4 ms·

The point is not that gold and silve were stable, but that they have been more stable and have kept more value than fiat/debt-based currencies.

dragonwriter 14y ago
> The point is not that gold and silver were stable, but that they have been more stable and have kept more value than fiat/debt-based currencies. Which is exactly half true. They have been less stable (more volatile) than major fiat currencies, but kept more value over the long term. "Less stable" makes them worse as currency. "Kept more value" makes them potentially better as long term investments.
Spooky23 14y ago
They absolutely were not. Look at a graph of UK inflation in the 19th century. http://www.bankofengland.co.uk/education/Pages/inflation/timeline/chart.aspx http://www.bankofengland.co.uk/education/Pages/inflation/tim... The market value of a hunk of gold has done ok over the centuries, but it's value at any point in time as a currency goes all over that place. This makes it difficult to get capital -- who wants to lend money when you have no idea what money will be worth?
- api 14y ago
  "who wants to lend money when you have no idea what money will be worth?" Easy. Don't lend in raw gold (or Bitcoin, or whatever). Create a mathematical construct that attempts to capture the value transacted and denominate your loan in that, and/or index your loan's value and payments to the in/deflation adjusted value of your currency. Quantitative finance and math in general was less well developed back in the gold standard days, and they didn't have computers. So they didn't invent such instruments. Today they probably would.
- 3pt14159 14y ago
  Your evidence is faulty for these reasons: 1. You are choosing a specific currency. 2. You are choosing a specific time period. 3. The time period you choose from already had world wide debt based currencies. 4. The UK already had a central bank. 5. The UK already had a reserve rate that was < 100%, and a practical reserve rate that was less than the prescribed one due to fraud by the banks. I do afford you that gold is volatile, that is true, but it is especially volatile these days because of its role in the economy. People view gold as the "oh shit, the government is going to default" or the "oh shit, I need to smuggle my wealth out of this country before they confiscate it" currency. Both of those properties make it very volatile to political and economic news. The point is that for every USD or CAD you bring forward, I can bring forward one of these: http://instagram.com/p/X7pWUKIHK5/ http://instagram.com/p/X7pWUKIHK5/ History is riddled with the collapse of currencies (and, hence, economies as there is a sudden shift of wealth away from those that saved it). The point of currencies is not to have them be good for the economy. The point of currencies is to be a store of value and a divisible good for exchange. I agree that gold has flaws, I also agree that bitcoin has flaws, but they do have some advantages as well, and I would argue that in gold or silver's case stability is one of them.
  - Spooky23 14y ago
    I deliberately chose the largest economy in the world at the time. Comparing US currency today vs. US currency in 1800 isn't a meaningful comparison. How far back do you want me to go? The Romans? Oh wait, they played around with coinage as well.

dragonwriter 14y ago

> The point is not that gold and silver were stable, but that they have been more stable and have kept more value than fiat/debt-based currencies. Which is exactly half true. They have been less stable (more volatile) than major fiat currencies, but kept more value over the long term. "Less stable" makes them worse as currency. "Kept more value" makes them potentially better as long term investments.

Spooky23 14y ago

They absolutely were not. Look at a graph of UK inflation in the 19th century. http://www.bankofengland.co.uk/education/Pages/inflation/timeline/chart.aspx http://www.bankofengland.co.uk/education/Pages/inflation/tim... The market value of a hunk of gold has done ok over the centuries, but it's value at any point in time as a currency goes all over that place. This makes it difficult to get capital -- who wants to lend money when you have no idea what money will be worth?

api 14y ago
"who wants to lend money when you have no idea what money will be worth?" Easy. Don't lend in raw gold (or Bitcoin, or whatever). Create a mathematical construct that attempts to capture the value transacted and denominate your loan in that, and/or index your loan's value and payments to the in/deflation adjusted value of your currency. Quantitative finance and math in general was less well developed back in the gold standard days, and they didn't have computers. So they didn't invent such instruments. Today they probably would.
3pt14159 14y ago
Your evidence is faulty for these reasons: 1. You are choosing a specific currency. 2. You are choosing a specific time period. 3. The time period you choose from already had world wide debt based currencies. 4. The UK already had a central bank. 5. The UK already had a reserve rate that was < 100%, and a practical reserve rate that was less than the prescribed one due to fraud by the banks. I do afford you that gold is volatile, that is true, but it is especially volatile these days because of its role in the economy. People view gold as the "oh shit, the government is going to default" or the "oh shit, I need to smuggle my wealth out of this country before they confiscate it" currency. Both of those properties make it very volatile to political and economic news. The point is that for every USD or CAD you bring forward, I can bring forward one of these: http://instagram.com/p/X7pWUKIHK5/ http://instagram.com/p/X7pWUKIHK5/ History is riddled with the collapse of currencies (and, hence, economies as there is a sudden shift of wealth away from those that saved it). The point of currencies is not to have them be good for the economy. The point of currencies is to be a store of value and a divisible good for exchange. I agree that gold has flaws, I also agree that bitcoin has flaws, but they do have some advantages as well, and I would argue that in gold or silver's case stability is one of them.
- Spooky23 14y ago
  I deliberately chose the largest economy in the world at the time. Comparing US currency today vs. US currency in 1800 isn't a meaningful comparison. How far back do you want me to go? The Romans? Oh wait, they played around with coinage as well.