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Gold. Intrinsic or Tautological.
#1
Necronic
Necronic
I had an argument with my brother recently about currency and central banking which inevitably lead to the whole gold argument. Part of it may have been because I was finishing up Atlas Shrugged where a big point for her is moving away from printed currency to gold. Anyways, he got onto the whole "Gold has an intrinsic value" argument.
Which is bullshit.
I ask him "why does gold have value?" to which he replys (more or less) "because it's valuable".
So there is no intrinsic value to gold, there is tautological value to it. Doesn't matter if you are talking about jewelry or whatever. The value exists because we say it does. Which is absolutely no different from printed currency.
Could someone explain to me what the intrinsic value of gold is?
Which is bullshit.
I ask him "why does gold have value?" to which he replys (more or less) "because it's valuable".
So there is no intrinsic value to gold, there is tautological value to it. Doesn't matter if you are talking about jewelry or whatever. The value exists because we say it does. Which is absolutely no different from printed currency.
Could someone explain to me what the intrinsic value of gold is?
#2
GasBandit
GasBandit
#3
strawman
strawman
It is scarce.
It is easily worked.
It is easily purified.
It is an amazing electrical conductor.
It has a very low reactance to other materials.
It doesn't tarnish/oxidize.
There really are no other materials that compare as favorably.
However, it's true value lies in scarcity - if it were as common as water we'd be using it for plumbing.
If water were as scarce as gold, we'd be using it as the base for currency.
Gold is both high in value and low in availability - which fits the requirements for a currency base very well.
It is easily worked.
It is easily purified.
It is an amazing electrical conductor.
It has a very low reactance to other materials.
It doesn't tarnish/oxidize.
There really are no other materials that compare as favorably.
However, it's true value lies in scarcity - if it were as common as water we'd be using it for plumbing.
If water were as scarce as gold, we'd be using it as the base for currency.
Gold is both high in value and low in availability - which fits the requirements for a currency base very well.
#4
Necronic
Necronic
HA. Man I had a line at the end that said "Don't bring up the circuitry BS". This is mainly because you really don't need that much gold to do it. Definitely not enough to justify the cost of gold
Edit: Also, for actual industrial useage and whatnot Copper is about a million times more useful than gold.
Edit2: Jesus that link is terrible. Here are there uses:
Jewelry - tautological
Dentistry - obsolete
Medicine - true of any element known to man nbd
Computers -Circuitry
Electronics - Circuitry
Aerospace - Circuitry (wow they are really stretching this one)
Awards and symbols - .....wow ok thats jewelry you morons
Gold Leaf/gilding - god damnit.
Glassmaking - ok wow didn't know about that one.
So there are 2 uses. Circuitry (where the content is in the MICROGRAMS) or exotic glassmaking.
Tell you what that is pretty impressive.
Edit: Also, for actual industrial useage and whatnot Copper is about a million times more useful than gold.
Edit2: Jesus that link is terrible. Here are there uses:
Jewelry - tautological
Dentistry - obsolete
Medicine - true of any element known to man nbd
Computers -Circuitry
Electronics - Circuitry
Aerospace - Circuitry (wow they are really stretching this one)
Awards and symbols - .....wow ok thats jewelry you morons
Gold Leaf/gilding - god damnit.
Glassmaking - ok wow didn't know about that one.
So there are 2 uses. Circuitry (where the content is in the MICROGRAMS) or exotic glassmaking.
Tell you what that is pretty impressive.
#5
strawman
No.
strawman
Hahaha.Also, for actual industrial useage and whatnot Copper is about a million times more useful than gold.
No.
#6
GasBandit
Gold does have an intrinsic value, and it is critical for electronics. However, you can then go back to your friend and say that its value based on utility is less than a century old.
Copper tarnishes and corrodes extremely easily.
GasBandit
It's very scarce. It's the best it is at what it does. Your smart cell phone literally would not be possible without it.HA. Man I had a line at the end that said "Don't bring up the circuitry BS". This is mainly because you really don't need that much gold to do it. Definitely not enough to justify the cost of gold
Edit: Also, for actual industrial useage and whatnot Copper is about a million times more useful than gold.
Gold does have an intrinsic value, and it is critical for electronics. However, you can then go back to your friend and say that its value based on utility is less than a century old.
Copper tarnishes and corrodes extremely easily.
#7
sixpackshaker
sixpackshaker
My personal argument against a gold or silver standard is that they limit available wealth. In an expanding economy having your monetary system based on pretty metals held out of view makes little sense.
Gold is...
pure
resists tarnishing
entirely recyclable
capable of being hammered/laid extremely thin with out losing any of its qualities
great conductor of electricity - electronics may get more expensive now
Gold is...
pure
resists tarnishing
entirely recyclable
capable of being hammered/laid extremely thin with out losing any of its qualities
great conductor of electricity - electronics may get more expensive now
#8
Necronic
Necronic
I ninja edited you a bit, sorry. Ok, for what you are talking about I would believe it with respect to Platinum, but not gold.
The amount of gold that is used industrially worldwide is laughably small compared to the global supply. If the value of gold were defined in its current industrial uses it would be worth ~1-200$ per ounce.
The amount of gold that is used industrially worldwide is laughably small compared to the global supply. If the value of gold were defined in its current industrial uses it would be worth ~1-200$ per ounce.
#9
sixpackshaker
sixpackshaker
Platinum is highly valuable to me. It is what will cure my cancer.
Now I am chock full of platinum and dynamite!!!
Added at: 00:02
Glen Beck says that it will keep you safe, in the coming fall of Western Civilization.
Except gold is not bullet proof.
Now I am chock full of platinum and dynamite!!!
Added at: 00:02
Glen Beck says that it will keep you safe, in the coming fall of Western Civilization.
Except gold is not bullet proof.
#10
GasBandit
GasBandit
Now you're making a different argument... you started off saying gold had NO intrinsic value, now you're just saying the price is inflated. The former is not true, the latter probably is.I ninja edited you a bit, sorry. Ok, for what you are talking about I would believe it with respect to Platinum, but not gold.
The amount of gold that is used industrially worldwide is laughably small compared to the global supply. If the value of gold were defined in its current industrial uses it would be worth ~1-200$ per ounce.
#11
sixpackshaker
sixpackshaker
I am still waiting for the "gold bubble" to burst. Fox has done a good job of getting poor people to buy gold at a high price, now it is time for it to fall. That happens with every bubble as soon as the everyday slob buys in, the market collapses.
#12
GasBandit
GasBandit
The question becomes, will gold collapse before the US dollar does.I am still waiting for the "gold bubble" to burst. Fox has done a good job of getting poor people to buy gold at a high price, now it is time for it to fall. That happens with every bubble as soon as the everyday slob buys in, the market collapses.
#13
AshburnerX
AshburnerX
All you need to ask yourself about the value of gold is this: If the economy were to collapse tomorrow, which would you rather have? A few bricks of gold or something else?
Basically, gold is only worth something because you don't have to worry about where your next meal is coming from, where your going to sleep tonight, or what you are going to do come winter... or to be even clearer, because the people in charge don't have to worry about those things. As long as there are people who are comfortable, gold will have value... because it's a mark of their comfort. Having/wearing gold is announcing to the world "Look how powerful I am! I can waste my time/resources on this useless metal without going hungry! Come sleep with me! My genes are AWESOME!". People want to announce this and gold was simply the easiest/flashiest way of doing it for thousands of years.
This is the entire reason why jewelry was invented: To announce to others that you are worthy of fucking. Gold is valuable because it gets you laid. PERIOD.
