[quote AK]You alarmist fool, the U.S. dollar is backed by … um … I dunno, Treasury bonds or something?[/quote]
Nope.. it is a fiat currency. It is backed by ‘faith’ in the US economic system. Wiki def. It is a ‘floating’ currency that serves as an ‘intermediary’ for exchange, but has no ‘intrinsic value’ in and of itself.
When that faith fails, or when the government starts printing more of its fiat currency(or changes-reduced reserve ratios, drops interest rates).. the representative value of the fiat currency vs a hard asset drops. The representative value of the fiat currency actually increases when the opposite happens.
[quote SK in CV]Precisely what is the relationship between the gold in fort knox and the amount spent on economic and quantitative stimulus? Why does that relationship exist?[/quote]
There is no such relationship.
[quote SK in CV]I would propose that it is entirely artificial, that gold has no significant intrinsic value and as a monetary unit is purely a social construct. (Unlike, for instance, oil or wheat.)[/quote]
All items have values that are in part social constructs. This includes both oil and gold. Imagine what would happen if people figured out how to make engines (for vehicles, electrical generators, etc) that were 80% efficient? The demand and therefore the price for oil would drop. What if the price of solar collectors dropped and efficiencies exceeded 30%? That would affect oil prices as well as prices on electrical generation.
[quote walterwhite]all monetary units are social constructs.
gold is the only monetary unit that will never completely fail.[/quote]
If it is a social construct, it can fail. The question is the odds of it happening. Large gold discovery would severely depress the price and not all places have been explored. Gold is dense, making it much less likely to get to the surface from the core of the earth. There is also much more gold that has been extracted than people realize (it is not as rare as other elements.) and its price presently exceeds its relative scarcity and economic desirability. Look up the ‘Platinum group metals’..
[quote walterwhite]gold is beautiful and humans love beauty.[/quote]
But the definition of beauty is relative. There is an interesting old style “Twilight Zone” short on that.