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The continued existence of gold as a store of value (and to a lesser extent silver) contradicts this model. Very few economic transactions are denominated in go

The continued existence of gold as a store of value (and to a lesser extent silver) contradicts this model. Very few economic transactions are denominated in gold, either as a medium of exchange or a unit of account. There is a small amount of industrial demand, but this is far too tiny to justify gold's gigantic market capitalization. Valued on industrial demand alone gold would maybe worth $100/oz, yet today it trades at $1700/oz. And it has held a lofty valuation more than half a century after all major economies abandoned any gold standard behind their fiat currencies. The only possible explanation for gold's continued valuation is that it's quite possible for assets to exist as money-like stores of value without necessarily needing to possess a functioning role as a medium of exchange or unit of account. Moreover what we can see is that store of value assets are highly path-dependent. Rhodium has similar properties to gold, yet gold is far more widely used as a store of value. The sole explanation for this is because of gold's historical narrative.

hans1729 4y ago
>Very few economic transactions are denominated in gold, either as a medium of exchange or a unit of account. That doesn't mean that gold isn't a viable medium of exchange - it obviously is, just go to a market of your choice and trade it for goods. In fact, it's the single most viable medium of exchange, globally, since currencies are tied to economies, and economies can crash. Gold can not, thus is it valuable.
- gumby 4y ago
  > economies can crash. Gold can not… A glance at the gold prices and economies of the 19th century show that in fact the gold price certainly can crash due to gold strikes. In addition, the stock of the planet’s gold is negligible compared to the global economy (the hard to quantify set of transactions that people do with each other) so by definition can only operate at the margins. If the world crashes so far that gold is a meaningful proportion, will there be much to transact at all?
  - hans1729 4y ago
    The exchange rate for gold (i.e. the interface of an economy with the material) can crash, not gold itself, thus the inherent value. That was my point, sorry if that wasn't coming across. >If the world crashes so far that gold is a meaningful proportion, will there be much to transact at all? This is where I start speculating, but couldn't we just create an arbitrary new currency and tie it to gold?
    - gumby 4y ago
      > This is where I start speculating, but couldn't we just create an arbitrary new currency and tie it to gold? How is that different from using the gold? i.e. has the same limitations. There are rational reasons for the gold standard having been dropped.
    - XorNot 4y ago
      > The exchange rate for gold (i.e. the interface of an economy with the material) can crash, not gold itself, thus the inherent value. What do you think this means? Because gold is only worth what you can trade it for - the exchange rate. It has no "inherent value" - you don't eat gold.
- apocalypstyx 4y ago
  >economies can crash. Gold can not, thus is it valuable. The thing about money is that it is a technology. But unlike other technologies, such as an electric toothbrush, for instance, it has an additional quirk: without belief, it doesn't work. Regardless of whether or not I believe in electricity, an electric tooth brush turns on and off; if the participants in an economy don't have faith in the economy, the economy falters. Money's value lies in this belief, whether it is the belief that I can buy groceries or pay taxes. It is a faith that is a function of utility: there is the interdependence of the gods' delivering and my belief that they will; should the gods not deliver sufficiently, my faith wavers; likewise, if enough of the faith of the masses wavers, the gods fail to deliver. Gold is like an old god: its faith has a lot of coinage. However, its rule is not necessarily omnipresent. Scenario: we are in a post-nuclear apocalypse. I have a small trading post and a can of beans; you have a solid gold coin. Challenge: convince me why I should take the coin.
  - hans1729 4y ago
    >Gold is like an old god: its faith has a lot of coinage. However, its rule is not necessarily omnipresent. Very nice point, you're not wrong. That being said: >we are in a post-nuclear apocalypse. I have a small trading post and a can of beans; you have a solid gold coin. Challenge: convince me why I should take the coin. Because it has properties that qualify it as a method of exchange (portability, provable chemical composition [...]) -- the same reasons it worked the first time. Mr Bean-Haggler, what else do you suggest we use for exchange? Mud? :-)
    - mitchdoogle 4y ago
      It's post apocalypse - you trade whatever you find. The most important commodities will be food, water, medicine. Gold would be practically worthless - it's not going to help anyone survive.
    - apocalypstyx 4y ago
