Well, you know of course that a commodity with little industrial use is an oxymoron.

Really, if there was any model that explained and predicted “money”, we wouldn’t be in the mess we are today. The #1 reason for this, and why no such model will can be expected any time soon, is that at the bottom of it all is human trust and confidence. We’ve tried gold, paper and (lately) magnetic patterns on spinning disks: they’ve all worked and failed awesomely. This strongly suggests that substituting another substance isn’t going to change anything.

Just a quick reminder: The FED issuing its own bonds would be a disaster. Either it would be just another way of adding to the already large supply of bonds outstanding, or worse yet, it would be stronger than t-bills and treasury bond yields would go through the roof.

"It is divisible, it is finite & scarce, it is difficult to counterfeit, and it has other non-monetary uses."

My question, as an amateur dismal scientist, is this: What about love? Can love be used as our currency? Love, as practiced by humans, is definitively finite and scarce. Most lovers will tell you it's hard to fake it and has other non-monetary uses. As for divisibility, I am told by owners of multiple pets and men with mistresses that it's divisible.

So, what about love?

http://globaleconomicanalysis.blogspot.com/2007/06/why-does-fiat-money-seemingly-work.html

I’m not calling for a new gold standard, but some of the “I don’t get it crowd” need a lesson in monetary history. They are right in that there is nothing special about gold. What they miss is that it was historically chosen as a medium of exchange for very good reasons. It was not accidental.

Some interesting history everyone should read:
http://globaleconomicanalysis.blogspot.com/2007/06/misconceptions-about-gold.html

http://globaleconomicanalysis.blogspot.com/2007/06/why-does-fiat-money-seemingly-work.html

I have no problem with your suggestion of technetium-99 except for one problem that might trouble the streetwalker who wants to redeem his note for its promise to pay just might find it hotter than he cared for, and therein lies the rub.

The crux of the whole matter is that when a money is irredeemable, and it can be created for nothing, it probably will end up being worth nothing. The non-mystical non-magical pluses for gold are not that it is purty and shiny–though that is clearly what makes it recognizable and desirable to a great many–it is that it satisfies the criteria I established above and does so in a not too inconvenient way. If the entire history of a gold brick consisted of it sitting in the same place in a single vault while its ownership constantly changed hands, that’s fine with me. The point being that it is signifying a placeholder value for extant notes.

When the banks are effectively freed from the requirements to redeem, and governments with favored industries are burgeoning to grow, you tend to find policy that–surprise surprise–allows those banks to lend against a fractional reserve. This newly created base money in the case of the central bank and the newly created state bank money is of most value to the first user, and that first user is essentially the prime lenders and the industries that they and their symbiotic government favor most for policy goals.

I don’t have much use for a central bank that artificially contrives interest rates and the boom/busts it so engenders. Nor do I have any use for the fractional reserves that provide ready gain to its first users by spending that newly created money before its depreciation causes prices to rise around us. It’s inflationary in the short term, deflationary in the long term, and confiscatory for the general public all around.

The misery that results from countless lives falling apart as the jobs they had worked vanish–in industries that never would have existed but for this phantom of leveraged credit–and the resultant transfer of title to wealth into concentrated hands, seems to obviate that this system favors those prime lenders and their governments and the industries they so favor.

Is it any wonder that governments and banks favor economists who recommend that governments and banks do exactly what they want to do? Is it any wonder that these banks don’t clamor against The FED who allows them to inflate simultaneously? No one bank would be able to leverage itself toward oblivion without its neighbor banks noticing its paper piling in their coffers and so checking its behavior. The FED lets them all do it simultaneously. Is it any wonder the system is insolvent en masse?

I don’t care much for gold myself. I don’t find it as pretty or as useful as other metals. I don’t collect gold rings or jewelry. I do support a non-fractionally reserved money of account based on it for its merits, perhaps and hopefully in competition with other similar intrinsically-backed monies of account in the general marketplace. I support this for the relief it may grant from these endless cycles of confiscatory booms and busts at the hands of an elite who at every turn manipulate the ‘free’ market to their advantage. Nothing is perfect and nothing will be, but why stack the deck in their favor?

But according to you, though, questions of availability are irrelevant. It should then follow that issues of identifiability are equally unimportant … except, perhaps, for the “few” people who are dependent on its physical characteristics (e.g., the examples for platinum noted by Anon1).

Remarkably, though, it’s basically impossible to confuse platinum and silver: even a cursory examination is sufficient to distinguish them (e.g., color, density, etc). Even if there was some kind of problem, however, I’d have to wonder how many people can reliably identify gold. If you came to me with a brick of the stuff, I’d be more or less at a loss and would assume, absent of other evidence, it’s fake.

But maybe that’s just me.

Personally, I find this entire gold-bug position amusing. Consider the reference above to Nathan Lewis: like you, he insists that it’s not the real gold that matters, but that the system be run in a manner consistent that it does matter. (This doesn’t make any sense, but that’s what he says!)

I find this no different from a fiat currency myself. In one case, we have a bunch of bureaucrats printing squiggly lines on paper, and in other case, we have a bunch of bureaucrats printing a bunch of squiggly lines on paper. I think the only difference is that the former (or latter) are paid by taxes and the latter (or former) aren’t. If that isn’t similar enough, recall that we have to trust both systems are being well-run … and look at what that has gotten us into today, eh?

But if some kind of bizarro precious metal must “back” the currency, my suggestion — and I am completely serious here — is that we use technetium-99. It’s nice and pretty — though making jewelery out of it isn’t recommended. It’s quite rare too, and expensive. It does have a few industrial and medical uses, certainly more that gold. But best of all is that it can be manufactured, and in the best way possible: it’s a principle component of the waste stream from a super-efficient nuclear power plant.

What better way to encourage investment in such?

http://www.theaustralian.news.com.au/story/0,25197,25267214-5013404,00.html

Skippy

Just a nit…there is no scarcity of diamonds. Not really. The entire diamond market is, literally, a racket. There are PLENTY of diamonds about. The Diamond cartels, however, create an artificial scarcity to keep prices high.

They should be shut down and jailed (diamond cartels).

As for platinum, it actually has FAR more actual utility in real world activities than gold does. It is used in catalytic converters, in catalytic surfaces in chemistry (beyond combustion), is used for wiring in electrophoresis devices). Gold, on the other hand…hardly any real utility at all.

There is no complaint about scarcity, only the obviation that platinum, being less common than gold, may not be as widely available and thus not as recognizable as gold. I made the point–which you copied–that I’ve seen it confused for silver.