Basically, gold is only worth something because you don't have to worry about where your next meal is coming from, where your going to sleep tonight, or what you are going to do come winter... or to be even clearer, because the people in charge don't have to worry about those things. As long as there are people who are comfortable, gold will have value... because it's a mark of their comfort. Having/wearing gold is announcing to the world "Look how powerful I am! I can waste my time/resources on this useless metal without going hungry! Come sleep with me! My genes are AWESOME!". People want to announce this and gold was simply the easiest/flashiest way of doing it for thousands of years.
This is the entire reason why jewelry was invented: To announce to others that you are worthy of fucking. Gold is valuable because it gets you laid. PERIOD.
#14
MindDetective
MindDetective
Isn't all value extrinsic? That is, it is people that do the valuation of resources and objects. They perceive the value and their perception is influenced by social pressures. I imagine white rhino feces are extremely rare but that doesn't make it valuable. For it to become valuable, people must also want it, and that is not intrinsic to the item. Valuation is a social phenomenon.
#15
AshburnerX
AshburnerX
Mostly true, except for some things. For instance, a house has intrinsic value because you can live in it. How much it is worth may be subjective, but any house that you can live in is valuable BECAUSE you can live in it.Isn't all value extrinsic? That is, it is people that do the valuation of resources and objects. They perceive the value and their perception is influenced by social pressures. I imagine white rhino feces are extremely rare but that doesn't make it valuable. For it to become valuable, people must also want it, and that is not intrinsic to the item. Valuation is a social phenomenon.
#16
MindDetective
MindDetective
But the value there depends on the usefulness to the thing that needs it in that case. A house has no value to a whale, but great value to a human. I think you're closer to the mark, though.Mostly true, except for some things. For instance, a house has intrinsic value because you can live in it. How much it is worth may be subjective, but any house that you can live in is valuable BECAUSE you can live in it.
#17
Adammon
Adammon
Value as a function of use is the argument being made against gold having intrinsic properties. A house has intrinsic value because it meets a basic human necessity: shelter. Not because of its rarity. Food has intrinsic value in much the same fashion. Gold bricks won't feed you through a winter. Looking back to the industrial age, it wasn't gold that drove economies, it was skills. Gold will only ever be as valued as those with the gold want it to be.
#18
Norris
Norris
Gold is only valuable because we live in a society (a worldwide one) that values it. In the event of a complete collapse of western civilization, everything going to pot, money means nothing anymore...it would be pretty fucking useless.
#19
MindDetective
MindDetective
A house isn't intrinsically valuable either, since it's value is relative still to those that can use it. As an extreme example, you could have a tiny shack that cannot fit a big fat man. A child can still use it for shelter but the big fat man cannot. If the shack had intrinsic value, the big fat man would still want it. Since it is relative, the value is still extrinsic.A house has intrinsic value because it meets a basic human necessity: shelter.
#20
Hailey Knight
Hailey Knight
Until people get out of a hunter-gatherer state; then they'll want a currency system rather than bartering. People criticized Land of the Dead for using money, but in that situation, there was a city and it needed to function regardless of what was going on outside its walls.Gold is only valuable because we live in a society (a worldwide one) that values it. In the event of a complete collapse of western civilization, everything going to pot, money means nothing anymore...it would be pretty fucking useless.
#21
Adammon
Adammon
Your extreme example is absurd. In the absence of shelter, the fat man will still take the small shack. In the absence of food, thevhungry man will still eat Lima beans. Satisfying Base needs will always provide anvintrinsic value to an itemA house isn't intrinsically valuable either, since it's value is relative still to those that can use it. As an extreme example, you could have a tiny shack that cannot fit a big fat man. A child can still use it for shelter but the big fat man cannot. If the shack had intrinsic value, the big fat man would still want it. Since it is relative, the value is still extrinsic.
#22
AshburnerX
AshburnerX
Exactly. Even if the shack doesn't completely fulfill the need, it's still better than being out in the rain.
#23
Zappit
Zappit
Plus, it's shiny. Most valuable metals and minerals either shine or sparkle when clean. People are like magpies that way. It sounds simple and stupid, but shine is how it got its value in the first place.It is scarce.
It is easily worked.
It is easily purified.
It is an amazing electrical conductor.
It has a very low reactance to other materials.
It doesn't tarnish/oxidize.
#24
figmentPez
Basically, is the title of this thread a false dichotomy. Gold is valuable both for it's intrinsic worth and for it's perceived value. If gold suddenly were to only be valued for it's practical applications, and it's price per ounce somehow reset to reflect only it's application in electronics, I imagine that the amount used for circuits would go up significantly. That gold is used at all in circuits, while it's value is so inflated by it's history as currency, really speaks to it's intrinsic value to electronics.
figmentPez
If gold weren't valued for jewelry and as currency, would the content still be in micrograms?Circuitry (where the content is in the MICROGRAMS)
Basically, is the title of this thread a false dichotomy. Gold is valuable both for it's intrinsic worth and for it's perceived value. If gold suddenly were to only be valued for it's practical applications, and it's price per ounce somehow reset to reflect only it's application in electronics, I imagine that the amount used for circuits would go up significantly. That gold is used at all in circuits, while it's value is so inflated by it's history as currency, really speaks to it's intrinsic value to electronics.
#25
MindDetective
Added at: 16:06
MindDetective
I did preface that it was an extreme example. And if the fat man doesn't fit inside of the shack, it is useless to him. The important part is the "to him" part. It just happens that 99.99% of all houses would be useful to 99.99% of most people. That still doesn't make the value of the house intrinsic. (<---that part is the whole point)Your extreme example is absurd. In the absence of shelter, the fat man will still take the small shack. In the absence of food, thevhungry man will still eat Lima beans. Satisfying Base needs will always provide anvintrinsic value to an item
Added at: 16:06
So before circuitry existed gold had no intrinsic value but when circuitry was invented it suddenly had it? It seems to me that your example is still speaking to an extrinsic value that is placed on gold. Value is a perception. It occurs in the mind, like colors and emotions.That gold is used at all in circuits, while it's value is so inflated by it's history as currency, really speaks to it's intrinsic value to electronics.
#26
Norris
If a person truly believes that a day will come in the immediate future where the U.S. Dollar is completely worthless, the U.S. Government falls apart, and things go all fucking "Road Warrior" (which I don't, as a matter of fact such predictions remind of the 2012 and Rapture bullshit), then the idea that they would be spending their cash on a metal whose primary worth is "looks pretty" and "used in electronics" (neither of which are very practical applications after the end, and make no mistake that the U.S. completely falling apart would fuck up the rest of the world pretty badly) is just asinine to me.
Norris
True. However, right now you still have allocate your monetary resources to obtain it and there is no way to predict how long you will be in a base survival phase. When you food (or a munition, or water, or medicine, etc) supply runs low, it will not matter if you have five milligrams or five kilograms of gold if no one has a use for it.Until people get out of a hunter-gatherer state; then they'll want a currency system rather than bartering. People criticized Land of the Dead for using money, but in that situation, there was a city and it needed to function regardless of what was going on outside its walls.
If a person truly believes that a day will come in the immediate future where the U.S. Dollar is completely worthless, the U.S. Government falls apart, and things go all fucking "Road Warrior" (which I don't, as a matter of fact such predictions remind of the 2012 and Rapture bullshit), then the idea that they would be spending their cash on a metal whose primary worth is "looks pretty" and "used in electronics" (neither of which are very practical applications after the end, and make no mistake that the U.S. completely falling apart would fuck up the rest of the world pretty badly) is just asinine to me.
