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It is truly painful to read some of the misinformed posts on economic issues here. Here is all you need to know: - Gold is money, and has been considered mone

It is truly painful to read some of the misinformed posts on economic issues here. Here is all you need to know: - Gold is money, and has been considered money by all civilizations on earth for thousands of years. - Gold does not decay, rust, degrade, or decompose in any way over time. - Gold cannot be printed, duplicated, or fabricated in any way. - Gold, because of it's unique color and atomic weight is almost impossible to imitate. Gold is real money that holds it's value over time. It is not in a bubble. What is happening is that the bubble of fiat currency is deflating against gold. Gold holds it's value in a remarkable manner over time. You will find, for example, that a fine tailored men's suit has cost about one ounce of gold for hundreds of years. When you figure out the fiat currency is the real "stupid" you will probably wish you had some gold. But, by then, it will probably be too late.

roel_v 15y ago
"Gold is money, and has been considered money by all civilizations on earth for thousands of years." Actually, no - the Inca's used textiles and animals for currency, and gold was used for ceremonial purposes (that last part iirc, it's been a few years since I was in Peru). The reason was that gold was plentiful for them, so its main reason for using it now and elsewhere didn't exist for them. Apart from that, 'gold is money' doesn't even make sense. 'money' is something that has value, and 'value' is in the eye of the beholder. If you want to argue that gold has a longer historical track record as a holder of value than paper money or any other economic theory about gold, fine - but you sound like a crackpot gold bug, and if that is really the case, please take your intellectually dishonest nonsense elsewhere.
- david927 15y ago
  So a paper dollar bill has "value"? Scarcity provides value. Read this and let's talk some more: http://johnlaw0.wordpress.com/2011/08/23/why-the-global-financial-system-is-about-to-collapse-2006/ http://johnlaw0.wordpress.com/2011/08/23/why-the-global-fina...
- yardie 15y ago
  Gold is a fungible item but it is definitely not money. You can't walk into a supermarket and buy a weeks worth of groceries with it. You can exchange it with someone, possible the store manager, for what he thinks it's worth. This will be far less than the gold market because now he has to find a way to exchange or store it. And the cycle continues.
  - illumin8 15y ago
    You can walk into a bank anywhere in the world and convert it into local currency. That's as close to money as you're likely to find. Edit: I should have said "coin dealer." To the reply below in Cork Ireland - I see you have a convenient merchant in your very town that will be happy to convert gold coins into cash: http://www.dublincoinauction.com/index.php?page=index http://www.dublincoinauction.com/index.php?page=index
    - jtbigwoo 15y ago
      I'm not sure what world you're living in, but none of the banks in my (medium-sized middle-American) city buy or sell gold. I have to go to a coin dealer, pawn shop, or one of those "WE BUY GOLD" places. A used guitar would be just as easy to convert to cash.
    - handelaar 15y ago
      I'm in Cork, Ireland. Second-largest city in the country. I'm gonna bet you €10 right now (or an equivalent value of the element of your choice, if you insist) that there's not a bank within 20 miles of here where I can walk in with gold and walk out with cash.
    - mikeash 15y ago
      You can walk into a pawn shop anywhere in the world and convert anything into local currency. That doesn't seem to prove very much.
- illumin8 15y ago
  The Incas had vaults and palaces full of gold. Just because the peasants of Inca times couldn't afford any, and bartered with textiles and animals, doesn't mean the gold wasn't valued by the ruling class. Please take your intellectually dishonest opinion somewhere else. The fact is that gold can be converted into any currency in the world, in any country in the world. I can walk into a bank in Zimbabwe with a gold eagle and walk out with several $trillion Zimbabwe dollars in fiat currency. As we speak, Gold just reached $1900 USD an ounce today. Which would you rather have stuck in a safe back in 2009? A gold eagle, or a $1000 in US currency?
