Gold Is Not Money

Speaking before the spooky Council on Foreign Relations, Former Chairman of the US Federal Reserve Bank, Alan Bubbles Greenspan, said:

Gold is a currency. It is still, by all evidence, a premier currency.

So what's a currency?

It is:

A system of money in general use in a particular country.

And what's money?

 It is:

something (such as coins or bills) used as a way to pay for goods and services and to pay people for their work 

So where is gold used to buy a pair of shoes, a loaf of bread, a Boeing airliner?


Um, well, actually, no where.

So, yes, gold was once money and it may again be money, but today, other than by a few cranks, gold is not used as a medium of exchange and is, therefore, not money.

And it is unlikely that gold ever will be money again for the simple reason that digits are much more convenient. Try buying a book of matches with gold:

That will be one millionth of an ounce please, and, no, we do n't have change for a gold Maple leaf.

Or try buying a Boeing 747 for gold.

That will be five tons please, you to pay freight and insurance. Or you may prefer to transfer the funds by wire.

But the craziest thing about the idea of gold as a currency is that it means prices of everything else have to be constantly adjusted to changes in the purchasing power (i.e., price) of gold, which as the gyrations of the last few years have shown, is very far from stable. Paper currencies are unstable in purchasing power also, but not usually as crazily so as gold, which has seen a six-fold increase since the millenium followed by a 50% crash.

So why does the man who crashed the world economy say gold is currency? Senility? Insanity? Or perhaps trying to hype the price of gold, a very expensive commodity with few uses other than to gild the domes of American state capitols and Russian churches, and fill teeth and central bank vaults.