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To: Wildstar who wrote (138)	9/30/2002 6:38:17 PM
From: Don Lloyd	Read Replies (2) \| Respond to of 445

Wildstar, [[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. ]] I not sure I agree with this. When the goldsmiths holds gold or the silversmith holds silver, the quantities of the metals server either as production goods or as a store of future purchasing power. You've anticipated where we were going next. It can be either/or, but not simultaneously both. I believe that the original puzzle statement specified that the intent was that the gold or silver was intended as a production good. If the goldsmith had intended for $5000 worth of his gold inventory to be a store of future purchasing power, and the same for the silversmith, then all the exchange would have done is diversify their stores of future purchasing power. The goldsmith can change his intent every day, but his marginal utility of the dollar will track that intent, assuming everything else being equal. I'm not sure that I'm being totally clear here, so please either question or confirm. [[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.']] I was originally going to add to my answer that there has been an increase in the money supply. Is this a valid statement? Technically, no. Austrian theory is fussy about the definition of the money supply, even though there's no universal answer. The purchasing power of money depends on the both the supply of, and the demand for, money, and on both the supply of, and the demand for, goods. When gold or silver is added to someone's store of future purchasing power, this is probably best seen as a reduction in the demand for actual money. Once we've got an agreement on all of the above, this can be pursued further. Regards,Don