I like gold because there is damned little of it [two swimming pools worth], it has a long history of being used as a store of wealth
These two swimming pools are exactly what keeps me confused about the notion of gold being used as money. The amount of gold IS limited; the volume of goods and services in the world is not.
In other words, whenever a new valuable industry is born, the sum total of existing gold based money would still have to remain limited to those two swimming pools. As new industries develop, like automotive, oil, nuclear, computing..... we would need to keep pricing the growing economy by further subdividing those very same two swimming pools of gold. Gold would have to be valued at absurd levels.
This makes me think that a strict gold standard would be very impractical, maybe impossible. Rates would have to be terribly high, since any new attempt at financing would have to place a claim on the very same - limited - pool of gold. And if, as it used to happen in the past, lenders would begin issuing more "receipts" than could be covered by the gold they have in possession, then... we would be back to the same problems we have today.
I think what I'm saying is that I can see Gold having a role as an investment - and I own some - but I can't see how it could be used to back currencies. I have no problem understanding Gold as a "parallel", concurrent currency, which also happened in the past, but... not as the only one. |
