Gold is unlike any other commodity. It is costly to extract from the earth and to refine to a reasonable degree of purity. It is costly to store. It has no remaining uses as a producer good - equivalent or superior alternatives exist for all its industrial uses. It may have some value as a consumer good - somewhat surprisingly people like to attach it to their earlobes or nostrils or to hang it around their necks. I have always considered it a rather vulgar metal, made for the Saturday Night Fever crowd, all shiny and in-your-face, as opposed to the much classier silver, but de gustibus... . ... Because to a reasonable first approximation gold has no intrinsic value as a consumption good or a producer good, it is an example of what I call a fiat (physical) commodity. You will be familiar with fiat currency. Unlike what Wikipedia says on the subject, the essence of fiat money is not that it is money declared by a government to be legal tender. It need not derive its value from the government demanding it in payment of taxes or insisting it should be accepted within the national jurisdiction in settlement of debt. Instead the defining property of fiat money is that it has no intrinsic value and derives any value it has only from the shared belief by a sufficient number of economic actors that it has that value. ... In a world with multiple fiat moneys, the zero value of money equilibrium lurks for each of the fiat currencies, including gold. Admittedly, as regards gold, so far so good. Gold has positive value. It has had positive value for nigh-on 6000 years. That must make it the longest-lasting bubble in human history.
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Because to a reasonable first approximation gold has no intrinsic value as a consumption good or a producer good, it is an example of what I call a fiat (physical) commodity. You will be familiar with fiat currency. Unlike what Wikipedia says on the subject, the essence of fiat money is not that it is money declared by a government to be legal tender. It need not derive its value from the government demanding it in payment of taxes or insisting it should be accepted within the national jurisdiction in settlement of debt. Instead the defining property of fiat money is that it has no intrinsic value and derives any value it has only from the shared belief by a sufficient number of economic actors that it has that value.
In a world with multiple fiat moneys, the zero value of money equilibrium lurks for each of the fiat currencies, including gold. Admittedly, as regards gold, so far so good. Gold has positive value. It has had positive value for nigh-on 6000 years. That must make it the longest-lasting bubble in human history.
We need an EU level macro-prudential stability board. The current proposals for the ESRB are, however, deeply misguided, as they make the central banks the dominant players in the systemic risk game. Central banks have neither the technical knowledge, nor the tools and instruments nor the legitimacy to dominate the macro-prudential financial stability framework. Back to the drawing board.
When we don't really know how the object of regulation looks like, it might be useful to research it first or in parallel, and here CBs do have an advantage.
Almost every CB in Europe or USA now is dying to hire 'macro-prudential' specialists. The problem is - no one really knows how these specialists would look like...
There was a WSJ feature several days ago on introducing financial considerations (fin markets, banking industry, housing, frictions of different kinds) into DSGE (mostly) models. This is an extremely active area of research right now (couldn't get enough students to engage), shows some promise.
