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J Bryant
J Bryant
1 month ago

Excellent article and a fine economics lesson.

Dennis Roberts
Dennis Roberts
1 month ago
Reply to  J Bryant

It is, and far too few people know this, especially the effect of the Greenspan Put.

Ethniciodo Rodenydo
Ethniciodo Rodenydo
1 month ago
Reply to  J Bryant

I said much the same in my comment

Martin M
Martin M
1 month ago

However little gold might be worth intrinsically, it has greater intrinsic value than Bitcoin.

Lancashire Lad
Lancashire Lad
1 month ago
Reply to  Martin M

Forged, along with other precious metals, by the unimaginable forces within supernovae and neutron stars, before being flung into the wider universe… i’d say so.

Martin M
Martin M
1 month ago
Reply to  Lancashire Lad

Exactly. Bitcoin, on the other hand, was forged (and the word is probably a good one) on a computer by a crook (or group of crooks).

Geoff W
Geoff W
1 month ago
Reply to  Martin M

And it’s used by crooks. And promoted by crooks.

UnHerd Reader
UnHerd Reader
1 month ago
Reply to  Martin M

When I first read about Bitcoin, in about 2012, I thought it was a clever and audacious idea that would make a great in-game currency for something like Second Life, which was popular at the time. I thought I would buy some to fool around with, but it was a bit of a hassle at the time. Hah, hindsight…

Martin M
Martin M
1 month ago
Reply to  UnHerd Reader

All the “early adopters” of Bitcoin I knew bought it to buy drugs on the now defunct website “Silk Road”.

2 plus 2 equals 4
2 plus 2 equals 4
1 month ago

Gold isn’t quite as worthless as a practical asset as the author claims. It is used in electronics as a conductor.
That aside, the question of its intrinsic value is more complex that its practical usefulness.
Beyond a certain point in their development all human societies value ceremony and decoration. These may not be a practical concern in the sense that an iron ploughshare is, but it appears to be universal and intrinsic to our species. Gold’s scarcity. malleability, and resistance to tarnishing make it ideal for these purposes.
So, yes. Gold is valuable because we all believe it is valuable, in contrast to something like iron which is valuable because we can make swords and scythes out of it. But believing that decorative things are valuable does itself appear to be something intrinsic to humanity.

Nell Clover
Nell Clover
1 month ago

Evolution has promoted some bizarre decorative but otherwise non-practical features and behaviours in many species. The male bowerbird for example builds highly decorative structures simply to woo mates. The male peacock is adorned with a decorative plumage that is conspicuous and quite an impediment to survival.

The value of this apparently unnecessary decorative waste is it is only possible if the individual is fit and healthy to gather the necessary resources to build or grow these decorations. The magnificence (or not) of the decoration is a proxy for the possession of genes that might be useful for survival, and natural selection winnows those less decorative individuals and their genes.

Of course, the “decorative” non-functional test of biological fitness varies by species. Nonetheless, some species value decorative effects that are similar to human sensibilities. Humans are naturally not exempt from biological selective pressure. The command of resources (be they people or material) is one factor humans use to choose a partner, and decorative effect (be it a fancy gold watch or a porsche) is a simple proxy for this.

UnHerd Reader
UnHerd Reader
1 month ago
Reply to  Nell Clover

This doesn’t really explain why gold is more extrinsically valuable than, say, a Lexus.

Dennis Roberts
Dennis Roberts
1 month ago

Yes, but it seems to only be gold that has its value questioned because it is mostly just decorativ. Precious gems, art, clothing beyond pure function, paint from the DIY store for your kitchen…

UnHerd Reader
UnHerd Reader
1 month ago

Gold’s valuable because it looks good against brown skin. That’s where the demand comes from. Industrial applications are negligible.

Matthew Powell
Matthew Powell
1 month ago

Gold was used for currency because of its practicalities.

Cultures have used numerous materials for currency but gold proved to be one of the best. It is both rare enough that production could be limited to prevent inflation but no so rare that there would be a scarcity of currency. It’s a very unreactive metal so does not degrade and can be stored safely for long periods of time, it preserves value and is more difficult to destroy than other mediums yet it’s light weight compared to more durable materials and so could be transported easily.

Gold was not money just because it was alluring to human eyes. It was money because it was an excellent material to use for money.

Nell Clover
Nell Clover
1 month ago
Reply to  Matthew Powell

In practice, gold is rather too valuable / rare to be a useful currency. For most day to day purchases, the amount of gold needed is tiny and alloying it sufficently dilutes the gold content so much as to make it essentially not gold. Consequently, silver has been the principal metal for currency and gold more commonly used for storing value.

