It's just that I was a bit surprised by his rhetoric. The lesson I took from the lecture is that any policy with a chance of success must have an inflation target, or something to that effect.
Now I'm wondering whether the Bretton Woods system -- which ended with the Nixon shock -- was really an elaborate scam.
]]>Yes, I agree. But gasdive and Greg don't agree with you.
Can you point to where I said that? I don't have any recollection of saying that gold is monetized debt. I don't remember saying it's fiat money.
I (basically) said it's worth what it's worth because people think it's worth that rather than for any intrinsic value. Like fiat money, tuilips, art or single digit number plates. Saying it's like fiat money in that respect isn't saying it is fiat money any more than I'm saying a gold bar will produce flowers in spring.
Where we disagree is that you say you think gold has an intrinsic value similar or equal to its dollar value and I say it doesn't.
Fiat money's only advantage is that the government accepts it as payment for tax. The reason it has value is like any other near valueless thing that costs a lot: people think that someone else will value it. When that someone else is the government, that makes people very confident that it will retain a value.
With gold, that "someone else" is the vast horde of goldbugs who think it has an intrinsic value.
]]>"Where we disagree is that you say you think gold has an intrinsic value similar or equal to its dollar value and I say it doesn't."
Nope, I wrote "It has value in and of itself, which is almost universally recognised. What that value is, is an entirely different matter, but one that cannot be set by decree."
I don't give a toss about what gold is actually worth, only that it has worth.
"Fiat money's only advantage is that the government accepts it as payment for tax."
If by "advantage" you mean "defining feature" then we might be in agreement.
"With gold, that 'someone else' is the vast horde of goldbugs who think it has an intrinsic value."
They think it has intrinsic value, because it does. If something has utility, it has value. Fiat money, in any practical sense of the word, does not have utility. It's just a fancy way of keeping tabs.
]]>Goldbugs & Bitcoiners don't seem to have grasped this simple reality.
]]>That was the great advantage of gold up until 2006: it held its value. By that I mean that I could look at, say, the price of a shotgun in 2006 US$, look at the spot price of gold in 2006 $US, and then back convert. I used this for things like the Call of Cthulhu RPG, but it worked just as well for medievaloid RPGs, with things like the cost of swords. What I found was that, while the dollar price for things fluctuated greatly over time, the price of gold fluctuated was highly correlated to monetary fluctuations. If something was worth about an ounce of gold in 1935, it was worth about an ounce of gold in 2006. That's no longer true due to gold speculation, but this gets at the fundamental value of money, especially the utility of things (like gold) that tended to hold their value over time.
Evaluation lets me put a value on, say, pottery and wheat in a low-tech farming community. We can barter and deal for how much wheat equals a pot for each pot (or each potful of wheat) someone needs, or the community can collectively set a dollar value on both, and we can use those numbers every time we need pots or wheat. In the latter case, you can actually run a local economy entirely without physical money, using accounts. If I'm a farmer and I need pots to hold my grain, I can contract to get the pots from my local pooter (at $X per pot), and then, once I have the grain harvested, I can give the potter a share (at $Y per weight) of grain to settle the debt. Then, once or a few times a year, everybody sits down, figures out who owes what, settle accounts, and perhaps a bit of money changes hands to make up for shortfalls here and there. The only other use for actual, modern money, fiat or otherwise, is to pay taxes as noted.*
So far as I know, keeping tabs and accounts was the normal state of affairs, and this, rather than barter, precedes the invention of physical money. Units of money are perhaps most useful for accounting and putting values on (evaluating) things for the purpose of exchange, and that's part of where a fiat currency can be useful. When the people issuing the fiat currency start goofing around by debasing the coinage, printing bills to pay debts, and so forth, it (potentially) throws everything out of whack. Instead of having one system to evaluate everything, you've got to sit down with all your partners and figure out how much each trade is worth, and that's inefficient (albeit fun, if you like to haggle).
