you missed my point in order to start a diatribe on gold -- that's OK -- it is largely a chicken and egg problem --
by saying that any country could buy all the gold you are simply saying that the price of gold is currently at a given exchange level with respect to those currencies. This is just stating the status quo -- nothing more.
I was trying to talk further about currency -- there is nothing new with currencies or financial systems in our day that gives us any more power than anyone else had at any time in history.
Currency / commodity exchange remains the same even if there are more complex arrangements. A medium of exchange remains that -- real economic resource, ingenuity of men, freedom, etc are what put the limits on economic development.
What is different is what you stated -- gold is worth less and less in real terms (the current reserve currency being the benchmark).
Some say because it no longer has a role in monetary matters, but CBs aren't on a truly massive dishoarding campaign. They could put all the miners out of business after a fashion I suppose, but the fact remains -- they value gold as a monetary asset. The idea that they simply keep it around to collect dust because they want to get a better price in pieces of paper is ludicrous.
Could they convert it to real goods instead -- they would not either.
Why? Because their willingness to hold and or sell given amounts also, in part, supports a relative value of the currency ... opposite of your view, but what is the absolute, the paper, or the commodity in the exchange.
My point was that you get nowhere arguing this from either side -- you have to consider how the expansion or contraction of the supply of a currency affects decisions regarding all economic resources. Clearly, currency is not a neutral medium of exchange, but has the power to divert resources, affect investment decisions -- see CB interest rate policy and money growth.
No one who thinks we live in a new age wants to hear about the purchasing power of gold or the purchasing power of another commodity vs. a currency -- such is irrelevant to the "new" reality. That is, unless you hold said commodity during a rapid change in the purchasing power of an official currency.
But most people are content to be nickled and dimed to death with inflation ...
I never meant to imply that gold == economic power. Gold is utlimately a commodity that may or may not serve as a monetary asset of greater or lesser relative value -- depending as you said on your POV, i.e. if you are dying of hunger and need a piece of bread ....
What I meant to say that there is nothing new about financial arrangement or currencies that have somehow diminshed forever the real economic value of gold. It is what it is. The CBs clearly regard it as a monetary asset or they would dishoard completely and quickly.
The only thing new about the current period in which we live is the extent and time for which currencies can be inflated with impunity and there be no repurcussions.
You see this as some sort of enlightened age where greater economic power is wielded for some good of all? |
