I hear some economics arguing that currency should be pegged to gold as a way of ensuring that its value isn’t arbitrary / volatile but I don’t understand how this would solve the problem. I understand that gold is a scarce resource that is difficult to mine but is it this alone that gives it intrinsic value ?
In: 115
Saw a video on why the Fallout series uses bottle caps for currency and similar reasons for why we use gold.
From the top of my head, the video said gold and caps are good currency because they’re:
1. Rare, but not too rare
2. Instantly recognizable
3. Hard to counterfeit
EDIT: Here’s the video – [Why are bottlecaps REALLY used as money?](https://www.youtube.com/watch?v=zzaTP6s_HcY&t=410s)
(some points from the other comments are also mentioned, namely that gold is nonreactive and easy to shape, and aside from electronics and decoration, gold doesn’t have practical use besides being currency)
Here is the reasons I have been able to distill this question down too:
* It’s Shiny
* It’s Rare
* People have more money than brains
Because value lies where people think it lies, and gold has been considered valuable for a long time.
Gold is very convenient and very useful, but none of these conveniences or uses make it inherently *valuable* to the extent that it is.
There are multiple factors to this:
1. Scarcity, gold and silver and even copper are relatively rare and back in the day hard to purify and manufacture.
2. Ability to maintain itself, gold and silver, though particularly gold, doesnt take electrons or strip electrons much, so while it can tarnish a bit it doesnt gain their version of rust without specific conditions.
3. Usability, hold, silver and copper are “soft” metals. You can work them cold and with basic tools. Hell even just with your hands if they are large enough. This makes them good for minting.
To go along with this until the scientific revolution, gold and silver werent used for much else besides ornamentation and jewelry so along with scarcity they were great things to make currency out of. There are only a few instances where other metals were used like steel or iron or stone like Jade and barely any survive today.
Today they have very broad and great uses for nearly all types of industry.
—
To top this off, things only have value we ascribe to them. Gold is still rare but its believed due to observation and scans and radiation patterns that lots of the bodies in our solar system are stuffed with “rare earth minerals”, called that because they are rare on earth but not in space.
There may be a time where gold is worth less than tin
Aside from its obvious qualities of being rust-proof and be easy to mold, I love David Milch’s approach to gold as part of the main theme of “Deadwood.” IIRC, the idea was that the town of Deadwood and the Gold Rush were both born out of this mutual agreement that gold has value even though most of the people in the town are using the gold for something else other that what it is prized for metallurgically.
No serious economist would suggest pegging the dollar to gold. That has always led to disastrous currency crashes. Dumping the gold standard was the best thing the world economy has ever done.
Gold is very useful for commercial and cultural applications, and there is a finite amount of it on Earth.
Neil deGrasse Tyson just did a great video on how much energy is needed to make a gold and how it’s one of the hardest to make elements. I’ll try to find the link later to post if anyone’s interested. Really puts it into perspective
first of all, it’s so called “noble” element. it’s non reactive to most things (apart from one solvent), it doesn’t rust or decay in any way. another thing is scarcity – it’s hard to find/mine/extract. also, since it’s relatively soft it’s been used for decoration and jewelery since man discovered secrets of metalurgy.
to answer your question directly – mostly because of scarcity. big gold suppliers will withold sales to keep the price up, when too much gets dumped on the market.
Because gold is a very rare resource. I once read somewhere that if you were to gather all the gold humanity has ever mined in its entire history it would only fill up 2 Olympics sized swimming pools.
Latest Answers