#27
AshburnerX
AshburnerX
This has always been my argument for people that buy it too. I'd rather have bullets, medicine, gas... a hundred other things. Gold would only be useful if you have some means to survive until the economy became large enough that you'd NEED a monetary system again.True. However, right now you still have allocate your monetary resources to obtain it and there is no way to predict how long you will be in a base survival phase. When you food (or a munition, or water, or medicine, etc) supply runs low, it will not matter if you have five milligrams or five kilograms of gold if no one has a use for it.
If a person truly believes that a day will come in the immediate future where the U.S. Dollar is completely worthless, the U.S. Government falls apart, and things go all fucking "Road Warrior" (which I don't, as a matter of fact such predictions remind of the 2012 and Rapture bullshit), then the idea that they would be spending their cash on a metal whose primary worth is "looks pretty" and "used in electronics" (neither of which are very practical applications after the end, and make no mistake that the U.S. completely falling apart would fuck up the rest of the world pretty badly) is just asinine to me.
#28
figmentPez
Of course value is a perception, but that applies to anything of value. If we all value dying of starvation more than we value food, then not even an apple has any inherent worth. If you want to argue that practical application is just perception then you're just being stupid for the sake of making an argument.
figmentPez
No, most of the practical uses for gold throughout history have been since supplanted by other metals. There is great value to gold's ability to be easily worked and refined.So before circuitry existed gold had no intrinsic value but when circuitry was invented it suddenly had it? It seems to me that your example is still speaking to an extrinsic value that is placed on gold. Value is a perception. It occurs in the mind, like colors and emotions.
Of course value is a perception, but that applies to anything of value. If we all value dying of starvation more than we value food, then not even an apple has any inherent worth. If you want to argue that practical application is just perception then you're just being stupid for the sake of making an argument.
#29
MindDetective
MindDetective
Exactly.Of course value is a perception, but that applies to anything of value.
I am not arguing anything about practical application, just the value of the commodity. Practical application is a context through which people perceive the value. It isn't inherent in the commodity at all.If we all value dying of starvation more than we value food, then not even an apple has any inherent worth. If you want to argue that practical application is just perception then you're just being stupid for the sake of making an argument.
#30
figmentPez
Oranges are a commodity. They have the inherent property of being edible. The practical application of oranges being eaten is inherent to the commodity.
figmentPez
Bullshit. Gold has the inherent properties that allow it to have practical application.I am not arguing anything about practical application, just the value of the commodity. Practical application is a context through which people perceive the value. It isn't inherent in the commodity at all.
Oranges are a commodity. They have the inherent property of being edible. The practical application of oranges being eaten is inherent to the commodity.
#31
MindDetective
What about someone that is allergic to oranges? Should they still value the oranges because of their "intrinsic" value of being edible? Value. Is. Relative. That means it is extrinsic. It is purely in our heads.
MindDetective
Of course gold has inherent properties. Value just isn't one of them. It is like meaning, it is relative to the experiences, the context in which they are used.Bullshit. Gold has the inherent properties that allow it to have practical application.
Oranges are a commodity. They have the inherent property of being edible. The practical application of oranges being eaten is inherent to the commodity.
What about someone that is allergic to oranges? Should they still value the oranges because of their "intrinsic" value of being edible? Value. Is. Relative. That means it is extrinsic. It is purely in our heads.
#32
figmentPez
figmentPez
They can still buy and sell oranges to other humans. The lack of use to one person does not invalidate their inherent value to the world at large. Relative does not equal extrinsic. The position and motion of all mass is relative to other mass, hover that does not mean that energy is an extrinsic value that is only in our heads.What about someone that is allergic to oranges? Should they still value the oranges because of their "intrinsic" value of being edible? Value. Is. Relative. That means it is extrinsic. It is purely in our heads.
#33
MindDetective
MindDetective
A social phenomenon, not a physical property of the orange.They can still buy and sell oranges to other humans.
Getting into semantics here. We're definitely not talking about relativistic physics. We're talking about how the utility of the commodity is relative to the organism using it. This means that the property is not universally valuable but relative to each each organism that is doing the valuing. While you can try and cram value into the commodity itself and explain the commodity as valuable, it is not very parsimonious to do so, since you have to explain how the value comes and goes with each organism. It is really only the organism (usually us) that are doing the valuing. If we did not exist, the value would not either.The lack of use to one person does not invalidate their inherent value to the world at large. Relative does not equal extrinsic. The position and motion of all mass is relative to other mass, hover that does not mean that energy is an extrinsic value that is only in our heads.
#34
AshburnerX
Who desires a resource is irrelevant to the inherent value of the resource, as long as said resource can be used by the one who desires it.
AshburnerX
This is the important thing. Just because you can't use a resource does not mean that it loses value. As long as you can trade it for something you can use, it retains it's inherent value. This is the entire basis for a barter based economy.The lack of use to one person does not invalidate their inherent value to the world at large. Relative does not equal extrinsic.
If we did not exist, another life form would be competing for the same resources instead. An apple has value whether it is possessed by a man or by a beast, especially considering the fate of the apple is still the same.If we did not exist, the value would not either.
Who desires a resource is irrelevant to the inherent value of the resource, as long as said resource can be used by the one who desires it.
#35
MindDetective
MindDetective
Again, this is a social phenomenon. You say yourself that it is dependent on your ability to trade the item. If you are on a desert island with a grove of orange trees and you allergic to oranges, they are valueless to you. You canot trade them and you cannot eat them. It makes very little sense to say that the oranges suddenly do not have value any more. And no castaway would begin hoarding oranges they could do nothing with. Valuation is social and entirely dependent on the relationship between the organism that values the commodity and the commodity being valued, not in the commodity itself.This is the important thing. Just because you can't use a resource does not mean that it loses value. As long as you can trade it for something you can use, it retains it's inherent value. This is the entire basis for a barter based economy.
#36
AshburnerX
AshburnerX
Except your example is flawed... because you could still use the oranges as bait for fish. Or to spell out an SOS. Or dozens of other things. You need to remember that a resource may have more than one use and it's inherent value is reflected in this. This is why things like salt and alcohol became so prized.Again, this is a social phenomenon. You say yourself that it is dependent on your ability to trade the item. If you are on a desert island with a grove of orange trees and you allergic to oranges, they are valueless to you. You canot trade them and you cannot eat them. It makes very little sense to say that the oranges suddenly do not have value any more. And no castaway would begin hoarding oranges they could do nothing with. Valuation is social and entirely dependent on the relationship between the organism that values the commodity and the commodity being valued, not in the commodity itself.
#37
MindDetective
This means that you have to explain value in terms of the ever changing context that the object is in, as well as the relationship of the person using the object to the object and to the context. The value is no longer within the object, now. It is in that relationship and that context, meaning extrinsic to the object itself. If you have to start considering elements outside the object in order to determine its value, I just can't see any way to properly say that the object itself has the value.
MindDetective
You are shifting the argument. If oranges have an instrinsic value, it is because they have that as an unchanging property. You can't say, "well, if that isn't the value property, it must be something else that is making it valuable." That way just leads to circular reasoning.Except your example is flawed... because you could still use the oranges as bait for fish. Or to spell out an SOS. Or dozens of other things. You need to remember that a resource may have more than one use and it's inherent value is reflected in this. This is why things like salt and alcohol became so prized.
Code:
It has properties which have value. It has value because it has some properties (that are sometimes valuable).
#38
figmentPez
figmentPez
The physical properties that give it that value would still exist. An orange has carbohydrates, essential oils and other biological matter in a specific configuration and the physics of the world lend those chemicals to certain inherent uses. If the orange did not exist, the value would not either. However, the orange does exist, and it's value does. How much can be done with that value depends on the individual, or the species, but the value remains.If we did not exist, the value would not either.
