Objective Money

Metaphysics and Epistemology
21

Let’s see. In 1916, $1=10+ loaves of bread, just under 3 gallons of milk, just less than 3 dozen eggs, 4+ gallons of gasoline, or 50 first class postage stamps.

Fast forward to 2010 and $1=1/3 loaf of bread, 1/3 gallon of milk, 8 eggs, 1/3 gallon of gas, or 2 first class postage stamps.

Sounds like a pretty complicated, not to mention not rigidly defined objective definition. Thus, you are quite accurate in stating that the meaning changes, thus has no real identity ( floating abstraction )

( emphasis added )

Not the core of the topic, but since its the second time you mentioned the term, this is not what “floating abstraction” means.

22

( emphasis added )

Not the core of the topic, but since its the second time you mentioned the term, this is not what “floating abstraction” means.

{An} abstraction without relation to the concrete—a “floating abstraction.” Ayn Rand’s first written use of this expression.

from what was replied to:<snip> a definition of a specific currency like the dollar would be the amount of stuff it can buy. <snip>

The topic references an objective money supply. Granted, a dollar is a differentia of the genus money. Yen, Yuan, Marks, etc (other differentia) all appear to have the same deficiency of having been severed from their concrete objective definitions.

If money’s immediate differentia have no relation to a concrete (inter-relating them to each other has the smell of circular reasoning to me) then the genus appears to be floating even higher in the stratosphere.

23

You are trying to solve non-problems.

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.

Gold skeptics often cite two issues: first, what would happen if the gold supply suddenly increased, and second, that there isn’t enough gold for it to work.

Man has been searching for gold deposits for ages. The odds of some large, new, undiscovered source are very, very small, and getting smaller every year. In fact, if anything, the reverse is more likely: existing gold supplies could easily not be renewable once they have been fully mined. Total annual gold production is about 1% of the existing supply, and it has been at around that level for quite some time. Also, keep in mind that bringing new gold to market requires effort: mines have to be located, then mining equipment has to be created, the mine itself has to be created, ore has to be dug out of the ground, then refined, etc. The people engaged in that work are, of course, entitled to compensation. The effect on the overall money supply would be relatively insignificant, particularly in light of increasing population.

Regarding not having enough gold: the misconception here is that gold would have to stay at its current value if it was used as money. The value of gold can be anything that people agree on. Because gold is nearly infinitely divisible, it turns out that any amount of gold is enough to run the global economy. It’s just that the less of it there is, the higher its value would be.

Regarding the idea of substituting some other commodity: an ideal money needs to be something that is easily recognized by most people as having value. Gold has been used as money for 5,000 years for a good reason. No other commodity can make that claim (although silver comes close). Also, for an ideal money, you want to choose something that can’t be created easily. If dolls were money, you can imagine how many doll factories would suddenly be created. The advantage of gold is that it’s hard to find and hard to bring to market: it’s self-limiting.

24

There were in fact two unexpected big increases in the gold supply (at least from the viewpoint of western civilization), first when the Spaniards conquered the Inca empire and brought all that gold back to Europe, then when a large, easily worked deposit was discovered in California. Both incidents–especially the first–brought the value of gold down relative to everything else. The key thing in both cases was a large area of land explored for the first time by the outside world.

However, even in those cases it was ultimately self limiting.

The only analogue to these incidents today would be discovering gold in Antarctica (difficult because first one must get through the ice in order to even look), Siberia (not well explored even today), places like New Guinea or the Amazon (If we are still finding new tribes, then we certainly haven’t been able to do mineral exploration), or–only with the advent of *much* cheaper space transportation, asteroids. I suspect asteroids would be a better source of the platinum group metals than for gold, in either case they’d be a byproduct of someone getting the iron or nickel out.

In any event I am registering my qualified agreement with the points made in the previous post–the precious metals in general (gold, silver, platinum, palladium, and even iridium and rhodium once we figure out how to deal with how hard they are to work) either make, or would make, good money.

25

Not the core of the topic, but since its the second time you mentioned the term, this is not what “floating abstraction” means.

A retraction is in order here. Money, even as fiat currancy is not a floating abstraction. The law of identity even applies at this point. A U.S. Dollar is a peice of very special paper with inks on it.

May the marketplace continue to aide and abet in bringing parity to the goods and services produced.

26

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.