Tippet, I'll have to simply repeat what I posted long time ago, the search engine here won't go that far. If new gold cannot be found at a constant cost of extraction to support the world economy growth, marginal gold will have to be at higher prices, thus as the economy grows, and more gold would be required to support the accompanying growth in world money supply (assuming a constant ratio of gold reserve to currencies), that additional gold will have to be extracted at higher prices, ands thus permanent inflation. Unless one is willing to accept a growth of the world economy equal to the growth in the total gold stock (in CB's mind you, not the other usage of gold), you will have intrinsic inflation tied to the marginal cost of this new additional gold finds. Once Gold gets to let say $10,000 or $20,000 (a price I estimate is high enough to extract it from ocean waters, and thus no longer a supply limitation), then you will be doomed to spend whatever percentage of world GDP is the right one to support money growth at those levels, thus wasting resources. Of course, at $20,000 a lot of other industrial and jewelry gold uses will migrate to Pd, Pt and other "cheaper but as good as" metals.
Zeev |
