Reply To: Not enough gold in the world


Of course, you are correct. There is enough gold in the world to serve as a medium of exchange.

The estimated total stock of gold in September 2011 was 171,300 tonnes. Each tonne is 32,150 troy ounces. So that’s 5.5 billion troy ounces of gold.

Each year for the past 15 years, around 80 million ounces of gold has been produced.

You could point out to her that prices have fallen for extended periods in history. The purchasing power of money rose during the classical gold standard, for example.

You could remind her that no one has to impose lower computer, cell phone, TV, and other consumer goods prices that occur year after year on us. Consumers are happy to pay lower prices and producers can still earn profit because capital accumulation has been driving down the prices of their inputs.

Silver has served more often than gold as a commodity money in history. The greater stock of silver relative to that of gold means its purchasing power is more suited to making everyday purchases of medium- and low-priced items. And the greater annual production of silver relative to that of gold means its purchasing power does not rise over time. In an unhampered market, people would choose a commodity money taking these facts into account. If they thought a rising purchasing power of money was problematic, they would choose silver instead of gold.