  - anamax 15y ago
    > The fact is that gold can be converted into any currency in the world, in any country in the world. That wasn't true in the US from the early 1930s until the 1970s.
  - roel_v 15y ago
    Inca rulers and the upper class used gold for decoration and to make things like tableware from - the point of this discussion is whether it was used as currency, which it wasn't. How are you going to call something a currency when it's only hanging on the wall of the upper 2% of society? I'm not sure what point you're trying to make, but you said that gold was used by all societies of the last 1000's of years as a currency, but it flat out isn't. Most societies, yes, but not all - and that's important, because it shows that in places where there is a relative abundance of gold, it's not good as a currency (the non-use of gold in Inca times was not solely because of high supply, I'm not interested in arguing details on Inca culture and economics here because frankly I don't know much more about it than what a couple of tour guides told me). Anyway, let's go back to 2007. A house in Phoenix that sold for 250k in 2004 just reached one million. Which would you have rather bought back in 2004? That house, or a gold eagle? My point - it's easy to make a 'case' with perfect hindsight. There are several drivers to the current high price of gold; people diversifying their portfolios into precious metals, Chinese millionaire who have limited options for storing value, increasing demand from emerging markets for jewelry. That's not the point; the point is that you are claiming that gold has 'intrinsic' value ('Gold is real money that holds it's value over time.'). That's bullshit, plain and simple. Yes, gold has historically been a relatively constant value store, but there is nothing intrinsically valuable about it, and (the vast majority of) those claiming it is are alarmist nutcases with little grasp of economics.
StavrosK 15y ago
Your comment is an instance where I wish I could see the number of upvotes, to gauge how many people corroborated this. For lack of that, can someone comment as to how valid this is? It sounds valid, I would just appreciate another data point.
- david927 15y ago
  Read this: http://johnlaw0.wordpress.com/2011/08/23/why-the-global-financial-system-is-about-to-collapse-2006/ http://johnlaw0.wordpress.com/2011/08/23/why-the-global-fina...
- illumin8 15y ago
  It's currently 4 points now. I don't expect most people on HN to understand modern monetary theory, but at least a few do.
onemoreact 15y ago
We can actually create gold today. Granted crating a 'tiny' amount of radioative gold is not particularly sensible but it's still possible.
- baltcode 15y ago
  It costs more to produce than the market price => it can't be counterfeited.
  - onemoreact 15y ago
    I see your point, but if it cost more to produce than the market price then nobody would mine gold. What separates gold from most other things is its durability not it's rarity. Gold from mined hundreds of years ago is just as valuable as fresh gold so the amount of new gold entering the market each year has little impact on its supply.
    - baltcode 15y ago
      By produce, I mean producing it using nuclear reactors/radioactivity from other elements, not mining.
      - onemoreact 15y ago
        I edited that comment, but more generally do you see a real difference between say extracting 10trillion dollars’ worth of gold from the world’s oceans from manufacturing it? With Diamonds I can see the appeal of natural gems but with gold it’s next to meaningless.
        baltcode 15y ago
        My point was that that a govt or bank can't "cheat" by leveraging it or counterfeiting it. Yes, if very large accessible reserves were found, one's savings in gold would be hurt but it would would not happen simply at the diktat of a government. The fact that you can mine it or produce isotopes does not change the fact. I did not say anything about its inherent value.
crxpandion 15y ago
