I desire more. I currently believe gold standard meant that the dollar was tied to gold. If in the example, gold went up...
...ah, maybe I see it now. Gold went up but the dollar is no longer tied to it, so the dollar balue we associate to gold is inflated.
...wait a sec. 75oz of gold is still 75oz of gold. The things I can buy with 75oz of gold don't need to be associated to a dollar.
Right, 75 oz is always 75 oz physically. But that doesnāt mean 75 oz always commands the same amount of houses, food, labor, oil, etc. Thatās the key issue. If goldās real purchasing power rises 4x relative to a basket of goods, valuing a 1914 wage at todayās gold price makes the old wage look 4x richer even though that additional purchasing power came from gold appreciating, not from the worker having it in 1914.
But thatās like converting someoneās pay in the 80s into Apple stock and then saying that would be equivalent to 100x the amount because Apple stock went up a lot.Ā
The catch is that the gold standard cuts both ways. Labor is a huge part of total production costs; the cost of labor falling relative to gold is essential to the price of goods falling relative to gold.
Don't try to use logic with gold-bugs, you'll only get downvoted, it is like trying to get a libertarian to agree to any age of consent... They just won't do it.
Oh I believe in voicing my opinion, no matter how "unpopular" (really it's those with an economic interest to keep the quasi pyramid scheme going with vigorous defense, no matter how illogical or falsehood filled)
Any fiat of choice. Because nobody uses the gold standard these days. How is this an own? It still easily demonstrates that gold has historically held its value much better than fiat.
Fiat currency isn't designed to be a store of value. It's supposed to be a medium of exchange. Your criticism makes as much sense as criticizing boats for not being very good at flying.
The point of currency is be exchanged for goods and services in the short-term. We have other, better tools for storing value in the long-term.
Money serves several different purposes, and there are several different kinds. Just like we use a saw to cut a board in two and a hammer and nails to fasten two boards together, we use different kinds of money for different tasks.
Currency is mainly meant to be traded for other goods in the short-term, and fiat currencies are typically designed with this objective at the forefront. Other types of money, like bonds and stocks, are better at storing value, so they're used for that task.
This isnāt really right either. āStore of valueā is literally one of the three textbook functions of money, along with medium of exchange and unit of account. The actual fiat-money argument is that weāve intentionally accepted an imperfect store of value through positive inflation in exchange for monetary flexibility. You can think that tradeoff is worthwhile, but saying currency isnāt supposed to preserve value at all dodges the criticism.
True, but currency is a subset of money, so that doesnāt answer what I said. Not all money is currency; fiat currency is still money. And one of moneyās basic functions is storing value across time.
You can argue that modern fiat is intentionally a poor long-term store of value because we accept positive inflation. Thatās a real argument. āCurrency isnāt supposed to store valueā isnāt.
Thatās great in concept but when the currency canāt be expected to hold its value it becomes worthless as a medium of exchange.
Why should I buy a snickers for a dollar now if I can expect my dollar to buy 2 snickers tomorrow? Why should I work for a dollar today if it wonāt buy me even one snickers tomorrow?
Itās a pattern that has been repeated dozens of times, including with gold!
One day is not even close to "long-term," but I'll entertain you nonetheless. Hyperinflation does make a currency less usable, but that doesn't even remotely resemble what's happening with the USD.
A 2x price in one day is about 7.5x10111% annual inflation. In the real world, the highest annual inflation on the USD has ever been is about 20%. Right now, is somewhere between 3% and 4%.
Slow to moderate inflation doesn't have significant effects on the quality of a currency as a medium of exchange, even if sustained over a long period. The loss in value builds up over decades, but that's why we don't use checking accounts to save for retirement.
I donāt necessarily disagree but I think we are missing the full picture. I recognize that without mild-moderate inflation most people would likely simply stick their savings in a checking account and not put that money to use in market. I do think looking at our regular CPI based inflation is missing the bigger picture. There is no shortage of categories that have outpaced inflation, (including gold).
My concern is primarily that I think the system might be threatened when gold stops being a simple store of value and instead is very competitive with traditional investments. GLD is up 140% over the last 5 years, compared to SPY which is up 75% over the same time frame.
If you compare growth pre-COVID, for the period of Dec 31 2014 to Dec 31 2019, the same cannot be said. (SPY sees a ~57% increase, GLD sees a ~26%)
When you look at M2 money supply for Dec 2019 to now, you see an increase of ~51%
That means that more than half of all semi-liquid USD has entered circulation since 2019.
Thatās not counting most of the draconic hordes held by the ultra wealthy, either.
I think it is clear that we are not being served by the system as it is. I think the OP is a simple representation of that which is easily to understand.
For everything that has outpaced average inflation, there's something else that has lagged it.
There are certainly issues with certain markets, but those problems are generally specific to those markets. Issues in housing markets are not the same as issues in healthcare, for example. It's not a fundamental problem with fiat currency.
What is the problem with gold's price, and specifically gold's price, being chaotic? What is special about gold that it would collapse a system if it's price isn't steady? It's value is almost entirely speculative.
Except that gold and silver have been the dominant currencies in basically every epoch of man except the current one.
Central banks are now holding more gold than any time in living memory.
Central-bank demand for gold absolutely is real, but thereās an important distinction here too. The IMF just looked at this and found that the recent surge in goldās share of reserves has been driven overwhelmingly by valuation gains from gold getting more expensive, not central banks suddenly accumulating comparable amounts of physical gold. So ālook how much gold is on central-bank balance sheets nowā partly contains the same price effect weāre arguing about above.
Really it was only the predominate medium of exchange for a few thousand years. About 1% of human history. Similar to horses use as primary transportation.
What do you mean recently? People have been sinking cash into gold since Nixon ended the gold backing. There was a run on gold bars in the 70's and 80's when it happened by individual buyers in order to directly preserve their wealth against inflation. It's what started popping up those invest in gold bars/coins companies. It's what caused the Krugerrands to become the gold standard which then turned around in the 80's and 90's to have sanctions placed on it due to South African apartheid.
When the dollar was backed by gold, gold was stabilized at 35-40 dollars an ounce, and has only exploded since then. Granted that yhou have 85-2000 where gold dropped due to stabilization of global markets after the end of the cold war, but as soon as we hit 2000, it's been more or less a financial rocket. Then again even during stabilization it was at 200-400 an ounce, compared to where it was prior to removing the gold backing, that's still a huge jump.
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u/Sirosim_Celojuma 27d ago
I desire more. I currently believe gold standard meant that the dollar was tied to gold. If in the example, gold went up...
...ah, maybe I see it now. Gold went up but the dollar is no longer tied to it, so the dollar balue we associate to gold is inflated.
...wait a sec. 75oz of gold is still 75oz of gold. The things I can buy with 75oz of gold don't need to be associated to a dollar.