Re: [Pen-l] Re: Gold money is fiat money too.

[Sean Andrews <cultstud76@xxxxxxxxx>]

On Thu, Jan 29, 2009 at 22:47, Sabri Oncu <sabri.oncu@xxxxxxxxx> wrote:
> Jim:
>
>> gold money isn't fiat, though it usually involves some role for the
>> state (i.e., certifying that coins are pure gold, etc.) Gold money is
>> money because it's naturally scarce ...
>
> Not at all, Jim! Gold is not scarce. Gold is infinitely divisible.

In fact, this was more what Adam Smith was concerned with in talking
about the problems of the coinage--that unless you are actually buying
and selling things with bars of gold, unless you're sitting there with
a scale and a chemistry set, there is always room for fudging the
value of gold coins.  maybe this isn't the same thing, but it seems
like, unless we are talking about some Platonic form of "gold," there
is some room for fiat.  I can't find the passages I remember most
seriously considering this, but here are a few examples from Wealth of
nations.

http://www.econlib.org/library/Smith/smWN2.html#I.5.29
http://www.econlib.org/library/Smith/smWN5.html#I.11.145

When he finally gets down to talking about paper currency relative to
gold, he is even more equivocal.

s
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