modern over-printing of money (or put it another way, excessive inflation), so for me I don’t see much substantive difference.
The Power of Gold and the Ascent of Money, as I recall, both hit on this. Disappearance of coinage from economic operations, passing a density test I don’t recall any serious author citing.
Nevertheless, the point is there are metallic monetary systems that also proved unstable for reasons, I think, effectively identical to that of pure fiat systems.