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Why is Gold Worth Anything!?
Comments
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Same with cash.
True. But I don't think anyone actually "invests" in cash as such - currency speculation is not actually investing in the cash itself, but making judgments about a whole economy.
So, apart from some industrial uses, edible in tiny quantities, making jewellery, and as someone said - it's shiny. No real intrinsic value.
There may be some truth in the posts that suggest its value would collapse if people stopped talking up its value. It looks like a pyramid selling scheme that has gone unchecked for many centuries. I could understand this in ancient Egypt or the Middle Ages, but in the 21st Century! Are people really still treating this element as something mythical? I wonder if one day people will see it for what it is and demand will collapse!
Has anyone got any idea of why it is really valuable? This is getting interesting.0 -
True. But I don't think anyone actually "invests" in cash as such - currency speculation is not actually investing in the cash itself, but making judgments about a whole economy.
That's not what I'm talking about. People work hard to get cash: they work to exchange their labour for money in the bank or pounds in their pocket. Businesses are prepared to exchange their goods and services for money.
What is so special about electronics zeroes on a computer, pieces of paper or bits of copper? What is their intrinsic value?Has anyone got any idea of why it is really valuable? This is getting interesting.
Do you think cash is valuable? Do you know what money is?0 -
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The use for gold is that it is the historic hedge against currency destabilization. Which is why it has value at this point in time. If capital is scared it will flee from all other medium's of exchange to gold.
The real value of gold does not come about as a hedge against inflation. Yes ofcourse it rises if there is inflation but anything can be classed as a hedge against inflation be it stocks, commodities, property & land etc. Look at a long-term chart or something and you will see that gold is the historic hedge during currency crises.0 -
That's not what I'm talking about. People work hard to get cash: they work to exchange their labour for money in the bank or pounds in their pocket. Businesses are prepared to exchange their goods and services for money.
What is so special about electronics zeroes on a computer, pieces of paper or bits of copper? What is their intrinsic value?
Do you think cash is valuable? Do you know what money is?
I do think there's a difference. Owning a pound coin gives you a stake in the UK economy as it is backed by the activity that goes on within it. The government accept it for payment of taxes, which I think has to count for something.
I can go to a shop and exchange it for goods and services easilly. Not so with gold or any other commodity for that matter.“I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse0 -
Yes gold is intrinsic but everything is intrinsic, even paper money.
Currency has intrinsic value since its backed by the productive capacity and stability of a nation.
Copper has intrinsic value since it is an industrial metal
Oil has intrinsic value since its used for energy consumption
Gold has intrinsic value because its the hedge against currency0 -
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Why would the government do that? So they can exchange it for goods and services?
Ultimately that's what they do. They give the money to the NHS so they can buy drugs to give to people, pay their staff, buy x-ray machines, that sort of thing.Why would the shop do that? So they can pay their taxes?
Why not? They can also exchange it for other things, stock, necessities of living, expansion of the business.
I suppose I would argue that it is the liquidity of the money that gives it the value, as well as its backing by the government. Physical gold certainly doesn't have that. 'Electronic gold' is going to end up like money anyway. Ultimately it's only the confidence that it will be accepted that makes it valuable - same as gold - but it has a legal backing, and an intrinsic liquidity that gold doesn't have. It represents a stake in the economy rather than just the total amount of gold mined, I would argue.“I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse0 -
I guess my point is that it's somewhat a circular argument. Money is valuable because it's valuable (like gold you could say). People value it because they believe they can exchange it for other stuff that they think is valueable.
Ultimately it's value is based on supply and demand. It's the government (and authorised banking system) that control that supply. And it's the government that grant it legal status. Legal tender means that you can use it to pay you taxes and it must be accepted to pay debts.
What is money? Basically it's a debt that society owe you (or at least people participating the economy upon which the money is based). It doesn't have intrinsic value but is basically an IOU.
When you give your employer your labour they give you some IOUs. You can go and do your shopping and society has 'settled up' with you. They shopkeeper then has to offload those IOUs to someone else... maybe their own staff, goverment taxes, suppliers...
Essentially it's a belief system that society will 'make good' on the debt it owes. It's also government controlled. And the government is the biggest debtor around. So they have a big incentive to devalue the money (via inflation).
We've witnessed what happend to money during hyperinflation and suddenly people don't think money is valuable. I'm not suggesting that's going to happen in Britain although we have had a banking crisis, ballooning government debt and quantitive easing. But you have to be aware that someone else is pulling the strings with the value of your money.
That's why gold still has a monetary role for many people since it's a hard asset and not subject to being created 'out of thin air' by a government (other hard assets might include land, property, art and antiques). Yes - you can argue it's value is psychological - but it's the same with money.0
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