Gold IS Money

I'm not a gold bug, I don't believe that gold has any inherent value beyond its utility as a commodity, and when it came to a choice between food, shelter or clothing against gold, I'd take the former trio every time; the story of Midas makes perfect sense to me. However, its interesting to see quite so much wisdom unintentionally wrapped up in an single paragraph: Nick Barisheff: Gold is Money.

Many people think gold is a commodity like copper, zinc or pork bellies, but it has 3,000 years of history as money. It was money that no government created by edict.  It was just adopted for usage by itself, and it was and still is the best form of money.

Good point, the reason it was adopted by itself is that it was apparently immutable and once Archimedes had solved the problem of contamination with other metals, our predecessors could RELY on the gold they used for payment today being the same gold that they received in IN payment next year. Reliability in the transfer of value matters.

I have a suspicion that the scale of the economy was also tightly controlled by the supply and denomination of gold but it didn't stop booms and busts so I'm not convinced by the gold bugs assertions that it is somehow better than fiat currency; when greed and indiscipline exist we will always find a way to screw ourselves, regardless of the currency form.

The next bit is VERY interesting.

Currently, we have a 37-year global experiment in paper money.  All prior paper money experiments ended in hyperinflation, with the currencies becoming worthless.

OK, lets take that as a given.

All previous hyperinflations were contained within a single country,

And that, its important.

but this time, because of the reserve status of the US dollar, it is likely to be global in nature.

"but this time" is an interesting conditional. It says that this one is different from all of the others, ALL of which were contained as we agree. This is an uncontained hyperinflationary environment so we are in uncharted territory here and we are entitled to think that the processes that finally caused the previous hyperinflations to revert to the mean may well be inoperative.

In this one there is no externality on which to call, no source of stability to which we can cling.

Gold wont help here any more than it would have helped in Germany in 1932 or in Zimbabwe now. Take a truck load of food and a truck load of gold to Zimbabwe right now and you will see something inhteresting. The Zanu PF leadership will go for the gold, the rest will go for the food.

There's a reason for that, money only needs to exist when there is surplus value to trade and surplus value exists only where people can be more productive than they need to be. To do that, they need the real source of wealth and that is energy, our first source of energy is food and without that, all the rest is worthless, even a truckload of gold.

The real entrepreneurs in the next phase of our settlemenrt on this planet will not be the financial or technical whizzes but those who can take low energy systems and still create surplus production, and they will be permaculturists.

As people point out all the time, the planet receives more energy from the sun every day than is locked in all the hydrocarbons buried in the earth below us and natural systems tap that energy all the time. If we can work within those systems we have a chance, if we can't survive without continuing to dig up energy from the ground then we can't survive.

Comments

[nomad496]

Your comment about the Zanu PF and the rest of the poor people of Zimbabwe is a good one. I think that the only reason the thugs would go for the gold is that they KNOW where their next meal is coming from, and they don't have to buy it. I have never been all that enamored of gold either. History shows that silver is much more practical. Gold is usually worth too much to do practical trading. Personally, I like keeping a good assortment of top quality tools (hand tools) available. When you NEED a good chisel or saw made out of good tool steel, you are willing to trade a lot to get that item.

[Jon Husband]

As people point out all the time, the planet receives more energy from the sun every day than is locked in all the hydrocarbons buried in the earth below us and natural systems tap that energy all the time. If we can work within those systems we have a chance, if we can't survive without continuing to dig up energy from the ground then we can't survive.

This paragraph nails with a conclusory bang THE issue of our times. Why "they" aren't throwing everything and the kitchen sink into figuring out more about solar energy I don't understand .. well, maybe I do, oil is too lucrative for those on the receiving end of the money. But it would indeed be fun to have "them" watch their grandchildren trying to eat the Bentley's tyres.

By the way .. what do you know about photovoltaic paint ?

[Earl Mardle]

PV Paint, I know Wayne Campbell at Massey Uni here announced last year a Titanium Dioxide compound that is PV and they are working on including it in glass and paint.

However, the press releases for Massey from December 2006 to march 07 are missing so I can't send you to the source.

Not only was it relatively efficient (and if you have the whole roof painted in it it doesn't have to be too high) but it was cheap because the titanium is a by-product of NZ steel production from west coast Iron sand; we have TONNES of the stuff and not nearly enough toothpaste demand.

[Jon Husband]

Solar-power paint lets you generate while you decorate

[Branedy]

because of the reserve status of the US dollar and it's only a reserve currency because it tied to oil. The first country that starts to price it's oil by the Euro, will destroy the U.S. economy. As with any currency it is only it's 'perceived' value as a measure of the transfer of labor value to trade value that gives it substance.

[Earl Mardle]

Thanks for the link Jon, that was the story I heard alright, and as usual there is a catch. Last paragraph refers to the "problem of getting electrons back into the dye". Why does the cynic in me immediately think that that problem is bigger and herder to solve than anyone suspects?

Brane, the counter to that is the staggering amount of US$ that is held by those countries in surplus. As the US economy crashes most of them/us, lose the customer of first resort and the value of their $ denominated reserves goes to zero.

Can China, Japan and the oil producers survive as economies and political entities while losing multiple trillions in currently stored wealth?

The $$ can't be used to buy forward oil because the oil producers wont accept the deals and be left holding the tar baby, they can't be used to buy up US assets because nobody can put a forward price on those assets given the fragility of the US economy.

The $ might be tied to oil, but we are all tied to the $, that's how empire works. And the end of empire is almost always catastrophic. the Brits did not collapse because, for perhaps the only time in history, the empirical crown was handed over - in payment of the debt incurred by WW2.

This time there is no externality, the global economy has put us all inside the boat. Going to be interesting alright.

[Rob Paterson]

Yes money disappeared in Britain by about 500ad - about 85 years after the last legion left. Wealth was your ability to produce food - cities were deserted

Rome itself went form about 700,000 in 400ad to about 30,000 in 500ad. It seems that if you depend on food grow locally using only human and animal power that about 30,000 is near the max of a group that can be fed.

Very few ancient cities were able to get beyond this - Rome did because like us it relied on a global food system of grain grown in Africa and shipped. When the global food system collapsed so did Rome.

I suspect that our kids may come to know this for real

[Earl Mardle]

Thanks for the historical note Rob, its nice (if you can call it that) to have some backing for the assumptions.

As for population dieoff, even a pessimist like me hasn't been happy to go there explicitly, but you are right and I'd go one further.

The ability to support 30,000 people was based on an intact ecology and access to resources well in excess of actual needs; the 30,000 limit would be at least in part a process and management problems.

We are now dealing with depleted soils toxins in the landscape and massive loss of skills; 30k may be too high by a big chunk.