3 ms·

That gold is overinflated doesn't diminish the fact that it has a utility outside of it's use as a financial instrument.

adrianN 15y ago
The paper used to print dollars also has intrinsic value, but you wouldn't want to argue that it's a good choice as currency just because you can burn it.
- knowtheory 15y ago
  Okay, now i'm veering into positions where i don't have a sound enough background in economics to be totally confident in the statements i am going to make. I'm sure there's economic research on this, and i'd further hazard a guess that there's probably not agreement on the subject: Sorry, let me be more clear. The criteria for a sound investment as an asset is different from the criteria determining soundness in a currency (from the perspective of an individual holding an asset or currency). I say that on the basis of a variety of discussions on what money is and what it's supposed to represent. The point of making sound investment is that you have faith that even if plans go horribly awry, you are exchanging your money and interest for an asset of some concrete worth (at least in the ideal). The point of currency is to provide a broad-based and stable mechanism to ensure liquidity in economic markets. The whole point of US dollars and what the Fed is trying do is provide a solid fundamental basis upon which the US economy can function. We can argue about the intrinsic worth of currency, but i don't think that's the point of currency. So, do i think gold is a good investment? No, i think it's way over-inflated, but if you have a big pile of gold, you'll be able to do something with it. Do i think gold is a good currency? Absolutely, positively, one-million-times NO. I think that using gold back currencies is being pushed by people (shysters) who want to further inflate the value of gold, and by people who have bought the bad arguments that the shysters have been pushing. tl;dr: good asset != good currency
  - nazgulnarsil 15y ago
    I think you're trying to distinguish between properties that make something a good way of transporting value over time and properties that make it good as a medium of exchange. You're right that these things aren't necessarily the same because they are overlapping, but not congruent, sets of properties.
hugh3 15y ago
True, but if you break down the value of gold then it's maybe a dollar an ounce from practical uses and 1500 dollars an ounce from the fact that it's a seven-thouand-year-old asset bubble. Or, to put it another way, suppose tomorrow I figure out a way to replace gold with some much cheaper tin-copper alloy in all its industrial applications. That's not gonna decrease the value of gold all that much. (Note that I don't really count jewellery as an industrial application -- gold is used in jewellery because it's valuable, not because it looks any prettier than other metals).
- javert 15y ago
  gold is used in jewellery because it's valuable, not because it looks any prettier than other metals I'm not so sure about that. Gold is used in jewelry because (a) it looks cooler than silver/tin/copper/etc.; and (b) because it is really rare. So I'm proposing the chain is: Looks good & rare -> Valuable I think if you were missing either "looks good for jewelry" OR "rare", it wouldn't be valuable and it wouldn't work as a medium of exchange. This is a historical perspective. These days you could also use: Used in industrial applications & rare -> Valuable but I doubt that would drive the value of it up to where my former hypothesis does, if it's right.
  - ohashi 15y ago
    Look at Platinum. More expensive than gold, largely commercial use (jewelry is about 25%).
    - regularfry 15y ago
      Also comparatively harder to work than gold.
  - bhickey 15y ago
    Gold is used in jewelry because: * It is malleable * It is resistant to corrosion/tarnish
    - 15y ago

adrianN 15y ago

The paper used to print dollars also has intrinsic value, but you wouldn't want to argue that it's a good choice as currency just because you can burn it.

knowtheory 15y ago
Okay, now i'm veering into positions where i don't have a sound enough background in economics to be totally confident in the statements i am going to make. I'm sure there's economic research on this, and i'd further hazard a guess that there's probably not agreement on the subject: Sorry, let me be more clear. The criteria for a sound investment as an asset is different from the criteria determining soundness in a currency (from the perspective of an individual holding an asset or currency). I say that on the basis of a variety of discussions on what money is and what it's supposed to represent. The point of making sound investment is that you have faith that even if plans go horribly awry, you are exchanging your money and interest for an asset of some concrete worth (at least in the ideal). The point of currency is to provide a broad-based and stable mechanism to ensure liquidity in economic markets. The whole point of US dollars and what the Fed is trying do is provide a solid fundamental basis upon which the US economy can function. We can argue about the intrinsic worth of currency, but i don't think that's the point of currency. So, do i think gold is a good investment? No, i think it's way over-inflated, but if you have a big pile of gold, you'll be able to do something with it. Do i think gold is a good currency? Absolutely, positively, one-million-times NO. I think that using gold back currencies is being pushed by people (shysters) who want to further inflate the value of gold, and by people who have bought the bad arguments that the shysters have been pushing. tl;dr: good asset != good currency
- nazgulnarsil 15y ago
  I think you're trying to distinguish between properties that make something a good way of transporting value over time and properties that make it good as a medium of exchange. You're right that these things aren't necessarily the same because they are overlapping, but not congruent, sets of properties.

hugh3 15y ago

True, but if you break down the value of gold then it's maybe a dollar an ounce from practical uses and 1500 dollars an ounce from the fact that it's a seven-thouand-year-old asset bubble. Or, to put it another way, suppose tomorrow I figure out a way to replace gold with some much cheaper tin-copper alloy in all its industrial applications. That's not gonna decrease the value of gold all that much. (Note that I don't really count jewellery as an industrial application -- gold is used in jewellery because it's valuable, not because it looks any prettier than other metals).

javert 15y ago
gold is used in jewellery because it's valuable, not because it looks any prettier than other metals I'm not so sure about that. Gold is used in jewelry because (a) it looks cooler than silver/tin/copper/etc.; and (b) because it is really rare. So I'm proposing the chain is: Looks good & rare -> Valuable I think if you were missing either "looks good for jewelry" OR "rare", it wouldn't be valuable and it wouldn't work as a medium of exchange. This is a historical perspective. These days you could also use: Used in industrial applications & rare -> Valuable but I doubt that would drive the value of it up to where my former hypothesis does, if it's right.
- ohashi 15y ago
  Look at Platinum. More expensive than gold, largely commercial use (jewelry is about 25%).
  - regularfry 15y ago
    Also comparatively harder to work than gold.
- bhickey 15y ago
  Gold is used in jewelry because: * It is malleable * It is resistant to corrosion/tarnish
  - 15y ago