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Gold is popular as jewellery. The price is determined largely by the cost of mining it and so has remained somewhat stable compared to the cost of things like houses for centuries, far more so than other money like things.
A new book about humanity's obsession with gold
71–80 of 84 posts
Re: A new book about humanity's obsession with gold
#72I'm amazed noone has quoted Warren Buffet on this subject:
“[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
The principle point being: "It has no utility".
Like crypto, it's primary function in the modern economy is financial crime...
Re: A new book about humanity's obsession with gold
#73I'm amazed noone has quoted Warren Buffet on this subject: “[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” The principle point being: "It has no utility". Like crypto, it's primary function in the modern economy is financial crime..…
Being a store of value is utility.
Re: A new book about humanity's obsession with gold
#74> Its well-documented contributions to deflationary and financial crises, including the Depression, go curiously undiscussed in this book. Why is deflation viewed as such a bad thing? If you've got savings in a deflationary time, your money becomes more valuable, not less. Don't we want to encourage savings?
Actually no. Money is probably the most misunderstood thing in the world. While saving money seems logical from an individual perspective on the macro level of the economy it can be a huge problem because everybodies income depends on money constantly being spent. This is a classic case of a "fallacy of composition".
To illustrate that it's often helpful to think in extreme scenarios. Imagine every household starts to save 100% of its monetary income. What does that mean? It means that nothing is sold anymore and companies have 0 revenue which will soon lead to a complete collapse of the economy and everybody becoming unemployed and loosing all their income as well unless the companies will take on debt to keep paying the wages/profits (which they will not do when there is no demand for their products).
Money needs to be spent or else demand will drop and the economy can enter a vicious downward spiral (a deflationary collapse / debt deflation). The most impressive example of that was the great depression.
If some sector of the economy wants to net save (usually those are the households) to keep the same level of economic activity (and therefore jobs and income) somebody else needs to spend money they don't have, i.e. they need to go into debt.
The main issue is that in a society with division of labor there is no mechanism that keeps saving and investing in line so that employment and income is kept on a stable level. The mainstream neoclassical economic theory claims that the interest rate is always and automatically making sure that for every dollar saved someone else will invest it but this is based on the assumption that investors have infinite and complete knowledge about what everybody else will do in the future and that the economy will always and necessarily tend towards an equilibrium state of full employment. They are obsessed with "equilibrium" which is why in mainstream publications you will find that word everywhere. But in reality the economy is a non-equilibrium complex system with pro-cyclical feedback loops and all the interesting characteristics worth studying are non-equilibrium behaviors of the system.
Some recommended literature regarding that topic:
- The two essays "What is money?" and "The credit theory of money" by Alfred Mitchell-Innes - "The theory of economic development: an inquiry into profits, capital, credit, interest, and the business cycle" by Joseph Schumpeter - "Debunking economics" by Steve Keen - "Can it happen again?" by Hyman Minsky - "Debt: The first 5000 years" by David Graeber
Money is credit. It's not an asset. Gold or Bitcoin are not money, they are an asset. The economy is credit-based, it's not a barter economy.
Re: A new book about humanity's obsession with gold
#75Name one thing in the universe which is better than gold? Tip: You can't.
> Name one thing in the universe which is better than gold?
Time.
Re: A new book about humanity's obsession with gold
#76He did a podcast with Tom Woods (libertarian historian) about the book: https://youtu.be/soJEdxjrYAw?si=gIt7Y3PB5H-zhw1f
Re: A new book about humanity's obsession with gold
#77Earlier quoted context omitted.
Paper/plastic currency (cash) has 0 FCF, 0 earnings, 0 dividends. The whole thesis is you trade it at a deprecated rate later. You can trade gold and cash with people a lot more easily than an equity in your brokerage account.
"You can trade gold ... easily" Only for very large amounts of money. It can't easily be subdivided. Oh and this is illegal in most countries. But yeah, what people forget is that gold is incredibly dense. Nearly double lead's density. This means 1kg of gold is about the size of a nokia 3360, and worth close to 150,000$. A very large amount of gold doesn't take up much volume at all. ... which also means that people…
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Re: A new book about humanity's obsession with gold
#78I'm amazed noone has quoted Warren Buffet on this subject: “[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” The principle point being: "It has no utility". Like crypto, it's primary function in the modern economy is financial crime..…
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Re: A new book about humanity's obsession with gold
#79Earlier quoted context omitted.
>Aluminum itself may not be the best counterexample to gold as it was not discovered until the industrial revolution was well underway. I think also the scarcity plays a factor, the estimates that I'm seeing after short search being that there's about 10,000x more processed aluminum in the world than gold.
This is because of what the comment you’re replying to was saying. Aluminum was a scarce resource prior to the electrolytic process being invented that made it “distillable from common rocks.” The cap on the washington monument is aluminum, because at the time it was still a precious metal. The guy who figured out how to electrolyze it out of ore went on to create the main company in the US that produced it, and chos…
The History Guy did a video on "The History of Aluminum": https://youtu.be/Nx16c6SB4kQ?si=jqaObtbTp3uNNjj3
From what I recall of the video, two people independently worked out the chemistry for cheaper aluminum. (I believe the video also mentions the source of the aluminum/alumininium name difference.)
Re: A new book about humanity's obsession with gold
#80> Its well-documented contributions to deflationary and financial crises, including the Depression, go curiously undiscussed in this book. Why is deflation viewed as such a bad thing? If you've got savings in a deflationary time, your money becomes more valuable, not less. Don't we want to encourage savings?
Actually no. Money is probably the most misunderstood thing in the world. While saving money seems logical from an individual perspective on the macro level of the economy it can be a huge problem because everybodies income depends on money constantly being spent. This is a classic case of a "fallacy of composition". To illustrate that it's often helpful to think in extreme scenarios. Imagine every household starts t…
Very well put. I'd add Money and Goverment by Skidelsky to the list of recommendations.