Friday, March 27, 2009

Gold Insanity

I know a guy who's something of a conspiracy theory aficionado. One of his favorites is how the Illuminati and the Freemasons and the Jews conspired to take us off the gold standard to enslave us and how it's the true meaning behind "The Wizard of Oz".

The Gold Standard
There's actually a really good reason why we got off the gold standard: there simply wasn't enough of it to meet our needs. The industrial revolution increased the world's economic productivity exponentially as it spread from country to country. All this growth came with massive increases in capital needs, but there was a problem because currencies were locked into gold and there was a finite amount of gold in the world and only so much new gold we could get out of the ground.

When the need for currency outstrips the available supply, its value goes through the roof, not only limiting economic growth but also causing pretty serious deflation. Countries tried to combat the problem by adding metals to their currency system, first silver, then copper, but even that could only slow the pending disaster.

Eventually, people began to realize there were really few practical uses for gold or silver. They are only valuable because we think they are, so money really is just a concept and not based in anything tangible. One by one, countries began switching from gold based currencies to currency based on debt which allowed us to meet the needs of a still growing economy without deflation.

The Value Of Gold
Nobody really knows why people think gold is so valuable. It has a few practical applications in electronics, but since we can only find a fraction of the amount we'd need to meet those applications, it's essentially worthless. For thousands of years, our only real application for gold has been as useless ornamentation.

My guess is that people find gold valuable because everybody has a neighbor with more of it than they do. Envy is a powerful motivating factor. Other than that, it's gaudy, useless and structurally weak. Gold has few beneficial aspects. It's easily mailable and it has a relatively low melting point so it's a useful medium to make jewelry, and it doesn't oxidize so it virtually never corrodes. Steel is infinitely more valuable. We could easily run the modern world without gold, but without steel we'd be in real trouble.

More Craziness
Since our desire for gold doesn't make much sense, there are a lot of crazy theories about it out there. One of my favorites has extra-terrestrials needing gold to run the atmospheric machines that keep their dying planet going, so they came to earth millions of years ago and genetically engineered humans with a desire for gold so we would mine it for them and every couple thousand years, they'd return to earth and harvest the gold we unwittingly collected for them.

If you ever saw the internet movie "Zeitgeist" and thought it was kind of cool, keep in mind this theory about gold hungry aliens is the real philosophy behind the film. Even scientlogists think these people are crazy.

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