The Golden Rule

I saw this headline "Gold prices post biggest 1-day gain ever" and it made me think.

Many years ago I thought about writing a book called "The Coming Collapse of Capitalism". What stopped me was a lack of formal business education and experience. (That was back in the day when being educated and experienced meant something.) What I sensed though, was that Capitalism was falling victim to the greed of capitalists and the failure of politicians to adequately control it.

To oversimplify my thesis was that:
1. Capitalism is based on faith and only faith. Money is only paper. Meaningless really, if the public decided it was meaningless. You can't eat a dollar bill, can't build shelter with it, it can't cure illness. Capitalism is a faith based system.
2. That faith was (and is) being destroyed by the separation between the super-rich and everyone else. This separation was causing (and will cause) everyday people to conclude that the current economic system is fatally flawed and therefore, once people decide not to play the game - not to have faith that those greenbacks mean anything - then Capitalism inevitably will collapse.

The headline above brings me back to the line of reasoning I have had for a very long time. You see, I don't understand why Gold is "valuable". Sure it looks nice and is a finite resource, but much like currency, it serves no real purpose in the sustenance of our lives. It too, is a faith based currency. Of course, those who buy and sell so-called precious metals see a profit or loss, but that does not automatically mean it has real use or value. It only has value if everyone agrees it does.

I'm sure I am missing something but in times of real crisis (I always think of South Florida in the days after Andrew) what would you rather have, a bag of groceries worth $100 or a handful of gold worth $1,000. Unless someone want to try to convince me otherwise, I will maintain that faith and only faith in the fairness of Capitalism gives greenbacks and precious metals their value. Nothing else. If and when that faith is broken, so will be our economic system.