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I would argue that USD and the rest of currncs are unstable vs. gold. Supply of gold is fixed. Supply of paper money is at the whim of greenspans.
by 1gor 18y ago
I would argue that USD and the rest of currncs are unstable vs. gold.
Supply of gold is fixed. Supply of paper money is at the whim of greenspans.
- Retric 18y agoIf you compare it with a basket of goods it's still highly unstable. It's not a true random walk, but day to day gold fluctuations can be extreme and it's still in the middle of a bubble so expect a sudden crash some time soon.
- 1gor 18y agoIf basket of goods was priced in gold rather than dollars - then its price would also be more stable. There have been centuries when gold was legal tender and nobody complained (apart from some emperors who found debasing gold coins by adding copper was a bit difficult; but printing press has not been invented yet).
- Retric 18y agoThink about this for a second, if you value a basket of goods in terms of oil and oil's value is fluctuating rapidly then the value of those goods also seems to fluctuate rapidly. So when you compare 2 things one of whose value is stable like USD or a basket of goods, and something else that is unstable like Gold. Then the unstable item makes the value of the other things seem to fluctuate. However, by making several comparisons you can determine that the ratio of USD to basket of goods is stable but gold vs USD or Basket is unstable so it's Gold that is unstable.
- bokonist 18y agoGold flucuates enormously because it is currently not the official currency of any country. If it ever became a major currency, it's price would sky rocket as it would have to absorb a huge amount of new monetary demand. Thus gold's current price fluctuations are basically a bet on the demise of Bretton Woods II. But if gold ever became an official currency, it's price would shoot up and then stabilize. After stabilizing its price would be more stable than any other form of currency. Gold has the lowest flow to stock ratio of any good, so its a perfect nash equilibrium as a currency. And empirically, the classical gold standard from 1865-1913 had much greater price stability than we have now.
- marvin 18y agoThis is pretty interesting. How much would the price of gold skyrocket if it were adopted as the international currency peg/medium of exchange/etc? Divide all the money in the world on the amount of gold available. That's the new price per ounce of gold. It would be a massive increase. With a gold price that high, it might become profitable to just synthesize gold in a nuclear reactor. Which would destroy the point of imposing a gold standard in the first place. Even if it wouldn't be profitable with today's technology, it would become a very lucrative field. Which you would have to outlaw. Etc. etc. etc. What all the gold nerds are really clamoring for is an international agreement saying that no one will ever increase the money supply. This won't happen. A system of fixed currencies is as unrealistic as every nation suddenly deciding to adopt communism.
- cousin_it 18y agoYou could tie the currency to energy, then individual people synthesizing it would be a good thing.
- asmithmd1 18y agowould it? Say you invented infinite, free, clean energy. You would wind up heating the earth as all the energy would have to dissipate somewhere. What does everyone really want? Happiness - if you generate happiness then your Wuffie account should be credited.
- 18y ago