Oh, another thing about intrade: It is based on short term analysis and is susceptible to huge fluctuation. Obama was a mortal lock on in trade a few weeks ago, now he is a dog. There is a lot of short term variation in perception, but there may or may not be stability in other predictors.

This first paragraph is pretty close to it, actually, although i don't think that it was particularly rising rates that triggered the end. The stupidly low rates in the us since, pretty much, 2000, are the largest factor in the whole mess, imo.

The problem is, when you get down to the fundamentals, the things people need to survive and prosper are by an large transient. Tying a currency to some fixed asset denies this reality. Gold is expensive because it is rare, and basically people think it is pretty. Diamonds are artificially expensive for the same reason. Yes, gold is needed in electronics. Yes, diamonds have industrial applications, too. But diamonds are sythesizable, and gold or gold alternatives will likely be, too before very long (if they already are not).

In short, there really is no way to remove the variance from life. You run into the same problems with the gold standard as with the fiat system, but maybe you gloss over some of the small hiccups due to perception, but then pay for it with the big hiccups which are more abrupt and severe.

Eh I'm willing to pay more money for something that I like more than something else. Does it matter if I pay for gold because I like how shiny it is or buy a Superbowl ticket because it provides me with entertainment?

If you say gold and diamonds are "artificially" expensive what do you propose to find out their real value?

And saying something is expensive because it's rare is somewhat of a stretch.

clown, gold is not artificially expensive afaik. Diamonds are because they are actually very common, but de beers controls the supply very tightly to maintiain a higher price than wouold be the market clearing level (with a more realistic supply)

If gold is money
and gold is scarce
and more people need money as time goes on

doesn't that mean that your money, in the bank or in your closet, on a gold standard, will increase in value instead of decreasing because of inflation (dilution of the money supply)? What is the problem with that?

Heh, I'd love to steer this discussion back to economics and why I think monopolies are not bad but I won't

Let's see, clown likes

• monopolies
• monarchy

I sense a theme.

fnord, your line of though seems to be in a nutshell:

Am I correct to assume that you hate the current currency system?
Why do you think money is worth anything?

why is gold worth anything?

mmmmmmm

Because it's scarce and people want it.

How does that differ from money?

What is it used for outside jewelry and electronics?

And the other real problem, in addition to it not being in any way a staple of life, is that population is growing exponentially. With a gold standard, you have a fixed quantity of currency. As population increases, you either have to devalue it and print more or run out of money. Exponential growth is a hell of a thing. Also, you restrict economic growth greatly with such an artificial standard.

Whenever you tie your currency to something that is really needed (like wheat or energy) you end up right back at a market driven fiat system. And if you are on the gold standard, how does that help when say China decides gold doesn't matter anywhere nearly as much as oil (or other forms of energy) to it? Suddenly your gold backed paper is worthless except by the value in gold you put on your items that people really want. So once again you are back at a fiat currency, except with less flexibility and a high susceptibility to changing global demands.

The vulnerability is of course as population grows and the items such as food/energy/land become more in demand, you get caught a bit flat footed by being tied to a item with no intrinsic value.

Land is about the only long term asset that does not lose value, but how can you possibly tie a currency to that? (Variable cost due to location/quality of land and human needs at the time, that damned exponential human growth, etc.)

If humans needed gold to survive, then it could work, but they don't. I guess the best illustration of my point is that I personally have no use for gold. So me being able to trade currency at a permanent rate for gold only has value in other people needing or wanting gold. So again, we are back to depending on people placing value in something for no tangible reason.

wot zurv said.

That's why money has value.

The problem is that it is completely artificial and falls apart over time because in the end, you don't need gold but you do need food, energy, clothes, medical attention, etc. Inflation follows naturally from population growth: more people competing for the same resources. If your currency is gathering in smaller and smaller percentage pools of the population, and it is tied to a non vital resource, your currency will eventually collapse and be replaced by something else. Historically, this something else is the barter system, which is not too conducive to a healthy economy.

Ok, just say in six words what I have typed 8324589072350872 pages to try to say.

Well how scarce is fiat money?

Sounds like the water/diamond paradoxon to me.

Scarce enough that most people don't have enough?

lol and you tell me I argue like a politician.

fiat currency grows at a rate the governing body dictates. (That is new currency is introduced as decided, but this generally follows population increase). If you introduce new currency too quickly, you get hyper inflation (and probably revert to barter).

I am not familiar with the water/diamond paradoxon, but I am guessing it is when no one has enough water, your diamonds are not going to be able to buy you any.

You asked a question, I answered. I don't know how much money is in the world, any more than you know how much gold is in the world. What is "scarcity" anyway? Who defines how much is "enough"?

I'm basically asking the same question as fnord... what does gold backed currency offer that fiat currency doesn't? Both depend on the concept that the currency has value. Both systems fail if people decide that the concept of that currency is invalid. When you're hungry, gold backed currency is as useless as fiat currency if the people with food won't exchange it for that currency.

Gold backed currency offers the advantage that the government can't manipulate it. This is a good thing if you don't trust the government.

well, except there are examples of gold backed currencies going through inflation crises and problems of the government not having enough gold, aren't there? Doesn't that amount to the same thing?

Of course they can. Who holds the gold? Do you really trust politicians (or if it is banks, bankers) to not break the rules if it suits them?

Or are you talking about using gold as currency, which has some serious implementation problems.

And how do you get around that little problem that gold is fixed but population grows exponentially?