John, you do make very good points. But with little gaps. For example, we need to define 'full faith' when discussing fiat currencies such as Uncle Al's versus a share-backed currency such as Dr J's.
Uncle Al promises to maintain the value of the US$ by increasing or reducing the supply of it so that a basket of goods and services increases in price against the US$ by between 1% and 3% a year [give or take a little]. That means, he promises to dilute holders by that amount each year.
He also, along with politicians, promises to keep things on the straight and narrow decade after decade. Some people don't trust Bill Clinton's promises, or Condit's or Ted Kennedy's or Trent Lott's or a lot of others. They know that Uncle Al won't be around a decade from now and he would probably not be the best person by then to be running the show anyway.
The holders of the US$ don't have a say in the management of it. They take it on trust that the US is capable of keeping the dollar on the straight and narrow. At current interest rates and inflation rates they need to do that for several decades before a lender gets their money back. At any time, the currency could do an Argentina if the world decides that the US$ has had its day and the full faith and credit of George W and buddies isn't what it was in the good old days.
A basket of the world's companies on the other hand, actually represents real productive capacity and the efforts and needs and wants of billions of people.
In Argentina, companies won't all go bust because a currency evaporates. They switch to US$ or some other means of exchange and go right on buying and selling.
The underlying concept of democracy is that inherent value rests in the proletariat, the masses, the man in the street, we the people and their drives and productive capacity. The underlying concept of communism and totalitarianism is that the state is the keeper of the flame and should centrally control the means of production and much else, including the means of exchange.
You are right that gold has many applications other than a store of value or speculation. The question is whether the stores of gold are much in excess of demand for real uses from wedding rings to electrical connectors. If they are vastly in excess of demand, then the store of value issue becomes important, a bit like OPEC oil is vastly in excess of current demand and is being used as a store of value for decades hence [at some risk to those hoping for higher values by storing their oil for future consumption].
Yes, it's nice to daydream. In 1989 I imagined how Fourier transforms could be used to code and decode cellphone signals to expand capacity. In about 1994 I imagined how single pulse signals could be used to further increase capacity. Both those things have come to pass. Those who imagine the future are in a position to create it. Those who don't, aren't.
We create our future. We define reality. We are reality. What is real now is a function of dreams of people past.
Mqurice |
