I'll post a link to this again:
Krugman - bits and barbarism.
And quote Krugger again:
Clever stuff — but Keynes wasn’t finished. He went on to point out that the real-life activity of gold mining was a lot like his thought experiment. Gold miners were, after all, going to great lengths to dig cash out of the ground, even though unlimited amounts of cash could be created at essentially no cost with the printing press. And no sooner was gold dug up than much of it was buried again, in places like the gold vault of the Federal Reserve Bank of New York, where hundreds of thousands of gold bars sit, doing nothing in particular.Hey Krugger! You know that old conceptual error of thinking this time is like another time? The old "apples & oranges" thing?
John Maynard Keynes seems to have died long before Nixon ended gold convertibility.
So, really, Keynes was right. Digging up gold was nothing more than digging up money. Because there was a hard price control on gold: a miner only got paid $35 for each ounce.
Since 1971, what currencies have been linked to the price of gold?
So why have we spent the last 42 years still digging up more and more gold? Inertia? Because holy crap we sure seem to have increased worldwide gold production since the end of Bretton Woods.
Or maybe gold is a commodity whose demand is dependent at least partially on its value as insurance against existential risk?
Note to Krugger: if you actually do respond, please give me a free NYT subscription otherwise I won't be able to read your post. I like reading you, but I'm not fucking paying for it.