guaranteed

  I was doing some reading about our money and what guarantees it's worth. I still don't have a real grasp on the concept, but it was explained that the value of a dollar is really based on a promise. The promise is that our government will honor its' debts. The promise is based on goods and services. Promised goods and services. To put it another way, the things we want and need. 

  Now we all have heard about the gold stored in Fort Knox and a few other depositories around the country. Thing is, we haven't been on the gold standard since 1971. So, I wondered why we even have that gold stored up now. Well, the answer is in case our credit gets shaky and other nations lose confidence in us. That is what the economists I read said about that. Gold is the backup but not the standard. That's where the confusion for me comes in. We don't use the value of gold as a standard, but we use gold to back up the standard. Does that make sense? Seems to me gold is that measure of last resort. We don't have the money to satisfy our debts, but we have gold. 

  Another reason given was to stabilize the world economy. If the United States were to sell their gold it would wreak havoc with the world economy. Gold prices would drop, and investors would lose billions of dollars. Prices would also drop. It's of vital importance that we have gold bullion to back up our dollars, although the dollars aren't backed by gold. And once again I'm left trying to figure that out. There are other metals much more valuable than gold but not enough of them to not back the dollar with. It's what the dollars can buy that is important, and what determines the value of that dollar. In 1971 just before we abandoned the gold standard a big Mac cost 65 cents. Today a big Mac costs about $3.99 backed by a promise, not by gold. So, I have to ask, which is the more valuable? I'm going with the old adage, a bird in the hand is worth two in the bush. I'll take the gold over the promise every time.

  I don't know. If you think about it the whole thing is kinda crazy. I mean what good is gold really. Yes, it makes pretty jewelry, it's a wonderful conductor of electricity and even has some medicinal properties but beyond that, what? Yet there was a time beginning in the twelfth century it became more than that, wealth was determined by how much of that stuff you could accumulate. Oh, it had always been desirable, even in ancient times, prized for its' beauty, ease of working, scarcity and magical powers but not currency. I'm talking about on a global scale. Before gold became a standard, tools, weapons and resources were the valuable items a civilization had to offer in trade. Gold made all that easier. Until it was decided that was all just nonsense and the gold standard abandoned. But we still keep that gold, just in case. 

  I suppose it all comes down to getting the things we need or want. Want, I believe, being the greater force in that equation. Man can live without a lot of things. We really only require a few things to survive. Shelter, food, and water. Man has always adapted to the land getting whatever they needed to survive from that land. People have lived in the jungles, deserts, mountains, plains, extremely hot locations and extremely cold. Some remained isolated from others for centuries and some still do. It is only when something from outside the environment creates a want in the population that things change. You see that and you want that. Next step is to figure out a way to get that. We decided to trade gold with one another. Then we decided gold isn't really worth it, a promise of goods and services is much better. If we break that promise, we can always give you gold. Make sense to you? Gold isn't the standard. it just backs up the standard. Gold can't get you what you want but can serve as an alternative when you don't get that. Like I said, I really don't have a firm grasp on the concept. But then again there are a lot of things like that in the world today. Don't get me started.