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Comment by utnick | Hacker News Reader

Is gold really any less arbitrary than paper money?

Couldn't advances in technology create cheap alternatives to gold that would destroy its value?

Indeed. This is the point that gold-standard people don't seem to get. Gold is just as arbitrary as anything else. More so, even, because it is absolutely /useless/ in any aspect except as a valuable. It's too soft to do anything with. Furthermore, it has issues with being a finite supply that is occasionally moved around (no control over the monetary supply).

Steel. Now /that's/ what we should back our money with. Everybody needs steel. At least until carbon nanotubes get popular...

It is actually its finite amounts that make it valuable. Anything that can be produced at will not hold up as a currency.

But we do create more of it (or dig it out of the ground and refine it, as it were), there's simply a practically finite rate at which we can grow the gold supply.

So the value of gold should in fact deflate over time, as we produce more and more of it.

No, we don't. No matter how you look at this, gold is not "created". Cold is extracted from gold mines, the only thing humans can do it try to find, but they simply can not create it.

Key here is that the total amount of gold on this planet is finite - not the production or extraction rate - making it truly valuable. Same thing applies to other natural resources such as oil, natural gas and diamonds.

Wait, you can grow diamonds in a laboratory.

But Carbon is finite, too. (And on the same note, Dollars are finite, too. We have to store the bits somewhere.)

>We have to store the bits somewhere.

+1 for the fine, fine irony. Intended or otherwise as it might have been.

>but they simply can not create it.

I seem to remember reading that that's not the case anymore. As in, we actually can make gold through transmutation. The amount of energy required to do so is bigger than the "value" of the resultant gold tough.

No, we mine it. We may discover more of it. But in ground reserve quantities are generally factored into the price of the stock of gold mining companies. So it is rather finite, and the more we explore and mine, the less likely we would be to discover more of it. Until someone invents the Philosopher's Stone.

Actually it's the demand that makes it valuable. (And the demand stems from everyone agreeing that it is valuable.)

There is a finite amount of uranium on earth too, but the only reason it's considered valuable is because there is demand for nuclear applications.

Only a little over 10% of gold is used for industrial applications. Without the demand provided by people agreeing that gold has value as a currency, the price of gold would plummet. The high value of gold is self-fulfilling... it's based on people's faith that everyone else thinks it is valuable.

That's not true tho'; it's resistance to corrosion makes gold industrially valuable.

Currencies should be backed by something pretty fundamental. Eventually it has to be the Joule.

High entropy joules are 'intrinsically' worthless and easy to come by.

Actually, the real bottom line is work transfer, which can be measured in energy. Energy can produce material goods. If I give you 1MJ in exchange for work, you could do something with it.

  The only law money needs to follow is conservation, which energy fits. OTOH, the US government does screw around with the conservation law a lot, but it does apply to normal people.

Energy comes in a lot of grades. Low-entropy energy is useful (e.g. electricity). High-entropy energy is useless (e.g. the oceans at their normal temperature).

http://news.ycombinator.com/item?id=424877 http://news.ycombinator.com/item?id=426142

12 points by demallien 20 days ago | link

Hey! Put some carriage returns in there! You're screwing up the page rendering...

I know this is off-topic, but every time I see a post like this, I feel like I'm back on /. during the 90's, why does this site feel the need to make the page wider than screen whenever pre-formatted text has long lines. (Other sites solve this by inserting scroll bars or forcing line wraps, but not this one.)

Depends on your browser. From what I remember, the pre's do properly size and have scrollbars in FF2, but not in FF3. The problem has to do with td cells expanding to fit their content I think.

There is a GM script that fixes this in FF3: http://userscripts.org/scripts/show/25039

Fix the bug!

Sorry about that guys!

Thanks for telling me how to not do that in the future. In this case, for some reason the edit button has disappeared... possibly because it was posted a while ago.

I suggest Germanium. (ducks)

Well you can carry around gold chips which have a lot of value. A gold coin is worth quiet a bit. Can't say the same for a steel coin. Have to carry around a lot more silver (in volume) to get the same value.

Another thing is control.

Having a gold standard means that gold mining companies can manipulate your currency. Suddenly find a huge new vein? Inflation! Go for a decade without any new discoveries? Deflation!

Ask someone who supports a gold-backed currency if they would be willing to back their currency with oil, and they look at you like you are crazy... as they should. But it's no more crazy than gold. Oil producing countries just have a more visible bad rap, so the problem with that particular commodity is more obvious.

I'd rather be in control of my own money supply thank you very much. Why you would want to leave it up to fate and potentially hostile entities is beyond me.

Gold arose as a monetary standard through the decentralized choice of the marketplace. Metallic standards have been in use for more than two millenia.

In contrast, a pure fiat system has only been in place since the 1970s, and all previous examples of fiat systems in history ended with disaster. This one might be the first stable fiat system, who knows?

But it is a lack of perspective to deem a gold standard as kooky, strange, and new and consider fiat as proven, reliable, and stable. Our system is a bold new experiment.

Unlike fiat money, gold cannot be manufactured cheaply. This limits government's power to obtain it. Think of Zimbabwe. If you were a wage earner in Zimbabwe, would you rather keep your retirement fund in Zimbabwean dollars or gold? These are two extremes along a continuum of ways to store wealth.

Gold is a good way to store wealth because it is durable, of limited supply, dense in space and value, portable, fungible, dividable, identifiable, and universally valued now and for the foreseeable future.

Zimbabwean paper money is portable, fungible, dividable, and identifiable, but its performance on the other characteristics makes it it an overall poor way to store value.

All forms of government-created fiat money are in danger of going the way of Zimbabwean dollar. The issuing government can just decide to print more, thus devaluing the existing money.

Other ways of storing value have their own problems. Some people use land, but while land is potentially very valuable, it's not portable, fungible, or universally valuable. Businesses organized as corporations can be used to store value, and many people save for their retirement this way (by buying stocks). This has the benefit that in good times, the value of your investment can grow by itself. Unfortunately, it can also shrink by itself in bad times. Also, shares of corporations are not easily dividable.

My point is that forms of money (stored wealth) are not arbitrary.

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