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A much deeper article by software entrepreneur "Mencius Moldbug": http://unqualified-reservations.blogspot.com/2009/12/gold-and-central-banks-game-theory.html

by rg 17y ago

A much deeper article by software entrepreneur "Mencius Moldbug": http://unqualified-reservations.blogspot.com/2009/12/gold-and-central-banks-game-theory.html http://unqualified-reservations.blogspot.com/2009/12/gold-an... "If gold will eventually be remonetized, gold is insanely cheap. If gold will never be remonetized, gold is insanely expensive. It's one or the other. Therefore, if you guess right about this question, you will make huge profits, and if you guess wrong take huge losses." "The reason I still expect gold remonetization to happen - in the long term, not tomorrow! - is that there's simply no other viable alternative. Everyone knows that the global economy needs a new currency. Most can see that the dollar cannot be saved or replaced by any other sovereign currency or basket thereof - because no central bank could tolerate the economic effects of the upward revaluation that would result if its currency replaced the dollar in C[entral] B[ank] portfolios"

jordanb 17y ago
Gold isn't a viable reserve currency. The supply of gold is dictated by mining operations, not by the liquidity needs of the world economy. And there is a viable alternative reserve currency: http://en.wikipedia.org/wiki/Special_Drawing_Rights http://en.wikipedia.org/wiki/Special_Drawing_Rights
- kingkongreveng_ 17y ago
  The supply of gold is irrelevant as long as the above ground gold stores dwarf what is mined every year. A single ounce of gold is theoretically sufficient to run the entire economy. The value of that ounce would just shoot up as the economy grew more productive. What exactly do you mean by "liquidity needs"? If people need cash they earn it or save it. That cash is supposed to represent real wealth someone saved. If it's printed out of thin air it just represents a theft from people who have actually produced and saved.
  - ubernostrum 17y ago
    The value of that ounce would just shoot up as the economy grew more productive. Which is a coy way of saying "there would be massive, uncontrollable price swings". With a gold standard and modern economies you don't get wild inflation, but you do get wild deflation, with effects just as bad (since inflation and deflation are isomorphic to each other).
    - kingkongreveng_ 17y ago
      Steady deflation is natural and good. As technology and business grow more productive prices generally fall. Prices fell for most of the 1800s (pre central bank). The problematic deflation associated with depressions is simply the consequence of fiat money credit bubbles collapsing. That deflation is an indictment of artificial interest rates and fiat money.
      - ubernostrum 17y ago
        But a gold standard, today, wouldn't produce steady deflation, so you're not really arguing with what I said. (a gold standard, in this modern world, would tend to produce periods of wild price fluctuation, ending with a significant deflation from the previous status quo)
        kingkongreveng_ 17y ago
        Yes, gold money would result in steady deflation as the economy grows. We have wild price swings now. Look at chart of any major commodity over the last 10 years. Gold would stabilize it as there would be no hot money flows on a gold standard.
        ubernostrum 17y ago
        I've explained this before, and probably will have to explain it again: http://news.ycombinator.com/item?id=629390 http://news.ycombinator.com/item?id=629390 If you're right, basic economics is wrong. More likely, basic economics is right and you're wrong.

by rg 17y ago

jordanb 17y ago

Gold isn't a viable reserve currency. The supply of gold is dictated by mining operations, not by the liquidity needs of the world economy. And there is a viable alternative reserve currency: http://en.wikipedia.org/wiki/Special_Drawing_Rights http://en.wikipedia.org/wiki/Special_Drawing_Rights

kingkongreveng_ 17y ago
The supply of gold is irrelevant as long as the above ground gold stores dwarf what is mined every year. A single ounce of gold is theoretically sufficient to run the entire economy. The value of that ounce would just shoot up as the economy grew more productive. What exactly do you mean by "liquidity needs"? If people need cash they earn it or save it. That cash is supposed to represent real wealth someone saved. If it's printed out of thin air it just represents a theft from people who have actually produced and saved.
- ubernostrum 17y ago
  The value of that ounce would just shoot up as the economy grew more productive. Which is a coy way of saying "there would be massive, uncontrollable price swings". With a gold standard and modern economies you don't get wild inflation, but you do get wild deflation, with effects just as bad (since inflation and deflation are isomorphic to each other).
  - kingkongreveng_ 17y ago
    Steady deflation is natural and good. As technology and business grow more productive prices generally fall. Prices fell for most of the 1800s (pre central bank). The problematic deflation associated with depressions is simply the consequence of fiat money credit bubbles collapsing. That deflation is an indictment of artificial interest rates and fiat money.
    - ubernostrum 17y ago
      But a gold standard, today, wouldn't produce steady deflation, so you're not really arguing with what I said. (a gold standard, in this modern world, would tend to produce periods of wild price fluctuation, ending with a significant deflation from the previous status quo)
      - kingkongreveng_ 17y ago
        Yes, gold money would result in steady deflation as the economy grows. We have wild price swings now. Look at chart of any major commodity over the last 10 years. Gold would stabilize it as there would be no hot money flows on a gold standard.
        ubernostrum 17y ago
        I've explained this before, and probably will have to explain it again: http://news.ycombinator.com/item?id=629390 http://news.ycombinator.com/item?id=629390 If you're right, basic economics is wrong. More likely, basic economics is right and you're wrong.