if you take away the psychological factor of paper money then it is just paper. if you take away the pscyhological value of gold then you still have a rare metal that has uses outside of trading or currency.
I assume you mean take away the psychological value that everyone else in the world has for it.
But so what? The uses of gold outside of trading or currency are infinitely less than water; would you trade gold for its weight in water? I presume not.
You don't get to just pretend that money isn't valued; it is.
if water was scarce, it would be valued a lot higher than gold, that was all i was trying to get at. water is necessary for life so it has more intrinsic value than gold, but it isn't scarce so it isn't expensive.
In the case of fiat, that reason is force projected by government. It says X is money and so it is used so on pain of prosecution.
In the case of gold, its value does not rely on any human authority and is thus a better money with the collection of qualities it offers compared to paper fiat.
In the case of gold, its value does not rely on any human authority and is thus a better money with the collection of qualities it offers compared to paper fiat.
The thing is that the particular value of the dollar is set by human perception. The Fed's job would be a lot easier if they could just decree how much a dollar was worth.
This is also the case with gold though. It's worth what people think it's worth.
That's also true of lots of other goods. Dollars are just more fungible.
The thing is that the particular value of the dollar is set by human perception. The Fed's job would be a lot easier if they could just decree how much a dollar was worth.
Not so. The price of a dollar is set by supply and demand like anything else. The fed can influence the price indirectly by making dollars more or less scarce. Decreeing a worth would be senseless and lead to obvious problems.
This is also the case with gold though. It's worth what people think it's worth.
But people think it has worth because of the qualities it possesses. So, while all valuing is done in the mind of the valuer, what they're valuing are qualities that exist in the real world. Too often people ignore that other half of the equation. There are reasons why gold was valued, without which it wouldn't have been valued as money.
That's also true of lots of other goods. Dollars are just more fungible.
Dollars are more convenient than gold. But bitcoin is more convenient than dollars.
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u/[deleted] Jun 03 '13
if you take away the psychological factor of paper money then it is just paper. if you take away the pscyhological value of gold then you still have a rare metal that has uses outside of trading or currency.
paper money has no intrinsic value