Oil and Gold Decoupling?

[Munger]

Re: Oil and Gold Decoupling?

If utility is "use as something that many people need or want to do" I would say the need for currency and a store of value is as valid as getting communications from distant places or recording thoughts.

*shrug* You can be right or win or whatever, but I've never understood the idea that currency isn't as essential as anything else in society, or that there are better and worse forms just like there are better and worse forms of distant communications or thought recordings.

You are right - currency is useful. The difference is that currency is unique in that in only has value of people agree that it has value. If third parties stop believing that a toaster is valuable, it can still be used to make toast. If third parties stop believing that gold is valuable, it can no longer be used as a medium of exchange.

[c1ue]

Re: Oil and Gold Decoupling?

Currency as a concept has value - there is benefit in being able to exchange currency for goods or services rather than chunks of gold and what not.

As an idea, currencies can't be physically debased like gold or coins.

Unfortunately, also as an idea, currencies can multiply virtually without limit (although Zimbabwe is apparently showing otherwise).

The problem is simple: no matter what the unit of value used, inevitably there are many who want it corrupted for their own purposes.

For our immediate purposes, a swing back toward physical backing might help correct the bad practices of currency devaluation, but nothing is going to happen without either a repudiation of existing debt or a bout of inflation so severe as to reduce the debt to manageable levels.

Given what I've seen so far, it seems that we're getting both ends of the stick: repudiation of mortgage debt plus enough inflation to hurt the regular folk, but neither actually fixing the core problem.