How is gold so valuable and the basis of currency, if it’s just being stored and not used for anything?
In: Economics
Because people agree it is, basically. Money has always been something of an illusion – it’s there so people don’t have to barter and figure out what the change is when you pay for two cows with a large pig and several chickens. For instance.
Currency is just something that physically represents money or value – a lump of gold, a coin, a banknote, a check, etc. Gold got used, back when, because it was shiny, easily shaped, and didn’t rust; lumps of it stayed the same, and could be tested for purity fairly easily. (If you see someone biting a coin in a book about older times, that’s actually what they’re doing, seeing how soft and workable it is.)
Where it’s piled up in a vault, it’s there to represent “I have all this value stored here” and “Other people agree, pretty much, on what one of these gold bars is worth, so I know what I’d get it if I sold it and got cash for it”.
Most money (maybe all?) these days isn’t “backed by gold” any more – the government doesn’t need to keep certain quantities of gold in a vault and, on request, exchange bits of it for bills or coins.
The idea that money’s worth what everyone agrees it’s worth is what supports currencies nowadays, and is why different currencies rise and fall in value relative to each other; sometimes investors think Canada and its currency is more stable and investable in, and sometimes they think the USA’s, or China’s, or Begium’s euro, is.
–Dave, cryptocurrencies basically work this way too; there, what “backs” them is that there’s a finite amount of SOMETHING related to it available, or else the game it’s used in values items at shopkeepers at certain levels. etc.
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