MattLikesAnalysis Wrote:
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> Isn’t gold a currency as much as copper? I mean,
> I’d say that copper’s uses are far beyond that of
> gold. Gold is only a currency if it can be
> exchanged for cash on a relatively fixed basis. I
> agree that gold can be more of a real currency
> because of its portability versus copper, but then
> I propose platinum as a currency. But wait, I’d
> say that we can use copper much more than platinum
> as well, and it is much more rare than gold. I
> just don’t understand why gold’s value remains,
> but that of platinum and silver decline
> drastically. Is it because people are suspecting
> that fiat currency will collapse and that currency
> will be backed by gold again. Why not silver, why
> not platinum? Why does an element of little use
> and quite large abundance have such a high value
> relative to elements that are used in everything?
Gold was used as a currency, at least somewhere in the world, from the beginning of documented human history until the early 1970s. Why? Because it has a lot of moneyish qualities. Gold is scarce, easily transportable, cannot be manipulated by governments wishing to increase spending (without discovering and mining it). It has good electrical properties, it’s used in jewelry, it doesn’t rust, it doesn’t oxidize (under normal circumstances), and it’s very difficult to counterfeit.
Why is it worth more now than it was in 2005? What has the money supply done since 2005? I assure you that gold discoveries since 2005 are a fraction of the increase in the U.S. (or global) money supply. In addition to the increase in the number of dollars outstanding, the fiscal irresponsibility that governments are displaying, demonstrate why a sound currency is necessary and it has created a lot more buyers.
Why not copper, silver, or platinum?
The scarcity of gold next to copper isn’t comparable, estimates of the total gold ever discovered vary, wiki estimates 158,000 tonnes
http://en.wikipedia.org/wiki/Gold. Last year alone the U.S. alone mined 1.19MM tonnes of copper.
Silver could be a part of a return to a sound currency and may be severely underpriced, but here’s the rub. Silver historically was used for smaller transactions because cutting a piece of gold down past a certain point didn’t make sense. Credit cards and electronic bank accounts could reduce and possibly even eliminate the need for a less scarce precious metal like silver if our currency was ever backed by gold because it would be a simple bookkeeping transaction. This site:
http://www.gold-eagle.com/editorials_03/sanders030703.html talks about the historical ratios of gold to silver and also makes the claim that their naturally occurring scarcity is 17.5:1. Maybe silver is severely undervalued or maybe it’s valued the way that it is because it has lost it’s utility as a money.
I can only assume that platinum has historically had less utility as a money because it looks so similar to silver. Perhaps if we ever get back to sound money, platinum will be a part of it.
If Asian nations (our creditors) think that the government is not behaving responsibly and ever decide against rolling over their short term treasuries, what would happen? We don’t have the money to pay them back, we’d have to print it. It is my understanding that approximately 2/3 of all dollar money balances are oversees. Is it not possible that the citizens would revolt when the price of everything doubled or even tripled? I think it’s highly likely that we will return to a money backed by precious metals at some point in the future. If not, gold still has a number of uses that give it value.