#39
AshburnerX
AshburnerX
Mind, I think we're starting to the enter into the existential nature of things. Something can't be ANYTHING without being observed. A rock isn't a rock until it's observed by something that knows what a rock is. Similarly, something can't have value until it is wanted by something.
I think at this point you've ceased talking about economics. We have to assume some basic level of societal interpretation, but that doesn't account for all or even most of an object's worth.
I think at this point you've ceased talking about economics. We have to assume some basic level of societal interpretation, but that doesn't account for all or even most of an object's worth.
#40
MindDetective
MindDetective
If there is no one there to value it, it does not matter what properties it has. There may be strange, delicious fruits growing on an alien, plant-only world right this very moment. They are worth nothing.The physical properties that give it that value would still exist. An orange has carbohydrates, essential oils and other biological matter in a specific configuration and the physics of the world lend those chemicals to certain inherent uses. If the orange did not exist, the value would not either. However, the orange does exist, and it's value does. How much can be done with that value depends on the individual, or the species, but the value remains.
But I am contending that it DOES account for all of its worth. If valuation is purely psychological, then it should be treated as such. Ascribing the value to the object itself, I believe, is counter productive, since the value emerges entirely from the context and the psychological and societal relationships involved.Mind, I think we're starting to the enter into the existential nature of things. Something can't be ANYTHING without being observed. A rock isn't a rock until it's observed by something that knows what a rock is. Similarly, something can't have value until it is wanted by something.
I think at this point you've ceased talking about economics. We have to assume some basic level of societal interpretation, but that doesn't account for all or even most of an object's worth.
#41
AshburnerX
AshburnerX
But how does your theory handle objects that have a value that isn't apparent or has gone undetected for millenia? For thousands of years we thought trees were only good for wood, food, and occasionally medicine, but then it turned out they were crucial to the air filtration system on the planet. All life was benefiting from the the oxygen that trees and other plants create, even if we did not now it. Yet it was a function inherent in the design of virtual all plants on the planet.
Basically, I'm saying an object can have value, even if we are unaware of it. This kinda takes the entire sociological angle out of picture until we have to define what the value actually is.
Basically, I'm saying an object can have value, even if we are unaware of it. This kinda takes the entire sociological angle out of picture until we have to define what the value actually is.
#42
MindDetective
MindDetective
Well, an object can have utility but not be valued. We have over forested trees because we valued them for their wood but not their oxygen production. What this means is that we can under-value something that might have an important utility to our survival.
#43
AshburnerX
AshburnerX
True, but this doesn't negate the original value of the object. Utility signifies value, but value does not always signify utility.Well, an object can have utility but not be valued. We have over forested trees because we valued them for their wood but not their oxygen production. What this means is that we can under-value something that might have an important utility to our survival.
#44
MindDetective
MindDetective
I would contend that utility only signifies the potential for value. That is why things can be considered undervalued in the first place.True, but this doesn't negate the original value of the object. Utility signifies value, but value does not always signify utility.
#45
Necronic
Edit: Actually I will make it easy for you by posing a specific question:
Is the industrial value of gold in it's use as a marginally improved electrical contact (from tin) more significant than the use of copper in pretty much every piece of electronics and every one of the millions of miles of electrical wiring in the world.
Plus it's use as a heat exchanger in any sufficiently large industrial heating system.
Plus it's use in making alloys like brass which give us things like bullet casings or musical instruments. Oh yeah and bronze of course.
See that's what you are supposed to say before you follow it up with:
hahahaha
no.
Necronic
Could you expand on that or are you unwilling to commit to an argument/viewpoint beyond a sarcastic remark like the standard e-intellectual?Hahaha.
No.
Edit: Actually I will make it easy for you by posing a specific question:
Is the industrial value of gold in it's use as a marginally improved electrical contact (from tin) more significant than the use of copper in pretty much every piece of electronics and every one of the millions of miles of electrical wiring in the world.
Plus it's use as a heat exchanger in any sufficiently large industrial heating system.
Plus it's use in making alloys like brass which give us things like bullet casings or musical instruments. Oh yeah and bronze of course.
See that's what you are supposed to say before you follow it up with:
hahahaha
no.
#46
Chibibar
Chibibar
Until recently gold doesn't really have "intrinsic" value (circuitry is only in the last 50 years or so)
Why is it valuable?
It is rare. It makes fine jewelry in the early days. I mean look at the old treasure, usually you see gold and jewels (another item that is rare but hardly use except diamond drills and such)
It is hard to obtain (back then) and thus it has value. People like to have stuff that is "hard to find" (see the collector's syndrome)
edit: Why does it have worth? cause people place worth on it.
How does money fit in all this? Well, originally gold was use as money because it is rare. It is "harder" to reproduce since there is a limited supply (in any given period really)
now-a-days we use money base on "faith" (no gold backing but institution backing of credit worth) because it is a unit of measurement of our time/worth/skill.
how else can we exchange services to each other in such world on a large scale. Barter system works in smaller communities, but on the large scale it is quite difficult hence the use of money.
Why is it valuable?
It is rare. It makes fine jewelry in the early days. I mean look at the old treasure, usually you see gold and jewels (another item that is rare but hardly use except diamond drills and such)
It is hard to obtain (back then) and thus it has value. People like to have stuff that is "hard to find" (see the collector's syndrome)
edit: Why does it have worth? cause people place worth on it.
How does money fit in all this? Well, originally gold was use as money because it is rare. It is "harder" to reproduce since there is a limited supply (in any given period really)
now-a-days we use money base on "faith" (no gold backing but institution backing of credit worth) because it is a unit of measurement of our time/worth/skill.
how else can we exchange services to each other in such world on a large scale. Barter system works in smaller communities, but on the large scale it is quite difficult hence the use of money.
#47
Eriol
Eriol
The copper argument doesn't work for an easy reason: copper is many MANY times more common than gold. It just is. That helps a lot with its shortcomings, like corrosion. Now it's a lot better than Iron, but that doesn't mean it's awesome either. And those many miles of wiring are almost-always with a sheath. Now that's also to prevent short-circuits, but it's also there to stop the corrosion of the wire.
I wouldn't under-play the "shiny" aspect. Gold is one of the very few metals that can be found in nature in a "metallic" state. Most of the rest are only found as ores. Thus for "shiny" there was very little else BUT gold for millennium of human history.
And that plays into the jewelry aspect. It's actually the workability of the metal that makes it so suited for that. You functionally cannot make jewelry from steel (these days almost anything is "possible" but I mean from a practical perspective) because you can't easily make settings and things like that because the metal just isn't good for that. Gold and silver and other such "traditional" jewelry metals you can. I'd bet the same with copper, but again, the corrosion problem. Silver is an in-between case because of the tarnish comes, and then it doesn't progress.
But I wouldn't be surprised if the straight-out rarity, combined with the jewelry functions of it (it's good for it, not just that it's valuable and desired) would be enough to justify most of the price. Plus add in the modern electronics usage (yes only plating is necessary, but still), and it doesn't seem like a big "this is totally overinflated" anymore.
Diamonds are what are really over-inflated. If it was straight out rarity of gem-quality stones, it would be Sapphires, not Diamonds as the most valuable. And you can make Sapphires at the mega-cheap in the lab now too. Lab-grown gem-quality diamonds are on the market too (here), but there's some expense there. Sapphires are literally holy-crap cheap from the lab (see here).
I wouldn't under-play the "shiny" aspect. Gold is one of the very few metals that can be found in nature in a "metallic" state. Most of the rest are only found as ores. Thus for "shiny" there was very little else BUT gold for millennium of human history.
