A Currency as Good as Gold
The nifty thing about a gold-backed currency is: they aren’t making any more gold. The alchemists have tried to make the stuff, but have failed. Of course, a currency can be backed by other precious metals, like silver. But the supply of those other metals isn’t getting any bigger either. There’s one huge exception, though, and that’s when a star dies. All the heavy elements are created in the death throes of large stars, or so the theory goes. Therefore, we can rule out that any metal-backed currency will be debased, debauched and devalued by the sudden appearance of more precious metals like gold, at least until the next supernova.
All the world’s gold that’s been mined can fit into three Olympic-size swimming pools. And not only that, most of the easily-mined gold may already have been found. So just as some petroleum analysts say the planet is at Peak Oil, it’s also at Peak Gold.
However, if miners were to discover another mother lode (such as in the Witwatersrand or Klondike gold rushes) and it were large enough, it would affect the value of a gold-backed currency. So for those who own gold or a currency backed by gold, their hope should be that the supply remains fixed, and that there isn’t “gold in them thar hills.”
We need some things much more than we need gold that are a lot less expensive than gold. One of them is air. When astronauts go into space, they don’t take gold with them, they take air. There isn’t any air in outer space, I’m told. But on Earth, air is omnipresent, so we don’t usually put a price on it, except in Tokyo oxygen bars.
Gold is a simile for virtue. When we wish to bestow the supreme accolade, we say she’s “as good as gold” or has a “heart of gold.”Gold is the metaphorical standard of value, too. Because diva Angela Gheorghiu‘s voice is golden, fans erect shrines to her. Here’s another golden voice from The Boy With a Cart (page 45) by Christopher Fry: “His voice hovered on memory with open wings and drew itself up from a chine of silence as though it had long time lain in a vein of gold.” And gold was one of the gifts of the Magi.
Why do we so prize gold? Some, like William Devane, “even like the feel of gold.” Silver is at least as “pretty” as gold, and there are other metals that have more uses and applications than gold. There’s about 50 cents worth of silver in a cell phone. But unlike silver, gold doesn’t tarnish; it’s immutable, permanent. And in an ever-changing world where everything is fading, gold‘s permanence is attractive. But regardless of the reason we prize gold, we wouldn’t prize it if it were plentiful. America once based her currency on gold precisely because it is rare.
For those who support a metal-backed currency but who also want to be able to inflate the money supply one might consider basing one’s currency on a nonprecious metal. Perhaps iron. But we wouldn’t want to base our currency on iron because iron is too plentiful. Heck, the core of the planet is made of iron.
A nation really needs to base its currency on something that’s fairly rare. Ian Fleming‘s villain Auric Goldfinger had a nifty plan to make his own considerable stash of gold more valuable, which was to make the much larger trove at Fort Knox radioactive. Old Auric had a great criminal mind — he had a plan to manufacture scarcity. Of course, Mr. Goldfinger hatched his plan when America was still on the gold standard.
In 1971, America went off the gold standard. Since then, U.S. money has been an abstraction. It is said that nowadays the Federal Reserve creates money out of “thin air.” Which is an abuse of thin air; at least we can breathe thin air. But before long we may not be able to do much of anything with our money. We have a “fiat currency” that is backed up by neither gold, nor thin air, nor anything other than the brilliance of our central bankers to manage the money supply. With such a currency, it is natural that gold would take on an added luster.
Things are valuable only when they are rare. That applies to the denominator of value as well, which is money. Money itself needs to be rare, and that’s our problem. Money is becoming less rare due to the policies of the Federal Reserve. We don’t need to base our currency on some nonprecious metal like iron to be able to inflate the money supply; all we need is someone who can type. So folks flock to gold.