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Something you gold fetishists might like to keep in mind is that for the first century of the US (and arguably quite a bit longer), the country was benefitting from massive amounts of virtually free capital, if you discount the fairly minor cost of driving Native American tribes off the land. When the US government needed to raise money in earlier times, it just sold off vast tracts of land for cheap. Obviously, this strategy couldn't go on forever, and by the time the west coast was properly settled the country needed to switch to a more conventional form of public financing, ie a central bank.

Seriously, if you have an entire continent at your disposal, running an economy is easy. Likewise, after WW2 most of the the rest of the developed world was in a shambles, and the US was the only industrial economy that hadn't been bombed heavily. Unsurprisingly, a long period of great economic growth followed, in time with the Bretton Woods system but not necessarily because of it.

I'm very interested in monetary theory, but a lot of gold fans seem to attribute stability or growth to the use of gold rather than extremely favorable economic conditions. If you back and read the the Wealth of Nations, there's a very worthwhile (if long-winded) explanation by Smith of how hard currency can act as a limit upon economic growth, as well as being corruptible in its own right.




Seriously, if you have an entire continent at your disposal, running an economy is easy.

Which is why Australia has such a remarkably stable economy, right? Oh, wait... http://www.abc.net.au/news/linkableblob/3873450/thumbnail/je...

See http://www.abc.net.au/unleashed/3872646.html for context, and in particular the bit about "mad boom and bust cycles".


Australia has a tiny population relative to its landmass. While it's rich in extractive resources (mining, minerals) from which much of its present wealth derives, it lacks both water and fertile land for agricultural production.

This itself is interesting: because Australia is an island continent, with few or no internal volcanoes or rift zones, the land is, literally, ancient, with many nutrients vital for ag production missing (one estimate I saw was that seeding land with an infinitesimal amount of iron would greatly increase production). Much productivity is due to windblown dust from the Indian subcontinent and south-east Asia. Even where irrigation is possible, evaporation causes accumulation of salts which degrade ag values. The first settlements in Sydney very nearly starved due to difficulties in producing sufficient food.


The vast majority of the Australasian landmass is desert.


I do not even how you can call paper dollar a currency. You cannot use something as a currency if: - it can be manufactured easily - it can change value from one day to another - it is not dense in physical space (i.e. you do not need to carry buckets of it to buy something).

The paper money clearly does not respect ANY of these principles nowadays. The FED can print (and does) as much as they want to buy back toxic assets (remember the Krugman clown advising after the Net bubble in 2001 that we should create a housing bubble to stimulate the economy ? That really worked well for everyone, did it not?). The US Dollar is constantly losing value versus Gold since its parity was dropped for good in the 70s, and now you have such a galoping inflation than looking at movies 30 years ago make you feel old: then the bad guys were asking for "a million dollars" as something highly valuable/desirable, while nowadays if you do not cross the billion mark it is not considered as much anymore (Austin Powers made this very good point in a clever way).

Why do you think China is buying all the Gold it can currently to replace its stinky dollars?


> I do not even how you can call paper dollar a currency. You cannot use something as a currency if [...]

Currency is based entirely on concensus. Anything (ivory, sheep, even bits of paper) could be currency; the only requirement is that there are people willing to use it as a basis for trade. In other words, it doesn't really matter if you don't believe in paper currency as long as everyone else does.


Well, currency is based on consensus, certainly, but that is not enough to create value. A paper has not value intrinsically speaking. Gold and other metals have always had value for various reasons (either because of their physical/chemical properties or because of their rarity). So, the day the Dollar loses its consensus, you are left with worthless paper and you might as well use them in the toilet. The day Gold, Silver and other lose all actual value is not in sight. Net, you are safer saving some of your assets in those.


Another instance of Poe's Law...




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