Ive never been able to understand the concept of gold. Why is it so valuable? How do countries know that the amount of gold being held by other countries? Who audits these gold reserves to make sure the gold isn’t fake? In the event of a major war would you trade food for gold? feel like people would trade goods for different goods in such a dramatic event. I have potatoes and trade them for fruit type stuff. Is gold the same scam as diamonds? Or how is gold any different than Bitcoin?
In: Economics
Ok, so I wrote a really long and in-depth response to answer all the questions, but Reddit didn’t like it for some reason, so I’ll write a shorter and less-involved one.
To answer the most important (imo) question specifically:
> In the event of a major war would you trade food for gold
This goes back to the root of commerce and why commerce exists at all. Once upon a time, society was agricultural. Everyone was a farmer and grew crops. Then technology got better and suddenly everyone grew more crops. The problem is, now people had too many crops. Crops are perishable, so what do you do when you have excess crops? As it turned out, when you have too much rice, someone else has not enough rice but has too many eggs. And someone else has too many tomatoes. And so on. And so, the person with too much rice traded rice for eggs or whatever.
The thing is, then what happened is technology got EVEN BETTER and suddenly everyone had too much rice AND eggs AND tomatoes. The thing about rice and eggs and tomatoes is that they’re great for a period of time (refrigeration hadn’t been invented yet) and then they go rotten. So you have a great poke bowl for about 2 weeks and then you starve to death. Clearly this is not an ideal situation. So people looked to a way to trade not only across resources but also across time: I have too much rice today, I want to give up some of my rice today for a guarantee of having rice tomorrow. And that’s how money was invented. “Hard” (tangible, valuable) money is a mechanism whereby I can forfeit a resource today to gain another resource tomorrow.
In a time of poverty or strife or war, you can be in plenty or in poverty. Those in poverty want to acquire the goods they need to live, while those in plenty have the goods they need and want to acquire these IOUs to remain in plenty tomorrow. So, the former group will trade gold for food, the latter group will trade food for gold. That’s basically how it works. As for the question of “why gold in particular?”, that’s a question that will be lost to the Reddit gods who refused to allow me to write the longer version of this answer. Others have written about it in their answers, though, so check those.
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