Re: Why didn't gold prices plummet when we decided to stop using gold as a currency?
If increased Bitcoin adoption results in higher Bitcoin prices then why didn't gold prices plummet when we decided to stop using gold as a currency (i.e. gold adoption fell)?
It used to be that currencies represented a specific quantity of gold. The value of these currencies were pegged to that of gold and could be converted to physical gold if desired. Hence, it could be said that gold was very much in demand. Bakers sold their bread for gold. Farmers sold their crops for gold. Teachers taught their students for gold. Of course, people preferred to transact in paper representations of gold for the convenience.
This was true until the Great Depression when societies began to leave the gold standard. Suddenly it was realized that gold was no longer attractive as a currency as it was hindered by its inflexible supply. No longer did the baker demand gold for his bread. No longer did the farmer demand gold for his crops. No longer did the teacher demand gold for her teaching.
And yet despite discovery of this flaw and subsequent mass abandonment of the usage of gold as a currency, gold prices didn't fall but instead they doubled during this period.
While leaving the gold standard meant that currencies were no longer paper representations of gold, they were still backed by a reserve of physical gold and it was still possible to redeem US dollars for gold until 1971. After 1971, it was decided that a currency without any ties to gold whatsoever would make a better medium of exchanging value. Yet despite this, the price of gold still rose.
Why is this so? Isn't decreased adoption synonymous with decreased demand? When people decide to abandon a currency - whether it be cowrie shells or gold in lieu of another currency (in this case, paper), would we not expect to see the value of the old currency drop as demand for the new currency increases?
It used to be that currencies represented a specific quantity of gold. The value of these currencies were pegged to that of gold and could be converted to physical gold if desired. Hence, it could be said that gold was very much in demand. Bakers sold their bread for gold. Farmers sold their crops for gold. Teachers taught their students for gold. Of course, people preferred to transact in paper representations of gold for the convenience.
This was true until the Great Depression when societies began to leave the gold standard. Suddenly it was realized that gold was no longer attractive as a currency as it was hindered by its inflexible supply. No longer did the baker demand gold for his bread. No longer did the farmer demand gold for his crops. No longer did the teacher demand gold for her teaching.
And yet despite discovery of this flaw and subsequent mass abandonment of the usage of gold as a currency, gold prices didn't fall but instead they doubled during this period.
While leaving the gold standard meant that currencies were no longer paper representations of gold, they were still backed by a reserve of physical gold and it was still possible to redeem US dollars for gold until 1971. After 1971, it was decided that a currency without any ties to gold whatsoever would make a better medium of exchanging value. Yet despite this, the price of gold still rose.
Why is this so? Isn't decreased adoption synonymous with decreased demand? When people decide to abandon a currency - whether it be cowrie shells or gold in lieu of another currency (in this case, paper), would we not expect to see the value of the old currency drop as demand for the new currency increases?
you are forgetting that dollar plummeted in value ever since it got off the gold standard.
Gold did not become more expensive, the dollar became worth less.
But because we all 'count' in dollars no one notices.
We should stop counting in dollars, since dollars have no value at all except the psychological value we give it. It's worthless junk nothing more.
I can't wait for the day humanity finally notices we should count in gold, silver, bitcoin or other limited commodities that could serve as currency with real value.
Anything that can be printed or replicated without limits can not hold value.