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Gold 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

Gold 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 ago
This 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 ago
  You could tie the currency to energy, then individual people synthesizing it would be a good thing.
  - asmithmd1 18y ago
    would 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.
    - cousin_it 18y ago
      Energy could easily be used to cool the earth too. Also in my scheme ordinary citizens end up building power plants, whereas in yours they end up dealing drugs.
      - asmithmd1 18y ago
        you say that like it's a bad thing;)
- sethg 18y ago
  ...more mundanely, countries with lots of gold available to mine could manipulate the rest of the world's economies by strategically deciding when to grant or restrict mining concessions. It would be an interesting mathematical exercise to define a cryptocash-like token that could be subdivided indefinitely without being duplicated--you could use this token as the basis of a permanently fixed money supply. Not sure how useful that would be in real life, though.

marvin 18y ago

This 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 ago
You could tie the currency to energy, then individual people synthesizing it would be a good thing.
- asmithmd1 18y ago
  would 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.
  - cousin_it 18y ago
    Energy could easily be used to cool the earth too. Also in my scheme ordinary citizens end up building power plants, whereas in yours they end up dealing drugs.
    - asmithmd1 18y ago
      you say that like it's a bad thing;)
sethg 18y ago
...more mundanely, countries with lots of gold available to mine could manipulate the rest of the world's economies by strategically deciding when to grant or restrict mining concessions. It would be an interesting mathematical exercise to define a cryptocash-like token that could be subdivided indefinitely without being duplicated--you could use this token as the basis of a permanently fixed money supply. Not sure how useful that would be in real life, though.