The “backing” of today’s money, part 2
Steve Saville
email: sas888_hk@yahoo.com
Posted Jun 14, 2011
Below is an excerpt from a commentary originally posted at www.speculative-investor.com on 12th June 2011.
Our 6th June commentary included a short piece titled "What backs today's money?", in which we attempted to explain that money is not "backed" by anything and nor does it need to be. Money is what it is -- the most commonly used medium of exchange within an economy. This piece was subsequently posted as a standalone article at a few web sites and generated an unusually large amount of feedback (questions, comments and objections). Today we'll address the three most common objections.
Based on the emails we received, the most controversial part of our article related to "intrinsic value". Considering that some popular gold market analysts and newsletter writers routinely assert that "intrinsic value" is the most important difference between gold and the dollar, we aren't surprised that many gold bulls reflexively rejected our statement that gold, like the dollar, has no intrinsic value. Our point was simply that all value is subjective. To explain what we meant we said that gold would have no or very little value to someone stranded alone on a desert island, but would likely have a lot of value to someone living in a modern inflation-prone economy.
A common view is that gold has "intrinsic value" because it costs a lot, in terms of materials and labour, to extract gold from the ground and turn it into a readily tradable form, but it is important to understand that something could be costly to produce and yet have little or no value to most people. Again, value is subjective and will often vary depending on personal circumstance.
Full article: http://www.321gold.com/editorials/saville/saville061411.html
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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