Why gold is (not) money.

*** MD: This article is from ZeroHedge.com. There they are clueless about money, but continue to pontificate with articles like this.

At MoneyDelusions (MoneyDelusions.com/wp) we know that gold is not money … and easily prove it. Lets see how they get around our proof.

A couple of months ago, CNBC’s Josh Brown made a blog post saying that “Permabears are Ridiculous People”. Here’s my answer.
Why Gold Is Money: A Periodic Perspective
Profile picture for user Tyler Durden
by Tyler Durden
Fri, 07/05/2019 – 22:25
Authord by Nicholas LePan via Visual Capitalist,

The economist John Maynard Keynes famously called gold a “barbarous relic”, suggesting that its usefulness as money is an artifact of the past. In an era filled with cashless transactions and hundreds of cryptocurrencies, this statement seems truer today than in Keynes’ time.

*** MD: Agreed.

However, gold also possesses elemental properties that has made it an ideal metal for money throughout history.

*** MD: Disagree. It has never been money and never will be money. However, it may be a better money substitute than, say, cement blocks.

Sanat Kumar, a chemical engineer from Columbia University, broke down the periodic table to show why gold has been used as a monetary metal for thousands of years.

The Periodic Table

The periodic table organizes 118 elements in rows by increasing atomic number (periods) and columns (groups) with similar electron configurations.

Just as in today’s animation, let’s apply the process of elimination to the periodic table to see why gold is money:

*** MD: Note, he begins with the premise that money can be stuff (wrong). He then goes through the periodic table to see what the best stuff is for money. With an errant premise, you’re going to come to an errant conclusion. Watch him do it.

Gases and Liquids
Noble gases (such as argon and helium), as well as elements such as hydrogen, nitrogen, oxygen, fluorine and chlorine are gaseous at room temperature and standard pressure. Meanwhile, mercury and bromine are liquids. As a form of money, these are implausible and impractical.

*** MD: So he takes his false premise and hones it down to solids. What if he said music can be found in the periodic table … and the job is to select the best music. See how ridiculous things get when you start with a ridiculous premise?

Lanthanides and Actinides
Next, lanthanides and actinides are both generally elements that can decay and become radioactive. If you were to carry these around in your pocket they could irradiate or poison you.

Alkali and Alkaline-Earth Metals
Alkali and alkaline earth metals are located on the left-hand side of the periodic table, and are highly reactive at standard pressure and room temperature. Some can even burst into flames.

Transition, Post Transition Metals, and Metalloids
There are about 30 elements that are solid, nonflammable, and nontoxic. For an element to be used as money it needs to be rare, but not too rare. Nickel and copper, for example, are found throughout the Earth’s crust in relative abundance.

MD: Ok, here’s another false premise. “Money needs to be rare”. Nonsense. There must perpetually be an equality between the amount of money needed and the amount of money available. No “stuff” will ever meet this requirement. Money logically should be in “free” supply. Something rare will never be in free supply. And we can prove empiracly that he is wrong. In 1963 I was able to trade a silver USA quarter for a gallon of gasoline. In 1964 I was able to trade a composite USA quarter for a gallon of gasoline. Today, I can trade a USA quarter for 1/10th gallon of gas … whether it has silver in it or not. Logical conclusion? The silver (i.e. intrinsic value of the token) has absolutely nothing to do with the trade. Why the factor of 10 difference in trading power of the token? As we know here at MD, it’s because of counterfeiting (i.e. default not mitigated by interest collections of like amount) … predominantly by governments.

Super Rare and Synthetic Elements
Osmium only exists in the Earth’s crust from meteorites. Meanwhile, synthetic elements such as rutherfordium and nihonium must be created in a laboratory.

Once the above elements are eliminated, there are only five precious metals left: platinum, palladium, rhodium, silver and gold. People have used silver as money, but it tarnishes over time. Rhodium and palladium are more recent discoveries, with limited historical uses.

*** MD: They had the specie wars towards the end of the 19th century in the USA. Why? Because, though both gold and silver meet the ridiculous “rare” requirement, the people who had the gold pulled rank on the people who had the silver. They prevailed lawfully (i.e. in an un-principled fashion). Laws only dilute principles as is vividly illustrated in this example.

Platinum and gold are the remaining elements. Platinum’s extremely high melting point would require a furnace of the Gods to melt back in ancient times, making it impractical. This leaves us with gold. It melts at a lower temperature and is malleable, making it easy to work with.
*** MD: Ah … so his wisdom is divine. How interesting!
Gold as Money

Gold does not dissipate into the atmosphere, it does not burst into flames, and it does not poison or irradiate the holder. It is rare enough to make it difficult to overproduce and malleable to mint into coins, bars, and bricks. Civilizations have consistently used gold as a material of value.

*** MD: This is the “can’t destroy it” and “precident” argument for gold stuff as money. Again, he started with a false premise and he brings forth false arguments. What’s not to love about the process?

Perhaps modern societies would be well-served by looking at the properties of gold, to see why it has served as money for millennia, especially when someone’s wealth could disappear in a click.

*** MD: The gold bugs would be well-served to look at societies, both modern and otherwise, for the real definition of money. In “no” society can you point to a case where money is created that a ‘trader” is not involved in its creation. Money is obviously and provably “an in-process promise to complete a trade over time and space.” It is always and only created by traders like you and me … making promises and delivering with time payments … like for a house or a car.

There are no comments

Join the conversation

Your email address will not be published. Required fields are marked *