A thought about Goldfinger

[ajva]

So...gold as money. There's a certain gold-loving subculture among investors peopled by those who believe that fiat money (i.e. to put it simply, money that is money purely because a government declares it is money - so that would mean pretty much any modern currency you care to name) is fundamentally untrustworthy because it is subject to the whims/evils of political machination, manipulation, incompetence and so on; believe me, some of these people do get rather excised about this. I have sympathy, but I'm not entirely in their camp.

So these people see gold as what they tend to call "sound money", in other words, the total amount of gold available in the world may increase a bit year-on-year as more is mined, but it can't be increased purely at the whim of a government like paper money can. Ergo, there is a naturally controlled total amount of it. It's not an accident that many of the gold bugs worry themselves sick about the possibility of hyperinflation. Interestingly, though, when you look back at the late 19th century, when there was a gold standard (i.e. currencies fixed to gold e.g. the US dollar used to be fixed at about $36 to the ounce or thereabouts), there were problems too. I've heard that The Wizard of Oz was actually written as an economic allegory. When the gold standard was in operation, there was a debate in America about the fact that there wasn't quite enough gold to make it a practical currency, so silver should be brought in as an everyday currency backup too. Which is apparently why Dorothy originally had silver slippers (not ruby) with which to walk along the yellow brick (gold) road. I'm not sure how true that is, but I'd be interested to know more.

So anyway, my point is this (notwithstanding my own liking for the yellow metal): what are such people going to do when chemical technology advances to the point where synthesising gold, and indeed any other element, achieves the ultimate dream of the old alchemists, in other words - it is both easily and economically achieved?

What will work as "sound money" then? I mean, even if you tried to make "naturally mined" gold into a different category from "synthesised" gold, there would then develop a new de facto fiat currency that was indistinguishable from your "sound" currency.

What then? :o)

ETA: I'm leaving this post public on the off chance that some geekish digital archivist in 2350 might discover it and point out that "people had thought about this as far back as 2008!"

In the hope I may become famous posthumously, obviously. :o)

PS to future archivist: I'm listening to Duran Duran's "View to a Kill" on my iTunes just now - there's a bit of human interest for you. One for the future equivalent of the papers, there.

Comments

[valkyriekaren.livejournal.com]

I would imagine that objets d'art, i.e. things of enduring beauty and quality into which exacting and time-consuming work had gone, would tend to hold their value over time. Sure, fashions in art and antiques come and go, but they're still generally a sound investment.

[ajva.livejournal.com]

Oh yes, but that's not what I mean. I'm talking about the metal itself, pure and simple.

Actually, you bring up a good point, though. That's another fun thing to speculate about: what objects that seem uninteresting now will morph into antiques of interest in the future?. Maybe nothing. But then again, maybe something unexpected...

I suspect pickled sharks probably won't cut it in 500 years' time, though. But of course, I could just be being narrow-minded there.

[ajva.livejournal.com]

To clarify: you can't use antiques/art as currency, because they're neither uniformally divisible in value nor fungible (exchangeable in value). They'd be great for a barter situation, though, as long as we're not talking about a hardcore starvation situation, where potatoes would presumably be the order of the day. :o)

[babysimon]

What will work as "sound money" then?

Same as now, fiat currency.

Obviously this is a long way in the future, we're not talking about something simple like synthetic diamonds. Practical transmutation to gold means doing a bunch of fission and/or fusion near the middle of the periodic table - that's really hard and outrageously expensive in energy terms too. I could easily see it taking hundreds of years even if we don't nuke / climate change / biowar / grey goo ourselves back into the stone age.

So by then all the curmudgeons who still fixate on the gold standard will have gotten over themselves.

My argument against the gold standard is largely that it constrains fiscal policy choices in unhelpful ways, often requiring a more deflationary policy than would otherwise be ideal, which can be pretty nasty in a recession, a bit like the ERM membership in '92. Short version: economy doing badly. Currency under pressure. Without gold standard: devalue. With: can't devalue, have to prop it up. Raise interest rates. Consumers save more and spend less. Businesses invest less. Congratulations! You just made everything much, much worse.

It's appealing because it stops governments doing truly stupid things like causing hyperinflation. (I think that hyperinflation is always direct government stupidity. Weimar Germany gets a possible excuse since the combination of the Ruhr invasion and Versailles obligations didn't give them much room to manoeuvre.) However, thank Christ we haven't seen that much stupidity even from Dubya, and he's the worst we have at the moment.

[babysimon]

However, if you just want your question answering:

Watts and CPU cycles.

[babysimon]

ISTR reading a magazine article stating that the late Victorians had a huge market going in cloyingly sentimental art that these days would be hard pressed to grace a cheap Hallmark card. Stuff went for stupid money, and it's all worthless now. So I think you're right about the sharks...

[ajva.livejournal.com]

Yes.

I mean, I suppose what I'm driving at is that I think we need a better way of managing fiat currency, because in the long run it's going to be the only option. I do think that in the 21st century we still have a problem in that mainstream economics hasn't yet caught up with 20th century mathematics in the sense that the world economic system seems to be, at base, a chaotic system, but if you talk to economists it quickly becomes clear that their idea of the best models for the way the world works economically are stuck in the past.

It's as if they're physicists, metaphorically speaking, using simple Newtonian models for a post-Einsteinian age, and missing relativistic effects. That's not a perfect allegory, but hopefully you can see what I mean.

[ajva.livejournal.com]

Btw: I know the synthesis of gold will be tricky: I'm just working on the assumption that anything that is not totally impossible will eventually be done. It might not turn out that way, but one has to consider all eventualities, n'est-ce pas? :o)

[alan1957.livejournal.com]

http://en.wikipedia.org/wiki/Political_interpretations_of_The_Wonderful_Wizard_of_Oz

No idea how much of this is true or not..

[boxcat.livejournal.com]

There's a certain amount of coverage of this in the futurist hard-SF genre (eg Charlie Stross, Bruce Stirling, Ken MacLeod, etc).

One of the slogans actually is: "If it's not fusing atoms or running programs, it's just bending space".

You might also want to read this.

[dreamsewing.livejournal.com]

Assuming the synthesis of gold is "perfect" we could maybe find that "Natural gold" attains even higher "value" much like synthetic pearls or topaz, which are structurally perfect but the real ones are of greater value for harder to measure values (time, effort in collecting, imperfections),origin certification,coloration due to and because of impurities prior to smelting.

Me, I think we will end up having a corn or rice standard. Esp. as corn is now becoming an asset which entails a tough choice between food vs. fuel. Some rural areas of Japan have real estate values set to a Rice Standard ( how much and of what quality can produce) and there are grades equivalent to Gold, Silver and Iron standards applied.

[kelemvor.livejournal.com]

David Gerrold is exploring this idea in the Chtorr series of books. In the lead-up to the books, there was an economic collapse, and kilocalorie (or "casey") became the internationally-preferred unit of currency. Tokens of exchange were therefore backed by how much human-consumable energy a government could produce.