From the Sumerians in 3000BC to the English in the 16th century, currency was struck in silver. The English penny was roughly 1g of silver. It was only with the emergence of modern Central banks, paper money, and disruptions to silver supplies in the 18th century that Europe – and thus the world – moved to a gold standard currency.

Ethniciodo Rodenydo
Ethniciodo Rodenydo
1 month ago

Well I understood the article and learned quite a bit from it

Martin Smith
Martin Smith
1 month ago

Ummm… BTC at $71k today… Just as all that glisters is not gold so all that is crypto is not bitcoin.

Martin M
Martin M
1 month ago
Reply to  Martin Smith

Bitcoin is the most crooked of the cryptos though.

UnHerd Reader
UnHerd Reader
1 month ago

This is not a great article, comments not great either. D minus all round. The old btc is outperforming everything, gold has already failed. Paper money will continue being printed to infinify. Meanwhile the developing world , Turkey, nigeria el salvadore get it . You all better wake up. The revolution will not be televised

UnHerd Reader
UnHerd Reader
1 month ago
Reply to  UnHerd Reader

BTC is great, as long as the powergrid stays on.

Cho Jinn
Cho Jinn
1 month ago
Reply to  UnHerd Reader

God bless coal!

Michael Layman
Michael Layman
1 month ago
Reply to  UnHerd Reader

If you can stand the volaility and sleep at night, which most can’t. BTC is prone to greater than 50% price drops and equally spectacular appreciation. Human nature causes most to buy high and sell low. Gold has traded sideways since 2011 until the recent breakout, so is not a particularly good long term investment. SPY will serve you better over the long haul. I prefer something tangible and though gold has appeal, companies that produce goods and services are a safer investment.

C D
C D
1 month ago
Reply to  UnHerd Reader

Crypto doesnt fullfill two good properties cash must have: 1.) be scare, 2.) low volatility.

Note: crypto is not really scarce. I can host my own crpyto and everyone can buy it (and drive its price). It only
gains value if people believe in it. Scharlatans everywhere.

Martin M
Martin M
1 month ago
Reply to  UnHerd Reader

Ah, Turkey, Nigeria and El Salvador. Those powerhouse economies that we all envy.

Pip G
Pip G
1 month ago

For a long time I never held Gold. That changed in c. 2016 with the possibility of a Corbyn government: while lowish risk it could have led to confiscation and exchange controls (we had them until c. 1976).
I view Gold as a protection against debasement of fiat currency, and a counterweight to stocks & bonds. Buy physical Gold stored in a safe overseas jurisdiction. Set & forget.
The excellent Lyn Alden published a book ‘Broken Money’ which explains the history of money and covers the use of Gold.

Martin M
Martin M
1 month ago
Reply to  Pip G

“….stored in a safe overseas jurisdiction“. Argentina?

Alex Lekas
Alex Lekas
1 month ago

Maybe people believe in gold because it has tangible value and always has. Fiat currency is a stand-in for value; gold stands all by itself.
As the money supply mushroomed, the allure of gold returned once more. 
Well, yes. The increased supply made existing money less valuable on a per-unit basis. Debasing the currency is an odd tactic to support but bank after bank went all-in and the foreseeable consequences are playing out.

Fafa Fafa
Fafa Fafa
1 month ago

I first read the title as “Why we still believe in GOD. The worthless asset has a mystical allure”. I was excited to jump into the fray. But gold, shmold, I had some, sold some, lost the tee shirt.

Jonathan Andrews
Jonathan Andrews
1 month ago

I don’t understand monetary theory and, sometimes, I wonder if anyone does

Jim M
Jim M
1 month ago

All experiments with paper money have failed. Gold is still gold after 5000 years in the ground or ocean. Keynes was an idiot who believed that government is god and a few smart Oxbridge men can run the world. What an arrogant idiot. The US dollar will be worthless in 100 years and maybe the state itself will collapse along with its morally bankrupt Marxist culture.

Martin M
Martin M
1 month ago
Reply to  Jim M

You can’t run a modern economy on a Gold Standard.

Alex Colchester
Alex Colchester
1 month ago

From the POV of the financial elite, Gold represents a constraint on debt creation and associated ‘cleverness’. The capitalist sausage machine relies on an endless putrid flow of minced debt. The ‘masters of the universe’ encase this odious paste with their thin prophylactic of respectability and sell it on to hungry suckers. But gold eventually calls time on this nonsense. It always does.

Christian Dorn
Christian Dorn
1 month ago

z

Mark V
Mark V
1 month ago

Keynes wasn’t an economist.