You are reading a single comment by @Leshaches and its replies.
Click here to read the full conversation.
-
Commodity money has intrinsic value
Often claimed, but not convincing.
Most of gold's "intrinsic" value comes from the fact that there's always someone to sell to who also thinks it has value, just the same as fiat currency.
Its actual intrinsic value as a non-oxidizing conductor is tiny (because you only need very small amounts). Jewellery is fashion, there's nothing intrinsic about that demand. It might be reliable demand, but that's not the same as being intrinsic.
useless
@Leshaches
Can I just suggest a crucial clarification on the meaning of ‘intrinsic’ regarding money?
There’s two basic types of money: commodity money and fiat. Commodity money has intrinsic value; fiat does not.
1) Commodity money is made of any material that is valued in a society and has a use other than being money. Europeans used gold and silver, Aztecs used cacao beans. We don’t really use this money today for a bunch of reasons but particularly because the price of a material can change rapidly depending on supply-demand. An example is when the Spanish discovered loads of silver in the Americas, and had to keep it secret and locked away because they used silver money, and if the price of silver tanked then everything would quickly become massively expensive to buy, and their economy would tank.
2) Fiat money, Latin for let it be (worth whatever it says), has little to no intrinsic value. The main reason for using fiat is that it is a cheap, easily transportable stand-in for something valuable held securely by the issuer of the money. Previously this was gold, and countries had massive fortresses storing tons of gold. Nowadays fiat is tied to the value of the economy, and the issuing country’s “word” helps makes it a strong currency.