Re: The Price of Gold: Does It Matter?
Posted: Thu Dec 28, 2017 11:49 pm
Gordon Lillibridge, BA Mathematics, University of California, Los Angeles
wants to know..."Why did humans choose gold as a main thing in the economy
as there are lots of alternative to gold?"
Other things besides gold have been used for currency. In India, they have
used beans. Shells have been used in other parts of the world. Silver and
copper have both been used as currencies. The chief reasons for anything
being chosen as a form of currency are durability, unfakable (easily),
portability, and have little utilitarian value in themselves. In ancient
times, gold was chosen over metals, because it has two unique features:
It does not corrode and it has almost no utilitarian value beyond jewelry.
When it was first designated a a form of currency. Its chief competitor
as a currency, silver has some limited utilitarian values and does corrode.
Gold has another unique feature. It is rare. In a stable society, new
injections of gold are rare. When they have occurred, the results have
been disruptive, notably when Spanish brought large amounts of gold from
the Spanish main to Europe in the 16th and 17th century. When the supply
of currency is constant, then everybody will know its value and be able
to trust it.
Paul Sutton, electrical engineer says...
Scarcity and color. Scarcity is obvious, it’s malleable and easily formed,
but color was equally important, since there are minerals that are more
scarce than gold. Gold’s color is unique, and because it doesn’t tarnish,
the color is just “always there.” There are other minerals that are,
arguably, equally scarce - platinum springs to mind - but weren’t initially
recognized as being unique until they were uniquely identified. Platinum,
for instance, has a color similar to silver, and is often found in silver
mines. The early Spanish silver miners, however, found that platinum is
a much harder mineral than silver, and much harder to fashion into trinkets,
so what do you think they did with the platinum? Threw it into the mining
tailings as being worthless silver, worth less than silver because it was
less malleable. Even though it was far more scarce, and remains so.
Geoffrey Widdison, investor, says...
Why we "chose" it is likely because ancient people found it to be both
beautiful and unique, to the point where they endowed it with mystical
powers. That made it desirable, which started people trading to get it,
which evolved into currency. The reason we kept on using it is because,
for the longest time, there were no alternatives that were as good. The
two basic requirements of currency are that it be scarce and fungible
(meaning that units of it are interchangeable). There are quite a few
things that meet these requirements, but there are a number of other
characteristics that make a currency especially practical. It should
be portable (and valuable in relatively small amounts), it should be
easily divisible (so you can set more specific prices), it should be
easy to identify and hard to counterfeit, and it should be durable.
Gold scores high on every one of those, and no other common substance
I can name does. The last, durability, is an especially big deal. A
currency that rots, rusts or otherwise loses value over time is
undesirable. The ideal currency should be capable of being buried
underground for ten years, dug back up, and be just as good as when
you first earned it. Few natural materials do that as well as gold,
and none that are particularly scarce. Silver and copper are okay in
that category (they do tarnish, but generally last a long time), which
is why they've also been used as currency, but they're less scarce than
gold and hence less valuable. If you can name another substance that's
found in the natural world, can be easily identified without special
equipment, and meets all of those requirements, I'd love to hear
about it.
wants to know..."Why did humans choose gold as a main thing in the economy
as there are lots of alternative to gold?"
Other things besides gold have been used for currency. In India, they have
used beans. Shells have been used in other parts of the world. Silver and
copper have both been used as currencies. The chief reasons for anything
being chosen as a form of currency are durability, unfakable (easily),
portability, and have little utilitarian value in themselves. In ancient
times, gold was chosen over metals, because it has two unique features:
It does not corrode and it has almost no utilitarian value beyond jewelry.
When it was first designated a a form of currency. Its chief competitor
as a currency, silver has some limited utilitarian values and does corrode.
Gold has another unique feature. It is rare. In a stable society, new
injections of gold are rare. When they have occurred, the results have
been disruptive, notably when Spanish brought large amounts of gold from
the Spanish main to Europe in the 16th and 17th century. When the supply
of currency is constant, then everybody will know its value and be able
to trust it.
Paul Sutton, electrical engineer says...
Scarcity and color. Scarcity is obvious, it’s malleable and easily formed,
but color was equally important, since there are minerals that are more
scarce than gold. Gold’s color is unique, and because it doesn’t tarnish,
the color is just “always there.” There are other minerals that are,
arguably, equally scarce - platinum springs to mind - but weren’t initially
recognized as being unique until they were uniquely identified. Platinum,
for instance, has a color similar to silver, and is often found in silver
mines. The early Spanish silver miners, however, found that platinum is
a much harder mineral than silver, and much harder to fashion into trinkets,
so what do you think they did with the platinum? Threw it into the mining
tailings as being worthless silver, worth less than silver because it was
less malleable. Even though it was far more scarce, and remains so.
Geoffrey Widdison, investor, says...
Why we "chose" it is likely because ancient people found it to be both
beautiful and unique, to the point where they endowed it with mystical
powers. That made it desirable, which started people trading to get it,
which evolved into currency. The reason we kept on using it is because,
for the longest time, there were no alternatives that were as good. The
two basic requirements of currency are that it be scarce and fungible
(meaning that units of it are interchangeable). There are quite a few
things that meet these requirements, but there are a number of other
characteristics that make a currency especially practical. It should
be portable (and valuable in relatively small amounts), it should be
easily divisible (so you can set more specific prices), it should be
easy to identify and hard to counterfeit, and it should be durable.
Gold scores high on every one of those, and no other common substance
I can name does. The last, durability, is an especially big deal. A
currency that rots, rusts or otherwise loses value over time is
undesirable. The ideal currency should be capable of being buried
underground for ten years, dug back up, and be just as good as when
you first earned it. Few natural materials do that as well as gold,
and none that are particularly scarce. Silver and copper are okay in
that category (they do tarnish, but generally last a long time), which
is why they've also been used as currency, but they're less scarce than
gold and hence less valuable. If you can name another substance that's
found in the natural world, can be easily identified without special
equipment, and meets all of those requirements, I'd love to hear
about it.