Below a screen shot from a report by Citibank its global chief economist Willem Buiter, released on November 26, aimed at clarifying why gold has no value whatsoever.
Although I can agree with his last point, I surely can’t with the rest. From my perspective these are some weird statements. A few more quotes:
…Gold is unlike any other commodity. The only things that come close to it are Bitcoin and similar digital peer-to-peer currencies. Gold is costly to extract from the earth and to refine to a reasonable degree of purity. There is an (unknown) upper limit to the total amount that is recoverable at any cost. It is costly to store. It has no significant remaining uses as a producer good – equivalent or superior alternatives exist for all its industrial uses.
…Like paper currency and Bitcoin, Gold is ‘irredeemable’.
…John Maynard Keynes once described the Gold Standard as a “barbarous relic”. From a social perspective, gold held by central banks as part of their foreign exchange reserves merits the same label, in our view.
…Because to a reasonable first approximation gold has no intrinsic value as a consumption good or a producer good, it is an example of what I call a fiat (physical) commodity. You will be familiar with fiat currency. Unlike what Wikipedia says on the subject, we argue that the essence of fiat money is not that it is money declared by a government to be legal tender. It need not derive its value from the government demanding it in payment of taxes or insisting it should be accepted within the national jurisdiction in settlement of debt. Instead the defining property of fiat money is that it has no intrinsic value; it derives any value it has only from the shared belief by a sufficient number of economic actors that it has that value.
…Gold has become a fiat commodity or a fiat commodity currency, just as the US dollar, the euro, the pound sterling and the yen (and a couple of hundred other currencies) are fiat paper currencies and as Bitcoin is a fiat virtual currency. The main differences between them are that gold, like Bitcoin, is very costly to produce, while the production of additional paper money has an extremely low marginal cost. If we count the deposits of commercial banks with the central banks, which together with currency in circulation make up the monetary base, as fiat money, then the incremental cost of fiat base money creation is zero.
…Remember, fiat money, including gold or Bitcoin, is intrinsically useless.
WOW, I’m speechless Click here to read the full report.