4 ms·
Gold is a useful metal, yes. Its use as a money standard is arbitrary. A wiser commodity standard for currency would be a basket of non-scarce commodities that
by nwah1 7y ago
Gold is a useful metal, yes. Its use as a money standard is arbitrary. A wiser commodity standard for currency would be a basket of non-scarce commodities that historically do not fluctuate much in price.
But commodity standards in general are not preferred by governments. You could even make an argument that forgoing fiat currency is a national security risk. Countries which use fiat money can conduct warfare more efficiently. And in peacetime they can conduct counter-cyclical monetary policy.
These key advantages make fiat the obvious choice for governments.
- throwaway_gold 7y ago>Its use as a money standard is arbitrary. But it is not. Gold is finite which is important for a currency. Gold is one of the easier metals to work with/coin, which is important, at least historically. And Gold is non-corrosive, which again is important in coinage. Sure these unique characteristics may not seem important now that most fiat is digital, but we are talking about a system of money going back thousands of years. It has withstood the test of time, not because its arbitrary, but because gold will last thousands of years, something no digital or paper/cotton based bank note can claim. Plus you can counterfeit all paper/cotton based bank notes, to date no one has successfully reproduced Gold.