      As an intermediary, currency requires a minimum amount of social relations. Its value, if it can be said to have one, lies in its use as an indirect measure of the degree of faith in a particular set of social constructs. The reason I use the post-apocalyptic scenario is exactly because of this rupture of social relations. It is not the ghost of the previous civilization trying to reconstitute itself. It is a place in a wilderness onto which people might stumble. (Admittedly, this might not be communicated well and too informed by my early secondary consumption of old western movies.) Without this broader social context, the concept of trade becomes purely localized. My needs are not serviced by an explicit diffuse network which is conceptualized as an aspect not just of society but constitutive of reality. Operating on a faith, we take the conceptualization as reality and can accept, in our lives now, intermediary exchange: I firmly believe that by accepting an electronic transfer to my bank, I will be able to buy sweet and salty food that is engineered to appeal to my dietary obsessions as bequeathed by a combination of evolution and social conditioning. In the midst of such a thought experiment, however, I am not guaranteed to encounter another haggard individual in this hypothesized godforsaken world for a very long time. Neither am I guaranteed that any individual I meet will have such social relations as to value such an intermediary, either. Intermediary exchange is only viable once the pool of social relations grows beyond a certain bounds. The function of my acceptance of any system is the fulfillment of my needs, to some degree. In such a scenario, the only way those needs can be serviced is an equivalence of exchange. In this case, food is required for immediate survival, the tools of procuring such, and shelter, etc. Intermediaries, in such a scenario, provide no guarantee to provide such. So such must be acquired directly. I can eat beans. To take the gold assumes, incorrectly, I can obtain another can or equivalent. That incorrect assumption is a holdover from the fundamental and all-pervasive faith we are at present steeped in and that must be maintained for our reality to function.
pavlov 4y ago
Very few economic transactions are denominated in gold, but having it is a hedge for the contingency of finding yourself in a situation where you can only do a transaction in gold, and then it can be life-saving (bribing your way out of a European country in 1944, etc.) The reason people believe gold will retain meaningful value in a situation where nothing else does is thousands of years of history where it did work out like that. It's debatable (to say the least) whether Bitcoin with its mere twelve years of history and inherent dependency on easily disrupted digital networks could have the same properties.
aabhay 4y ago
Gold is the world's best physical commodity to use as a store of value -- it doesn't degrade or tarnish, is easily molded into coins or other symbols, melts easily, has a highly fixed supply (synthesizing it is prohibitively expensive), and (now) increasingly is not tied to an industrial output so can weather GDP fluctuations. So in a battle Royale of all commodities, gold wins. That said, all commodities are affected by price action by speculators, so the actual traded value of gold can be very unrealistic. Gold is conceptually very similar to bitcoin, except gold can't be forked or copied. Which is why in the long term, I prefer gold.
- daniel-cussen 4y ago
  Gold and bitcoin are practically identical.
  - derac 4y ago
    Good has a long history of use as a store of value. Bitcoin has a few years of being valuable. So did beanie babies. Noone knows if Bitcoin will be worth 0 or 100,000 in 5 years.
- kloch 4y ago
  > a highly fixed supply (synthesizing it is prohibitively expensive) This is what gives Bitcoin much of its value as well. > Gold is conceptually very similar to bitcoin, except gold can't be forked or copied This touches on another thing that makes Bitcoin valuable - consensus. Enough people agree to use it that it becomes the defacto standard. Bitcoin (and Ether to a lesser extent) are the “rough consensus and running code” of decentralized algorithmic money The two points are related. It was much easier to synthesize Bitcoin when fewer people were using it, and it’s market value was less. This auto-scaling of difficulty with interest/value was added as a security mechanism but actually plays a key monetary role as well.
  - aabhay 4y ago
    What makes you trust consensus? Consensus is fickle. Gold is unique in its physical properties. Even if you can’t agree on which country has a trustworthy currency, you have to trust gold.
Aunche 4y ago
Gold is used for jewelry more than it used as a store of value. Even as a store of value, Gold has an advantage of cryptocurrency in that you can actually store it. Cryptocurrency presupposes the existence of the internet. If all the world reserve currencies collapse, there is a good chance that the internet would go down with it, and your cryptocurrency would be worthless.
- yellowapple 4y ago
  > Cryptocurrency presupposes the existence of the internet. Not really. You just need some way for nodes to communicate. That could happen over the Internet, or it could happen over mail, or it could happen over a team of ravens carrying transaction data on little scrolls (hell, given corvid intelligence, they might even be able to execute smart contracts in transit).
  - automatic6131 4y ago
    Theoretically, maybe you could do it over letters. Just like you could run a computing algorith with horsemen and flags in place of a CPU (like in the scifi novel, Three Body Problem). Practically, you are talking nonsense and it's patently impossible. You cannot run any crypto currency with a system of letters even if you're transporting them with the full infrastrcture of the modern world with it's airmail and diesel vans. Try and do it with letters delivered on foot. It is actually impossible.
    - yellowapple 4y ago
      > Practically, you are talking nonsense and it's patently impossible. The existence of IP over Avian Carrier demonstrates otherwise. It's slow and it's lossy, but it's good enough for a blockchain.
      - tsimionescu 4y ago
        I thought IPoAC only works on the 91st day of each year (or 92nd for leap years)...
deleted 4y ago
[deleted]

