Won’t work. Gold and silver are no longer what they were.
Gold is just a yellow metal. Why buy it? It’s good in electronics and dentists like it because it’s so malleable and has nice properties but dental fillings look so much better now when they blend in with teeth.
So what is gold good for?
UBS in Zurich is said to have 11 underground floors full of gold as a repository. Can you imagine the security they have to pay for to store all that gold? But why?
Below describes the WHY that explains the historical value of gold or silver.
First, understand that ‘value’ is a psychological construct that is created in many many ways.
The value of gold is said to be tied to its scarcity or rarity or limited quantity. But that is not entirely true. Pearls, before cultured pearls existed, were also historically rare.
The value of gold lay in its institutionalization as a means of money exchange. Romans for example could have opted to pay their armies in Puca Shells. But soldiers wanted something that was more substantial like land. Gold was accepted only to purchase land and buildings because it *had been institutionalized as money*. In other words money is an invention for trading and gold with its limited quantity served to stabilize the measure of ‘value’. Bit not so much any more.
George Washington did not have so much gold to pay the Continental Army. But he had worked many years as a land surveyor in the Ohio territories, wilderness. So, he paid his army with tracts of land that the descendants of that army eventually migrated to.
So what gives ‘gold’ value? It’s all psychology. If there is fear or uncertainty in the world, people for some odd reason will go buy gold even they don’t hold it physically. It’s an emotional statement based on fear.
There do exist conveniences of gold, silver and jewels during times of instability or war. Jewels are easy to carry under cover, hide and not have to declare. It’s always been that way.
But is there a market for it and what is the value? I have a gold ring that I paid $900 for. It’s value at a “We Buy Gold” merchant is less than $100. I could search for a better price but is it worth it to sell it at say $300? I still have a loss.
How about if I possess a dory bar of gold which is worth considerably more? Well now I have to worry about storing it and paying for its storage. But it’s supposed to protect me from severe inflation right? So then I have to ‘time’ when to sell it because just as soon as any panic has passed, the ‘value’ of my dory bar will crash. So I’ve got to sell it when it’s high but how do I know when to sell and in the USA I have to know where to sell it at fair value. So now I have to spend all this time becoming a gold expert and I don’t want to have to do that. It’s not enjoyable.
So what do we do when there is inflation and why is gold valuable to begin with? What is ‘value’?
Value is based on the attractiveness of a society’s living standards.
Well-constructed homes, good roads, sidewalks, good schools and colleges, parks, good hospitals, clean water, good sewage tratment, good health and smiling children are the essence of ‘value’. Gold does not make this come to be.
Where did the value of gold come from? Scarcity? Not really, that was only a convenience to make it stable as a measure. Anything could have been used in place of gold or silver.
So what made it the defacto measure of ‘value’?
It was forced into usage by Ceasar and other rulers of ancient history who had their profiles stamped on it. In other words it never really had value until some force said it did.
What creates value in gold is the ‘force’ behind it.
Does Mexico have the ‘force’ to make silver valuable? No.
Do the Chinese or the Russians have the ‘force’ to make whatever they propose as money have ‘value’? No.
Are Americans attracted to the Mexican lifestyle? To the Chinese lifestyle? To the Russian lifestyle? Aside from a few tourist excursions and beach vacations, Americans and most of the world are not attracted to these cultures.
So how can they ‘force’ silver, or gold or Faberge eggs on the rest of the world?
Money is a reflection of the status of a society somewhere. If there exists an attractive society that people want to live in or replicate, then they want that ‘thing’ and they will trade to have it. They may use gold or they may use paper money; whatever works to get that ‘thing of value’ whatever it is.
The United States of America has been attractive to the rest of the world (and still is) for such a long long that the US Dollar is the ticket to ‘get that thing of value’, not by ‘force’ but by ‘attraction’. The value of a nation’s currency reflects the value of the society, its people, their morality and quality of life.
Mexico has some nice resorts but the rest of it does not stand out. There are better resorts in the world and better societies to emulate.
Mexico’s monetary idea for silver is ‘nice talk’ but there is no there there.
The only way for Mexico to emerge as an ‘attractive force’ is if the USA declines so seriously that Mexico is a better alternative. The odds of that happening are slim to none.
The USA is still the most attractive place on Earth even after 5 years of a poor president, even after 8 years of Bill Clinton and after all the other poor history. It still shines to most of the people on the planet. They want the American dream. It still exists in certain regions of the USA. And in other places it has been abused and appears dead but it is still there ready for a new generation to put a shine on it. Because the American dream is not a ‘thing’. It is an idea based on principles. As long as people remember and ‘value’ the principles that underlie the idea, the currency of America will always be valuable.
All that you say makes sense to me. But I have a few questions.
1. How can a nation's currency, whatever the unit, reflect the value of the nation when it can be counterfeited? In other words, if the number of units can be doubled at whim, does the currency still reflect the value of the nation? (Assuming the actual value of the nation remains constant.)
2. Anything can be used as "local" currency within a nation, including no currency at all (barter). It seems to me that the nation's only way to establish a national currency is to deem some unit as the only way to pay taxes. That imposes the currency unit. Do you agree?
Bingo!
I think the same way about the billions of hard clear stones. Jewelry is nice if is it handcrafted and original but I’m not the type of person that needs attention because of bling. Living on a hardwood forested hill with a stream running through and my grandkids playing in peace, that is priceless. Maranatha!
Because the American dream is not a ‘thing’. It is an idea based on principles. As long as people remember and ‘value’ the principles that underlie the idea, the currency of America will always be valuable.
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Your posting #16 is an excellent piece of writing!
‘So what gives ‘gold’ value? It’s all psychology. If there is fear or uncertainty in the world, people for some odd reason will go buy gold even they don’t hold it physically. It’s an emotional statement based on fear.’
Yes the value of gold is psychological. The value of silver is that and its thousands of industrial uses. Gold has been used as a medium of exchange for roughly 4 thousand years, so I have heard. The value of everything is psychological, it is worth what someone else is willing to give for it. But you can’t print gold.
American fiat currency is backed by ‘the full faith and credit of’ nothing. It is backed by nothing. Every fiat currency ever tried has failed. At the present time the great unwashed American people are the only people in the world that don’t question its value and even they are waking up to its demise. With inflation easily noticed when you buy anything why hold dollars? It is a depreciating asset, I would rather hold food, it’s value is going up rapidly. The dollar does not even make good toilet paper, but if you have some you don’t need you are welcome to send it to me while it is still worth something. Better hurry.