The Economist and Gold - 31 May 2011"...Gold offers humanity one exceptionally useful property; it has an extraordinarily stable stock. There are 166,000 tonnes of the stuff above ground (worth about 8 trillion dollars) of which about 88% is held as a value store of sorts, in jewellery (52%) and bullion (36%). The stock is growing by about 1.5% a year, from the combined efforts of all the world's miners.
[Mrt: In Asian countries jewellery is another way of savings bought by weight rather than art properties]
It is because gold is each of:
elemental (i.e. incapable of being manufactured); and
that it has this reliable stock quantity. Nothing else can do it; not silver, which is 80 times more common in the ground, nor platinum, which is far too useful as a catalyst to offer stock stability.
Reliable scarcity is the key property savers require of money, which otherwise fails to store value. But of course we don't need gold to deliver reliable scarcity, we can usually create that reliable scarcity artificially, as we do with our modern currencies.
Now the marginal utility explanation. When new currency is too freely issued reliable scarcity becomes under-supplied, and savers go in search of it. Having seen artificial reliable scarcity fail in one currency, the promise of it in another is unconvincing, so they turn to natural reliable scarcity, and demand for it increases dramatically as governments print money. This is what drives gold up. Mr Sandberg is right though, that it will eventually go down again, when currencies' artificial scarcity once more becomes reliable, and when those currencies start to generate a yield..."
[Mrt: Is this last blue sentence true? or will new Fofoa´s higher level hold? Time will tell. Utility for savers and a hard lesson will teach us I believe. Then freegold as a possible outcome?]
"...The question, therefore, is whether the savers who own 100 trillion dollars of dated debt instruments in the bond markets will take fright at continuing money printing policies of the US and other governments. That 100 trillion of dated debt has already started running down the clock. It is shifting to the short end, where it behaves more and more like cash..."
[Mrt: The ticking monetary bomb.]