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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: maceng2 who wrote (24452)10/22/2002 8:05:24 PM
From: Don Lloyd  Read Replies (1) of 74559
 
Pearly,

I was more interested from this statement on my thread I post to myself on. (No problem I am a happy nutcase -g-)

Subject 53302

Thank you for making me aware of your thread. Just a quick glance shows topics of interest.

Completing the previous subject of money and its backing, I realized that I had only dealt with the demand side.

The historic virtue of gold as money or its backing is on the supply side. The key is the relative difficulty and expense of increasing the supply of gold which tends to prevent the inflationist policies of government. The price of any money is likely to end up slightly above its marginal cost of supply. This is why all fiat moneys always will tend to zero in the long run. The problem with gold is that after it has been severed from money per se, the previous existing backing has been left in the hands of governments. This means that they can decide to supply gold to the market at virtually any price, no matter how low, and they become the marginal supplier, and, worst of all, they have no economic profit and loss motives, as it is not their asset that is being sold. They have only political motives, which are often in conflict with what a private owner of gold would experience.

Regards, Don
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