It’s a natural cycle that societies and civilizations start out with quality money and then degenerate into using quantity currency. As societies become debased, they also debase their money. This has happened many times before. Ancient Rome started out with quality money- they had the Denarius which was almost entirely silver. By the end, the Denarius was almost entirely base metals. But in the end, sound money always wins.
Gold and silver require discipline and constraint from banks and governments, which is why they hate them.
(BTW, central banks all over the world are aggressively hoarding gold. They want the real wealth and want us chasing after paper and digital illusions of wealth)
That and, if the productivity of a nation doubles, but the quantity of gold stagnates, then you end up in a situation in which either transactions cannot occur (I can’t trade you my labor for the gold it’s worth because there isn’t enough gold), or a given quantity in gold will buy more than it did previously (leading you to want to hoard gold, which only makes things worse and can cause the economy to stagnate as well).
Gold is the ultimate (or should that be original?) fiat. It served its purpose in ancient times, but as modern economies have developed we realize there is no reason to shackle ourselves to it.
ETA: I mean, I’d invoke William Jennings Bryan and the whole “cross of gold” line, except he was still arguing for a bimetallic standard, rather than just gold based. But the sentiment is still there.
If Shadow Stat is correct, GDP of the U.S. has been in a long-term decline. Does that sound plausible to you?
According to some sites, ‘Shadow Stat’ does its “calculations” by … simply adding a constant to the official rates!
Shadow Stat attracts little attention from economists, but lots of attention from right-wing talk-show hosts.
Prices vary! Plot the wood-to-wool price ratio (as an arbitrary example) and the fluctuations will frighten! One can set up a basket and get any conclusion one wants. But just now, I see that the popular Producer Price Index (totally distinct from CPI) shows average 1.9% inflation over the 39 years since its PPI=100 fixing in 1982.
When guesstimating an inflation rate, do you compare a 2010 iPhone with a 2020 iPhone? The latter is far more powerful on a per-dollar basis.
Uh, If gold is increasingly scarce, then gold buyers will profit, AOTBE. HTH.
And FYI, what Bryan and the ‘Free Silver’ folk wanted was To Devalue the U.S. Dollar. Nothing more, nothing less. This would be to the benefit of mortgage-paying farmers. (Admittedly, Bryan was responding to a deflation caused by, as you point out, the scarcity of gold.)
WHY is Gold no longer used as money? If it’s because it failed as a store of value someone forgot to tell gold shops which charge $1000’s for a simple necklace.
I can’t speak for OP, but for many investors the question is NOT whether countries will go back to a gold standard. It’s simply whether the spot price of the metal will rise or fall over the next several years.
The government can’t hide a whole lot of inflation. Because we would all notice. But let’s say they do. Let’s say inflation is really, say, 11 %. The banks, who would I assume are in on this scam, are willing to loan you money at about 4%. Willing to give up 7% because they cunningly… hell if I know. I literally cannot come up with a scenario where that makes sense.
Gold, silver, diamonds etc only work in a collapsed economy when there is access to a non-collapsed economy. A example I have used is WW2 concentration camps: gold etc had value because it could be used outside the camp by guards. Even then, the trade value of it had shrunk dramatically.
If all societies debase into using “quantity currency” that how can it be true that “sound money always wins”?
Cite? And if hordes of gold are being taken off the market then why isn’t the price of gold skyrocketing?
You can’t have the “spot price” and the collapse of American currency in the same sentence. If people are bartering for gold then civilization has ended and no markets exist. I can’t speak for the OP either, but nothing in this thread leads to any belief that the spot price is being discussed.
Well, yes. We’re in the midst of a horrific long-term economic decline, and we’ve only been covering it up by accumulating unbelievably massive debt. Unsustainable, irrational, and yes-immoral, amounts of debt.
American dollars have been a stable currency for over a century before I was born. And I fully expect them to still be a stable currency for a hundred years after I die. So while you can argue that American dollars are sure to fail in the historical long term, I don’t expect it to be a factor at any point where it would affect me or anyone now alive.
Well of course they adjust the basket. A lot of items are simply not manufactured anymore like VCRs, or have sharply declined in usage. And many items that are now essential parts of life, such as cellphones or laptops, barely even existed 30 years ago and have wildly improved since.
Money is a lubricant for trade. It has very little intrinsic value. If a currency collapses it’s because a government has made colossally bad decisions such as in Zimbabwe or Venezuela.
In a society like that, personal security is more important than stores of precious commodities that will make you a target of murder and robbery.
With regards to gold and silver, if gold and silver were so valued the ones with money and gold and silver wouldn’t be paying money to sell gold and silver.
I’m old enough to have had to deal with 11% inflation. It affected everything in the economy. Remember adjustable mortgages? It affected the raises we gave out. It was common for sellers of houses to finance the buyer. I did, at 12 1/2% interest. Which the buyer was thrilled to get.
I can track inflation pretty well using the cover price of the sf magazines in my collection. If we had high inflation, you wouldn’t need to be Sherlock Holmes to figure it out.
I hereby predict that the USD will collapse in a week. If it doesn’t, I’ll predict it again for a week later. Eventually I’ll be right. Maybe not in my lifetime, but eventually. That’s how Robert Reich forecast the 1987 stock market collapse. He started a decade earlier and kept at it, week after week, on the talk shows. See, perseverance pays off!
How much of total global currencies are backed by precious metals? How much weight would you schlep for your monthly payments? When transmutation is economically viable and “precious” metals are reduced to industrial or artistic materials, won’t gold bugs feel silly?
The collapse of the universe and/or heat death/proton decay will bring everything to an end. All fiat currencies are doomed, especially if you get to stick “eventually” in there like that.
I’m more receptive to some of your views than others in the thread. But this reads like cartoon caricature. America is awash in millions of iPhones; people are still drinking French wines and Scotch whiskey instead of bathtub gin. Millions of Americans even have health insurance. All because … of what? Because countries like China are foolishly eager to gobble up our worthless paper?
WHY is Gold no longer used as money? If it’s because it failed as a store of value someone forgot to tell gold shops which charge $1000’s for a simple necklace.