On Sep 25, 2008, at 5:30 AM, Chris Doss wrote:
> Can somebody explain to me how this theory/ideology works? I know
> the idea is that currency should be tied to something physical and
> tangible -- but why? And why gold of all things?
It's partly superstition, partly real. Gold is dense and easily refined. It lasts forever. It can be divided and/or combined. Those make it a flexible, relatively compact, and highly durable form of money. Its supply grows very slowly, unlike paper money, which can be printed ad infinitum. It has an intrinsic value, based on the labor needed to produce it. It's almost universally regarded as money. But the slow growth in its supply puts a damper on economic growth. And its value does swing wildly - its intrinsic value is something of a center of gravity for its market price, but there can be enormous moves around that. Plus there's no small amount of mysticism to a belief in gold as "real" money - it still depends on social convention, and if there's no productive economy, no amount of gold will get you food or shelter.
Goldbugs tend to be very strange people - paranoid anal retentives. Go to a goldbug conference and you'll want to take a shower soon after.
Doug