reply to post by Flavian
Thinking about your query as to what makes gold's value several thoughts come up. To most of the world's population, food, shelter and safety are
primary concerns and gold is something that can immediately get more of those necessities if you happen to have any. To the rest of the people, who
produce or work and can get more food, shelter and things than they need right now they need to store that extra product for later in life. Gold sits
at an apex of this 'store of value through time' aspect, the important part is 'through time'. Helium is a good example of being opposite to this
basic aspect, very hard to store through time.
In western civilization there are a lot of people who produce more than they need and wish to store for later, retirement funds are the primary store
of value for them. As they store their extra productivity in retirement funds, they store their extra wealth in the debts of others, hoping to be paid
back later in time. Now we see a global debt crisis where many of these debts are not going to be paid back, as this process of debt deflation
continues notice that the bail-outs are happening, instead of people working and paying back future debts, new currency is printed and used to keep
your retirement funds at current nominal levels. Instead of people working in the future to provide for your retirement, you are going to get currency
instead. If everyone starts getting currency instead of getting the benefits of someones productive work then what do we have to divide amongst
ourselves, less actual goods and services and more currency.
Coming back to gold, there are always going to be people that need to save their extra work into the future unless civilization collapses and food
becomes ultimate wealth, these people are going to store their extra value somewhere through time. Hoarding goods of value to the economy has a
detrimental effect, gold does not experience detriment to hoarding and indeed benefits from people using it to store value, it's almost a circular
argument except it's not quite. This not quite bit is the clue to gold's real world value.
Currently, countries settle their balance of trade with each other using each others debts. When these trade imbalances are finally referenced into
something in the physical world the debt crisis will be resolved. The only physical item left to balance all the goods and services in trade is
physical gold. The USA can settle her trade debts today, using half her gold at a purchasing power of $100,000 per ounce ($16Tdebt/4000tons). It's
not the dollar value that is important to the re-balancing, it is the fact that it is half the gold, a sizable quantity, an unambiguous quantity, a
real world quantity. Gold's value will increase in value compared to it's current basic economic value as it increases in it's functional state of
a 'store of value over time'
From Pragmatic Capitalism: Understanding The Modern Monetary System
"As a current account deficit nation, the US government can appropriately be thought of as a net currency exporter. This means that we send pieces of
paper over to foreign nations in exchange for goods and services"