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To: Hammerhead
If you live alone on a desert island, then you're right. Gold is useless.

But if you live among other people who need things when you need things, and the local currency is heading to Weimar and Continental levels, then gold is the key medium of exchange. Silver and platinum are good, too. Oil is consumed, as are pork chops and ground steak.

A day may come when an ounce of gold will buy something that you'd need a wheelbarrel of Federal Reserve Notes to pay for.

77 posted on 02/19/2003 7:43:32 PM PST by Publius
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To: Publius
But if you live among other people who need things when you need things, and the local currency is heading to Weimar and Continental levels, then gold is the key medium of exchange. Silver and platinum are good, too.

As are nickel, copper, mercury, aluminum, and so forth. And all these things can be manufactured in large quantities in the same sense that timber can be.

One of the problems with trying to map historical truisms in this regard to today is that our resource extraction technologies are vastly better than they used to be. We have the capability to reprocess and extract metals from a myriad of sources with high sensitivity to the current market value. If gold hits $500, there are millions of metric tons of low-grade ore and tailings left in that will suddenly become immensely profitable to mine. Most people don't realize that a fair portion of gold is mined from waste and leftovers anyway. And most mining companies have a laundry list a mile long of gold sources and the associated strike price at which they become a profitable resource. Every time the gold price creeps up, they exploit these resources like crazy while the profit is good.

Among the things that made gold a good standard historically was that the supply was fairly inflexible regardless of the relative market value, since there was only really one way to get more and with well-established yields and sources. Today, gold supply increases exponentially with market price. There is a very smooth gradient of extractable resources that scale with the market price and an extraction infrastructure that can move very fast to exploit resources that fall within the profit margins of current prices. In other words, gold has become a true commodity, just like most other things. The only thing that could be considered "inflexible" supply-wise in the gold market would be refining capacity. But the same could be said of virtually every other commodity as well (e.g. oil).

98 posted on 02/19/2003 9:29:06 PM PST by tortoise
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