COTW two-fer, starting with an anecdote from Jay Fink:
The welfare state is seducing people who have never had experience with it before. I am friends with a Chinese-American man who is collecting unemployment with the $600 weekly bonus. He always had a strong work ethic and never took a government handout before. At first he thought the lockdowns were a bad overreaction. He wanted to go back to work. Then the unemployment plus bonus started rolling in and he completely changed his tune. He now thinks for the safety of all everything should remain closed for as long as possible.
These unemployment-plus benefits are in place through July. Does anyone think that, three months out from the general election, anyone from either party is going to oppose extending them through the end of the year, or of even making them permanent?
If we wanted to conjure up a story of how UBI would go from pipe dream to permanent fixture of the American economic landscape, could we do a better job than coronavirus is doing?
Elmer’s Washable School Glue–chortle!–on those silly sound money goldbuggers (it is a soft metal, after all):
Gold is also a fiat currency. The industrial demand for gold does nothing to justify even a fraction of its price. The only reason it is valuable is because everyone has agreed that it should be considered valuable. Not any different than the dollar except that it is harder to create more gold than dollars.
What goldbugs don’t seem to understand is that currency should be valueless, precisely so that it can serve as an independent means of exchange. Fiat currency has only one value: that which has been agreed on. “Backed” currency has two values: the value of the underlying asset, plus a premium based on its value of exchange.
If you’re whining about currency volatility now, imagine how much worse it would be if tied to something with variable “useful” demand like grain or (lol) oil? Gold serves as a decent currency specifically because it is mostly useless, but it does have some minor uses so truly valueless currency is still better.
For something to function as currency it must have a perceived monetary premium exceeding its specific industrial, artistic, or status-signalling utility. If it lacks this attribute, it is merely a barterable good. Gold isn’t quite the Methuselah of money–that honor belongs to silver–but it has an impressively long track record all the same.
Gold serves as a decent currency not because it is mostly useless, but because it can neither be created nor destroyed. In that way it fundamentally differs from fiat currencies, crypto, debt instruments, equities, and all other financial assets.
The cost of transaction compliance is the biggest obstacle this gold faces in re-entering the commercial economy in a significant way. Think Venmo, but for gold. If negative interest rates become normalized, the incentive to overcome said obstacle will be even bigger than the obstacle itself. Gold as a salient political issue is not just in the past–it’s in the future, too.