If by the gold standard you mean the one that millions of people all over the world voluntarily chose over the course of thousands of years? Well, at least until it was co-opted by fiat currencies in many countries. I'd rather have the problems that come with a free currency than those that come with a fiat one.
Can you eat gold? No. Can you make anything useful with it, other than some component in electronics? No. Gold was only valuable because it didn't corrode, and was scarce in the ancient world, therefore making it an ideal medium of exchange in an environment of weak central governments and zero ability to stop counterfeiters.
If a zombie apocalypse happened today, and somebody tried to buy food or weapons from me with gold, I'd tell them off. Gold has ZERO inherent value. When you understand that the purpose of a currency is simply to facilitate exchange of goods and services as efficiently as possible, you reach a conclusion that a gold standard is stupid, because it prevents governments from increasing quantity in times where hoarding is occurring.
Can you eat dollars? Can you make anything useful with them, other than small fires or cocaine straws? If there was a zombie apocalypse today and somebody tried to buy food or weapons from me with dollars, I'd tell them off. Dollars have ZERO inherent value.
When you understand that the purposes (PLURAL) for a currency are (according to wikipedia and many other places) a medium of exchange; a unit of account; a store of value; you'll reach the conclusion that the dollar standard is stupid because it cannot be a store of value so long as there is a printing press. http://en.wikipedia.org/wiki/Money
> Can you eat dollars? Can you make anything useful with them, other than small fires or cocaine straws? If there was a zombie apocalypse today and somebody tried to buy food or weapons from me with dollars, I'd tell them off. Dollars have ZERO inherent value.
Yes, precisely. Gold is just another kind of 'fiat' currency. You're catching on.
Given the choice between two kinds of arbitrary, intrinsically valueless currency, I'll take the one whose supply we have far more control over.
> Given the choice between two kinds of arbitrary, intrinsically valueless currency, I'll take the one whose supply we have far more control over.
* Who is this "we" you are referring to? You seem to be implying that the people have some control over the currency when the reality is that the Federal Reserve and in fact all centralized currencies are incredibly corrupt and machined and manipulated for very powerful people. When interest rates are manipulated or certain banks get access to loans and getting money and bailouts through these central banks, that's so obviously not for the people. Gold can't be manipulated in this way, but paper can. That's why the government loves its paper. It can pay for wars and anything it wants through inflation instead of raising taxes. But the end result of wealth getting sucked out of peoples' hands is the same.
* For the record, everything is intrinsically and inherently valueless. You can't use a microscope to examine any type of object and find a tiny particle called "value". All value people place on everything in an economy is subjective in nature, whether its gold or paper or corn or milk or iron or wood. Your argument here for gold being valueless doesn't make a point because that's inherent in anything and everything.
* That being said, gold has successfully been used as a currency throughout the planet's history. It was accepted worldwide with no barriers to its ability to trade throughout countries.
* The argument that people make against gold being suitable as a currency because of its lack of stability compared to paper is unbelievably laughable. What type of event is more likely: gold somehow losing its application in all kinds of industries/mass quantities of gold being suddenly discovered that alters its fundamental market value (events never before seen in human history) or somehow corrupt politicians and powerful people that manage these paper currencies manipulating the currency for their own benefit?
* That being said, regarding this larger argument about Bitcoin, these coins lack any practical value as far as I can see outside of perhaps anonymity. I say perhaps because Bitcoin isn't actually an anonymous currency, but all transactions can ultimately be traced in some fashion. So it remains to be seen if this will work as a currency long-term.
The point wasn't that dollars are inherently valuable, rather that gold is as much a fiat currency as any other, it is just one that is propped up on a shared delusion of inherent value rather than other factors.
>Can you make anything useful with it, other than some component in electronics?
Yes, you can. Gold has uses in dentistry and aerospace as well. For example, a space suit has a really thin layer of gold foil to keep out (some kinds of) radiation.
Also, there's a reason jewelers like to use gold. It's very malleable, so it's easier to make intricate designs. Yeah, that property won't help much in the zombie apocalypse, but in the real world there will always be some amount of demand for gold in jewelry (plus jewelry-like products such as guns with gold inlay).
While it's true 90% of the gold that gets mined goes straight into a vault somewhere it has far more intrinsic value than any fiat currency.
"because it prevents governments from increasing quantity in times where hoarding is occurring."
As opposed to a currency which allows a government to deliberately and invisibly transfer wealth from the poorest to the richest in society? With hoarding you can switch to silver or copper. With the current system you have to put up with the decisions of an unaccountable class of people who can manipulate the currency for their own personal gain without repercussion.
It's as if the government was trying to solve the problem of hoarding by printing more money and giving the money to the hoarders.
Inflation doesn't transfer wealth from the poorest, for normal-world version of "poorest." They have debt, not piles of cash hidden in their mattresses, and inflation reduces the amounts of those debts.
Inflation is a bugger for someone who wants to hide dollars in their mattress and have them be worth the same in 30 years.
The newly minted money is given to: the banks. Who benefits from that new money? The banks! Who benefits from the banks benefiting? The rich! The poor have to pay higher prices and see their raises lag the increased prices. The poor get poorer while the rich get richer.
Once your income substantially outstrips your daily need for food, water, shelter, etc inflation hurts you less as you are able to invest. The poor are always behind and thus pay the most for inflation.
"and inflation reduces the amounts of those debts."
Only if inflation is at a higher rate than than the interest on the debt. Which is rarely the case. Bank loans are constructed so that the bank makes money and that couldn't happen if they loaned money at a lower rate than inflation allowed.
If you want to escape inflation, you put your money in a savings account and hope that the interest rate is properly matched to the inflation rate (they're commonly indexed to inflation.) This is less feasible for poorer people who don't have enough money to take out bank accounts and who necessarily have a higher percentage of their money in cash.
It's amazing how consistently the defense of gold is "because we used to". Autocracy and theocracy served humanity so long also, why do we need this democracy thing?
At least the gold supply tended to increase over time, and (by luck) tended to increase by the size of the overall economy.
With Bitcoins having a finite supply, it's guaranteed deflation. The early adopters love it for that, but there's no reason for anyone else to hop on board.
But only if it's the sole/main currency. Otherwise it becomes like gold is today, only a bit easier to move money in/out of it. That's always been the main flaw in the "deflationary" theory, it depends on some absolutes that wouldn't exist in the real world.
> But only if it's the sole/main currency. Otherwise it becomes like gold is today, only a bit easier to move money in/out of it. That's always been the main flaw in the "deflationary" theory, it depends on some absolutes that wouldn't exist in the real world.
The deflation argument is usually an argument against the proposal that Bitcoin ought to become a major currency and that it should displace traditional sovereign currencies. So, no, its not a problem with that argument that it relies on assumption of a dominant-currency role for Bitcoin.
Its probably true that such a role won't ever happen, in no small part because there are enough people with enough economic power that understand the problem to prevent it from happening, but that doesn't make the argument is invalid as to why it shouldn't happen.