hans1729 4y ago

>Very few economic transactions are denominated in gold, either as a medium of exchange or a unit of account. That doesn't mean that gold isn't a viable medium of exchange - it obviously is, just go to a market of your choice and trade it for goods. In fact, it's the single most viable medium of exchange, globally, since currencies are tied to economies, and economies can crash. Gold can not, thus is it valuable.

gumby 4y ago
> economies can crash. Gold can not… A glance at the gold prices and economies of the 19th century show that in fact the gold price certainly can crash due to gold strikes. In addition, the stock of the planet’s gold is negligible compared to the global economy (the hard to quantify set of transactions that people do with each other) so by definition can only operate at the margins. If the world crashes so far that gold is a meaningful proportion, will there be much to transact at all?
- hans1729 4y ago
  The exchange rate for gold (i.e. the interface of an economy with the material) can crash, not gold itself, thus the inherent value. That was my point, sorry if that wasn't coming across. >If the world crashes so far that gold is a meaningful proportion, will there be much to transact at all? This is where I start speculating, but couldn't we just create an arbitrary new currency and tie it to gold?
  - gumby 4y ago
    > This is where I start speculating, but couldn't we just create an arbitrary new currency and tie it to gold? How is that different from using the gold? i.e. has the same limitations. There are rational reasons for the gold standard having been dropped.
  - XorNot 4y ago
    > The exchange rate for gold (i.e. the interface of an economy with the material) can crash, not gold itself, thus the inherent value. What do you think this means? Because gold is only worth what you can trade it for - the exchange rate. It has no "inherent value" - you don't eat gold.
apocalypstyx 4y ago
>economies can crash. Gold can not, thus is it valuable. The thing about money is that it is a technology. But unlike other technologies, such as an electric toothbrush, for instance, it has an additional quirk: without belief, it doesn't work. Regardless of whether or not I believe in electricity, an electric tooth brush turns on and off; if the participants in an economy don't have faith in the economy, the economy falters. Money's value lies in this belief, whether it is the belief that I can buy groceries or pay taxes. It is a faith that is a function of utility: there is the interdependence of the gods' delivering and my belief that they will; should the gods not deliver sufficiently, my faith wavers; likewise, if enough of the faith of the masses wavers, the gods fail to deliver. Gold is like an old god: its faith has a lot of coinage. However, its rule is not necessarily omnipresent. Scenario: we are in a post-nuclear apocalypse. I have a small trading post and a can of beans; you have a solid gold coin. Challenge: convince me why I should take the coin.
- hans1729 4y ago
  >Gold is like an old god: its faith has a lot of coinage. However, its rule is not necessarily omnipresent. Very nice point, you're not wrong. That being said: >we are in a post-nuclear apocalypse. I have a small trading post and a can of beans; you have a solid gold coin. Challenge: convince me why I should take the coin. Because it has properties that qualify it as a method of exchange (portability, provable chemical composition [...]) -- the same reasons it worked the first time. Mr Bean-Haggler, what else do you suggest we use for exchange? Mud? :-)
  - mitchdoogle 4y ago
    It's post apocalypse - you trade whatever you find. The most important commodities will be food, water, medicine. Gold would be practically worthless - it's not going to help anyone survive.
  - apocalypstyx 4y ago
    As an intermediary, currency requires a minimum amount of social relations. Its value, if it can be said to have one, lies in its use as an indirect measure of the degree of faith in a particular set of social constructs. The reason I use the post-apocalyptic scenario is exactly because of this rupture of social relations. It is not the ghost of the previous civilization trying to reconstitute itself. It is a place in a wilderness onto which people might stumble. (Admittedly, this might not be communicated well and too informed by my early secondary consumption of old western movies.) Without this broader social context, the concept of trade becomes purely localized. My needs are not serviced by an explicit diffuse network which is conceptualized as an aspect not just of society but constitutive of reality. Operating on a faith, we take the conceptualization as reality and can accept, in our lives now, intermediary exchange: I firmly believe that by accepting an electronic transfer to my bank, I will be able to buy sweet and salty food that is engineered to appeal to my dietary obsessions as bequeathed by a combination of evolution and social conditioning. In the midst of such a thought experiment, however, I am not guaranteed to encounter another haggard individual in this hypothesized godforsaken world for a very long time. Neither am I guaranteed that any individual I meet will have such social relations as to value such an intermediary, either. Intermediary exchange is only viable once the pool of social relations grows beyond a certain bounds. The function of my acceptance of any system is the fulfillment of my needs, to some degree. In such a scenario, the only way those needs can be serviced is an equivalence of exchange. In this case, food is required for immediate survival, the tools of procuring such, and shelter, etc. Intermediaries, in such a scenario, provide no guarantee to provide such. So such must be acquired directly. I can eat beans. To take the gold assumes, incorrectly, I can obtain another can or equivalent. That incorrect assumption is a holdover from the fundamental and all-pervasive faith we are at present steeped in and that must be maintained for our reality to function.

