Iran melting down | 54 comments (54 topical, 0 editorial, 0 hidden)

Re: Iran melting down (none / 0)

It's the threat of counterfeit that would drive people away from using dollars as money, not that gold in of itself would be more preferred than dollars.

Precisely. Under this scenario the velocity of greenbacks goes up while for gold it remains stable.

luis_de_sousa@mastodon.social

by Luis de Sousa (luis[dot]de[dot]sousa[at]protonmail[dot]ch) on Sat Dec 31st, 2011 at 05:40:01 AM EST
[ Parent ]

Re: Iran melting down (none / 0)

Except for the fact that it is a lot easier to rip people off with fake or reduced weight gold when used for currency than it is to print counterfeit dollars or euros, so the counterfeit threat doesn't add anything to the story here.

by santiago on Sat Dec 31st, 2011 at 03:05:20 PM EST
[ Parent ]

Re: Iran melting down (none / 0)

It does not have to be more difficult to counterfeit gold for people to prefer gold to dollars. It only has to be believed that it is more difficult to counterfeit gold...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Dec 31st, 2011 at 04:31:56 PM EST
[ Parent ]

Re: Iran melting down (none / 0)

True, but such a condition can only last for a short time before actual gold counterfeiters begin to compete with each other, and with currency counterfeiters, for business. Once people stop trusting the weight of gold involved in everyday, local transactions, any advantage of gold over currency disappears and "bad money" starts again "drive out the good" as people hoard the gold instead of using it as currency.

by santiago on Sun Jan 1st, 2012 at 12:06:12 PM EST
[ Parent ]

Re: Iran melting down (none / 0)

People don't use gold as currency, they use it as a presumed safe store of value during a run on the currency. Runs are, of necessity, reasonably short affairs, so the belief doesn't have to last that long and the time window for the creation of fake gold to respond to popular demand is fairly narrow.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 1st, 2012 at 03:59:43 PM EST
[ Parent ]

Re: Iran melting down (none / 0)

Exactly. Gold is not being used as money, so any arguments about it being better than paper currency because people seem to want it (and also want foreign paper currency) now in Iran for wealth preserving purposes and not transaction purposes say nothing about gold used as money as the diary talks about -- just that people may want to hedge wealth in Iran now more than before for whatever reason.

by santiago on Sun Jan 1st, 2012 at 04:10:09 PM EST
[ Parent ]

Re: Iran melting down (none / 1)

It comes down to a fundamental dispute over whether money should function as a long-term store of value. The gold bugs believe that money should store value long-term, and so see the failure of paper currency to do so as evidence that it is a poor form of money.

I believe - and you seem to agree - that money should store value only long enough that its depreciation is not an inconvenience in ordinary transactions, because money is an instrument for organising transactions. In this picture, the failure to store value over years or decades says nothing about the suitability of currency to function as money, because money only needs to store value on the order of weeks and months.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 1st, 2012 at 06:23:42 PM EST
[ Parent ]

Gold Buggery...who benefits? (none / 0)

The beneficiaries of gold buggery are the traders, not the hoarders.

There are huge parallels here to the financialization of commerce that brought the booms and busts.

Gotta have booms and busts. Higher money velocity generates higher returns for financial parasites. I'm reminded of Kurt Vonnegut's analysis of lawyers:

"To encourage movement of money and always take ten percent."

Align culture with our nature. Ot else!

by ormondotvos (ormond.otvosnospamgmialcon) on Thu Jan 5th, 2012 at 11:04:08 PM EST
[ Parent ]

Iran melting down | 54 comments (54 topical, 0 editorial, 0 hidden)

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