The weird, wild story of humanity's obsession with gold(economist.com) |
The weird, wild story of humanity's obsession with gold(economist.com) |
Article is a brief review of the book "The Secret History of Gold" by Dominic Frisby.
EDIT: Aluminum itself may not be the best counterexample to gold as it was not discovered until the industrial revolution was well underway.
I think also the scarcity plays a factor, the estimates that I'm seeing after short search being that there's about 10,000x more processed aluminum in the world than gold.
The cap on the washington monument is aluminum, because at the time it was still a precious metal.
The guy who figured out how to electrolyze it out of ore went on to create the main company in the US that produced it, and chose to call it aluminum instead of aluminium, thus leading to the split in spelling. That story may be apocryphal though.
It is rare, inert, malleable, has a low melting point and has a distinct unique colour.
All of these are quite useful for being a store of value:
- inert: gold from 10000 years ago is basically exactly the same
- malleable: it is easy to subdivide for coinage (compare with diamonds for an extreme example)
- low melting point: easy to purify (and melting temp is a decent purity check)
- distinct colour: less useful now but being so distinct from other metals makes it easier to spot vs the many silvery coloured metals
The funny thing is that all these store of value properties also make it less useful: inert means it's not reactive and has fewer forms/compounds
Malleable, lower melting temp and rare makes it a poor choice for typical metal usages...
Why is deflation viewed as such a bad thing? If you've got savings in a deflationary time, your money becomes more valuable, not less. Don't we want to encourage savings?
Deflation does far more damage than inflation. This is why the Federal Reserve fears deflation a lot more than deflation.
“[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
The principle point being: "It has no utility".
Like crypto, it's primary function in the modern economy is financial crime...
Until recently it was an "Oil Standard". But now we are in transition from Oil to Renewals. I think that transition is causing some if not most of the political issues we are having now.
With renewals, the source is always available and everyone just needs to purchase the means of accessing it once. With Oil, you need to constantly "pay" someone to get that energy, so many people/companies know their gravy train is ending and they are doing all the can to keep us using fossil fuels.
Also there is an on-going struggle on who produces the items needed to access sun and wind power. Right now China is easily winning that struggle.
You can trade gold and cash with people a lot more easily than an equity in your brokerage account.
A court cannot generally find that I must furnish someone with some weight of gold for example but they can find a monetary value in sovereign currency which I must supply.
As a daily currency, it also has sharp downsides, but at least it’s not all bad.
Only for very large amounts of money. It can't easily be subdivided. Oh and this is illegal in most countries.
But yeah, what people forget is that gold is incredibly dense. Nearly double lead's density. This means 1kg of gold is about the size of a nokia 3360, and worth close to 150,000$. A very large amount of gold doesn't take up much volume at all.
... which also means that people "stealing gold" like in the bond movies is totally unrealistic. If you loaded a pallet of gold bars (12.5 kg a piece, 200 gold bars, about 2.5 tons, 375 million USD) into a standard van, that van would probably just break down. And carrying 10 gold bars, 20 million USD in a backpack? Not happening.
(which frankly Trump is abusing because of course the density of gold means that any facility storing gold, including Fort Knox, is going to "look empty")
The staying power of gold is a value in itself.
In an ideal world gold would be convertible to and from currency tax free so it could be used as such. A gold-backed currency is too constrained by the supply of gold in the world, but tax-free gold would allow people to avoid currency depreciation and the credit collapses of our current debt-based system without paying a penalty.
-- Proverbs 16:16
-- Psalms 19
A quick search says maybe the last year it was true was in 2003.
Oxygen is one of the most ignoble gases, and reacts with almost everything.
The supply of gold is always inflating. One day we will have asteroid mining of gold and it will be inflated even more. Bitcoin doesn't have this problem.
Nobody will accept your gold for a cup of coffee in day to day life, but restraints and coffee shops will increasingly take your bitcoin over lightning.
And even if you want to "smuggle" gold, it's not hard either. Nothing is easier.
> One day we will have asteroid mining of gold
Rejoice, that will be the best day in the history of humanity!
Hydrocarbons? Everything from making life to providing energy.
Silicon? Making silicon chips.
Oxygen? I like breathing.
Even if a state actor manages to break the asymmetric cryptography before then (literally impossible to get enough compute power to do this currently), the users can just fork the blockchain before that happens, fix the bug, and continue on.
Sure, but it also said "it could have gone the way of aluminum", which is mostly where my point rests: I don't really see how. The disparity of volume seems to explain it to me fully.
If we found a way to extract gold from seawater[0], for example, it would change the accessible volume of gold quite a bit.
[0]: https://www.discovermagazine.com/6-times-we-tried-to-extract...
Inflation means "interest" on gold, measured in reliable currencies like USD or EUR, is at least 4%. Far more than you will get from any bank.
Of course this goes for anything, so you might want to select something with less regulation attached to it. On the other hand, gold is really dense and "liquid" (easy to sell), which are great advantages to have for a store of wealth. And then there's the recent history of gold prices (which is due to the third world attempting to use anything but dollars but not succeeding at it, but one assumes it will end)
But yes, gold makes less than you'll probably get on the S&P500.
Whereas with gold, it isn't there in the rocks - not in the same amounts. No future chemical wizardry is going to make it extractable, because it isn't there to extract.
To make gold more abundant is going to take transmutation, which is a much bigger ask.
Now, if you want to say that the ancients didn't know that aluminum was there and gold wasn't, and therefore lucked out by picking the one that wasn't there, I would agree with that.
People talk about stuff like extracting gold from seawater, so it also isn’t a given that the scarcity difference will always remain what it is.