Economics Questions

Re: Money - gold or composite reserve?

Jon Irenicus — Sun, 28 Sep 2008 02:39:04 GMT

Knowing one's limits is not mysticism when it comes to knowledge.

-Jon

Re: Money - gold or composite reserve?

liberty student — Sun, 28 Sep 2008 02:23:57 GMT

Eduard - Gabriel Munteanu:
My question was meant to take a peek into this possibility and try to reasonably tell how the market will adapt and how it works.

My apologies for misunderstanding then. I'm a mysticist when it comes to the market. I don't think we can predict it much better than we can predict what shape a snow flake will take when it starts to form.

Re: Money - gold or composite reserve?

Jon Irenicus — Sun, 28 Sep 2008 01:51:40 GMT

They might have a medium of exchange (or media of exchange). It's not money until it's nearly universally used throughout the economy.

-Jon

Re: Money - gold or composite reserve?

Eduard - Gabriel Munteanu — Sun, 28 Sep 2008 01:49:44 GMT

liberty student:

Eduard - Gabriel Munteanu:
But I'm worried from a purely theoretical point of view: what if gold, in the future (be it distant or not), becomes readily available? I'm seeing scientists getting quite close to manufacturing "artificial" diamonds that are indistinguishable from natural ones. What if the alchemists' dream comes true?

Then we use silver. Or Platinum. Or Rhodium. Or blue sapphires.

Free market money. Let the market decide what is money, when.

Of course the market would decide. My question was meant to take a peek into this possibility and try to reasonably tell how the market will adapt and how it works.

On a side note, I'm starting to see that one can't separate barter from money. Barter economies do have money (only they don't know it) and the opposite is true aswell. Regarding the discussed situation, gold operates both as a commodity and as a currency, and changes roles depending on the situation. Austrian economics is quite fun :).

Re: Money - gold or composite reserve?

liberty student — Sun, 28 Sep 2008 01:38:33 GMT

Eduard - Gabriel Munteanu:
But I'm worried from a purely theoretical point of view: what if gold, in the future (be it distant or not), becomes readily available? I'm seeing scientists getting quite close to manufacturing "artificial" diamonds that are indistinguishable from natural ones. What if the alchemists' dream comes true?

Then we use silver. Or Platinum. Or Rhodium. Or blue sapphires.

Free market money. Let the market decide what is money, when.

Money - gold or composite reserve?

Eduard - Gabriel Munteanu — Sun, 28 Sep 2008 01:34:25 GMT

Hello everybody.

I had been browsing through a F. Hayek book, while reading some of Rothbard's works. I see Hayek advocates competitive paper money, while Rothbard would rather have gold as money.

Rothbard's theory is quite sound, at least for the forseeable future. But I'm worried from a purely theoretical point of view: what if gold, in the future (be it distant or not), becomes readily available? I'm seeing scientists getting quite close to manufacturing "artificial" diamonds that are indistinguishable from natural ones. What if the alchemists' dream comes true?

And perhaps, let's assume, it would take few resources to make gold. I agree that finding a way to create vast amounts of gold is overall good for the market (e.g. cheaper jewelry and CPUs).

My question, or perhaps invitation for discussion, is whether we can be sure that whatever reserve we choose for the money it won't depreciate suddenly. Here are some ideas:

The first thing I agree to is that money must be redeemable. Without redeemability, we would require the issuer to go against the market (print or destroy money). Though Hayek does not agree, if I'm correct.
I suppose a composite reserve (e.g. gold + silver) could be less prone to what I said.
I figure non-durable goods can't be part of the reserve. While non-durable goods may depreciate less than the rest of the reserve, you can't keep them in a warehouse. If you can't do that, then you must buy them on demand. But this means you could go bankrupt if the durable reserve goes bullish.

If you say no money could be stable in all circumstances, then I ask: can we do without stability? Probably, since this would be both a rare and a beneficial event.

And then, would gold still be a good currency? Can one hold large amounts of a durable good priced so low? What if there's nothing left to switch to (Star Trek-like scenario)?

I hope a discussion would prove helpful in settling this matters.

Cheers,

Eduard