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It often is argued that gold is inappropriate as money because it js too limited in supply to satisfy the needs of modern commerce.On the surface, that may sound logical—after all, we do need a lot of money out there to keep the wheels of the economy turning—but, upon examination, this turns out to be one of the most childish ideas imaginable.
First of all, it is estimated that approximately 45% of all the gold mined throughout the world since the discovery of America is now in government or banking stockpiles. There undoubtedly is at least an additional 30% in jewelry, ornaments, and private hoards. Any commodity which exists to the extent of 75% of its total world production since Columbus discovered America can hardly be described as in short supply.
The deeper reality, however, is that the supply is not even important. Remember that the primary function of money is to measure the value of the items for which it is exchanged...
If the supply of gold in relation to the supply of available goods is so small that a one-ounce coin would be too valuable for minor transactions, people simply would use half-ounce coins or tenth-ounce coins. The amount of gold in the world does not affect its ability to serve as money; it only affects the quantity that will be used to measure any given transaction.