EDIT: Aluminum itself may not be the best counterexample to gold as it was not discovered until the industrial revolution was well underway.
It is rare, inert, malleable, has a low melting point and has a distinct unique colour.
All of these are quite useful for being a store of value:
- inert: gold from 10000 years ago is basically exactly the same
- malleable: it is easy to subdivide for coinage (compare with diamonds for an extreme example)
- low melting point: easy to purify (and melting temp is a decent purity check)
- distinct colour: less useful now but being so distinct from other metals makes it easier to spot vs the many silvery coloured metals
The funny thing is that all these store of value properties also make it less useful: inert means it's not reactive and has fewer forms/compounds
Malleable, lower melting temp and rare makes it a poor choice for typical metal usages...
I think also the scarcity plays a factor, the estimates that I'm seeing after short search being that there's about 10,000x more processed aluminum in the world than gold.
The cap on the washington monument is aluminum, because at the time it was still a precious metal.
The guy who figured out how to electrolyze it out of ore went on to create the main company in the US that produced it, and chose to call it aluminum instead of aluminium, thus leading to the split in spelling. That story may be apocryphal though.
“no example of a barter economy, pure and simple, has ever been described… all available ethnography suggests there has never been such a thing”.
Barter as a form of commerce pre-dating monetary economies is a myth, a post-hoc rationalization of how money might have came about from the perspective of somebody that already lives in a monetary economy and it's entirely an armchair theory that does not rest on any historical and anthropological evidence.
What is true is that between parties that do not have an established relationship barter occurred and it is true that people seek to hold assets and demand tradable collateral during periods of unrest. But barter has never been a primary way to do commerce between parties that had a long-standing relationship. A theory of credit-money is way more useful to explain real world behavor than a metalist approach is. Gold isn't used in daily transactions, it primarily sits in basements and is also is not an input to allmost all of production. What makes us rich in real terms is not gold but knowledge, machines and technology.
“[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
The principle point being: "It has no utility".
Like crypto, it's primary function in the modern economy is financial crime...
Why is deflation viewed as such a bad thing? If you've got savings in a deflationary time, your money becomes more valuable, not less. Don't we want to encourage savings?
To illustrate that it's often helpful to think in extreme scenarios. Imagine every household starts to save 100% of its monetary income. What does that mean? It means that nothing is sold anymore and companies have 0 revenue which will soon lead to a complete collapse of the economy and everybody becoming unemployed and loosing all their income as well unless the companies will take on debt to keep paying the wages/profits (which they will not do when there is no demand for their products).
Money needs to be spent or else demand will drop and the economy can enter a vicious downward spiral (a deflationary collapse / debt deflation). The most impressive example of that was the great depression.
If some sector of the economy wants to net save (usually those are the households) to keep the same level of economic activity (and therefore jobs and income) somebody else needs to spend money they don't have, i.e. they need to go into debt.
The main issue is that in a society with division of labor there is no mechanism that keeps saving and investing in line so that employment and income is kept on a stable level. The mainstream neoclassical economic theory claims that the interest rate is always and automatically making sure that for every dollar saved someone else will invest it but this is based on the assumption that investors have infinite and complete knowledge about what everybody else will do in the future and that the economy will always and necessarily tend towards an equilibrium state of full employment. They are obsessed with "equilibrium" which is why in mainstream publications you will find that word everywhere. But in reality the economy is a non-equilibrium complex system with pro-cyclical feedback loops and all the interesting characteristics worth studying are non-equilibrium behaviors of the system.
Some recommended literature regarding that topic:
- The two essays "What is money?" and "The credit theory of money" by Alfred Mitchell-Innes - "The theory of economic development: an inquiry into profits, capital, credit, interest, and the business cycle" by Joseph Schumpeter - "Debunking economics" by Steve Keen - "Can it happen again?" by Hyman Minsky - "Debt: The first 5000 years" by David Graeber
Money is credit. It's not an asset. Gold or Bitcoin are not money, they are an asset. The economy is credit-based, it's not a barter economy.
