← Autodidact Archive · Original Dissent · jay
Thread ID: 18337 | Posts: 8 | Started: 2005-05-22
2005-05-22 02:47 | User Profile
In a recent exchange on another board, I stated that Supply Siders (wanniski in particular) favor gold b/c it has phycial properties unique to other commodities.
The rebuttal to me was:
"Wanniski knows that gold is not intrinsically unique. He explains why gold is the commodity best suited for use in monetary policy. Not because there is anything intrinsically special about gold, but because it is the most convenient for use. "
Any help on this question? WY? Angler?
2005-05-22 03:33 | User Profile
Unique means it possesses qualities not found for any other commodities. Most convinient means, while it shares qualities with some, it possesses the most optimal combinations of thereof for the purpose.
Disclaimer: I am not familiar with economy and the above is simply how I see it from a common sense point of view.
2005-05-22 04:36 | User Profile
I would think Gold is easy to use because it is so precious that a small amount equals a lot of money. No problems of storage that you might have with pork bellies or some other commodity.
2005-05-22 13:47 | User Profile
[QUOTE=madrussian]Unique means it possesses qualities not found for any other commodities. Most convinient means, while it shares qualities with some, it possesses the most optimal combinations of thereof for the purpose.
Disclaimer: I am not familiar with economy and the above is simply how I see it from a common sense point of view.[/QUOTE]
So, Mad - which view is right? Is gold, by itself, unique? Or is it lacking any special quality in an of itself, and only providing value in that it's just one more data point we have to measure value?
I think gold by itself is valuable, b/c even if world markets collapsed, people would want the gold anyway. The other guy disagrees.
2005-05-22 15:04 | User Profile
[QUOTE=jay]So, Mad - which view is right? Is gold, by itself, unique? Or is it lacking any special quality in an of itself, and only providing value in that it's just one more data point we have to measure value?
I think gold by itself is valuable, b/c even if world markets collapsed, people would want the gold anyway. The other guy disagrees.[/QUOTE]
I agree with madrussian.
"Intrinsic" means that it has some value in and of itself. That is, in sharp contrast to our fiat money system that really has no value in and of itself (it's just paper and ink and also comes in the form of electronic digital book entries), but rather is based wholly on the US Government's promise to accept them to pay government obligations like taxes.
Gold has value in and of itself. But so does any other commodity, like a pack of Marlboro cigarettes of a 10-pack of Sony 90-minute cassette tapes, both of which I personally used as currency in the Soviet Union back in 1987. You could get a taxi ride from one end of Moscow to another for three packs of Marlboros. These were standard commodities that had a (black) market value that everybody understood. They had value in and of themselves - instrinsic value.
But not the ruble (although it had a black market value, about a sixth of the official exchange rate). Nobody trusted the ruble, because it was just paper and good only as far as the word of the Soviet government to accept them for obligations (a promise it reneged on in a big way through apalling devaluations, currency replacements, and so forth).
But cigarettes and casette tapes were cumbersome. You needed a whole carload of cigarettes to buy anything large like, say, a Japanese television. Gold is "uniquely" fit to act as a medium of exchange because, while like cigarettes and tapes it has intrinsic value and isn't subject to the mere whims of dishonest governments, it carries a lot of value in a little space and weight. Gold also doesn't rust, wear out or spoil. It's in demand all over the world and never goes out of fashion. And it's easy to move and conceal.
The same can be said for silver, platinum, diamonds and other precious metals and stones.
Hope that helped.
2005-05-22 16:26 | User Profile
The primary characteristic of gold that favors its use as the medium of exchange is finiteness: there is only so much gold in the world, all other things being equal. The supply of gold can't be inflated, which favors savers and creditors as opposed to spenders and debtors. That's why the supply-siders and the Austrians like it.
2005-05-22 16:56 | User Profile
[QUOTE=jay]So, Mad - which view is right? Is gold, by itself, unique? Or is it lacking any special quality in an of itself, and only providing value in that it's just one more data point we have to measure value?
I think gold by itself is valuable, b/c even if world markets collapsed, people would want the gold anyway. The other guy disagrees.[/QUOTE] Intrinsic as in "used in manufacturing, or can be eaten", not much. They use gold in electronics, but its value isn't based on that. But universally peoples everywhere came to agree on its value as an exchange medium. Other precious metals can fill this role too, but gold seems to have the optimal value-to-weight ratio. There may be other physical characteristics in addition to weight that put gold apart from other precious metals, like inertness and ease of handling. Also, gold may be easier to separate from the ore due to its inertness.
2005-05-22 18:56 | User Profile
Gold has intrinsic value as jewelry, as well as industrial uses. Platinum even more so. One of the problems with gold is the huge reserves governments hoard and release from time to time thereby influencing its price.