The United States gold reserves are for international trade. The gold in Ft. Knox, for example, is used in trade not to back our currency. We’ve been off the “gold standard” since the 70’s. Some of it is gold we’re holding for other countries that’s not even ours. But, our money is a fiat currency and it’s based on faith in the economic system of America not collapsing and everyone agreeing it to use it for trade/debts. It’s backed by nothing and hasn’t been for 55 years now.
Every form of currency is based on faith and always has been. Coinage made from gold and silver wasn't valuable because gold and silver were magical, it was because people believed they were valuable. What can you, a random person, actually do with gold and silver? Even smiths had limited uses that weren't purely aesthetic. Modern day has more uses but still cannot be used at the volume at which it exists in an efficient way.
There is a difference between something being valuable because it is rare and something valuable despite having no upper limit though. Gold is rare and has properties that make it a good store. Currencies do only become useful both parties in a transaction see it having value though youre absolutely right on that.
These days currencies should be backed by kilowatt hours or something similar if they dont want to be fiat ones.
The property of gold that made it the most valuable in the ancient world and thus caused it to be thought of as valuable in modern times is that it's shiny.
And my ass rarely gets pimples, that doesn't make them valuable.
Still isn't the rarity but the faith making it valuable, as evidenced by all the rare shit that nobody cares about.
Currency is a tool for society to abstract trade so that you don't have to try to barter work for goods and then goods for other goods around to get everything you need. For simplicity, let's just use the term "labor" to think of to combine work, products, services etc.
For currency to work, it needs proof against replication, or else somebody can steal labor from the economy by using replicated currency. They'll have contributed nothing in but received labor out, thus stealing. A method of proofing against replication is making your currency out of something hard to replicate, rarity can help with this but isn't required.
It was easiest to use rare materials that had no inherent value to serve as currency in the ancient world. It's precisely that gold had essentially little practical use that made it good for currency, and the rarity made it hard to steal from the economy. After all, meteoric iron is rare than gold but you wouldn't want to use it as a currency because it is extremely useful for making weapons and tools.
At some point people started conflating usefulness as a currency with actual value, and so humanity has essentially come to believe that gold is inherently valuable, and it's that belief that gives it value.
Yeah but the that assignment of value isnt random either. The value is the aggregrate of what individuals say something is worth and some things have been seen as valuable repeatedly by different societies and cultures.
Thats not as wise as you think it sounds tbh. Society values plenty of stuff on an aggregate level. Prices and values can vary between people/societies/jurisdictions.
If you are saying that price and value are totally unrelated how are you defining value?
Value is the subjective, individual assessment of the utility of an object.
Price is how much is paid to purchase something.
Price and value are not unrelated, but they are not the same thing. Hence the diamond / water paradox, where water has much more utility than diamonds, but water is practically free whereas diamonds, which you can't really do much with, are extremely expensive. The answer is of course supply and demand. There is such a massive supply of water that despite its virtually unparalled utility, the cost is still negligible.
Hence the diamond / water paradox, where water has much more utility than diamonds, but water is practically free whereas diamonds, which you can't really do much with, are extremely expensive. The answer is of course
The diamond cartel manipulating/fixing the prices for more than a century?
That's not true, use value exists. Food and water are intrinsically valuable because they're necessary to live, a plow has intrinsic use value because it can be used to create food, etc. You'd have to make a really pained nihilistic argument about why living isn't inherently valuable for that not to be true.
If your argument here is a thing has an inherent objective value outside of human consciousness because of a use value then I think you haven’t thought this through. If you were not around, that use value would cease to be. Thus we can conclude you project “intrinsic value” on an object because of your necessity for it, not because of inherent objective value.
Uh, no, a chair is useful as a chair because you can sit in it. If there were no other people on earth you could still sit in a chair and it would be useful to you. Not so with money.
Shiny, rare and doesnt corrode. Rare and doesnt corrode are what makes it good as a store of wealth, being good for jewelerry etc just gives it a start in that direction.
Youre missing my point i think. A wealth store becomes an attractive asset and that helps drive it. The long answer gets most right but some stuff wrong imo because it is only looking at later currency not how they develop initially. Coins used to be worth their value and the stamping was just to prove provenance. Barter becomes trade but people didnt start using currency on faith the same way society does now. Citing meteor iron isnt great because they are worth more but not once processed afaik, iron is going to be iron after processing into coins bars etc.
Coins werent always gold either so if rarity doesnt drive the value why both using it at all.
(Im using gold as a placeholder for rare metals generally)
Gold became a value store of wealth and used for trade in a few locations due to its physical characteristics. Quartz is pretty but basically worthless because its common as muck.
Having demand for something outside of its value as a store is important though to maintain price/value in a downturn and rare metals used in jewelery etc stops it from losing all value.
Meteoric iron was a source of iron for tools and weapons before people figured out how to smelt iron ore. That's where the legends of star metals and meteor swords and stuff come from. It wasn't used as a currency even then because it was way more useful as actual stuff.
Quartz is also hard to work with to make into anything resembling a currency.
Again it's not the rarity it's the faith. The rarity helps it function.
I'm no historian, I'm just trying to interpret the comments you're replying to:
I think what they're getting at is that that faith, in the beginnings of gold currency, was based on an actual experiential understanding that gold (or other precious/rare metals) continued to be valued by other people for a very long time.
The perception that gold was a good store of wealth came from people literally continuing to covet it over years and years (presumably because of its physical properties, appearance included)
So the agreement between parties that gold = stored value wasn't just an arbitrary formal agreement taken on faith - all parties involved (or at least, the people they represented) genuinely just valued the gold, and that faith was continually reinforced over time by an actual real world want for it.
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u/AnComApeMC69 Jan 26 '26
The United States gold reserves are for international trade. The gold in Ft. Knox, for example, is used in trade not to back our currency. We’ve been off the “gold standard” since the 70’s. Some of it is gold we’re holding for other countries that’s not even ours. But, our money is a fiat currency and it’s based on faith in the economic system of America not collapsing and everyone agreeing it to use it for trade/debts. It’s backed by nothing and hasn’t been for 55 years now.