Quote:
Originally Posted by The Heron
You really think gold makes more sense as a form of currency? WTF you gonna do with gold when you need to eat, it's useless too unless people say that is means something.
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Under extreme circumstances, you are correct. Having gold on a deserted island is not going to do you any good. And it is also true that it is only of value to the extent that other people accept its value.
What is the alternative though? Currency originally came into existence due to the difficulty of bartering. If you wanted to get some bread from the bakery you would have to trade it with something the baker wanted. Let's say he wanted a certain amount of beef for a loaf of bread. You would then have to barter with the butcher but he only wants new shoes, and the shoemaker only wants bread. Without currency it is nearly impossible for modern civilization to exist.
The reason gold was chosen is because it was a scarce commodity, the supply is fairly steady and predictable. It could really be anything and different societies throughout history have used everything from precious metals, to pottery, to barrels of grain, to nails, to salt (the origin of the word salary), to sea shells.
Ultimately though commodities fluctuate based on finding new supplies, technology, and manufacturing techniques. Nobody has been able to produce gold through chemistry or other forms of technology. That is one reason it was chosen.
Commodities like grain are not an ideal because they do not hold their value (they can spoil), and it is something that needs to be consumed. Also, grain is very much subject to the whims of nature. With farming technology more grain can be produced and thus it becomes less valuable as a currency.
Ultimately though, the only true form of scarcity is labor.
The reason fiat currency (currency that is not backed by anything) have ALWAYS (yes ALWAYS) failed is that the people in control can just print more and more. History has shown that there has not been a single society that has stood the test of time with fiat currency. One of the most cited examples is during the Roman empire when silver coins were either shaved down or the silver content from the mint was decreased. The government realized that if they didn't use as much silver in the coins they could pay off their liabilities easier. Eventually the silver coin went from 100% silver to less than a fraction of 1%. Many other examples can be cited (Weimar Germany, France, the Roman Empire, and the list goes on).
This is why abandoning of the gold standard is seen by many as the beginning of the end.