<p>What did it cost to grow a tulip?
How hard was it to make Wampum?
How much does it cost to mine an ounce of told?</p>
<p>Newmont Mining’s Kori Kollo mine has an average grade of 1.7 grams per
ton of ore. So you need to process more than 14 tons of ore to get
less than an ounce of gold. Then you have to refine it.</p>
<p>Can the price of gold go below manufacturing cost? Yes. When it does,
buy with both hands.</p>
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<p>Completely untrue.</p>
<p>You don’t understand what a gold-backed currency is.</p>
<p>"> If a significant part of the wealth of the world were left to gather</p>
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<p>Completely untrue."</p>
<p>Perhaps a listing of countries that adhere to gold-back currencies would clarify this. Or a listing of gold retailers willing to sell gold for less than today’s dollar-based market price (which seems like a reasonable expectation, since it’s claimed by some that fiat currencies devalue money).</p>
<p>Or if someone is feeling really ambitious … what would be the “value” of an ounce of gold if currency was gold-linked?</p>
<p>Actually, it was pretty hard to make wampum, which was legal tender in New York during the 17th century. Reportedly environmental changes wiped out the shellfish which generated the shells which were used to make wampum. Also, as noted in the Wikipedia article on wampum: “The ultimate basis for their value was their redeemability for pelts from the Native Americans. As Native Americans became reluctant to exchange pelts for the shells, the shells lost value.” </p>
<p>There’s absolutely no difference between gold and shells, aside from gold’s utilitarian value in some industrial uses, like electrical contacts. Its value in excess of that utilitarian worth is strictly based on other people’s willingness to buy it in the expectation that it will be worth more to someone else in the future - that’s the “greater fool” basis of value.</p>
<p>It’s not even needed. With a gold-backed currency, you just keep gold
in vaults or big deposit boxes.</p>
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<p>How does it compare to mining 14 tons of ore?</p>
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<p>There is the production cost and it does have wide use as jewelry.</p>
<p>It does have some use as eating utensils (especially silver) in
certain cultures.</p>
<p>Many countries in the world look at gold as money given their
governments’ proclivity to inflation or deliberate devaluation for
competitive devaluation purposes.</p>
<p>One other difference between gold and wampum is that you can melt
one of them down to subdivide units. Can you mult down wampum?
Would it survive a house fire?</p>
<p>Gold is also used in dentistry. I personally prefer porcelain but
you can still get gold if you want it.</p>
<p>“I’m picking the gold. There’s a reason FDR had to make it illegal to hold gold …”</p>
<p>Ah yes, Executive Order 6102. The dollar was a gold-backed currency then, and of course deflation was a real problem in 1933 (and not because the supply of gold has constricted … cough, cough). Roosevelt wanted to increase government spending, but needed more gold (or more valuable gold) in order to finance the increased spending.</p>
<p>One interesting side note was that holders of large amounts of gold simply moved the gold offshore. EO 6102 only applied to gold held within the United States.</p>
<p>Some tried to move it offshore and got caught and publicly embarrassed.</p>
<p>People of less means but that held gold in coin form often turned them into jewelry. My mother showed me a gold coin necklace from the 30s - I think that it had about a dozen one-ounce gold coins on it. I saw it when I was a child. I wondered how anyone could wear it. It was only much later that I realized that people turned coins into jewelry to avoid confiscation as there was exceptions in the law.</p>
<p>The confiscation issue was given as the reason why Buffett held his massive silver hoard in England.</p>
<p>But can you take those bars of gold, silver, or platinum (presumably made in some standard size by someone that you trust) and go to any store and buy food, clothing, guns, ammunition, etc. with it? Or do you have to convert it to some form of money that is more widely accepted before buying something with it? Given the presence of a bid-ask spread on trading gold, silver, or platinum (larger for “consumer” quantities, smaller but still non-zero for industrial quantities), this makes it a less than ideal form of money.</p>
<p>I would guess that I could bring in a bar of gold, silver or platinum into most stores and trade it for food, clothing, guns or ammunition for it but it would require a bit of effort on my part.</p>
<p>I didn’t say that gold bars make for an ideal form of money but that gold is money. Dollars are currency. Historically, gold and silver were money too. Silver for smaller purchases and gold for larger purchases. I don’t think that the average person dealt in gold. Now we have copper, nickel and aluminum coins for small items when we used to have silver coins. The natural effect of this was to hoard silver coins which is why you no longer have them in circulation. You had the same thing with pennies and copper which is why the mint changed the content. Nickels are still worth more in melt than face amount but not by much.</p>
<p>You probably wouldn’t get a very good “exchange rate” doing that at an ordinary store not accustomed to dealing in metal bars.</p>
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<p>Gold and silver coins were minted in the US when the metal value of the gold and silver was less than the face value of the coins. So the value of the gold and silver coins in a monetary sense included a “fiat” component.</p>
<p>Obviously, the minting of silver coinage in the US did not prevent inflation; as a result of inflation, the metal value became higher than the face value.</p>
<p>Yes, they do but risks increase the further you get away from direct barter.</p>
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<p>I’ve read that organizations and countries are buying a lot of gold directly from the miners instead of going to the exchanges where a lot of games are played with the metals price. I tried to buy some platinum recently where the price dipped quite a bit - it took my dealer two weeks to locate some for sale. Trading the paper is not like trading the physical.</p>
<p>Barter can also be used to avoid sales and transaction taxes. Like trading a few dozen eggs for apples.</p>
<p>I have been thinking of barter too. I like kluge’s posts about gold having only the value we assign it and in recent years have been trying to figure out what, if anything, has real value. Arable land with a water source? Maybe partially timbered? Maybe with oil/gas? Some desirable skill sets? I can imagine a society in which gold is useless but at that point probably you’ve lost your land. </p>
<p>food, alcohol, drugs, weapons, tools - in no particular order - could be more valuable than gold in some circumstances</p>
<p>Barter may also be used when one works to grow or create something, or provides a service, but not for a paycheck!
There are definitely people who just do not have cash or bank accounts…</p>