09-15-2024, 10:40 AM
tl;dw -- some notes on the overall topic:
To paraphrase Mises on the matter of the divisibility of the monetary medium (gold, silver, etc.): Any total amount of money is as serviceable for the use of the monetary medium as any other amount. That is, there is never a need for "more money". For coinage, we do want more of the monetary metal as population grows, simply because coins can only become so small before they become too small to handle. However, there are solutions to this, such as using non-precious metals for very small transactions, which is why copper used to be used for pennies, nickel for 5cent coins, and so on. Thus, even if you had just one gold bar for the whole world, it would still be possible through subdivision to give every nation in the world their one small piece of that gold bar, and that small piece would be the gold reserve of the nation. Obviously, that is an exaggerated situation. In reality, as population grows (thus, increased demand for coinage) the demand for precious-metal mining for coinage also grows, and so more resources are invested into that, and the low-dilution mining sources that were formerly unprofitable, become profitable. IIRC, there's vastly more gold dissolved in the water of the ocean than all gold ever mined by humans added together, many times over. Obviously, the cost of recovering that is very high, but if the population really grew to be so enormous that the amount of gold available today would not suffice for coinage, then it would become so precious that mining it directly from the ocean, even at great expense, would become profitable.
The assumption that gold is no longer money is not correct. Gold is no longer popular money in the West, that is, it is not used hand-to-hand by most people, most of the time. But this is not actually historically unique, as bimetallism in Britain and Europe caused many gold outflows during the era where those laws were being imposed. Sometimes, gold would disappear from a bimetallic economy and silver would have higher legal value than gold, and vice-versa. So, yes, it is true that people don't use gold very often in hand-to-hand transactions in the US/West but this says nothing about whether gold itself is still money. Go to Dubai and find out whether gold is still used as money. It is commonly-used money there. While less common, it is still used as money in India, among the upper-class. They do transactions in gold. In Russia, it is used as money for large transactions. In Africa, it widely used for all kinds of large transactions. In Switzerland, it is actually used as money in purchase transactions. Gold never completely stopped being money.
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