Until recently it was an "Oil Standard". But now we are in transition from Oil to Renewals. I think that transition is causing some if not most of the political issues we are having now.
With renewals, the source is always available and everyone just needs to purchase the means of accessing it once. With Oil, you need to constantly "pay" someone to get that energy, so many people/companies know their gravy train is ending and they are doing all the can to keep us using fossil fuels.
Also there is an on-going struggle on who produces the items needed to access sun and wind power. Right now China is easily winning that struggle.
Article is a brief review of the book "The Secret History of Gold" by Dominic Frisby.
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You can trade gold and cash with people a lot more easily than an equity in your brokerage account.
From what I recall of the video, two people independently worked out the chemistry for cheaper aluminum. (I believe the video also mentions the source of the aluminum/alumininium name difference.)
Sure, but it also said "it could have gone the way of aluminum", which is mostly where my point rests: I don't really see how. The disparity of volume seems to explain it to me fully.
If we found a way to extract gold from seawater[0], for example, it would change the accessible volume of gold quite a bit.
[0]: https://www.discovermagazine.com/6-times-we-tried-to-extract...
Whereas with gold, it isn't there in the rocks - not in the same amounts. No future chemical wizardry is going to make it extractable, because it isn't there to extract.
To make gold more abundant is going to take transmutation, which is a much bigger ask.
Now, if you want to say that the ancients didn't know that aluminum was there and gold wasn't, and therefore lucked out by picking the one that wasn't there, I would agree with that.
People talk about stuff like extracting gold from seawater, so it also isn’t a given that the scarcity difference will always remain what it is.
It has utility because it's a store of value, and it's a store of value because it has utility because it's a store of value, and it has utility because it's a store of value because it has utility because it's a store of value...
That explains it perfectly...
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The main issue with mainstream economics is that it is some cargo-cult fairytale of a world that doesn't exist where everybody individually behaves rationally and that is supposed to lead to a desired outcome overall. But this is simply a fallacy of composition because individual behavior (especially if it involves spending/saving/investment decisions) is always liked to others through balance sheets, basically simple accounting.
A simple illustration of the fallacy of composition: One person can stand up in the cinema to improve their view. But it would be a mistake to think that therefore if everybody in the cinema stood up everybody improved their view. In fact already the first person standing up, while improving their view, did impair the view of the person behind them. This is the fallacy of composition and when it comes to saving money it's known as the "paradox of thrift" which states that an economy as a whole can not save any money.
Saving by definition means that you spend less than your income in any given period which necessarily requires one or more other entities to spend more than their income to make the math work. Therefore savings and debt are the same thing, the two sides of the same coin.
Instead of just looking at a single individual you can divide the economy into sectors and watch the flows between those sectors which always have to add up to 0 (this is called sectoral balances or stock-flow-consistent modeling). If we take a simple closed economy (so not considering the government and there is no foreign sector) and divide it into households and companies and we also assume that the household sector as a whole wants to net save 5% of their income in every period (which is empirically about correct) that means to keep income for the households steady the companies have to run a deficit of equal size in every period (i.e. spend more than they earn). What that means is that savings always and necessarily equal investment which is usually stated as I = S. But if households try to save more than the companies expected and which will lead to less sales than expected companies are forced into a deficit in p1 which they will likely react to by decreasing their investment in the following period p2 even when the interest rate dropped because any investment is pointless if there is no demand for the products to invest in producing. So the propensity of companies to invest is mainly influenced by their expectations of future sales and this is genuinely uncertain. If companies do not invest at least as much as households save the economy will inevitably shrink and both income and investment will drop together in the following period. Of course when we consider a government it could also run a deficit to compensate for the gap (the US would be a prime example for that) and/or a country could run a trade surplus (Germany, China).
