One traditional attribute of money is that it be a "store of value", what do you see being accomplished by (moderately) compromising this?
Daniel,
Only in a relative manner is money a "storehouse" of value.
Money is a medium of exchange utilized as a proxy to outright barter of goods and service.
Assets are supposed to be a storehouse of value. Assets like a house, real-estate, securities and bonds, or as a last resort rare commodities that have a constant demand. Gold acts as a asset of last resort when there exists doubt in the viability and credibility of the gov't who's currency you are holding.
The point being, yes.. to make people participate.
The alternative is to have a population hoarding trillions of dollars in cash like the Japanese, afraid to put it at risk for fear for the future and lapsing into a liquidity trap requiring massive govt spending and devaluation/printing of currency (forcing inflation into the economy).
So the trick is for the investing public to find adequate places to invest in order to preserve or grow wealth. Bonds are great so long as inflation does not exceed the rate of interest (but now there are inflation adjusted bonds as well).
Like I stated before, putting money under the mattress is not guarantee of preserving wealth. That's why a number of other options have been developed, like bear funds, hedge funds(long/short), inflation indexed bonds... etc, etc.
But goldbugs make a valid point when they say that gold will climb in value should the credibility of these other IOU's fail. But then again, unless you have the physical stuff, your gold shares or certificates are merely another form of promissory note which are only as good as the stability of the system backing those promises.
Regards,
Ron |
