I was wondering what would happen if the value of gold increases so much such as any good could be sold at a price which represents less that a molecule of gold. From that point on, supposing that productivity keeps increasing faster than the supply of money, more and more goods will start to be sold at non-gold values (a percentage of a gold molecule). How would people react? Would that allow to establish a double standard?
what is artifical about it, if it is not by fiat?
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Juan: But paper is going to fix that problem. Actually paper can fix any problem.
talk about papering over the gaps!
nirgrahamUK: what is artifical about it, if it is not by fiat?
It's artificial in the sense that it isn't the market price. I think this is somewhat clear, I mean, this is what is harmful when we speak of artificial prices set by the government. They don't reflect supply and demand, likewise, an exchange rate set between gold and silver would have the same problems. Unless of course, it was updated continuously with changes in the market price. But we're sort of getting into Walrasian territory now, I'm not sure you'd want that.
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GilesStratton: nirgrahamUK: what is artifical about it, if it is not by fiat? It's artificial in the sense that it isn't the market price. I think this is somewhat clear, I mean, this is what is harmful when we speak of artificial prices set by the government. They don't reflect supply and demand, likewise, an exchange rate set between gold and silver would have the same problems. Unless of course, it was updated continuously with changes in the market price. But we're sort of getting into Walrasian territory now, I'm not sure you'd want that.
I don't see why the price of gold in terms of silver wouldn't fluctuate to reflect supply and demand in a free market.
what are you talking abou?. an ounce of gold is an ounce of gold. you have coins which are weights of gold. and ounce of silver is an ounce of silver. silver coins on their face bear their weight. there is an exhange rate between the two types of coins. it is not fixed, apart from that gold is fixed to itself, silver to itself. between gold and silver it floats on the market just like all prices do (should do). if it helps you to understand, you can think of the most widely accepted medium as being 'money' and the other just a preciously valued medium that is often, though not so widely, accepted in exchange. make up a name for that. 'noney'. so gold is money. and silver is noney. and noney has a money price. and if you want to buy stuff that is so cheap its hardly worth gving up money for, give up some of the noney you bought in bulk in exchange for a little of the money you spent on it. you routinely spend a very little money to buy enough noney to facilitate your purchase of trivial treats.
Giles, if my currently suggested answer seems not clear enough I'll expand on it. In the terms of what I consider superscarcity (scarcity that exceeds or outstrips any level of demand at a marketwide level (meaning that interpersonal exchange would effectively be nullified)) would more or less lead back to square one from which gold itself was selected in the far past as a defacto currency (via the Regression Theorem of Money...). I'm not sure if there wouldn't be special conditions that would make it distinctive from the distant past, but I suspect that the answer is no since other commodities in the past competed with gold under special conditions (salt was the currency of choice in towns bordering deserts). And some continue today. It's a matter of understanding the conditions themselves and realizing the abstraction (the principle "law") is a separate fact that can stand on its own.
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Two things:
1. If gold becomes that valuable, I assume that we would switch to something like silver, platinum, palladium, rhodium, etc.
2. Gold being an element, it could be split into individual atoms, molecules would technically not be needed.
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