Objective Money

[ZSorenson]

First, you speculate that the value of gold would collapse if a huge deposit was discovered on an asteroid. Just FYI, the cost of getting to an asteroid and bringing anything back would far exceeds the value of gold, so such a deposit would have basically zero effect on terrestrial prices. Plus, of course, such an idea is completely arbitrary and should therefore have no bearing on decisions here in the real world.

Not completely, it could be cost effective within 50 years. And if you are young and wealthy and want long term savings... Well, it may be arbitrary today, but soon enough it very well may not be.

I think you can argue the importance of gold as currency, but a government mandate to that effect would be wrong. Also, I think the way I mentioned would be a better way of doing money. I don't think money and wealth should be the same thing in large quantities. Money is a medium for exchange, and its value does depend on the amount of consumption a economy engages in at a given time - which I suppose would be steady or at least predictable in the long run. But imagine consumption will rise in the long run, the demand for money will then increase in the long run, so you might divide up money, but you also deflate the money supply. Those who have saved large quantities of their wealth in money (gold) will have disproportionately more wealth over time then what they originally produced. This is probably why gold has a deflation problem.

As an economy grows, more money is needed, so gold can be subdivided. But then that raises the value of savings, so distorts the value of the wealth. See? Gold, paper, etc. is just that: gold, paper, etc. It has no intrinsic value beyond what it is, or perhaps minimally as a technology for exchange. But then you might as well use bits and bytes. Of course, you can cheat with bits and bytes, and you correctly mentioned that gold is cosmically rare, so you can't cheat with it.

Windows on the other hand is a tool, and has real value in the context of today. I think gold as a valuable currency is a superstition that will fade eventually as currency regimes are dismantled and currency is deregulated. With technology, advanced bartering, "Visa bucks", will take over. This is only because gold's value is inflated in the context of legal fiat regimes. It's insurance against that. I can't see institutional savers using gold under the conditions I described - where they are free to trade in any capacity and currency.