Tuesday, March 01, 2011

Golden words

I consider myself a conservative when it comes to fiscal public policy, and usually gobble up most fiscal prescriptions made by the likes of Ron Paul, Sauvik Chakraverti and Peter Schiff . Yet, one element of the conservative school of thought that has always stuck me as illogical has been the role of gold.

According to their line of reasoning, government-issued money today is a travesty since it is not backed by real wealth. So far, so good. But this usually leads to a conclusion that gold should again play a role in how central banks issue money; in other words, all money should be backed by gold, where the real value lies. That is where the I fall off the bus.

Warren Gibson attempts to address some questions about the value of gold in this article in The Freeman. He makes a good start with the following line, which echoes my sentiment towards gold as a symbol of economic strength:
Actually, nothing has intrinsic value.
He does not follow through with that bold statement though. How gold has any more intrinsic value than, say, a clay brick, is not clear. Does the coupling of rarity and remarkable physical properties alone mean value?

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