Gold is a useless yellow metal. To me, at least.
I neither want nor crave gold. I don't like jewelry, I don't have a penchant for things that shine and shimmer, I don't need a very heavy paperweight. I am hardly unique in this indifference to gold - many, many people have no love or desire for gold. Of course, many, many people just love gold. They think it's the best thing..like..y'know...ever!
Then again, many, many people love all kinds of things - old stamps, football stickers...practically anything and everything has it's enthusiasts.
Why does gold have anything to do with banking though, and why do some people (goldbugs as they are known) think that "gold is money?"
The general idea is that money is a kindof abstract idea has certain properties and that gold fulfills the abstraction most closely out of all substances in reality. Platonistic foolishness, like all platonicity is.
Money is said to want to be -
Stable. That is there wants to only be so much of it, so that it's not subject to sudden deflations or inflations and it therefore preserves it's value.
Rare. That is, it's supposed to be in limited supply. The rarer something is, the more valuable if people desire it. Everyone likes to breathe but air isn't in short supply, so it's no good to use as money.
Divisible. A good money will be able to split into parts without losing any value. 1 gold bar cut in half is exactly the same value as the gold bar was. 1 sheep cut in half really isn't.
Concentrated. A lot of value in a small space. A money that was twelve feet square wouldn't be much good to go shopping with, even if it was really light. You'd need one hell of a wallet, for a start.
And the list goes on for some time and sounds very plausible.
However, I am telling you right now - it's all nonsense. Money is just any medium of exchange. If you trade goats for sheep and have cows as a middle step, then cows are money. If in prison you trade cigarettes for hard core porn with your cell mate and he then trades those cigarettes for soap with someone else - cigarettes are money. If you trade football cards with your friends in the schoolyard, then the cards are money.
What's the problem with all free market forms of money?
Refusal. No doubt you knew a kid who assembled all the football cards back in your schooldays. He might have appeared vaguely cooler than the other kids, or got a burst of happiness from his collection. After a time though, people moved on and his card collection became almost worthless. Cigarettes are also waning in popularity - everything has it's day, even cancer sticks.
What happens to the holders of gold when people move on and want much cooler things instead - TV's, cars, mobile phones or whatever? Gold's main property to those who genuinely want it for what it is, is jewelry. Jewelry is just one form of social display these days. One social marker amongst hundreds. The goldbugs are the equivalent of the kid with the cards in the playground wanting, wishing that the value of the cards remained high as it used to be. This does give gold a sort of faux value, but it's not actual demand as far as I can tell, it's a memory.
Can you say bubble?
Not that you can't trade a bubble or that people's individual valuations aren't valid. All I am pointing out is that gold doesn't have the objective value that some would like it to have. All values are subjective, in fact.
Why was gold used as money in the past?
Gold was money because in the three ring circus of taxman, banker and workmaster, gold was used to regulate the banker. The workmaster and the taxman both know the main problem with the banker is that he can just pretend to have more and more money to more and more people unless there is something stopping him. His greed will inevitably get the better of him, and knowing that he is a fraudster as both the workmaster and the taxman do, only a fool would trust him.
Of course it was a four ring circus in those days, because they had the religious guy in on the action. He's not as active these days, more of a part timer. His tradition of not marrying people without a gold ring has hung around though. Now, people don't want to get married without a gold ring, although they don't get married as much and also maybe more often. Or something. Whatever, the gold ring tradition is still here but the religious reasons aren't as significant is what I am saying.
Gold has all the properties needed to keep a lid on the banker. Therefore the taxman wanted it and the workmaster issued it. This keeps a lid on the banker and keeps the slave economy stable.
This is what makes gold so valuable in the political economy. It stabilizes the predation. Remove the predation and gold is revealed to just be a shiny kind of fiat. In a free market, gold isn't anything special - in fact it's rarity makes it almost useless for day to day trading.
Having said that, I do have some and I do have some other monetary metals. Why?
Because I don't see much of a free market in the near to medium future. I can easily see a post paper money collapse gold standard being introduced. (Bloody stupid because if gold standards worked we wouldn't be here in the first place, but that's people for you.)
There we have it then - gold ain't all that.