Should You Buy Gold Bullion?

Money is a complex concept to be explained simply. That’s why a lot of economists choose to go with a mental example, such as Robinson Crusoe. They love this example because it tells the story of a man who got stranded on an island after a shipwreck. This ideal situation gives them the perfect playground to talk about economic effects and scarcity in a world without money. Even today, this example is extremely powerful when it comes to using gold as the optimal monetary currency.

Is money always important?

In the case of Crusoe, money is not important when he survives the shipwreck. The priority of a man who is hungry and thirsty is to find food and water. Next on the list come clothing and shelter. All of these tasks have their own importance, and in a world where there are only limited resources, making decisions is difficult. Click on this link to read more.

Since the island he got stranded on was pretty big, he couldn’t do a lot of activities at the same time. He can pick a lot of fruits from the trees, but they don’t last long, so that wouldn’t be the optimal strategy. Or, he could pick a few and use some time to create a stick to hit coconuts without having to climb a tree. He could also make a fishing rod and use it to diversify his meals.

How is value determined in a world without money?

When you’re stranded all alone on an island, your value system changes. Let’s say that there’s a shop nearby with tools that could make your life easier. You make a raft and decide to go and gather a few items.

When you get there, you notice that the raft is starting to sink, and you can only take three things if you want to make it back in time. Instead of choosing an expensive musical instrument, or a digital watch, it would make sense to pick a knife, a barrel for collecting rainwater, and a few matches to start a fire. Even though these items are much cheaper in price, their value in the specific situation is much higher.

This means that value is a subjective principle. The only thing that’s important in that situation is the projected use and future output of the tools. By mentally calculating what the future is going to look like, we can make decisions today that can make the end result later. Instead of looking at the past performance of the items, you’ll have to look at the future production value.

Does money change everything?

If the entire economy of the world was condensed into a single person, there would be no use for it. In that case, it would only take up space and be a heavy nuisance. In that case, the total value of money would be zero. Follow this page to find out more https://www.marketwatch.com/story/gold-attempts-to-extend-winning-streak-to-4-sessions-11649765864.

However, when the number of people increases, everything starts to change. The only way to force another human being to do something willingly is by a monetary incentive. That’s because our entire society has agreed to the belief that other things can be exchanged for it.

For money to work, it has to cover five main pillars. First of all, it needs to be scarce. If dirt was used as currency, then everyone would be able to do anything since there’s so much of it lying around. Plus, it would take you an insane amount of dirt to be able to buy anything since it’s readily available. This makes it suboptimal.

A better alternative would be gold or diamonds since there are not a lot of them. The second property is recognizability. Everyone needs to know what money is. In the case of gold, it shines beautifully in the sun, and it has been ingrained in every culture around the world. Next on the list is durability. Vegetables, fruits, and grain can’t be used as money because they can rot quickly.

The value of money needs to be able to transcend time and space and be worth the same or more during that transport. Let’s say that there are only a million people in the world and only 100 gold bars. After a few years, there can be 2 million people and 100 gold bars.

The price and value of gold in the second case would be much higher because the people who want the asset have increased in number. That’s the law of supply and demand. Furthermore, the portability aspect means that it can be carried from one place to another. We could be using mountains as payment, but no one would be able to move them!

Finally, there’s the concept of divisibility. Every unit of currency needs to have small enough pieces to be used in transactions. This review of APMEX will help you understand it a bit better. You need to be able to count things. Five ounces of gold for a brand-new car. Three ounces of gold for a used car. It helps the mind be at ease, and it keeps the business running. In the divisibility aspect, the thing that can change is the weight of the money or the number of zeros.

Will the dollar fail?

Compared to gold, which is real metal, the dollar is an abstract term. When the United States got off the Gold Standard, it started to enter an inflationary crisis that’s been going on for more than fifty years. When society doesn’t have a basis that serves as a foundation, it’s like building castles in the sand. Eventually, they’re going to turn into rubble.

Keeping precious metals in your portfolio is the only safe haven you need to navigate the modern world, even though savvy investors think that it’s a relic of the past. The current political climate showcased just how important precious metals really are. Russia saved its currency with gold when it suffered a 36 percent decrease in price against the dollar. If the most powerful countries in the world are using gold, so should you.