Oddbean

Would be happy to, because this is a fundamental misunderstanding of volatility based on what your shared here. It’s purely a product of liquidity and perceived assurances from the market. In other words, the longer it doesn’t die and becomes a certainty in the minds of the market, and the larger and more liquid the global market is (which will inevitably be far greater depth than gold purely due to its fundamental characteristics) this becomes a completely meaningless criticism and it will destroy gold in this category after saturation. The only “volatility” that will remain will be explicitly a reflection on the market conditions, not the asset itself, which will mean those changes will be critical for market balancing.

A good way to think about why this analogy he is arguing is nonsense, is to realize that silver would then be less volatile than gold and thus would be the “better money,” because it has a more elastic supply. Which essentially means, he is arguing that there is some special optimum with gold despite having no fundamental reasoning for it, or anything to compare it to. It’s not unlike Keynesian central bankers claiming that 2% inflation is optimal, yet it’s based on literally nothing at all.

That makes sense. His argument assumes prices need to be stable as a general rule in the first place, which I took issue with, but thought it deserved a second look. For a smart guy who has clearly read Saifedean's work, he sure is a devoted goldbug. Thanks :)

Yeah and he misunderstands that the “prices need to be stable” issue is circular. IF market goods are widely priced in a particular money, it literally creates stability to the currency. Because essentially every market product is adding to the liquidity of the money. This is why Bitcoin will demolish gold. Nobody prices anything in gold because it isn’t a good currency in a digital world. Bitcoin is a protocol and there will be thousands of varying payments networks built on top of it. On a long enough timeline bitcoin, simply due to being a software protocol, will inevitably outperform fiat on every metric. Because bitcoin will be globally priced, used as a pricing tool in every country in the world, and will be usable in exactly the same way in every country and on either side of any arbitrary border, bitcoin will be the most liquid money that has ever existed.

Thank you for laying this out so simply. I had encountered the same basic argument made by George Gilder in Life after Google. He stated that #gold was optimal over #bitcoin because the jewelry stock of gold could be quickly #remonitized in the event of a #liquidity crunch. The argument felt wrong to me but I didn't have a succinct way of explaining why until now. The simple fact that the #market settled on gold over the more easily expanded monies such as #silver shows it's a weak argument.