I like to think about money this way: when the world ends and we are left in some of post-apocalyptic zombie epic society do you think that gold will still be valuable? Gold cannot feed you, protect you, or help you survive in any way. Besides being very resistant to corrosion and very malleable, gold really doesn't have that many special properties. Really the only reason gold is considered to be so valuable is because its rare. But if you really want to talk about money, then goods and materials have far more intrinsic value than gold. In fact, your post is totally wrong. Most currency was very nonstandard, with all sorts of alloys and rare metals being used.
- illumin8 15y ago
  How is my post wrong? Name one fiat currency in the history of the world that has not eventually been devalued and become worthless over time. Every currency that has crumbled has had one thing in common - it used to be backed by gold, silver, or some other precious resource, and then due to the need of government to print more money, the backing was removed. Why are we as humans destined to learn this lesson the hard way every few decades? Because people have a short memory and forget history. Once confidence in a currency has eroded no amount of it can be worth almost anything. See Germany during the Weimar republic - people carrying wheelbarrows full of paper bills to buy a loaf of bread. I'm not saying that's going to happen tomorrow in the US, but currency devaluation is a slippery slope and it is happening all around us.
  - crxpandion 15y ago
    your post is wrong in its claim that all civilizations have used gold as currency. In fact most civilizations until recently didnt really have an official currency. Furthermore, raw materials such as food were far more commonly traded. Taxes, until recently, were collected in raw goods. Im not really sure why you want to go back to the gold standard so badly. Do you realize that the reason technologies like the internet have grown so fast is because we have a fiat currency? This allows people, especially small and new businesses, to borrow effectively.
    - 15y ago
dmm 15y ago
> all civilizations on earth Not all. Silver was money in China. A significant fact because for several centuries European nations wanted Chinese goods but China wanted nothing from western barbarians but their silver.
- illumin8 15y ago
  Silver was money, and so was gold.
sek 15y ago
> Gold is money, and has been considered money by all civilizations on earth for thousands of years. That is the historical value i was talking about, or how it is seen as money today? In which civilization can you buy your groceries with it? I never said fiat currency is there to invest, if you put your money in something that costs just to have it and you can't do anything with it then do it. For the unrealistic case that there comes a new gold based currency than you have no advantage over anyone else. I call this stupid and misinformed.
- illumin8 15y ago
  You can walk into a bank in any country in the world and convert it into a local currency. How is this not money, or equivalent to money?
brown9-2 15y ago
> Gold holds it's value in a remarkable manner over time. You will find, for example, that a fine tailored men's suit has cost about one ounce of gold for hundreds of years. Can you provide a citation for this? Wouldn't you find the same thing to be true of other types of resource/materials that had no correlation to the manufacturer of suits - that their monetary value moves in the same direction, likely due to the overall level of inflation in the economy?
- onemoreact 15y ago
  Over long time scales the relative value of things can change a lot. Salt and Grains have both lost a lot of their relative value over time. Diamonds are actually worth far more now than they were in the past. Gold has maintained it's value fairly in Europe for a long time, but it was not worth all that much in south America. Unfortunately, for the gold bugs out there gold’s relative value often changes rapidly in the short time frame.
jahmed 15y ago
Gold is not money. Gold is an asset. Dollars, Yen, Euros are money. Assets can be converted to money but assets are not money. Money is something that is commonly and readily accepted in exchange for goods or services. Can gold be money? Sure if everyone accepted it but shells, cool rocks or toe nail clippings can be money too.

