“Hard Money” and Terry Pratchett

I just finished Making Money, Terry Pratchett’s latest Discworld novel.  He couldn’t have possibly written a more timely book. Zimram, the HTML hack with an economics education, today writes:

I would love to see any discounted cash flow for gold, an inert, industrially useless metal, whose only savings graces are 1) Bernanke cannot make more of it, 2) neither can anyone else, 3) people have agreed it’s money for ten billions years.

Along with the rising popularity of gold-bugs like Ron Paul and their ilk, Gold prices have been going up recently. But even though gold has given a relatively large return lately, that doesn’t mean you should invest in it:

With all the bear markets, through the oil crises, Black Monday, the implosion of the dot-coms, stagflation, and all the economic risks you can think of, do you know which asset class was the only one that lost money in a 10-year time frame? Yup, our favorite precious metal: gold.

Anyway, what does all this have to do with Making Money?  Not much, except that Gold Bugs tend to be Gold-Standard Luddites. and Terry Pratchett’s novel covers the path of a fictional city-state away from the gold standard.  After reading the book, Zimram’s statement makes for entertaining reading.

They could build canals and dam floods, level mountains and make roads! .. That is value! That is worth!  What is the worth of a gold coin compared to the dexterity of the hand that holds it?

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