pavlov 4y ago

Very few economic transactions are denominated in gold, but having it is a hedge for the contingency of finding yourself in a situation where you can only do a transaction in gold, and then it can be life-saving (bribing your way out of a European country in 1944, etc.) The reason people believe gold will retain meaningful value in a situation where nothing else does is thousands of years of history where it did work out like that. It's debatable (to say the least) whether Bitcoin with its mere twelve years of history and inherent dependency on easily disrupted digital networks could have the same properties.

aabhay 4y ago

Gold is the world's best physical commodity to use as a store of value -- it doesn't degrade or tarnish, is easily molded into coins or other symbols, melts easily, has a highly fixed supply (synthesizing it is prohibitively expensive), and (now) increasingly is not tied to an industrial output so can weather GDP fluctuations. So in a battle Royale of all commodities, gold wins. That said, all commodities are affected by price action by speculators, so the actual traded value of gold can be very unrealistic. Gold is conceptually very similar to bitcoin, except gold can't be forked or copied. Which is why in the long term, I prefer gold.

daniel-cussen 4y ago
Gold and bitcoin are practically identical.
- derac 4y ago
  Good has a long history of use as a store of value. Bitcoin has a few years of being valuable. So did beanie babies. Noone knows if Bitcoin will be worth 0 or 100,000 in 5 years.
kloch 4y ago
> a highly fixed supply (synthesizing it is prohibitively expensive) This is what gives Bitcoin much of its value as well. > Gold is conceptually very similar to bitcoin, except gold can't be forked or copied This touches on another thing that makes Bitcoin valuable - consensus. Enough people agree to use it that it becomes the defacto standard. Bitcoin (and Ether to a lesser extent) are the “rough consensus and running code” of decentralized algorithmic money The two points are related. It was much easier to synthesize Bitcoin when fewer people were using it, and it’s market value was less. This auto-scaling of difficulty with interest/value was added as a security mechanism but actually plays a key monetary role as well.
- aabhay 4y ago
  What makes you trust consensus? Consensus is fickle. Gold is unique in its physical properties. Even if you can’t agree on which country has a trustworthy currency, you have to trust gold.

Aunche 4y ago

Gold is used for jewelry more than it used as a store of value. Even as a store of value, Gold has an advantage of cryptocurrency in that you can actually store it. Cryptocurrency presupposes the existence of the internet. If all the world reserve currencies collapse, there is a good chance that the internet would go down with it, and your cryptocurrency would be worthless.

yellowapple 4y ago
> Cryptocurrency presupposes the existence of the internet. Not really. You just need some way for nodes to communicate. That could happen over the Internet, or it could happen over mail, or it could happen over a team of ravens carrying transaction data on little scrolls (hell, given corvid intelligence, they might even be able to execute smart contracts in transit).
- automatic6131 4y ago
  Theoretically, maybe you could do it over letters. Just like you could run a computing algorith with horsemen and flags in place of a CPU (like in the scifi novel, Three Body Problem). Practically, you are talking nonsense and it's patently impossible. You cannot run any crypto currency with a system of letters even if you're transporting them with the full infrastrcture of the modern world with it's airmail and diesel vans. Try and do it with letters delivered on foot. It is actually impossible.
  - yellowapple 4y ago
    > Practically, you are talking nonsense and it's patently impossible. The existence of IP over Avian Carrier demonstrates otherwise. It's slow and it's lossy, but it's good enough for a blockchain.
    - tsimionescu 4y ago
      I thought IPoAC only works on the 91st day of each year (or 92nd for leap years)...

deleted 4y ago

[deleted]