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People didn't move away from gold because it was too scarce (it isn't).

They just added a more liquid layer that would eventually become fiat. We are doing the same thing now with bitcoin, lightning, ecash, etc. Hopefully not back to fiat though.

Btw, secondary money, credit, and some elasticity between them isn't a bad thing. Gold backed paper money came along with an unprecedented level of human progress.

I think this is because such a monetary setup allows for accelerated expansion and contraction phases based on societal needs. It optimizes risk management, liquidity, capital allocation, etc.

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Discussion

Laeserin 1y ago

Well, it wasn't too scarce, absolutely, but it was too scarce practically, on the market. You had to rebalance stocks in the vaults and move it around with armored cars or ships, it was difficult to break into smaller denominations, you had to go dig some more up or refine it into monetizable units, etc., so lots of places that had a direct gold standard eventually moved to a gold-backed standard or added a silver/copper standard for smaller transactions. (Maybe a gold or fiat will be one of the subsat-tradeable currencies, for people who want to settle subsat credits. 🤷🏻‍♀️)

In the same way, you'd never run out of sats in the universe, but it may be that they become impractical for daily use, if Bitcoin rises in value too much and/or too many sats are taken out of commission, as you'd be needing to trade with increasingly smaller parts of a sat. That might already be the case, in some countries.

Laeserin 1y ago

I am just saying that something that rises inexonorably in value is actually something that will eventually become less attractive for normal trade and moves back into being a reserve asset or used in large financial transactions, like buying petroleum or purchasing a home.

Nobody is going to pay for some bubble gum at the supermarket with 0.0000000000000001 Bitcoin. Most people don't own any Bitcoin (directly), and it might even stay that way. Most people also don't own any gold or silver or dollars or Treasury bills, and yet, they transact every day.

Laeserin 1y ago

The thing about Bitcoin, is that it has a lot of decimal places, but so much of it is retired or holdled, that there isn't actually much of it liquid in the market. That is, after all, why the price rises so fast.

Most Bitcoiners will claim _both_, that we will be purchasing bubble gum and apples with Bitcoin, in 10 years, _and_ that each Bitcoin will be worth the equivalent of a (current) 1 billion USD. But that would mean that one current USD ¢ would be 0.0001 sats, so a pack of gum for $0.69 would require 0.0069 sats. (I think, check my math 🙈.)