Not All That’s Gold Glitters

January 18, 2013

So the United States Treasury has seriously been contemplating forging a $1 trillion platinum coin as a way to pay off some debts. I’m not sure exactly how this works, although I’ve read that it’s something to do with the Treasury’s ability to make commemorative coins, so maybe they’re going to call up the Prime Minister of Sweden’s grandmother and convince her to buy it for her grandson, which she’ll probably do, but then she’ll forget to give it to him and in twenty years he’ll find it while cleaning out her closet and take it to that cash-for-platinum place on the corner. Or maybe this idea will join those other failed attempts at fixing the U.S. monetary system: getting rid of the penny and using dollar coins instead of dollar bills. I know in an era when penny candy is surprisingly expensive it seems strange to hang on to the penny, but I think enough people are already too hard up to go rounding every amount up to the nearest round number, plus retailers really like being able to trick us into thinking that $4.99 is so much cheaper than $5.00.

The dollar coin, on the other hand, is an idea I really do wish we’d go with. It would make getting stuff out of vending machines so much easier. I can’t tell you how many times I’ve spent twenty minutes trying to get a vending machine to take a dollar bill that is absolutely perfect in every way except for one tiny crease on one corner. And then the bag of pretzels I want gets stuck halfway, and I’m faced with the choice of either spending another dollar to possibly get two bags of chips when I really only want one or tipping the machine over, which they always say you’re not supposed to do, because if the machine ends up face down there’s no way you’re ever going to get those pretzels. And it was bad enough when most of the food in vending machines went up to a dollar, but now I’m seeing more and more where that same bag of pretzels that’s been there for three years is now $1.25, so if all I have is dollar bills I’m doing to end up with seventy-five cents in change. At least if there were dollar coins I’d already have a bunch of coins in my pocket, and even though I’d still get back seventy-five cents in change I’m penny foolish enough that I probably wouldn’t feel as ripped off changing one group of coins for another. Or maybe I’d just do what I’d do now and decide that the bag of pretzels isn’t worth $1.25 and go on which, you’d think, would make the price go back down, but it seems like there are enough other people who’re willing to spend the extra quarter that they keep driving up the price of pretzels. And I guess it works for them as long as they feel that’s what it’s worth.

After all that’s how the price of everything is determined. Everything is only worth what people are willing to pay for it. Although there’s also inflation, which I really don’t understand either. I once visited a recreation of a British Victorian farming town. There was a pub there where you could get a pint for eight pence, although the trick was you had to use the local money, which you could buy. So that eight pence cost me £1.87, which seemed reasonable, at least until it got stuck in the vending machine. And if I’d been willing to spend £48 in my money I could have gotten £1 in Victorian money, although I probably would have gotten it in change, so I’d get two crowns, three shillings, six pence, a thrupenny, nine bob, and a handful of pins. Prior to 1971 the British used a monetary system designed by a chancellor of the exchequer in the tertiary stages of syphilis, but that’s another story.

Anyway there are some things for which people are prepared to pay absolutely ridiculous prices. Remember Beanie Babies? It’s bad enough that people would rush to the closest fast food place to buy whatever Beanie Baby they were giving away with cheeseburgers. There were also rare Beanie Babies that people were willing to pay thousands of dollars for, or that at least were priced at thousands of dollars. During the height of the Beanie Baby craze there was a sale at a local mall, and there were Beanie Babies that were already selling for thousands of dollars, but were predicted to go even higher. Then the market collapsed when banks stopped accepting Beanie Babies as legal tender, although Pancho the Pangolin did continue to be a cosigner on several home mortgage loans, and currently operates a real estate agency in San Diego. Something similar happened with comic books, which I collected when I was a teenager. With most comics, but especially the independent ones, you had to buy an issue as soon as it came out. Wait a week and that issue of Fish Police #14 you’d meant to buy earlier would have doubled in price. Then the market collapsed because people started realizing that the only really valuable comics were the ones that guys left under their beds while they went to fight World War II and that had been used by their moms to line birdcages. And even the value of those comics was completely arbitrary and determined by the law of supply and demand, a law which, I think, has a great effect on inflation because people keep demanding money and treasuries keep supplying it, which makes the amounts go up while the values mostly stay the same.

This is because the value of money itself, like Beanie Babies and comic books or your grandmother’s organs, is completely arbitrary. In 1994 Brazil was suffering an inflation crisis, and economists came up with a crazy plan to fix it: replace the old currency with a new currency. They replaced the old cruzeiro with a new currency called the real. I think this name was picked for marketing purposes—people would think of the new currency as real money. And thanks to a slow transition that got people used to the new currency and made them start trusting it the plan worked. It worked even though this was basically the equivalent of the entire Brazilian population clapping their hands and saying “I do believe in fairies!” Not that I’m mocking the Brazilians because, hey, it worked, and also because this is how money works everywhere. Money has value because we believe in it, even though for centuries it’s really just been little pieces of metal and paper and is increasingly made of electrons. This is why anybody who stops and thinks about it realizes how crazy the recent gold rush, with all those cash-for-gold places popping up like roaches, is. Gold is valuable now because the suckers who are willing to pay a lot for it can find even bigger suckers who’ll pay more. And gold has a nice history of being used for money because it’s a metal that doesn’t look like most other metals. And because it doesn’t react with a lot of things it’s also really easy to get out, even when it’s bound up in mineral form. Some gold-bearing rocks will literally ooze gold if placed in a regular fire, which a bunch of Australian prospectors discovered in a spot in the outback in the 1890’s, near what’s now Kalgoorlie. Before long people who’d set up residence in the area were tearing apart the houses they’d built with local rocks to get the gold out. And gold is relatively scarce, although scarcity isn’t always a factor. Aluminum is really common, but it used to be really valuable because it was hard to process. When the Washington monument was built it was capped with aluminum as a show of U.S. wealth and power, but now that same aluminum cap isn’t worth the twelve-pack of beer cans you could make from it. If the world economy really does ever collapse, as some doomsayers think it will, the price of gold will probably evaporate just like the price of everything else, because you can’t eat gold. Well, you can, but not for long. Gold, like all forms of money, is only valuable because people assign it a value and accept it as a token of exchange, but I’m not saying that money is worthless. Although if I have made you think money is worthless I’ll be happy to take yours off your hands. For free.

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