And that plays into the jewelry aspect. It's actually the workability of the metal that makes it so suited for that. You functionally cannot make jewelry from steel (these days almost anything is "possible" but I mean from a practical perspective) because you can't easily make settings and things like that because the metal just isn't good for that. Gold and silver and other such "traditional" jewelry metals you can. I'd bet the same with copper, but again, the corrosion problem. Silver is an in-between case because of the tarnish comes, and then it doesn't progress.
But I wouldn't be surprised if the straight-out rarity, combined with the jewelry functions of it (it's good for it, not just that it's valuable and desired) would be enough to justify most of the price. Plus add in the modern electronics usage (yes only plating is necessary, but still), and it doesn't seem like a big "this is totally overinflated" anymore.
Diamonds are what are really over-inflated. If it was straight out rarity of gem-quality stones, it would be Sapphires, not Diamonds as the most valuable. And you can make Sapphires at the mega-cheap in the lab now too. Lab-grown gem-quality diamonds are on the market too (here), but there's some expense there. Sapphires are literally holy-crap cheap from the lab (see here).
#48
Necronic
Necronic
For the copper thing I was ignoring rarity and just looking at functional usage. You're right that gold is rare, and it is also shiny. But so what?
Your example of Diamonds and Gems is a perfect example of this. Diamonds and Sapphires are an interesting thing. They are rare and shiny, and they are also industrially useful. I use equipment that uses sapphire seals, and I use diamond tipped cutting blades. Of course those are the synthetic diamonds and sapphires. Now, what's interesting to me is that the synthesis of these things didn't devalue diamonds or sapphires at all. They are both still used in jewelry and are exceedingly expensive. This is because the industrial value, and even the "shiny" value of them was inconsequential in their valuation, which leaves rarity.
But is rarity enough of a justification for value? There are lots of things that are rare. My cats' litter box contains the unique one of a kind remains of my two precious cants. Sadly though people don't seem to want to buy them. So what is it then if not rarity alone?
At the end of the day it's valuable because people say its valuable.
Your example of Diamonds and Gems is a perfect example of this. Diamonds and Sapphires are an interesting thing. They are rare and shiny, and they are also industrially useful. I use equipment that uses sapphire seals, and I use diamond tipped cutting blades. Of course those are the synthetic diamonds and sapphires. Now, what's interesting to me is that the synthesis of these things didn't devalue diamonds or sapphires at all. They are both still used in jewelry and are exceedingly expensive. This is because the industrial value, and even the "shiny" value of them was inconsequential in their valuation, which leaves rarity.
But is rarity enough of a justification for value? There are lots of things that are rare. My cats' litter box contains the unique one of a kind remains of my two precious cants. Sadly though people don't seem to want to buy them. So what is it then if not rarity alone?
At the end of the day it's valuable because people say its valuable.
#49
GasBandit
GasBandit
I think there's a false assertion here. Even if gold and diamonds were not "pretty" they'd still have a value as useful materials. That value would not be the grossly inflated "ooh shiny" value it has now. But just because something's price is super-bloated does not mean it has no intrinsic value whatsoever... just that its value is overstated because of a tautology. That's my only nit to pick here. The original post made a case for gold having absolutely no value other than the value we say it has because it's pretty and rare, which is false.
#50
sixpackshaker
sixpackshaker
Diamonds are not rare. They are just not allowed onto the market.
#51
strawman
I think we need a stick to determine what's rare and what's not so we can all be on the same page.
strawman
The fact that a single entity can control the majority of the distribution of diamonds actually indicates that they are rare. There are copper mines all over the US. How many diamond mines are there in the US?Diamonds are not rare. They are just not allowed onto the market.
I think we need a stick to determine what's rare and what's not so we can all be on the same page.
#52
Necronic
Edit: Also depending on how you define a diamond or a sapphire they aren't rare at all. You can make them pretty cheap.
Necronic
Ok, I'll buy that.I think there's a false assertion here. Even if gold and diamonds were not "pretty" they'd still have a value as useful materials. That value would not be the grossly inflated "ooh shiny" value it has now. But just because something's price is super-bloated does not mean it has no intrinsic value whatsoever... just that its value is overstated because of a tautology. That's my only nit to pick here. The original post made a case for gold having absolutely no value other than the value we say it has because it's pretty and rare, which is false.
Edit: Also depending on how you define a diamond or a sapphire they aren't rare at all. You can make them pretty cheap.
#53
sixpackshaker
But globally, there are many areas like Namibia that diamonds are just pebbles on the beach. But the cartel got to them first...
sixpackshaker
I'll have to look into it, but I think there is only one open copper mine in America. There is only one place in the US were Diamonds can be found, but it is just a tourist trap. But Canada has a couple of diamond mines that could meet our demand. But the cartel got to them first.The fact that a single entity can control the majority of the distribution of diamonds actually indicates that they are rare. There are copper mines all over the US. How many diamond mines are there in the US?
I think we need a stick to determine what's rare and what's not so we can all be on the same page.
But globally, there are many areas like Namibia that diamonds are just pebbles on the beach. But the cartel got to them first...
#54
Necronic
Necronic
I think I still need it explained to me why rarity creates real value. Like I said I have some one of a kind litter critters I can sell to you if you want them.I think we need a stick to determine what's rare and what's not so we can all be on the same page.
#55
Chibibar
Chibibar
I think rarity and usability of an item show status. Gold is rare, so is your cat poo, but you can't use your cat poo as jewerly or something shiny. You can with gold hence it has some value.I think I still need it explained to me why rarity creates real value. Like I said I have some one of a kind litter critters I can sell to you if you want them.
#56
@Li3n
@Li3n
Because if you have one hammer and 3 people that have nails that need hammering only one guy can use it at a time... obviously if the item in question is useless in the first place rarity doesn't add real value (300% of 0 is still 0), but humans have a great ability to generalize...I think I still need it explained to me why rarity creates real value. Like I said I have some one of a kind litter critters I can sell to you if you want them.
#57
figmentPez
figmentPez
Rarity limits the use. Many people have said that gold's practical use is limited to recent years in electronics. That's WRONG. Gold was used as bowls, utensils, mirrors and other practical uses before other metals were refined. If gold weren't as rare as it is, those uses probably would have continued well after copper and iron were available. The rarity of gold increased it's cost beyond what was reasonable for use in various applications. Gold was valued more for it's use as jewelry and currency than it was for it's practical use in cooking utensils and elsewhere, but the value it has for those applications remains.For the copper thing I was ignoring rarity and just looking at functional usage. You're right that gold is rare, and it is also shiny. But so what?
#58
sixpackshaker
sixpackshaker
I agree with Pez, that gold very good for utensils and dining ware, because they did not get germ-ridden like wooden utensils of the time did.
#59
AshburnerX
True be told, Diamonds are common as shit. It's just that the market has been manipulated by DeBeers enough that they can dictate terms at this point.
AshburnerX
The simple fact is that DeBeers used it's influence to make diamonds from the war torn areas of Africa illegal under "humanitarian" reasons. While i agree that Blood Diamonds are mined under horrible and illegal conditions, that doesn't change the fact that DeBeers has a near monopoly on natural diamonds now. They've bought near every mine outside of Africa and have been swooping in to pick up new ones as parts of Africa stabilize.But globally, there are many areas like Namibia that diamonds are just pebbles on the beach. But the cartel got to them first...
True be told, Diamonds are common as shit. It's just that the market has been manipulated by DeBeers enough that they can dictate terms at this point.
#60
strawman
strawman
There are likely a few good online sources that explain the whole of economics. Once you understand micro economics and macro economics, the reason scarcity plays a role in demand becomes more clear, and should also explain to you the difference between gold and your feline's feces.I think I still need it explained to me why rarity creates real value. Like I said I have some one of a kind litter critters I can sell to you if you want them.