The main issue is that other than neoclassical mainstream economists think we are not living in a world where there is only Robinson Crusoe on a lonely island that knows when he saves some fish it's because he wants to manufacture a fishing rod. But that is essentially what neoclassical models model, they pretend that everybody is basically acting like a hive mind that knows all future spending and saving decisions in the future and where money is merely an infrastructure to facilitate barter. This is entirely wrong. Money is non-neutral and it is not just another commodity. It is created when somebody incurs a debt (e.g. by taking a loan from a bank) and it is destroyed when the debt is repaid. Banks create money, they are not acting as intermediaries between savers and borrowers. This has long been argued by Post-Keynesians and is well known for at least 100 years but mainstream economists only admitted that publicly just a few years ago.
See "Money creation in the modern economy" by the Bank of England (2014) for an example of that recognition.
Closing with to quotes:
"I have found out what economics is; it is the science of confusing stocks with flows" - Michal Kalecki
“it is much more realistic to say that banks "create credit", that is that they create deposits in their act of lending, than to say that they lend the deposits entrusted to them. And the reason for insisting on this is that depositors should not be invested with the insignia of a role they do not play. The theory to which economists have clung so tenaciously […] attributes to them an influence on the 'supply of credit' which they do not have. " - Joseph Schumpeter
Deflation does far more damage than inflation. This is why the Federal Reserve fears deflation a lot more than deflation.
A court cannot generally find that I must furnish someone with some weight of gold for example but they can find a monetary value in sovereign currency which I must supply.
As a daily currency, it also has sharp downsides, but at least it’s not all bad.
Inflation means "interest" on gold, measured in reliable currencies like USD or EUR, is at least 4%. Far more than you will get from any bank.
Of course this goes for anything, so you might want to select something with less regulation attached to it. On the other hand, gold is really dense and "liquid" (easy to sell), which are great advantages to have for a store of wealth. And then there's the recent history of gold prices (which is due to the third world attempting to use anything but dollars but not succeeding at it, but one assumes it will end)
But yes, gold makes less than you'll probably get on the S&P500.
Only for very large amounts of money. It can't easily be subdivided. Oh and this is illegal in most countries.
But yeah, what people forget is that gold is incredibly dense. Nearly double lead's density. This means 1kg of gold is about the size of a nokia 3360, and worth close to 150,000$. A very large amount of gold doesn't take up much volume at all.
... which also means that people "stealing gold" like in the bond movies is totally unrealistic. If you loaded a pallet of gold bars (12.5 kg a piece, 200 gold bars, about 2.5 tons, 375 million USD) into a standard van, that van would probably just break down. And carrying 10 gold bars, 20 million USD in a backpack? Not happening.
(which frankly Trump is abusing because of course the density of gold means that any facility storing gold, including Fort Knox, is going to "look empty")
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The staying power of gold is a value in itself.
In an ideal world gold would be convertible to and from currency tax free so it could be used as such. A gold-backed currency is too constrained by the supply of gold in the world, but tax-free gold would allow people to avoid currency depreciation and the credit collapses of our current debt-based system without paying a penalty.
-- Proverbs 16:16
-- Psalms 19
A quick search says maybe the last year it was true was in 2003.
Oxygen is one of the most ignoble gases, and reacts with almost everything.
The supply of gold is always inflating. One day we will have asteroid mining of gold and it will be inflated even more. Bitcoin doesn't have this problem.
Nobody will accept your gold for a cup of coffee in day to day life, but restraints and coffee shops will increasingly take your bitcoin over lightning.
And even if you want to "smuggle" gold, it's not hard either. Nothing is easier.
> One day we will have asteroid mining of gold
Rejoice, that will be the best day in the history of humanity!
Almost every entity in the world has an incentive to find the solution to this problem, and when it is found Bitcoin will just do a soft fork and include it into itself.
Time.
Hydrocarbons? Everything from making life to providing energy.
Silicon? Making silicon chips.
Oxygen? I like breathing.
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Even if a state actor manages to break the asymmetric cryptography before then (literally impossible to get enough compute power to do this currently), the users can just fork the blockchain before that happens, fix the bug, and continue on.