Re:Global Currency

[Srinath S <srinaths@usa.net>]

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Padmanabha Rao <kvprao@igidr.ac.in> wrote:
<<<<<
I think there is no case for gold in the economy except as any other
commodity in demand by people for whatever purely consumptive reasons they
have. I think it is expensive, as Abhijeet/Prakash pointed also out,
because it takes a lot of energy to produce it, and then there are people
who find it valuable to purchase it at the asking price. Why they do find
gold and not, say, plastic valuable is perhaps because "it's a metal",
"does not corrode", "does not lose lustre" etc etc all of which suit their
requirements for jewellery and other umpteen uses in their activities. I
think the supply and demand price meet where they do currently. Do you
imply there is some other explanation ? 
>>>>>> 

I think it is a bit more complex than a "linear" model of demand and supply.
If we contend that "gold is valuable because people value it -- because there
exists a demand" we can also note that "people have a demand for gold because
it is valuable." 

"Visually appealing" is one thing: there are a lot many things (cowrie shells,
for example) that are visually appealing and non corruptible as well. 

But for some "non linearity" in the story of gold, it would have been just
another metal. The non-linearity comes from a system that feeds unto itself.
Gold at some point in time started to be used not just as a commodity, but as
a "marker" that held information, and which could be exchanged for commodities
or services or markers in turn. This abstraction for gold made it even more
lucrative: people could now hoard one single thing -- gold rather than food or
whatever commodity they need or would need at some point in the future.
Consequently the "value" of gold itself increased in the eyes of people... 

Complexity of economics comes from non-linearities like the above...


<<<<
I think the problem to be contended with the advent of money, then and now
and in the future, is that of integrity. Whether we do that with cowrie
shells, frogs, gold coins, informative records on a paper or a webserver
or paper notes, the problem is the same: is the issuer's integrity
unquestionable ? In the case of the informative records on a storage
device such as the webserver, the webserver's integrity has to be sound
and it should work alright. I agree.
>>>> 

Yes, the integrity of the issuer should be unquestionable. But that is in a
single system with a single currency. The question becomes much more complex
when multiple systems with multiple currencies (present day globalization) is
taken up. There are multiple issuers here and each currency acts as a currency
for every other currency, in addition to representing commodities and services
of value locally. 

Even if every issuer were to be staunchly integral, the entire system would
still create chaotic turbulences. 

Regards, 
Srinath 



Ideas for India: Building the future -- together 
http://www.ideasforindia.net/ 

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