#61
Necronic
I'll go ahead and do it for you. First off your statement "scarcity plays a role in demand". No it doesn't (if it did my cats shit would be in demand). Supply and demand are independent in the standard model, its a fundamental assumption. I will admit that there are advanced models that talk about interdependence but I doubt that was what you meant. What I think you are trying to say is that a limited supply with a large demand will command a large value. Which is true. But it's not the rarity that creates the value, it's the rarity coupled with the demand.
Which leads us to the question from before. Why is there a demand? Industrial uses? Not enough to really matter. Aesthetic qualities? Ok that's a justification for demand (which is also why my cat shit is not worth anything.) However, aesthetics are subjective (Elvis's cat's shit would be worth something.)
Should we consider something with a subjective demand valuation a more stable representation of value than a piece of paper? They are both fictions that we choose to share. What exactly is the difference? To me the only difference is that the piece of paper is a managed and universally recognized fiction. The central bank goes in and does it's voodoo, and I can pay for my boozing with cash at any bar I want. What about gold? It's not universally recognized (try and pay in gold sometimes). Plus there's always the chance that someone could find large deposits of it (or god forbid find the treasures from the copper scroll), or the chance that a real industrial use is discovered for it, or the chance that people finally stop giving a shit about gold. The subjectivity of the value as well as the lack of management makes it much much more dangerous of a monetary supply.
Necronic
To be honest I'm not convinced you could, since all of your posts in this thread have only contained the implication of an argument, not an actual argument.There are likely a few good online sources that explain the whole of economics. Once you understand micro economics and macro economics, the reason scarcity plays a role in demand becomes more clear, and should also explain to you the difference between gold and your feline's feces.
I'll go ahead and do it for you. First off your statement "scarcity plays a role in demand". No it doesn't (if it did my cats shit would be in demand). Supply and demand are independent in the standard model, its a fundamental assumption. I will admit that there are advanced models that talk about interdependence but I doubt that was what you meant. What I think you are trying to say is that a limited supply with a large demand will command a large value. Which is true. But it's not the rarity that creates the value, it's the rarity coupled with the demand.
Which leads us to the question from before. Why is there a demand? Industrial uses? Not enough to really matter. Aesthetic qualities? Ok that's a justification for demand (which is also why my cat shit is not worth anything.) However, aesthetics are subjective (Elvis's cat's shit would be worth something.)
Should we consider something with a subjective demand valuation a more stable representation of value than a piece of paper? They are both fictions that we choose to share. What exactly is the difference? To me the only difference is that the piece of paper is a managed and universally recognized fiction. The central bank goes in and does it's voodoo, and I can pay for my boozing with cash at any bar I want. What about gold? It's not universally recognized (try and pay in gold sometimes). Plus there's always the chance that someone could find large deposits of it (or god forbid find the treasures from the copper scroll), or the chance that a real industrial use is discovered for it, or the chance that people finally stop giving a shit about gold. The subjectivity of the value as well as the lack of management makes it much much more dangerous of a monetary supply.
#62
strawman
You cannot possibly apply the simplified model to gold and expect to predict anything about it.
You can apply the simplified model to your cat poop, and it should apply pretty well.
Choosing the correct model is almost as important (and difficult) as actually applying the model.
strawman
Sorry about that. I thought that I could give you starting points and have you do the research, since I really don't have the time to sit down and answer this question at length, and you appear to be interested in the answer.To be honest I'm not convinced you could, since all of your posts in this thread have only contained the implication of an argument, not an actual argument.
Scarcity does not define demand, but it does play a role in it. Of course the simplified model doesn't account for this interaction, it's a simplified model!I'll go ahead and do it for you. First off your statement "scarcity plays a role in demand". No it doesn't (if it did my cats shit would be in demand).
You cannot possibly apply the simplified model to gold and expect to predict anything about it.
You can apply the simplified model to your cat poop, and it should apply pretty well.
Choosing the correct model is almost as important (and difficult) as actually applying the model.
#63
@Li3n
@Li3n
Scarcity = Low Supply + High Demand...
#64
Chibibar
Chibibar
Ok. So you want a universal answer of something to apply to all? it will be hard but lets see what we can do.
Item in question: Gold
Does it have utility? Yes - Example (old days) utensils, jewelry (present day) electronics
What makes it useful? It doesn't rust, or tarnish. It is malleable. Doesn't require much process unlike other metal.
Is it rare? Yes
Does it have alternatives? Yes
example: Copper : plentiful, ore form, require processing, malleable, can rust over time. Iron/steel - stronger, require advance process not as malleable without proper tools. Silver - tarnish, similar to gold, not as rare.
Is there a demand? Yes. Since it has a high utility, but rare, thus it has higher value/cost
Item in question: Cat poo
Does it have utility? yes
What make it useful? fertilizer
is it rare? no. any cat can produce it
Does it have alternative: yes
example: any other living organism that can generate poo.
Is there a demand? No. Thus it is not in consider "rare" poo.
Item in question: Gold
Does it have utility? Yes - Example (old days) utensils, jewelry (present day) electronics
What makes it useful? It doesn't rust, or tarnish. It is malleable. Doesn't require much process unlike other metal.
Is it rare? Yes
Does it have alternatives? Yes
example: Copper : plentiful, ore form, require processing, malleable, can rust over time. Iron/steel - stronger, require advance process not as malleable without proper tools. Silver - tarnish, similar to gold, not as rare.
Is there a demand? Yes. Since it has a high utility, but rare, thus it has higher value/cost
Item in question: Cat poo
Does it have utility? yes
What make it useful? fertilizer
is it rare? no. any cat can produce it
Does it have alternative: yes
example: any other living organism that can generate poo.
Is there a demand? No. Thus it is not in consider "rare" poo.
#65
MindDetective
MindDetective
No it doesn't.Scarcity = Low Supply + High Demand...
#66
Necronic
The global supply of gold, that which could be brought to the market, is static (more or less), because it isn't consumed. This is different, however, from the supply brought to market. The difference between the global supply and the market supply is the hoarded stock supply. Since gold isn't consumed or produced (more or less), but only withdrawn from the stock supply, it is the fastest response of the supply-demand-price equation, or at least it is as fast as price.
Demand is the driving force, the independant variable of the equation, and it goes up when people get pannicky about the economy. Supply then reacts to the demand. The greater the demand, the greater the supply (although it is limited to allow the price to rise). When the economy goes the other direction, demand tanks and supply follows.
Here's a pretty telling chart on gold futures (look at the volumes)
http://tfc-charts.w2d.com/chart/DG/
Anyways, the only way this works is because gold has a static market supply, which it does due to rarity. BUT, that STILL doesn't answer the question of WHY. I still don't get it. Maybe it's one of those things where it has to be something, so why not this.
Edit: Haha I have summoned the Glen Beck adds with all this gold talk. You can thank me by giving me gold.
Necronic
Derp, I didn't realize that scarcity had a specific definition in economics. I just assumed it meant it was rare, thank's for the correction. Well let's go back to Steinman's argumentScarcity = Low Supply + High Demand...
Well now if scarcity includes a high demand in it's definition then this a better tautology than the one I was using for gold.the reason scarcity plays a role in demand becomes more clear
Why not? You keep making assertions without arguments. It's aggravating. Although I do think you're right the more I look at it (ye bastard).You cannot possibly apply the simplified model to gold and expect to predict anything about it
The global supply of gold, that which could be brought to the market, is static (more or less), because it isn't consumed. This is different, however, from the supply brought to market. The difference between the global supply and the market supply is the hoarded stock supply. Since gold isn't consumed or produced (more or less), but only withdrawn from the stock supply, it is the fastest response of the supply-demand-price equation, or at least it is as fast as price.
