> 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?
Doug Henwood wrote:
> 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.
And it's self-regulating monetary policy. No gubment.
Of course, a government has to decide to go onto the gold standard in the first place. They can also decide, or be persuaded by speculators, to give up the glittering goodness.
http://www.econbrowser.com/archives/2008/05/what_if_wed_bee.html
Shane