Earlier quoted context omitted.
Congrats, you just decided that gold miners are the most altruistic people in the world, charging people only what it costs to mine the gold, not what the market would bear. I wish other companies could be so generous! Also, I would recommend "Making Money" by Terry Prachet. Good book that actually explores a lot of the same ideas behind gold as the basis of a currency. In essence, the main character eventually reali…
Ah - that was a simplification. If it costs $1000 to mine and sells for $2000 then short term the miners will make a profit but long term people will build more mines. This is a slow process - 10 or 20 years but eventually supply exceeds demand, the price drops to $700 or some such, the miners go bust and the cycle repeats. But generally the price stays within a factor of two or so of the production cost.
Re: Please remove mitsuhiko/*
#431so you talk about supply and demand, yet think cost is set purely by suppliers? What do you think would happen to the cost of potatoes if only 10% of last years harvest was harvested this year. It would go up, but only to the point where the supply vs. demand equalized, i.e. 90% of people wouldn't be buying potatoes cause they cost way too much, but there would be 10% of the people(like my wife) who would still be willing to buy them at $50 for 5 pounds, cause she values potatoes that much(she's got a serious fixation on potato soup). I.e. the value of a good depends on the person doing the valuing, i.e. subjective value.