4T? What 4T?

[pbrower2a]

(05-22-2016, 09:29 PM)Galen Wrote:

(05-22-2016, 10:32 AM)Mikebert Wrote: There is a reason why there is no longer a gold standard.  The supply of gold is limited.  It expands at a slow rate.  The world output of goods and services (GDP) grows at a much faster rate than the supply of gold (S).  If gold was used as money, its value would be directly related to the ratio of GDP to S.  This means gold sitting in a safe draws a return and anyone would has more gold than they need to pay for living expenses would hang on it to.  This would reduce S and increase the value of gold further.  Thus by not using gold for purposes other than paying for consumption (i.e. investing) owners of gold would maximize their returns.

This is its virtue because it protects from the arbitrary inflation we are subject to now.  Yes, we would get a mild deflation of about one to two percent as a consequence of increased.  This would make it much easier to save for retirement because in the days before the Federal Reserve this did happen.  In most cases this was simply deferred consumption and that gold would later be spent.  Bank deposits were loaned out for capital expansion which gave savers a return much greater than the passive return of one or two percent inflation.

Gold became the definitive coinage metal because:

1. it is dense. Metals denser than gold are even rarer -- or radioactive. That made detection of metals offered as fakes easy, as shown by Archimedes over 2000 years ago.
2. It is unique in color.  (OK, cesium has a gold-like color, but it was not discovered until 1860, and it is difficult to handle due to its chemistry which is about as unlike gold as any other metal could be. A recently-developed substance, titanium nitride, has a gold-like color -- but it is hard and abrasive enough to be used on drill bits. But its abrasiveness and hardness would make it easy to distinguish from gold.
3. It is extremely malleable, which like its density makes fakes of gold difficult to get away with.
4. It is extremely unreactive. It does not corrode or tarnish. Not even acid mine discharge can corrode it. (Aqua regia, a combination of nitric and hydrochloric acids can can do so, which makes possible a story about some Nobel Prize winner dissolving his medal, which the Nazis prohibited him from keeping, and storing the gold in a solution of the aqua regia. He returned the gold to Sweden for reconstitution as his medal. The Nazis would have of course confiscated gold metal.
5. It typically appears uncombined. A rock that contains gold can often be destroyed chemically, and the gold emerges unscathed. Such limited the availability of gold.
6. It is rare, so it has few uses. Because it is so soft it could never be used as a structural material.


...its supply is extremely limited.

Quote:Keep in mind that under the gold standard and laissez-faire the US has some of the greatest economic growth and increase in living standards ever.  People were living better than they ever had before even if it doesn't seem like that by current standards.

The gold standard created prosperity? Mere coincidence in contrast to technological innovation, rarity of corporate bureaucracies, hard work, recent discoveries of raw materials, lax regulation and some of the most amoral entrepreneurialism to have ever existed. Sure, John D. Rockefeller practically invented the refining of petroleum and the fuel pipeline, but people were also concocting some of the most hideous patent medicines ever made.

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Ther beginning of the end: