The other week I had the flu - well, a cold - but it was enough for me to sit around for a few days doing nothing. As it happens it was something of a blessing, as in my lazy, snotty boredom I ended up watching videos about the history of money. This clarified in my mind why gold isn't a good currency, and why gold standards aren't a good idea.
A currency is something that helps lubricate the economy. An oil that helps people trade their time and goods.
So a good currency isn't just something that gives people confidence that it's a good store of value. It also has to be readily available enough that everyone has access to it. The peasant paying his landlord, the old woman buying her loaf of bread, the businessman making his trades.
It's something that balances these two things. Rare enough to be worth something, but common enough to be readily utilised.
This is why gold isn't good as a currency. It's too rare. Too precious.
It's a great store of value, but not a great currency.
It's similar with Bitcoin. That too, like gold, is more a store of value than a currency. It is scarce, therefore people value it. Therefore people are reluctant to let go of it.
An Example
For instance, let's say you're someone who owns gold and/or Bitcoin, and you want to buy something that costs £10. You'll be more than happy enough to spend £10 in pounds sterling to buy it, however if someone suggests you use your gold or Bitcoin, you'll balk at the idea. As you believe over time your gold will increase in value relative to other things, and you believe your Bitcoin is "Going to the Moon."
So as gold is a very, very good store of value, you're very, very reluctant to let go of it. You'd much rather use something less precious for daily transactions.
Gold, Silver and Copper
Historically it was generally silver that was used as a standard, not gold. This makes sense as silver is less precious, and it's a natural intermediary between gold and copper. People would generally use copper and silver coins for normal trade.
Supposedly, gold only really began being used as a de facto standard around 300 years ago by Britain. It probably worked quite well for Britain because Britain was the ascendant power, and the rest of the world still used silver - so it was a luxury position. However, when everyone else jumped on the gold standard in the 19th century that appears to be when things started going a bit haywire, and when gold decoupled from silver.
This makes sense, as pegging an entire economy to one commodity - especially the most precious and rare commodity - is asking for trouble. People are always going to want to hold on to gold, and especially so when things start looking dicey. How can you lubricate everyday trade with something no-one wants to let go of?
Again, even in the days of silver standards, things were much more organic, and people used multiple other things as currency too. They had a degree of freedom to trade and barter without every transaction being watched and taxed by government - and the tax needing to be paid in the specific state issued currency.
The modern world with its monolithic governments, taxes and standards is really the straightjacket that's locked everything in to one universal money measure - whatever form it takes.
Fiat-philia
Personally, I actually like fiat currency. This won't be popular, but as an actual currency - an oil for trade - it's much better than something pegged to a specific commodity. Of course, they're open to abuse by governments and banks that are in a position to inflate them, but this also makes them flexible enough to function. If you want a store of value get some gold, but if you want a gold standard then you want something that simply won't work. Appreciate gold for what it is, not what you want it to be.
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