><i>So what does this process of elemental elimination tell us about what makes a good currency?</i> First off, it doesn't have to have any intrinsic value. A currency only has value because we, as a society, decide that it does. As we've seen, it also needs to be stable, portable and non-toxic. And it needs to be fairly rare - you might be surprised just how little gold there is in the world.<p>>The demand for gold can vary wildly - and with a fixed supply, that can lead to equally wild swings in its price. Most recently for example, the price has gone from $260 per troy ounce in 2001, to peak at $1,921.15 in September 2011, before falling back to $1,230 currently. That is hardly the behaviour of a stable store of value.<p>Basically describes what are and are not the problems with Bitcoin.
"Chemically, it is uninteresting - it barely reacts with any other element."<p>What a bad start, this is chemically very interesting... :)<p>The whole article comes across this way to me, it starts from a bad hypothesis and then continues to make baseless assumptions until it reaches its desired conclusion. :/<p>It explains a load of reasons exactly why gold has value, then claims that this is not intrinsic?<p>Interesting read though... I do enjoy that we have abandoned gold and silver standards, although knowing this does make me wonder why our leaders are so terrible at managing the economy. We made it easy for ourselves, and now we have politicians selling us the idea that its complicated to fix...
"Most recently for example, the price has gone from $260 per troy ounce in 2001, to peak at $1,921.15 in September 2011, before falling back to $1,230 currently. That is hardly the behaviour of a stable store of value."<p>There are many who believe gold is somewhat of a proxy to the probability that at some point there will be complete lack of faith in fiat currencies (combined with the belief that it will be an acceptable substitute in such an eventuality). If that is the case, the price volatility of gold has in fact a lot to say about the viability of fiat currencies as a stable store of value.
In evolutionary biology and anthropology "<i>Everything is the way it is because it got that way</i>".)<p>Gold was cross-culturally "evolved" (due to ancient trade and customs) to be recognized as a precious metal suitable for garments, wealth storage and, consequently, payments for no other reasons but being good enough.
Currently I'm studying accountancy, so the concept of monetary value has suddenly become important to me. I had pondered it in the past, but not to a great extent.<p><i>A currency only has value because we, as a society, decide that it does. As we've seen, it also needs to be stable, portable and non-toxic.</i> The second sentence contradicts the first. Portability is very important to the effectiveness of a currency, especially in times past when our modern communication methods did not exist. Currency represents an agreement as well as a quantitative value. The ten pound note currently in my wallet is a liability that the Bank of England owes to me when demanded. This is far more convenient than having to call up the Bank of England and demand a portion of their liability every time I go and buy a pack of ciggies (another viable currency, if you are presently incarcerated).<p><i>A similar argument applies to another whole class of elements, the radioactive ones: you don't want your cash to give you cancer.</i> Regarding Uranium 238, this has a very long half life (roughly the same as the age of the Earth) and it is an alpha-emitter. Radioactive effects of alpha-emitters are usually only toxic if ingested or inhaled, whereas a strong beta-emitter can burn your skin in sufficient amounts. The chemical toxicity of Uranium is a far more serious issue. If the potential radio-currency is highly radioactive, it would lose its value very quickly. Of the four main decay series, three result in lead.
> Nixon made his decision for the simple reason that the US was running out of the necessary gold to back all the dollars it had printed.<p>That's the whole problem right there. The ~~counterfeiting~~ quantitive easing is simply too attractive to the congresscritters to allow a little honesty to get in the way.
An interesting, mildly related tidbit is that certain types of seashells were used as currency in large parts of the world until about 150 years ago. [0] Probably occupying a similar sweet-spot: rare but not too rare and robust. An additional feature (or bug) would have been the inherent quantization.<p>[0] <a href="http://en.wikipedia.org/wiki/Shell_money" rel="nofollow">http://en.wikipedia.org/wiki/Shell_money</a>
NPR 's Planet Money did a good episode (<20 minutes) on this topic:
<a href="http://www.npr.org/blogs/money/2011/02/07/131363098/the-tuesday-podcast-why-gold" rel="nofollow">http://www.npr.org/blogs/money/2011/02/07/131363098/the-tues...</a>
The argument for why a medium of exchange (a currency) needs to be transportable and relatively nondestructible goes all the way back to Aristotle, in the West. (Similar arguments about silver surely must have appeared in Chinese culture, long ago.) I'm sorry not to follow my usual practice of providing references here, but I guess I think it is drop-dead obvious that not all features that give something value necessarily make that thing a convenient medium of exchange for trade.<p>The particular argument in the article kindly submitted here (well worth a read, even if you have read all the comments here) takes a good look at the properties of gold as contrasted with other chemical elements, and points out what features gold (and silver) have that most other elements do not share.
Interesting article. The article claims that gold has no intrinsic value. I may be wrong, but I can't think of any entity that has intrinsic value, or, "value in and of itself." On the other hand, I can think of countless things that have value in relation to other things, such as, a loaf of bread and a hungry man.<p>Could it be that gold makes a good currency, and a good currency makes trading easier, and people value the ability to trade with one another, and therefore, gold has value?
I imagine some day we will have 'currency' backed in real things - Terabytes maybe, or Petahertz. Something fungible you could use and trade.
The real history. A Play By Brandon Wirtz:<p>Nearly 20,000 years ago a man said said, "we have to stop trading seashells, they are to plentiful, people just go get more of them, and they break"<p>"Fine what do you propose we use?"<p>"Have you seen this shiny yellow stuff? You can form it with heat and it stays shiny forever."<p>"That Gold stuff? yeah It is pretty. I like Pretty things. But there isn't that much of it, and it is hard to find."<p>"Yes, that way we can control how much of it there is, so it will have value. No one will be able to just wander down to the ocean and pick up more. And we'll make different sizes of it so that we know how much each is worth"<p>This is why we use Gold. Because it was the first metal we could work with, it is scarce enough, and requires enough skill that only certain people (usually a government) can issue coins of it. You can still trade the raw stuff, but to fewer people and with out the trust of the minter you get a lower price for it.