The value of gold is objective, not subjective. It is superior to green cotton paper because of its intrinsic value. The energy and manpower required to mine and refine it, in addition to its scarcity are what give it intrinsic value. Its beauty, durability, density, resistance to rust, scientific and industrial applications, you can add those as well.
Green cotton paper has none of those properties, neither does toilet paper, neither does shit.
"Injecting paper" is theft by counterfeiting, it has never created prosperity.
If you say that is what gives it value, then the value would not be intrinsic but relative, because it would depend on certain specific circumstances to have value; as the fact that its scarce or the difficulty in its extraction.
Already in the past there have been cases where gold, not only is not scarce, but its abundance created similar effects as the FIAT. The first to notice inflation were in fact the Spaniards of the 15th century, when the gold of the Americas flooded the Iberian peninsula. They realized that in the places where gold was most abundant, the prices of all products increased, this of course, because gold was devalued in the same way as any other currency.
We also have no reason to think that technology will not make it easier to extract gold in the future.
The injection of paper has similar effects to the injection of gold, and in both cases economic prosperity is created, however, nothing that usually lasts because the only thing that gives value to both, is not its intrinsic properties, but the human will.
And by the way when I said "paper injection" I don't refer to the issuance of new paper, but to investment of foreign capital. Injection of paper from one place to another.
Hey that is actually a valid point about Iberia, but I believe it was mostly silver with regards to the flood into Europe and the resulting price increases. Bolivia, Peru and such were oozing silver, kids would kick it down the alleys.
It really is the exception that proves the rule, though. There are no new continents to discover like there were 500 years ago. The galleons of silver poured into Europe before even Adam Smith’s grandparents were born. We can politely say the bullion was mismanaged long before the concept of supply/demand was codified.
Mine production has essentially increased in line with population growth for decades now if not centuries. You’ve got to move a lot of earth and there is no going around that. I’m guessing a couple grams per ton at the best mines.
Fiat is a different story altogether. They all go extinct. That is the rule without exception. I was looking at some paper currencies from the Mongolian Empire the other day!
Fiat counterfeiters have done more damage to humanity than anything else.
I don't doubt that.
In my opinion, gold is much better than fiat and that any other, however, is not because it has an intrinsic value but because of a series of circumstances that make it so.
Damn, I thought we were making progress.
intrinsic - Belonging naturally; essential.
extrinsic - Not part of the essential nature of someone or something; coming or operating from outside.
value - The regard that something is held to deserve; the importance, worth, or usefulness of something.
progress - Forward or onward movement towards a destination
Oxford dictionary.
Ha, that's what I thought.
If gold possessed intrinsic value there would be no possible way to devalue it.
What happened in Spain is not only an exception. It happened in all western Europe, the abundance of gold made that the products in the international market went up doing that the countries that did not benefit from the colonization went bankrupt, this is one of the reasons why the Ottoman Empire declined.
There is also the example of Mansa Musa, who on his pilgrimage to Mecca causes the devaluation of gold from Mali to the Middle East, wiping out all the markets of the Mediterranean.
And of course, the fact that the American Indians had so much gold that did not give them much value, they also did not know its usefulness, so it shows us that the utility is related to the knowledge that humans have of it and to the human needs.
It's not a myth that the Spaniards bartered with the Indians to give them mirrors and trinkets from the old continent in exchange for gold. This might seem like a scam today, but it was not, for an American the mirror had more value than gold.
I have never heard of Mansa Musa. Quick check shows he died 585 years before the end of the Ottoman empire and went to mecca, not anatolia.
Back to south America, we have already covered the fact that there was abundance of silver rather than a scarcity, which was the case everywhere else. Scarcity is one of the intrinsic features of precious metals, hence the term precious, hence their value.
To say silver has no intrinsic value would be saying nothing has intrinsic value. The main veins have been exploited, tons of earth have to be moved per ounce. Were there isolated times in history in isolated places where veins were bursting on surface? Yes, those are exceptions.
It has industrial uses as well. There is a reason the US constitution defines the dollar in terms of silver, that is because it has intrinsic value.
I never said that he went to Anatolia, and in fact, if you reread my comment you will notice that I said that he went to Mecca.
Mansa Musa has nothing to do with the Ottomans, maybe I did not explain myself well.
I said that the gold obtained by the Europeans through colonization made it devaluate, so the nations that did not colonize and therefore could not grow their coffers, like the Ottoman Empire, collapsed economically.
Scarcity can not be intrinsic, scarcity is precisely linked to other things, we say that something is scarce not because there is much or little, but because the supply is much less than the demand for such a thing. So that if the demand goes down, the same product that is scarce could become abundant, because nobody would want it anymore.
If tomorrow we go to Mars and discover giant gold mines there making it abundant, just to give an extreme example, then the gold would be devaluated.
Exactly. That is why I said that the value is subjective, because the valuation depends on the subject and not on the qualities of the object, therefore, the value varies depending on the circumstances, not depending on the object itself.