Wednesday, January 28, 2009

Goldbugs



I'm working on a short article about this peculiar fetish (i.e. the gold fetish). The more I read, the more I find statements like "Gold is money, and money retains its value" to be foolish.

Think about it this way: if I were to offer you an ounce of gold (no strings attached), would you take it? Most rational people would say yes. The interesting thing is, most won't take it because they will be able to use it for electronics, jewelry, or dentistry, they will take it and turn it in for fiat money. And the person they give the gold to will likely keep it in a safe somewhere.

The point I'm trying to get at is that gold has whatever value people give to it. Yes, historically gold has been used as a currency. But, and I may be missing something here, it seems like it is all in our heads. Compared to other commodities, gold's current utility (excluding the ability to exchange it for other commodities) is limited.

Its value is based largely on tradition. And, even then, that tradition is mired in all sorts of business failings and market crashes that goldbugs fail to mention. Gold has not prevented inflation, as new gold deposits are found value of current gold holdings drop (although how much gold is left to be found is up to debate). And there have been plenty of depressions and recessions with gold as a standard. Another problem is gold hoarding which reduces the amount of gold (i.e. money) in circulation. Actually, because of gold's inelasticity, a gold standard tends to restrain and even stiffle economic growth. From what I have gathered so far, most people are much better off without a gold standard, despite what Dr. Ron Paul says.

I'm still trying to parse it all; I'll post more later. For now, enjoy:


A highly technical look at the gold fetish: "Leprechaun, gimme da gold" rap video. You have to admit, Mr. T is highly convincing.
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7 comments:

Charlie G. said...

When the whole world economy collapses, I will have my gold bars in my safe, and I will protect them with my shotgun, ha, ha. Gold is a powerful symbol over time and many cultures, but a symbol that can be traded/has real value - though relative. I can't believe how big gold parties are, it's like tupperware for the late 2000s.

Complacent Panda said...

I know what you mean =) (guns come in a close second to gold!)

Have you seen those advertisements selling kits that allow you to extract gold from electronics? Crazy stuff.

I'm not saying to buy or sell gold either. Really, I would probably buy and sell dogshit if I could make a profit. I'm not too picky =) I just think some of the zealots have lost touch with reality.

Attitude Trader said...

Ya still can't have my solid gold grill...the chicks dig it when I smile ya know?

-AT

Complacent Panda said...

=D Haha.

Trader Dan said...

You've got things backwards. It's the rectangular pieces of paper that we call dollars that only have a value because we say so.

Gold has not prevented inflation? What causes inflation? Money printing!

All paper currencies that have ever existed have eventually collapsed. Gold has been accepted as money for over 5000 years.

This post would be great if you were being facetious.

-Danny

Complacent Panda said...

Actually, at points in history, the discovery of more gold caused tremendous inflation, just as when large amounts of money are printed and added to the economy.

Also, I am more of a rational minded person. I don't see any intrinsic value in gold, at least not monetarily. Just because it's been used for 5000 years doesn't mean anything more to me than that Christianity has been practiced for many, many centuries and that judaism has been around for millenia. It doesn't mean I'm going to believe in the stuff. Although, I am not stupid enough to ignore the fact that many other people believe in it (like I said above, if people wanted to buy dog shit, I'd sell it to them; that's their beef).

What I was trying to get across is that gold only has value because we say so and think so. It's just less flexible and more prone to hoarding.

Gold places control in the hands of old wealth. It can cause its own credit crunches.

There's a lot wrong with gold. I think people are just mad because they recently found out that paper money was just paper money. It's not "backed" by anything. Shit, I want my money backed by shiny metal!

I guess I'm a metallic atheist. But I do understand the importance of metals in keeping people under control (again, a reference to religion). Otherwise, gold _is_ silly.

Trader Dan said...

You've got some good points. You are right that an influx of South American gold to Spain in the 16th century caused inflation. But ordinarily, gold mine output only increase by about 2-3% annually, whereas the supply of paper money has no upper bounds.

I still think paper only has value because we think so, but that will be the case with whatever we happen to using for money, whether it's sea shells, pieces of metal, or pieces of paper.

I guess everyone is entitled to their own opinion.

Regards,

-Danny