roel_v 15y ago

"Gold is money, and has been considered money by all civilizations on earth for thousands of years." Actually, no - the Inca's used textiles and animals for currency, and gold was used for ceremonial purposes (that last part iirc, it's been a few years since I was in Peru). The reason was that gold was plentiful for them, so its main reason for using it now and elsewhere didn't exist for them. Apart from that, 'gold is money' doesn't even make sense. 'money' is something that has value, and 'value' is in the eye of the beholder. If you want to argue that gold has a longer historical track record as a holder of value than paper money or any other economic theory about gold, fine - but you sound like a crackpot gold bug, and if that is really the case, please take your intellectually dishonest nonsense elsewhere.

david927 15y ago
So a paper dollar bill has "value"? Scarcity provides value. Read this and let's talk some more: http://johnlaw0.wordpress.com/2011/08/23/why-the-global-financial-system-is-about-to-collapse-2006/ http://johnlaw0.wordpress.com/2011/08/23/why-the-global-fina...
yardie 15y ago
Gold is a fungible item but it is definitely not money. You can't walk into a supermarket and buy a weeks worth of groceries with it. You can exchange it with someone, possible the store manager, for what he thinks it's worth. This will be far less than the gold market because now he has to find a way to exchange or store it. And the cycle continues.
- illumin8 15y ago
  You can walk into a bank anywhere in the world and convert it into local currency. That's as close to money as you're likely to find. Edit: I should have said "coin dealer." To the reply below in Cork Ireland - I see you have a convenient merchant in your very town that will be happy to convert gold coins into cash: http://www.dublincoinauction.com/index.php?page=index http://www.dublincoinauction.com/index.php?page=index
  - jtbigwoo 15y ago
    I'm not sure what world you're living in, but none of the banks in my (medium-sized middle-American) city buy or sell gold. I have to go to a coin dealer, pawn shop, or one of those "WE BUY GOLD" places. A used guitar would be just as easy to convert to cash.
  - handelaar 15y ago
    I'm in Cork, Ireland. Second-largest city in the country. I'm gonna bet you €10 right now (or an equivalent value of the element of your choice, if you insist) that there's not a bank within 20 miles of here where I can walk in with gold and walk out with cash.
  - mikeash 15y ago
    You can walk into a pawn shop anywhere in the world and convert anything into local currency. That doesn't seem to prove very much.
illumin8 15y ago
The Incas had vaults and palaces full of gold. Just because the peasants of Inca times couldn't afford any, and bartered with textiles and animals, doesn't mean the gold wasn't valued by the ruling class. Please take your intellectually dishonest opinion somewhere else. The fact is that gold can be converted into any currency in the world, in any country in the world. I can walk into a bank in Zimbabwe with a gold eagle and walk out with several $trillion Zimbabwe dollars in fiat currency. As we speak, Gold just reached $1900 USD an ounce today. Which would you rather have stuck in a safe back in 2009? A gold eagle, or a $1000 in US currency?
- anamax 15y ago
  > The fact is that gold can be converted into any currency in the world, in any country in the world. That wasn't true in the US from the early 1930s until the 1970s.
- roel_v 15y ago
  Inca rulers and the upper class used gold for decoration and to make things like tableware from - the point of this discussion is whether it was used as currency, which it wasn't. How are you going to call something a currency when it's only hanging on the wall of the upper 2% of society? I'm not sure what point you're trying to make, but you said that gold was used by all societies of the last 1000's of years as a currency, but it flat out isn't. Most societies, yes, but not all - and that's important, because it shows that in places where there is a relative abundance of gold, it's not good as a currency (the non-use of gold in Inca times was not solely because of high supply, I'm not interested in arguing details on Inca culture and economics here because frankly I don't know much more about it than what a couple of tour guides told me). Anyway, let's go back to 2007. A house in Phoenix that sold for 250k in 2004 just reached one million. Which would you have rather bought back in 2004? That house, or a gold eagle? My point - it's easy to make a 'case' with perfect hindsight. There are several drivers to the current high price of gold; people diversifying their portfolios into precious metals, Chinese millionaire who have limited options for storing value, increasing demand from emerging markets for jewelry. That's not the point; the point is that you are claiming that gold has 'intrinsic' value ('Gold is real money that holds it's value over time.'). That's bullshit, plain and simple. Yes, gold has historically been a relatively constant value store, but there is nothing intrinsically valuable about it, and (the vast majority of) those claiming it is are alarmist nutcases with little grasp of economics.

StavrosK 15y ago

Your comment is an instance where I wish I could see the number of upvotes, to gauge how many people corroborated this. For lack of that, can someone comment as to how valid this is? It sounds valid, I would just appreciate another data point.

david927 15y ago
Read this: http://johnlaw0.wordpress.com/2011/08/23/why-the-global-financial-system-is-about-to-collapse-2006/ http://johnlaw0.wordpress.com/2011/08/23/why-the-global-fina...
illumin8 15y ago
It's currently 4 points now. I don't expect most people on HN to understand modern monetary theory, but at least a few do.

onemoreact 15y ago

We can actually create gold today. Granted crating a 'tiny' amount of radioative gold is not particularly sensible but it's still possible.

