There are tons of gold bugs who believe we should go back to a gold backed currency. (Or, just use gold coins again) Or, i should say, they believe we CAN go back to a gold backed currency.
There thoughts are that gold is a physical precious metal, it has a limited supply, and thus is a great thing to use for money, or the backing of money.
Holding a gold coin in your hand has a particular effect. It is shiny, it is weighty. It feels like something valuable. (I like holding silver more than gold)
And this is the root of gold-bug-ism, and how they think it can be/should be money.
But, does this scale from the single coin to a monetary system?
Gold can easily become money
Gold can easily become money if society collapses too far.
If we lose the internet. If we lose electricity, then gold coins will come back into fashion quite quickly.
It is too easy to imagine a world were we are bombed back into the stone age.
And with many people already used to gold, it may become the money of whatever society we restart. But, this will be local, and may take decades (depending on how far one could travel in a day) before there was a standard in the area.
However, one big problem will be if, lets say you have a small town that is working well, and someone with a lot of gold comes into town, buys up everything, an leaves a pile of gold. You may think that everyone is rich, but really, they just got cleaned out. If the town is unable to make more of what was sold, then all they are left with is a pile of inedible gold.
Further, the town now has to reprice everything because now everyone has more gold.
Gold has all kinds of problem, even in a (constrained to) local economy.
If gold is just backing, why not just use digital bits?
Gold bugs champion the idea of returning to a gold standard.
The problem with this is, it has always failed.
Someone always gets in and prints more gold certificates then there is gold. And thus, the collapse of that monetary system is inevitable.
How could we stop this? By engraving a QR code into each gold bar! Then we can track and maintain that each gold bar is in its place. Then we put QR codes on each gold certificate so we know if there are any forgeries. And then we will put this on a block chain so all these numbers are on a public record.
Or, we have just reinvented bitcoin. And why do we need the gold bars that, if everything goes well, just sits there in a dark vault forever?
It could even be imagined that the gold bars are forgotten. Everyone just uses the G-bitcoin and the gold backing it becomes something that is discussed in school, and so everyone believes the gold is there, but no one know if it is, or even cares. It is one of those things that belongs in a museum. Relegated to the dusty annals of history.
There is way too much gold
But, all of this is mute, because there is way too much gold hiding in vaults all over the world.
The Vatican has hidden gold, the Fort Knox gold is somewhere, Yamashita's gold, all the gold that the Cocain Import Agency has "freed" from other countries…
And this doesn't include the rots-child's gold, or all the gold that has been moved to China recently.
On top of this, there are huge reserves in the ground kept from being mined by govern-cements putting them in reserves or national parks.
We have more gold than we know what to do with.
I am sure that rots-child could set the price of gold to $20 an ounce, just by selling it to jewellers at that price. And they could probably do this for decades if not centuries before they ran out.
So, the most important thing about gold being money, is actually an illusion. Its scarcity is not real.
Further, in the future, we will just vibrationally extract it from rocks. Its scarcity will take an even bigger hit.
The only way we can keep it scarce is by using digital scarcity. Only "these" gold bars are money backing gold bars, and then we are back to bitcoin with some gold in a vault somewhere.
Gold has none of the future attributes of money.
It was only money in certain areas of the world due to scarcity in those areas. And even then, it was because the gold didn't travel very far.
In the future, we will demand:
- the security of cryptographics
- the ease of sending it anywhere in the world.
- the absolute transparency of how much money is flowing
- the record of having sent payment (public and/or private)
- the ability to divide it into smaller and smaller pieces
- having no fee for holding your money
- … and many others
As long as we don't find ourselves back in the stone age, we will find gold is really not a good money. And so, gold will completely lose its "money" status over the next decades as it falls further and further from use and usability.
AND THEN! the new money comes out. The thing after bitcoin. Then, gold and bitcoin will be thrown in the rubbish heap.