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"Need I remind you that the world has been running almost exclusively on gold," Actually that is not true. Gold by weight as a currency has been used at times

"Need I remind you that the world has been running almost exclusively on gold," Actually that is not true. Gold by weight as a currency has been used at times, but many other forms of currency were used historically even by people who had gold available to them. There is a lot of historical precedent for credit money (i.e. people using debts owed to them as currency) and for coins minted with non-gold metals like iron and bronze. The earliest known currencies were "virtual," taking the form of clay tokens that were used for accounting in the ancient near east -- a civilization that was well aware of gold but considered it to be more useful for producing ceremonial objects. Shortly after inventing paper the Chinese started using paper money. Gold is actually a terrible currency that makes trade much less efficient. Historically gold was most useful as a currency when empires were able to procure a growing supply of the metal, and when the gold stopped coming in people would switch to some other currency (typically some form of credit money).

H8crilA 6y ago
Yeah I agree with the first paragraph. I wrote "deeply flexible", that is ultimately not redeemable by gold. Credit is okay with me. Why do you think the second paragraph is true? Gold has been disconnected from currencies only since 1971, and this detachment clearly has had significant impact: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/
- betterunix2 6y ago
  Even if you are only talking about the United States, 1971 was not the first time the country left the gold standard: https://en.wikipedia.org/wiki/Demand_Note#Suspension_of_specie_payment https://en.wikipedia.org/wiki/Demand_Note#Suspension_of_spec... https://en.wikipedia.org/wiki/History_of_the_United_States_dollar#The_Gold_Reserve_Act https://en.wikipedia.org/wiki/History_of_the_United_States_d... Historically the pattern has generally been for a metal standard to be introduced only to be abandoned when the state is unable to procure more of the metal. The Romans abandoned their silver standard and started debasing their coins shortly after the empire reached its greatest extent, almost certainly because they could not find enough silver to keep the system going (though nobody bothered to write this detail down). In ancient China various dynasties are known to have started issuing iron and bronze coins when they could not find enough gold/silver/copper to meet their monetary needs (and when the weight of coins became impractical they issued paper money). There is no question that using weights of gold as a currency makes trade less efficient. Most merchants and most consumers do not have the equipment or expertise needed to evaluate whether or not a given weight is pure gold, and having to pay someone to evaluate a sample amounts to a tax on every transaction. The inability for a central bank to adjust the supply of money in response to changing economic conditions actually led to greater price instability when the gold standard was in place (deflation during a banking crisis). It is economically inefficient to pay people to guard vaults filled with gold bars that are never going to do anything but collect dust. Leaving the gold standard was the right thing to do every time it happened, and going back to it was in every case the wrong thing to do (motivated more by alchemy and tradition than by any serious economic considerations).

H8crilA 6y ago

Yeah I agree with the first paragraph. I wrote "deeply flexible", that is ultimately not redeemable by gold. Credit is okay with me. Why do you think the second paragraph is true? Gold has been disconnected from currencies only since 1971, and this detachment clearly has had significant impact: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/

betterunix2 6y ago
Even if you are only talking about the United States, 1971 was not the first time the country left the gold standard: https://en.wikipedia.org/wiki/Demand_Note#Suspension_of_specie_payment https://en.wikipedia.org/wiki/Demand_Note#Suspension_of_spec... https://en.wikipedia.org/wiki/History_of_the_United_States_dollar#The_Gold_Reserve_Act https://en.wikipedia.org/wiki/History_of_the_United_States_d... Historically the pattern has generally been for a metal standard to be introduced only to be abandoned when the state is unable to procure more of the metal. The Romans abandoned their silver standard and started debasing their coins shortly after the empire reached its greatest extent, almost certainly because they could not find enough silver to keep the system going (though nobody bothered to write this detail down). In ancient China various dynasties are known to have started issuing iron and bronze coins when they could not find enough gold/silver/copper to meet their monetary needs (and when the weight of coins became impractical they issued paper money). There is no question that using weights of gold as a currency makes trade less efficient. Most merchants and most consumers do not have the equipment or expertise needed to evaluate whether or not a given weight is pure gold, and having to pay someone to evaluate a sample amounts to a tax on every transaction. The inability for a central bank to adjust the supply of money in response to changing economic conditions actually led to greater price instability when the gold standard was in place (deflation during a banking crisis). It is economically inefficient to pay people to guard vaults filled with gold bars that are never going to do anything but collect dust. Leaving the gold standard was the right thing to do every time it happened, and going back to it was in every case the wrong thing to do (motivated more by alchemy and tradition than by any serious economic considerations).