[like the sports fan in the basement] The market is not capable of introspection. It is only capable of action: up, down or sideways. It doesn't go inward.
Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.
Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices.
A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.
one more dead town's last parade: while gold is a physical entity BitCoin requires infrastructure to maintain
No infrastructure is required to stop other people from stealing your gold?
saulgoodman: the criteria they set out on that planet money bit for what makes gold such a useful currency are only good criteria due to certain historical accidents--limited tech for printing money, inadequate infrastructure for storing and issuing money, etc.
And they didn't even mention it's drawbacks as a currency--it's heaviness making it impractical to carry around in quantity, it's relative scarcity limiting economic growth potential and contributing to hording and market cornering behaviors that can be economically destructive, etc.
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