Lorne,
Ok... if the price of Diamonds went up drastically...
AND there was an ACTIVE PERCEPTION that if Diamonds rise in value, that it indicates inflation in the global reserve currency.. (the dollar)....
Then I would be just as worried and concerned about Diamonds competing against the Dollar.
I'm worried about a drastic spike in the price of ANY COMMODITY that DIRECTLY COMPETES with the dollar. (which is what most people spend and denominate their assets in here in the US).
Right now, that competition just happens to be Gold.
And your right... the currency of the United States is only as valuable as the confidence in the underlying economy against other economies.
Currencies fluctuate based upon economic strength in different major economies.
What is the economic strength of gold??
Gold derives value from perceptions of weakness in other currencies/economies, not from it own economic GDP. Strength in the price of gold undermines the confidence in economic strength, and all of the coincidental factors that make up that confidence.
Rightly or wrongly, we have a Fiat system based upon the economic strengths and weaknesses of our underlying economies. Throwing in an irrelevant commodity like gold, platinum, palladium, or diamonds, as a competitor to that system would be devastating and cause drastic economic disruptions.
Face it Lorne, people create economic illusions of all types. For thousands of years we would decide the value of a commodity based upon our need or its attractiveness to us and what quantity of another commodity we would be willing to exchange for it.
Then people started using gold, salt, and stone wheels, as a proxy for barter, safe in the reasonable confidence it would hold value as a medium of exchange.
Then we found the gold standard was overly restrictive to the economies ability to create wealth and economic growth so we made it a commodity again and the CB's have fought to demonetize it ever since, while still retaining control over it to prevent it from becoming so common it was used as currency (as the Russians appear to be trying to do now).
So now we have a Fiat system, like it or not, with everyone basing their economic confidence in little pieces of colored cloth paper that permits us to buy what we want, and backed by the economic power of our entire nation, real or percieved.
And now you, and other goldbugs, seek to directly destroy or undermine that system in order to bring back a system where we spend little colored pieces of paper that permit us to buy what we want, which are backed by a shiny yellow metal that is durable, malleble, and to some, attractive, instead of the economic power of our country.
What Fiat and Gold-backed money have in common is that fact that they are both financial illusions at their heart. Both are only as valuable as the belief of those who have the primary assets tied up in one or the other asset.
Now where the H*ll is the logic in substituting one financial illusion for a previous one? I accept that the Fiat system is an illusion. Money is an illusion. Gold is an illusion. But so long as we believe it is real, it works as a storehouse of value.
The problem with most goldbugs is that I can accept this, while they can't. They seem to believe that gold is some mythical creation of God, or a religion unto itself.
It's not. It's just a means of acting a proxy for basic barter based economic systems which are immensely inefficient.
Regards,
Ron
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