Gold!

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Seeing Rand Paul pushing for a return to the gold standard got me thinking about gold. I’m not expert on gold, but I know that we went off the gold standard under Nixon and that hard currency like gold is often portrayed as very useful in various post-apocalyptic scenarios (although zombies only accept brains as currency).

While Paul is often portrayed as being a bit crazy (moonbattastic even), the idea of restoring the gold standard does seem to have some appeal-at least to certain folks. Of course, it also seems like it would simply bring about a return to the problems that leaving the standard was intended to address.

Rand and other gold proponents tend to focus on gold being a tangible asset and that it has consistently held or increased its value. Rand often contrasts gold with paper money, with paper money coming up the loser in his eyes.

In some ways, Rand does have some good points. While gold is valuable because we value it, there are some important differences between the way the value of gold works and the way the value of paper money works. In the case of gold, most people seem to value the gold itself. In contrast, paper money is valued to the degree that people have faith in what lies behind the printing on the paper. Crudely put, gold seems to back itself, while paper requires backing. So, for example, if I have some gold coins, I could take them almost anywhere and expect that people would value (and probably try to steal) them, regardless of what king, president or country’s mark is upon the metal. In contrast, how people regard my paper money would depend a great deal on the marks upon the money and what was supposed to be backing it up.

Though gold is a special sort of currency, its value is still extrinsic-that is, it is valuable only to the degree that people value it. True, from a practical standpoint, most people do value it. But this is quite different from gold actually being somehow intrinsically valuable. This would mean that gold would somehow have value even if no one valued it or had any use for it. It is, I suspect, important to keep this in mind.