Demand is the driving force, the independant variable of the equation, and it goes up when people get pannicky about the economy. Supply then reacts to the demand. The greater the demand, the greater the supply (although it is limited to allow the price to rise). When the economy goes the other direction, demand tanks and supply follows.
Here's a pretty telling chart on gold futures (look at the volumes)
http://tfc-charts.w2d.com/chart/DG/
Anyways, the only way this works is because gold has a static market supply, which it does due to rarity. BUT, that STILL doesn't answer the question of WHY. I still don't get it. Maybe it's one of those things where it has to be something, so why not this.
Edit: Haha I have summoned the Glen Beck adds with all this gold talk. You can thank me by giving me gold.
#67
Chibibar
Chibibar
If demand for gold is not needed (say we somehow found/create another metal as useful as gold), then I can see that gold eventually lose value overtime (less and less people want it)
It would be like a rare Magic trading card. Only a few want it for whatever reason, but can't demand a high price for it
It would be like a rare Magic trading card. Only a few want it for whatever reason, but can't demand a high price for it
#68
@Li3n
Should have used rarity or something, but for this discussion it works fine... see here: http://en.wikipedia.org/wiki/Free_good (the relatively unlimited supply makes the good not be scarce, no mater the demand)
And it's not really economics as much as common sense, if there's no demand for it there's really no way to determine any economic value...
@Li3n
That's because scarcity actually refers to resources being limited, and i was thinking of something else (2nd language and all): http://en.wikipedia.org/wiki/ScarcityNo it doesn't.
Should have used rarity or something, but for this discussion it works fine... see here: http://en.wikipedia.org/wiki/Free_good (the relatively unlimited supply makes the good not be scarce, no mater the demand)
See above.Derp, I didn't realize that scarcity had a specific definition in economics. I just assumed it meant it was rare, thank's for the correction. Well let's go back to Steinman's argument
And it's not really economics as much as common sense, if there's no demand for it there's really no way to determine any economic value...
High demand is simply being higher then the supply...Well now if scarcity includes a high demand in it's definition then this a better tautology than the one I was using for gold.
#69
strawman
In early human history gold could be found with very little effort. In some areas you didn't even mine it, you simply looked for the shiny rocks. Because it existed in the environment in its ideal human-use form, it was valued. The fact that it could be easily worked, didn't kill people for using it (ie, lead), and was naturally more scarce than, say, dirt, it was valued first as a commodity.
People used it as jewelry due to the combination of ease of work, and due to the fact that using an important item as jewelry suggests to others that you have enough to meet your basic needs, and you can "afford" to waste some as decoration. Until you actually work gold with your own hands and then attempt to work any other metal, you really have no idea just how huge a deal this is. It's not just "easy to work" it's like butter - you can make any shape out of it. In fact this is why we almost always use it in alloys such a 14k - pure gold would bend and scratch a lot more easily than the alloys.
It's a pleasure to form gold. It can be pulled into seemingly impoosibly thin wires without breaking. It can be beaten to one atom's thickness mechanically. It melts and softens as low temperatures compared to other metals. It's not a minor attribute.
In early barter systems gold was bartered just as food and other commodities were. However, due to it's usefulness and relative global scarcity, people figured out that if they needed an item from a distant place, taking a cow, or three bags of grain with them was more trouble than taking a small sack of gold.
It became a de facto currency due to ease of transport, and universal usefulness and appeal, which was preceded by its scarcity. If everyone had as much gold as they had water, and it rained gold seasonally, then you wouldn't trade your grain for it - you have as much as you need. However, one could, at that time, always find a practical use for the metal.
Scarcity plays a very significant role in how much something is valued for bartering.
So:
Gold is valuable today because we agree that it's valuable (ie, social contract).
We agreed on its value due to
- Relative global scarcity (there were societies that treated it as trash merely because they had so much of it, despite its usefulness)
- High natural usefulness (doesn't tarnish, easy to work, easy to find early on, low melting point, easy to purify, not poisonous, brilliantly shines in the human visual spectrum, etc, etc, etc)
- Ease of transport
The above three points made it an ideal tool for bartering, and so we formed this social contract to agree, as humanity, to value it.
Gold is an oddity in this regard - it now has a lot more social value than practical value. Thus it is much more likely to experience fluctuation due to human perception more than to supply or demand, which is why normal economic models don't apply.
Added at: 12:24
Keep in mind, though, that even though it has a high social value, the fact that we still use it industrially at it's insane cost indicates that there really is no other replacement. Its extraordinary properties are well worth the cost for many things, which only reinforces the belief that gold is valuable.
If it were not for its continued usefulness in industry, it would very likely bubble and deflate.
strawman
The major reason it has value today beyond it's usefulness is because it historically has had value due to its usefulness. Now it's a self-sufficient, or tautalogical, system - gold is valuable simply because gold is valuable.Anyways, the only way this works is because gold has a static market supply, which it does due to rarity. BUT, that STILL doesn't answer the question of WHY. I still don't get it. Maybe it's one of those things where it has to be something, so why not this.
In early human history gold could be found with very little effort. In some areas you didn't even mine it, you simply looked for the shiny rocks. Because it existed in the environment in its ideal human-use form, it was valued. The fact that it could be easily worked, didn't kill people for using it (ie, lead), and was naturally more scarce than, say, dirt, it was valued first as a commodity.
People used it as jewelry due to the combination of ease of work, and due to the fact that using an important item as jewelry suggests to others that you have enough to meet your basic needs, and you can "afford" to waste some as decoration. Until you actually work gold with your own hands and then attempt to work any other metal, you really have no idea just how huge a deal this is. It's not just "easy to work" it's like butter - you can make any shape out of it. In fact this is why we almost always use it in alloys such a 14k - pure gold would bend and scratch a lot more easily than the alloys.
It's a pleasure to form gold. It can be pulled into seemingly impoosibly thin wires without breaking. It can be beaten to one atom's thickness mechanically. It melts and softens as low temperatures compared to other metals. It's not a minor attribute.
In early barter systems gold was bartered just as food and other commodities were. However, due to it's usefulness and relative global scarcity, people figured out that if they needed an item from a distant place, taking a cow, or three bags of grain with them was more trouble than taking a small sack of gold.
It became a de facto currency due to ease of transport, and universal usefulness and appeal, which was preceded by its scarcity. If everyone had as much gold as they had water, and it rained gold seasonally, then you wouldn't trade your grain for it - you have as much as you need. However, one could, at that time, always find a practical use for the metal.
Scarcity plays a very significant role in how much something is valued for bartering.
So:
Gold is valuable today because we agree that it's valuable (ie, social contract).
We agreed on its value due to
- Relative global scarcity (there were societies that treated it as trash merely because they had so much of it, despite its usefulness)
- High natural usefulness (doesn't tarnish, easy to work, easy to find early on, low melting point, easy to purify, not poisonous, brilliantly shines in the human visual spectrum, etc, etc, etc)
- Ease of transport
The above three points made it an ideal tool for bartering, and so we formed this social contract to agree, as humanity, to value it.
Gold is an oddity in this regard - it now has a lot more social value than practical value. Thus it is much more likely to experience fluctuation due to human perception more than to supply or demand, which is why normal economic models don't apply.
Added at: 12:24
Keep in mind, though, that even though it has a high social value, the fact that we still use it industrially at it's insane cost indicates that there really is no other replacement. Its extraordinary properties are well worth the cost for many things, which only reinforces the belief that gold is valuable.
