Wildstar,
I don’t quite know where to go with your question. I’ve pondered it over the weekend and the best I can do is lay down my thoughts.
I’m thinking that the question revolves around the different types of value the two metals in question can hold – direct-use value vs. exchange value.
In the hands of Gus, the exclusive goldsmith, silver has no direct use value, and only has exchange value. Vice versa, in the hands of Sam, the exclusive silversmith, gold only has exchange value.
After the exchange occurs, each one has $15,000 worth of “stuff” that can be used for exchange (cash + metal he cannot directly use) and $5,000 worth of metal that he can either use directly or use for exchange.
That's a good analysis. My answer follows :
My claim is that the economic effect is likely to be an incremental decrease
in the purchasing power of money, specifically the purchasing power of the
dollar, in this case.
Both gold and silver have potential utility as both production goods and
also as what Rothbard calls 'quasi-money' and Mises calls a 'secondary
medium of exchange.'
Which utility a specific quantity of gold or silver serves depends on the
intent of the holder. When the goldsmith holds gold, or the silversmith
holds silver, the entire quantities of the two metals serve as production
goods. In contrast, when the goldsmith holds silver, or the silversmith
holds gold, the metals serve their new holders as a store of future
purchasing power.
For both the goldsmith and the silversmith, their store of future purchasing
power is provided by a combination of dollars and either silver or gold,
respectively. If their demands for future purchasing power are not greatly
changed in conjunction with the exchange of gold and silver, then the newly
acquired metals will tend to reduce their demand for actual dollars and
thereby reduce their subjective marginal utility of dollars. This results in
a reduced intensity of grip on the marginal dollar and a willingness to pay
higher dollar prices for desired goods.
Regards, Don |