baltcode 15y ago
It costs more to produce than the market price => it can't be counterfeited.
- onemoreact 15y ago
  I see your point, but if it cost more to produce than the market price then nobody would mine gold. What separates gold from most other things is its durability not it's rarity. Gold from mined hundreds of years ago is just as valuable as fresh gold so the amount of new gold entering the market each year has little impact on its supply.
  - baltcode 15y ago
    By produce, I mean producing it using nuclear reactors/radioactivity from other elements, not mining.
    - onemoreact 15y ago
      I edited that comment, but more generally do you see a real difference between say extracting 10trillion dollars’ worth of gold from the world’s oceans from manufacturing it? With Diamonds I can see the appeal of natural gems but with gold it’s next to meaningless.
      - baltcode 15y ago
        My point was that that a govt or bank can't "cheat" by leveraging it or counterfeiting it. Yes, if very large accessible reserves were found, one's savings in gold would be hurt but it would would not happen simply at the diktat of a government. The fact that you can mine it or produce isotopes does not change the fact. I did not say anything about its inherent value.

crxpandion 15y ago

I like to think about money this way: when the world ends and we are left in some of post-apocalyptic zombie epic society do you think that gold will still be valuable? Gold cannot feed you, protect you, or help you survive in any way. Besides being very resistant to corrosion and very malleable, gold really doesn't have that many special properties. Really the only reason gold is considered to be so valuable is because its rare. But if you really want to talk about money, then goods and materials have far more intrinsic value than gold. In fact, your post is totally wrong. Most currency was very nonstandard, with all sorts of alloys and rare metals being used.

illumin8 15y ago
How is my post wrong? Name one fiat currency in the history of the world that has not eventually been devalued and become worthless over time. Every currency that has crumbled has had one thing in common - it used to be backed by gold, silver, or some other precious resource, and then due to the need of government to print more money, the backing was removed. Why are we as humans destined to learn this lesson the hard way every few decades? Because people have a short memory and forget history. Once confidence in a currency has eroded no amount of it can be worth almost anything. See Germany during the Weimar republic - people carrying wheelbarrows full of paper bills to buy a loaf of bread. I'm not saying that's going to happen tomorrow in the US, but currency devaluation is a slippery slope and it is happening all around us.
- crxpandion 15y ago
  your post is wrong in its claim that all civilizations have used gold as currency. In fact most civilizations until recently didnt really have an official currency. Furthermore, raw materials such as food were far more commonly traded. Taxes, until recently, were collected in raw goods. Im not really sure why you want to go back to the gold standard so badly. Do you realize that the reason technologies like the internet have grown so fast is because we have a fiat currency? This allows people, especially small and new businesses, to borrow effectively.
  - 15y ago

dmm 15y ago

> all civilizations on earth Not all. Silver was money in China. A significant fact because for several centuries European nations wanted Chinese goods but China wanted nothing from western barbarians but their silver.

illumin8 15y ago
Silver was money, and so was gold.

sek 15y ago

> Gold is money, and has been considered money by all civilizations on earth for thousands of years. That is the historical value i was talking about, or how it is seen as money today? In which civilization can you buy your groceries with it? I never said fiat currency is there to invest, if you put your money in something that costs just to have it and you can't do anything with it then do it. For the unrealistic case that there comes a new gold based currency than you have no advantage over anyone else. I call this stupid and misinformed.

illumin8 15y ago
You can walk into a bank in any country in the world and convert it into a local currency. How is this not money, or equivalent to money?

brown9-2 15y ago

> Gold holds it's value in a remarkable manner over time. You will find, for example, that a fine tailored men's suit has cost about one ounce of gold for hundreds of years. Can you provide a citation for this? Wouldn't you find the same thing to be true of other types of resource/materials that had no correlation to the manufacturer of suits - that their monetary value moves in the same direction, likely due to the overall level of inflation in the economy?

onemoreact 15y ago
Over long time scales the relative value of things can change a lot. Salt and Grains have both lost a lot of their relative value over time. Diamonds are actually worth far more now than they were in the past. Gold has maintained it's value fairly in Europe for a long time, but it was not worth all that much in south America. Unfortunately, for the gold bugs out there gold’s relative value often changes rapidly in the short time frame.

jahmed 15y ago

Gold is not money. Gold is an asset. Dollars, Yen, Euros are money. Assets can be converted to money but assets are not money. Money is something that is commonly and readily accepted in exchange for goods or services. Can gold be money? Sure if everyone accepted it but shells, cool rocks or toe nail clippings can be money too.