From: bolden@beta.math.unc.edu (Jeffrey Bolden)
Subject: Re: Views? :
Organization: University of North Carolina
Date: Mon, 14 Dec 1992 01:13:15 GMT

In article <!SS=bp+@engin.umich.edu> positron@engin.umich.edu (Jonathan Scott Haas) writes:
>In article <1992Dec13.134148.26485@samba.oit.unc.edu> bolden@beta.math.unc.edu (Jeffrey Bolden) writes:
>>In article <a0R=Lv_@engin.umich.edu> positron@engin.umich.edu (Jonathan Scott Haas) writes:
>>>
>>>Look at the free market, pal, look at the free market. It doesn't really
>>>matter what gold is *used* for, what matters is that there is a demand
>>>for it, and that there is a supply of it. The most useless thing in the
>>>world has value if people want it and people can supply it. Gold is a
>>>good store of value because it's durable, doesn't rot, decay, or dissolve,
>>>and is relatively rare. If you can come up with something else on which
>>>to base currency, sounds good to me. As long as it's *something* concrete.
>>>I want a guarantee from the government along the lines of, "We're giving
>>>you these green pieces of paper to use as currency, and we assure you that
>>>you can always exchange five hundred of them for an ounce of gold" or
>>>something like that. Without any backing, the government can just print
>>>more currency, causing inflation.
>>>
>>
>>	I think your discription of gold is slightly off.  The demand for
>>gold is relativly small.  The supply is huge, the major holders of gold
>>and the major suppliers, are the people who maintain the high price by
>>chocking off supply.  The natural supply of is very big.  As for golds
>>physical properties that's true. What I would tend to think might be a
>>good medium for exchange that does have an intrinsic value is oil.
>>	Sort of like in early America where we used tabacco.
>>
>
>Horsepucky. You think my discription [sic] of gold is slightly off. You
>think wrong. If you think that the price of gold is limited by people
>choking off supply, I invite you to visit COMEX and watch the gold
>trading pits. MILLIONS of ounces of gold trade hands EVERY DAY. There
>is no shortage of a free market in gold.
>
>Oil as a store of value?? Have you SEEN the price of oil flunctuate over
>the past decade? What you want for a medium of exchange is something
>*stable*... otherwise, the price of EVERYTHING flunctuates with the price
>of your store of value. Oil varies widely in price, has an extremely
>limited supply, gets USED UP, and is primarily supplied by foreign
>powers. Do you want the economy of the U.S. to sit firmly in the palms
>of Arabian sheiks? (bear in mind, all they'd have to do is embargo to
>cause mass deflation here in the U.S.)
>
>-- 
>__/\__  Jonathan S. Haas         | Jake liked his women the way he liked


	Ok, if the price of gold isn't artificial, then why can't we sell
of Fort Knox and end our annual budget deficit now.  In the early 60's the
value of the holding in Fort Know was around 50 billion, and the price of
gold was what $50- ounce.  Then on today's market that's worth at least
400 billion, or larger than the annual deficit.  Come on now, the price is
artificial.  Your claim about the trading doesn't mean anything.  Many
cities have whole streets of diamond merchants, by your logic diamond
prices aren't being artificial inflated.
	Also, everything you've said about oil applies only more so to
gold.  Oil is produced in an enormous quantities in large numbers of countries
(and can be produced in
the US for about 180% of current price in huge quanties).  Gold on the
other had is primarily located in Russia and South Africa.  
	Finally on the issue of price fluctiations, fixing the value of
the dollar to oil would do several things:
1)  Guarentee a level of return for oil production, thus increasing supply
to the level of maximum demand.
2)  Encourage the maintance of large hords of oil, by giving them a cash
value.
3)  Stablize prices further on oil, by making bidding the price of oil up
hundreds of times more expensive than it is now.
4)  All of the above would lead much more stable oil prics ->  much more
stable energy prices ->  better profits for industry.

	Finally unlike gold, oil is usable in large quantity.  Now gold is
pretty and in some industries is useful in small quantities, but no way is
all the gold in the world worth the current quantity of American currency.
 Contrast this with oil where there is plenty of surplus value to go around.