If it were not for its continued usefulness in industry, it would very likely bubble and deflate.
#70
@Li3n
I really wouldn't call that odd... we do it pretty often...
Just look at diamonds... their main value comes from being shiny.
@Li3n
Gold is an oddity in this regard - it now has a lot more social value than practical value.
I really wouldn't call that odd... we do it pretty often...
Just look at diamonds... their main value comes from being shiny.
#71
strawman
strawman
Diamonds are even worse. They have a high cost, but a very, very low value due to the monopoly destroying the secondary market. You really can't buy a diamond, and expect to sell it for the same cost, nevermind at a profit. It's not a good investment choice for this and many other reasons.I really wouldn't call that odd... we do it pretty often...
Just look at diamonds... their main value comes from being shiny.
#73
Necronic
Indium is the main ingredient of Indium Tin Oxide, which is used for LCD, solar panels, and touch screen manufacturing. Currently ~900 tonnes of Indium are produced annually, and 50% of that goes to ITO production. This is something with a limited supply (mostly coming from China) that has a massively increased industrial application. The price of Indium has risen from 90$ to 900$/kg in the last 10 years (more or less.) And you want to know something REALLY scary? We're projected to run out of it in the next 10 years.
THAT's a mineral with an industrial demand that drives up a price. As an aside though it is crazy toxic so it really couldn't be used for jewelry.
Also, a lot of the industrial usage of gold is simply a marketing gimmick. There are tons of cables and whatnot you can buy out there that have "gold plated" connectors. They are actually gold-plated, but they are done so purely for marketing. They make no significant difference in quality. In most electronic applications you can get away with tin or copper or whatever.
Necronic
Ok, so we are in agreement (but your reasoning is way better):The major reason it has value today beyond it's usefulness is because it historically has had value due to its usefulness. Now it's a self-sufficient, or tautalogical, system - gold is valuable simply because gold is valuable.
I like that description.Gold is an oddity in this regard - it now has a lot more social value than practical value. Thus it is much more likely to experience fluctuation due to human perception more than to supply or demand, which is why normal economic models don't apply.
Yeah but we really don't use that much industrially. For scale I found a study that said roughly 320 tons of gold is consumed yearly for industrial uses, compared to the 3800 tons consumed through other sources (against ~2600 tons produced annually). Considering that there is a global supply of close to 130k tonnes we could consume gold for industry at this rate for centuries. Compare that to other precious resources, like oil or (my favorite) Indium.4Keep in mind, though, that even though it has a high social value, the fact that we still use it industrially at it's insane cost indicates that there really is no other replacement. Its extraordinary properties are well worth the cost for many things, which only reinforces the belief that gold is valuable.
If it were not for its continued usefulness in industry, it would very likely bubble and deflate.
Indium is the main ingredient of Indium Tin Oxide, which is used for LCD, solar panels, and touch screen manufacturing. Currently ~900 tonnes of Indium are produced annually, and 50% of that goes to ITO production. This is something with a limited supply (mostly coming from China) that has a massively increased industrial application. The price of Indium has risen from 90$ to 900$/kg in the last 10 years (more or less.) And you want to know something REALLY scary? We're projected to run out of it in the next 10 years.
THAT's a mineral with an industrial demand that drives up a price. As an aside though it is crazy toxic so it really couldn't be used for jewelry.
Also, a lot of the industrial usage of gold is simply a marketing gimmick. There are tons of cables and whatnot you can buy out there that have "gold plated" connectors. They are actually gold-plated, but they are done so purely for marketing. They make no significant difference in quality. In most electronic applications you can get away with tin or copper or whatever.
#74
strawman
strawman
No wonder you and I disagreed earlier on regarding the importance of gold in the industry - you have a different measuring stick for what is "much". I'd say that 12% is significant. I'd call under half a percent insignificant.Yeah but we really don't use that much industrially....roughly 320 tons of gold is consumed yearly for industrial uses, ... against ~2600 tons produced annually
#75
Necronic
Necronic
Well I would consider 12% significant (although not incredibly significant), but you're looking at the annual production. I'm looking at the current worldwide supply. In regards to the current supply the annual tonnage that goes to industry is ~0.3%. That is what I would call insignificant.
Edit: That's a really unique thing about gold though, the fact that there is this MASSIVE quantity of it already out there, just hanging about ready to use. People don't stockpile other minerals like that.
Edit: That's a really unique thing about gold though, the fact that there is this MASSIVE quantity of it already out there, just hanging about ready to use. People don't stockpile other minerals like that.
#76
sixpackshaker
sixpackshaker
The US and many other countries keeps large stockpiles of strategic minerals and resources.
#77
@Li3n
@Li3n
Yeah, but i bet none of them represent the majority of the resource...The US and many other countries keeps large stockpiles of strategic minerals and resources.
#78
@Li3n
Of course gold isn't the only rare resource, so me saying "none" was very likely an exaggeration...
@Li3n
That doesn't actually say anything about how much helium is stockpiled vs how much is in use though...The US has the worlds single largest stockpile of helium in the world
Of course gold isn't the only rare resource, so me saying "none" was very likely an exaggeration...
#79
AshburnerX
AshburnerX
This is mainly because the US Rare Earth Metal mine cost a shit ton to operate, due to insurance and other factors. For a long time it was actually cheaper to buy the metals from China than to dig them up here in the US. However, because of how much China is overcharging the world, it's actually almost at the point where it would be cheaper to mine it here. Plus there is the threat of China stopping it's exports again for political pressure.That said, we get most of our rare earth minerals from China...and they've wisely stockpiled tens of thousands of tons of the stuff we need. heh
#80
@Li3n
@Li3n
And that still tell one nothing about how much was stored vs how much was used... (well obviously use had to have gone up, seeing how the stockpile that should have lasted 100 years is now running out).
#81
@Li3n
@Li3n
Aka 80% of the quantity stockpiled... see my problem?accounting for something like 80% of the world reserves.
#82
figmentPez
figmentPez
From my understanding, helium is even more limited than gold. Gold can be recovered and recycled without much pre-planning. If worse comes to worse, for gold, we start mining old landfills for computer parts. Helium is another matter. If my understanding is correct, helium can escape into space once it's used. We can't just mine the atmosphere for it once it's used. More helium is produced gradually by radioactive element decay (somehow, I'm a little fuzzy on that) but it's a slow process that wouldn't keep up with the world's demand. I suppose helium could also be produced if we started using fusion power, but I'm guessing that wouldn't result in much volume, either.Like gold, helium is a bit of a limited resource--the majority of it comes from natural gas wells. Getting it any other way invovles far more expense and difficulty than would be practical under today's use.
#83
@Li3n
@Li3n
"Next to hydrogen, it is the second most abundant element in the universe and accounts for 24% of the elemental mass of our galaxy."
Of course that says nothing on how much you can find on Earth...
Of course that says nothing on how much you can find on Earth...
#84
Necronic
Necronic
Its actually pretty scary how fast we are running out of Helium.
#85
@Li3n
@Li3n
Well that voice is funny as hell...
#86
Necronic
Necronic
Dude so what? We just have to start mining it from the sun nbd nbd.
#87
@Li3n
@Li3n
YEAH BABY, THAT"S THE STUFF...Oh god...have it your way.Warning, JCM-worthy wall of quotes forthcoming.
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/11/AR2010101104496.html
http://www.independent.co.uk/news/science/why-the-world-is-running-out-of-helium-2059357.html
http://www.sciencedaily.com/releases/2008/01/080102093943.htm
http://www.istockanalyst.com/business/news/5310712/last-federal-helium-reserve-is-running-out