This story is about value or the difficulty in measuring and finding true value. The US gold holdings total 261 million fine troy-ounces. Fort Knox’s gold holdings are 147.43 millions troy ounces. At the current market price, this should be worth about $470 billion (give or take a couple of billion), the Treasury marks t he gold at $11.1 billion (the 11.1 billion includes silver). The’statutory gold price’ is $42.22 per fine troy-ounce. This price was set in 1971, when the dollar was removed from the gold standard. $1750 per troy-ounce is the real gold price on the open market. This is 40 times higher than the mark value. This heading is based upon $11 billion in gold holdings by the Treasury. It is the reason it states 1% of current bitcoin supply.
The paucity or availability of gold is the only obstacle to reverting to the gold standard. However, there are other reasons why it is impractical to create an exogenous standard to the which a country must adhere. One of the most important is the effect that gold has on the issuance and release of money during times of stress or crisis. The great depression can be said to be caused partially because of the gold standard. The gold bugs will tell you that gold is the most valuable material in the world. Custom has given great value to one of the most utilitarian materials on the planet, gold. Adam Smith was one of the most renowned monetary philosophers to have discovered this mystery of value. Why is water and air less valuable than gold? Scarcity is the reason. The main driver of bitcoin and gold’s value is scarcity. In a desert where water is scarce, scarcity can also be context dependent. No amount of bitcoin or gold can buy water in extreme cases.
The gold standard is not currently used by any nation. Money has existed in many forms throughout history. Some of the most successful currencies were fully backed with gold. First, struck the coins with gold. Many schemes and human ingenuity contributed to this standard being literally chipped away over the years. Bi-metallism, which was established in the young American republic, caused many problems due to differences in purity and arbitrage between gold and silver prices at different points. This led to breakdowns including the inability to pay for transactions.
Two main concepts exist about value. One is a supply-side view that considers the total cost of labor, land and machines used in producing goods or services. The objective, supply-side view. Another concept is the demand side. Value is determined by utility to the buyer, and thus by the market. This is subjective. Market failures can result from these concepts, particularly when they are used to determine only value. Market failures can have ripple effects that cause economic and social pain.
Harvesting seems to have the most profound value, but not mining. True creation of value is achieved through harvesting and the creation of value using renewable resources. Mining or extraction of non-renewable resources leads to a dead end. There is no other option for certain metals or raw materials. Even in this instance, the recycling of metals seems to push mining towards harvesting. Mining can also masquerade as harvesting. Intense monoculture-based agriculture, which is usually associated with harvesting and can drain aquifers to cause irreversible Desertification, which is a mining-like after-effect. Uncontrolled mining can often lead to irreversible and harmful changes.
According to its proponents, an exogenous peg such as gold promotes discipline and austerity. However, Robert Triffin, who opposed the peg in early 60s, exposed the problem. A safe asset like the US Dollar was highly sought after around the globe, and it is still in high demand today. A restriction on the availability of such assets would lead to world deflation. This is the opposite of inflation, and could also cause a more serious wasting disease. The Bretton Woods Gold Peg was another horn in the problem. A strictly pegged dollar, which was based on gold, would also be in short supply and behave more like a mined resource. In 1971, ten years after Triffin’s paper was released, the dollar was freed from the gold standard. These nuances are often lost in the argument that scarcity is a desirable property to have as a currency.