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
Gold is a soft metal, so can be shaped easily. Gold doesn’t rust, so stays pretty for a long time. Gold is rare and requires lots of work to mine. Vanity is a common driver for determining what is considered “expensive” that does suffers from a “chicken and the egg” problem, but it’s durability has made it rise above art, fashion, titles, and so forth, which come and go.
The world mostly moved off of gold as being the standard in 1933 when President Roosevelt because deflation encouraged hording, while a small amount of inflation encouraged investment.
People trade their paper money for gold nowadays because the paper money depends on the strength of a country in comparison to other countries. Gold doesn’t have many intrinsic value nowadays, so it is faith-based, faith that other people will also try to buy gold when times get hard.
Bitcoin also has no intrinsic value, but breaks ties to any given country’s strength on the world stage, so people want to hold onto their buying power when countries start making more and more foolish decisions, like not playing nice when deciding how big to make a fee when trading with them or going to war.
Other precious metals like platinum is an alternative that is also rare and doesn’t rust (sometimes we want metals to be hard instead of soft because machines and chemicals are rough with them). Like gold they mostly rely on faith rather than having an intrinsic value. The value often quoted is in the automotive industry, namely the exhaust cleaner, but if the world shifts to electric, then these precious metals won’t be needed. Copper has a tiny growth and the most intrinsic value, but is fairly common.
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