... then won't a recession result when private agents increase the money supply, too?
Say there's a gold standard in place; gold is money, and the supply of gold is the money supply. If there's random year to year fluctuations in gold production, or superior capitalist production allows an ever increasing production of gold, then won't the money supply expand eventually, lowering interest rates and so forth?
But it won't cause a recession, right, because it's "good money" when private banks issue it and "bad money" when the federal reserve issues it?
1.8 trillion in gold out there? so using YOUR reference 40% of mined in the past 5 years?
Not to mention is maybe illegal to use as money so what do you think will happen to the demand if it is made legal?
The paper. Then the fed that doesnt have government monopoly actually has to watch the dollar to make sure its value is stable.
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If that happened, I guess demand would pick up, more gold would enter circulation, and a major expansion of the circulating gold supply would occur.
About the sources, well, $60 billion out of $1.8 trillion times five years is 15%, and it's an exponential not arithmetic function.
Well of course initial demand and supply will probably go up, but then it will level out eventually.
"if more is mined it inflates the whole market" -
proof?
lets just say a whole bunch is mined and the value of gold goes down and raises prices. Wouldnt more people hold onto their gold waiting for the influx of gold to die down and the demand for gold to go back up? If anyone acted that way then the supply gold would go down per ounce that is waiting for demand to go back up. Perhaps they will make a gold necklace out of their money until the purchasing power of gold goes to a level they want to trade at.
Wouldnt more people hold onto their gold waiting for the influx of gold to die down and the demand for gold to go back up?
If anything, they'd spend their gold and put it back into circulation. Holding onto a depreciating asset isn't a good plan. An increase in the gold supply from mining is basically permanent.
no YOUR reference said 2500 tonnes is mined a year for the past 5 years. 140 billion. 57% is put into jewelry, 80 billion. 43% which Im making a claim for argument sake that 100% of that 60 would go into the money supply.
so 140 billion was mined a year for 5 years. that 700 billion. 700 billion out of 1.8 is about 40%.
I don't know. JJ said that there's 165,000 tons of aboveground gold. What's the cost per ton?
why would you spend something that you value as more? how are you predicting demand for gold? do you know technologies that will come out? do you know demand for gold jewelry? do you know that 2500 tonnes will be mined every year?
why would you spend something that you value as more?
Not sure what this means. Newly mined gold increases the gold supply and reduces the per-unit value of existing gold.
"not sure what this means"
if i valued gold as 10,000 an ounce why would i sell at 9,000 an ounce?
'newly mined gold increases the gold supply and reduces the per-unit value of existing gold'
not exactly. If demand for gold goes up more than the gold that is mined then the per-unit value still goes up. if people subjective value of gold is worth more than the market price then they will hold onto the gold and reduce the supply of money until it reaches a price they are will to trade for.
not to mention you have never refuted my point that the market KNOWS that 2500 tonnes of gold is mined every year and therefore that influx of gold is already calculated into the price before it is even mined.
You ignored my point.
Gold will only be mined if it iis profitable.
If gold keeps getting devalued by continuing increase of supply then people will stop mining it as they lose money from doing so.
If i run x company and pay 5 gold to worker to mine 6 gold, its fine
but then i cant pay miner 5 gold to mine 4 gold.
there will be a market equilibirum, it wont be an infinity ass loop.
valid point that needs to be refuted.
If prices drop to 600 like YOUR reference suggests how many gold mines do you think will be able to continue to operate when their revenues get cut by 65%?
*you are going to have to refute capitalism here. It is proven that entrepreneurs will leave that industry and invest their money in markets where they will get higher returns.
That's not what happens in reality. The cost to produce gold falls as technology advances. Nominal wages may stay the same but real output increases.
Their costs fall by the same amount (if gold is used as money).