Is Gold Money?

                                                                ( Image by PIRO4D from Pixabay )

Gold. Mmmm - nice! But is it "money"?

(a) What is gold?
Gold is a rare element found in the Earth's crust. It is a shiny yellow metal with very interesting properties, the most important here being is that it doesn't easily corrode or oxidise, so a gold coin 2,000 years old will still look like a gold coin, rather than a lump of rust.
Though you can sell gold for "money", there are probably no shops in the world that will accept payment of gold in exchange for goods. You can't buy stuff with it at the supermarket, or change it for money at a high-street bank. You can wear it as jewellery, and that's about it. Of course, there are many uses for gold in industries such as electronics, but the average person can't actually buy anything with it without exchanging it for "money" first.

(b) What is "money"?
The lens of MMT tells us that "money" is of two types, 'Vertical' and 'Horizontal'. It is represented in these modern times (c.2019) by either cash or numbers in the computers of banks. Cash means special pieces of paper or plastic 'notes' or metal disks called 'coins'. Sometimes the metal used for coins is gold, but usually not. Most "money" (about 97% in the UK) is in the form of bank computer numbers in spreadsheet software. The cost of most "money" creation is therefore practically zero for any amount you can imagine.
Importantly, "money" can be exchanged for actual goods almost anywhere on the planet, provided it is in (or converted to) the local currency.
'Vertical' "money" is created by the government central bank when it pays someone and can be used to pay government taxes, which destroys it, and anything else, such as buying gold.
'Horizontal' "money" is created under licence from the government by high street banks when they grant a loan, and destroyed when the loan is repaid. All horizontal "money" obviously nets to zero eventually. Obviously any interest paid must eventually have come from vertical "money".
(This basic description does not include government bonds and so forth which are also a form of "money", as you can't use them to buy anything directly in the high street.)

So - gold is not "money", but is very nice to have. Even if it represents Bitcoin such as in the photo at the top of the page.

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