Markets in everything

by on December 22, 2012 at 6:10 pm in Economics | Permalink

Private investors in Switzerland, Austria and Germany are lining up to buy gold bars the size of a credit card that can easily be broken into one gram pieces and used as payment in an emergency.

The story is here and for the pointer I thank the excellent Mark Thorson.

1 Willitts December 22, 2012 at 7:03 pm

I see a potential for clipping the fractured pieces to make each end slightly less than a gram. Of course people will use scales but then there will be barter to deal with the fractions of a gram that is off.

There is a reason we stopped using precious metal coins, and even when we did, they embedded ridges to prevent clipping.

I understand the lack of faith in fiat money, but I’m puzzled why people think commodity money is the answer. There has been disastrous consequences of both too much of the commodity and too little. Too much and you get inflation, too little and your money supply drops relative to desired economic activity and recession ensues. Too little commodity money also makes it difficult to pay for exports.

We don’t need to tie up useful resources to have stable money. We just need a stable central bank and, at the very least, predictable monetary policy. It disturbs me when macroeconomists say that only unexpected Fed moves can be effective. I see no benefit from a policy derived from fooling people en masse. It asserts that the only welfare optimizing strategy is to force most individuals to make inefficient allocations of their resources. I don’t buy it.

2 ladderff December 22, 2012 at 8:33 pm

We just need…

Alcoholics just need to stop drinking

3 Greg G December 23, 2012 at 7:59 am

I agree with everything you wrote there Willets but I don’t think the story here is that there is a significant movement to go back on the gold standard. I think it is just that there are enough people that want to hold some gold as an insurance policy that it is getting easier to do that. Markets in everything.

4 Steve Skubinna December 24, 2012 at 9:35 am

All money is fiat money. There is no intrinsic value in precious metal. Whether paper, metal, or pigs and chickens, all means of exchange have a value assigned by the makers of the transaction.

5 Joe Smith December 22, 2012 at 7:10 pm

Brilliant marketing.

6 Scott December 22, 2012 at 7:44 pm

Great news for shroffs, if there still are any.

7 Foobarista December 22, 2012 at 8:02 pm

Pieces of eight! Pieces of eight! Pieces of eight! Braaaakkkhhhh!!!

8 anon December 22, 2012 at 8:15 pm

used as payment in an emergency.

That’s why I’m stocking up on those little bottles of whiskey.

9 Dismalist December 22, 2012 at 8:33 pm

Yes, better, because if one finds no takers, one can drink the stuff! Cigarette currency, anyone?

10 creedofhubris December 22, 2012 at 10:41 pm


11 Ray Lopez December 23, 2012 at 5:11 am

Silver = poor man’s gold. Most survivalists say to stockpile gold for preserving your net worth and stockpile silver for emergency trading. Me? I have a house in the woods in the mountains remote from civilization, complete with canned goods. Trouble is, it’s outside the USA so I hope airplanes are working if there’s an apocalypse.

12 Andreas Moser December 23, 2012 at 6:16 am

I have an airplane, but no house in the woods. We should team up.
But don’t bring any gold, it’s too heavy.

13 Moti December 23, 2012 at 12:24 pm

Hah reminds me of an old coworker I had who was buying Gold ETFs for when the US Dollar went bust…

14 Jan December 23, 2012 at 7:04 pm

Doomsday Preppers? (I want to see an airplane episode.)

15 Michael December 23, 2012 at 12:11 am

Whenever I meet someone so desperate to buy gold in some form or another, I wonder if they ever stop to think, “Why does the other party seem so desperate to trade their gold for my fiat currency?”

Or, to put it another way, whenever I hear multiple ads from a company telling me that the smart thing to do is for me to buy their gold, I take it as a signal that I really really shouldn’t.

16 Joel December 23, 2012 at 12:59 am

That argument could apply to literally anybody selling anything.

17 AlecC December 23, 2012 at 4:52 am

It is only worrying when applied to something intended to be a store of value.-when you are exchanging currency for currency. The baker know well why I want what he sells.

18 david December 23, 2012 at 4:54 am

It doesn’t apply to things which you are intending to consume yourself. That is the vast majority of what we humans trade in, happily.

Money-like substitutes, on the other hand, are supposed to have the same value to both you and them. You don’t intend to wear the gold, you intend to spend it.

19 Goat December 23, 2012 at 12:26 pm

Eh. I see where you’re going, but people also trade for liquidity reasons.

20 Joe Smith December 23, 2012 at 2:55 pm

Except that someone with a lot of gold might legitimately want to diversify or rebalance his portfolio and gold miners will want to sell their production to pay for the costs of mining. Years ago the Canadian Mint started producing “Maple Leafs” to improve the market opportunities for Canadian gold miners.

21 asdf December 24, 2012 at 12:19 am

I know. When I see cash 4 gold I wonder whey they want my gold so bad.

22 prior_approval December 23, 2012 at 7:15 am

They’ve been around a while, and cost more than other forms of gold (not counting jewelry, of course).

Among the suggested uses are giving gifts of gold to children (a strip for each grandchild is affordable), or to keep as an investment.

Though it would be hard to escape a certain subtext involving exchangeable quantities of gold compared to the ease of silver, there is no American style survivalist angle here.

They were interesting to look at a local precious metal dealer, but apart from novelty, not really worth the price – I handed out 10 euro silver coins which cost me 10 euro apiece

23 Jan December 23, 2012 at 7:07 pm

Which precious metal (or other small, value-storing good) is easiest to verify for the layman, in case we turn to a barter society right quick?

24 Roy December 24, 2012 at 6:18 am

Gold is really easy to verify. That and that it doesn’t tarnish, and thus vary in weight, is why every society that ever existed noticed and valued it if they had any.

25 brian December 23, 2012 at 10:31 pm

@Jan –

Ammunition, water, food, knowledge. Be useful to someone else, and you’ll always have something to barter.

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