What is Money?

[RickFlorance]

I enjoyed Mr. turk's article "8 Things Everyone Should Know About Gold" however, as I have recently learned, Gold is not money any more than wood is a baseball bat. Money is manufactured in a place called a Mint and is made out of Gold or Silver or an alloy containing Gold or Silver like U.S. Gold Eagles. Usually in the shape of a coin. It has a specific amount of precious metal in it based upon a standard so that the users of this money will be able to know for certain how much gold or silver is in the money. Gold nuggets picked up off the ground or mined are not money because the purity is unknown. Even Goldgrams are not money, they are a money substitute and are used AS money but they are not money. I have been studying money off and on for over 15 years and this perspective did not dawn on me until I began reading a book called "MONEY, ye shall have honest weights and measures". You can find it at http://www.principiapub.com/ this book ranks right up there with "The Creature from Jekyll Island" but is more practical. Read it, you'll have a whole new perspective.

[Nickel]

Gold coins are usually worth less as a promissory token than the gold content as metal. The U.S. 1 oz Gold Eagle is worth $50 face value, but sells for around $700. The metal value trumps the mint's promise.

People are often confused by what gold is. "Money" is simply an asset, anything that generates rather than consumes wealth. In this sense, gold is not formally money, since it is probably not the ultimate and final settlement of a debt. Ultimately some wealth generating asset must change hands as payment.

So yes, gold is a token or a currency, but it is a special case. The special nature of gold arises from its universal appeal, it is not reliant or tied to any one country's promise, but to all of them, combined. It is simultaneously backed by virtually every nation on earth. As such, for any country to coin gold as their own currency, always first requires an expenditure of their currency equal to the value of the gold, or more. This keeps the value of the underlying metal intact. In other words, governments cannot "print" gold for free, like they can paper currency. It costs them to coin it.

So gold, the token, becomes indistinguishable from the real money assets it represents, since it is universal and thus sound. In a sense, gold is better than a real money asset, like an oil well or a jet airliner, since it is valuable to all people of the world, under all financial conditions, and is easy transfered.