*Ancient and vernacular money, like shells, feathers, livestock, and so forth, actually had nothing to do with day-to-day exchanges of things like food and tools in chiefly societies. Farmers and craftsmen were fed, and they were expected to produce the stuff other people needed (as in the Santa Cruz Island saying that, if a chief wants a canoe, the first thing he does is to plant an extra garden. That's necessary to keep all the people fed while they build his canoe for him). Rather, all these primitive types of "money" were for dealing with crimes, marriages, and so on. They were regarded as ways of paying (sometimes symbolically) for, say, the loss of a daughter from a family to marriage into another family, or to compensate the family of someone who died through an accident or violence (thereby to end a feud), or to compensate especially for injuries (again to end feuds). If you see things like the old Irish laws, they went into great detail about how much a certain wound to a king was worth (more than the same wound to a peasant), but they said nothing at all about how much something like a pot or food was worth. These systems showed up all over the world, apparently being created multiple times independently. Where things get ugly is that, when you set a price on a human being (normally a servant girl, sadly), then outsiders who have a slave economy can start buying up people and making them into slaves, thereby enriching the chiefs who sell these slaves off. And when you can convert indigenous currency into something like modern money that can also be used to buy food and tools, then you start turning people into things, and the Homo economicus model can be used.
This is one of the things Graeber goes into at some length, because it shows how a system designed primarily to stop feuds and render some measure of justice for losses can be subverted into a system that, to some degree, enslaves everyone involved in it. The critical lesson here is that biology has nothing to do with Homo economicus. It's far more the result of how an innate human desire for fairness can be used to enrich some at the expense of others.
]]>I don't think I'm so much specifically disagreeing with anyone on here. I'm more disagreeing with the view that this subthread of discussion is commenting on, which didn't originate with any of us, that there is some kind of intrinsic conceptual difference between a lump of gold and a piece of paper with a picture of the Queen on it (or whatever your local flavour has), when in fact they are both just tokens that both work in the same way.
Both of them are fairly worthless things in their own right, but are nevertheless considered to be "worth something" and so can be used as tokens of exchange. For both, the "considered to be worth something" works only because nearly everyone is happy to play along with it.
Neither of them has zero value in their own right; they do have a little bit. Gold, as I mentioned, can be used for various purposes where properties like corrosion resistance or IR reflectivity are desirable. Pieces of paper can be used for writing stuff down on. (Indeed, for the Clapham omnibus passenger, the piece of paper is probably more useful; the things gold is useful for are rather technical and specialised, whereas writing stuff down is something everyone needs to do quite frequently. I'm sure we've all seen banknotes that people have done little sums on.)
But in both cases the considered-to-be-worth-something value is a purely artificial concept that has bugger all to do with their intrinsic value. To be sure, the habit of considering gold to be worth something has such a long history that people have difficulty disentangling the concepts, but that doesn't make it any less true that its real and pretend values are essentially unrelated in just the same way as with the piece of paper.
(Indeed, considering the history should really make it more obvious that gold is just like the piece of paper. The applications for which gold is actually useful are all of comparatively recent origin. For thousands of years it has been completely useless for all but two purposes - as a token of exchange, and as a substitute penis to wave in people's faces (like "Loadsamoney" with his wad of notes) - and both these purposes only make any kind of sense in a situation where everyone agrees to pretend it is worth a lot.)
It is not important whether the pretend value arises out of a government decree or out of thousands of years of people being collectively silly. What is important is simply that enough people are happy to go along with the pretence. That general agreement is what makes it work. Someone who has not grown up with the habit of the pretence - say the proverbial inhabitant of a previously undiscovered island - isn't going to be particularly impressed with either gold or banknotes.
]]>YouTube https://youtu.be/CTtf5s2HFkA
]]>There's not a lot of gold in the world.
Not a lot and yet nearly twice as much as there's a use for.
]]>Makes the assumption that TrumPence will collapse at or before 2020, though .....
]]>With your and Schaffer's input, I consider this matter settled. The discussion was getting silly anyway.
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