It's Nathan again.
In my previous video entitled "What MakesMoney Valuable," I talked about some of the properties that arenecessary for any resource to be considered valuable as a currency.
Now in this video, I want to build on topof that a little bit and address this idea that getsbrought up quite frequently.
And it's actually a very old idea, which isanother criteria for something to be viewed as valuableas a currency is intrinsic value or a value that is just in-built to the asset.
And it's inherently valuable to people forthis reason.
So you'll hear this brought up a lot withgold.
People will say, well, gold has a lot ofindustrial uses.
For instance, it's a very good conductor ofelectricity.
And so that's intrinsicvalue.
That is just something built in to the physicsof gold that makes it valuable.
Well, I'd like to provide an alternative viewpointto that.
Because I don't think– and I will actuallyargue that intrinsic value is mutually exclusiveto value as a currency.
Gold, for instance, yes, it does have a certaindegree of intrinsic value.
But we don't care about its intrinsic valuewhen we're talking about it as a currency.
Why? Because its value as a currency ismuch, much higher than its value as a conductor of electricity.
And so let's look at some of the assets thathave been used as currency throughout time.
One of myfavorites is salt.
So with salt, I have intrinsic value in salt,right? I mean, as a human being, I needsalt.
If I don't have any salt, I'm going to die.
People need salt to live.
So salt has, certainly I think we can argue,a certain degree of intrinsic value to humans.
However, that intrinsic value can only betapped if you are eating the salt.
And if you're eating the salt, then you'renot spending it as a currency.
And so the salt at any given moment is eitherbeing treated as a currency, or it's being treated as a food, but never both.
And so the intrinsic value of salt does notjustify its value as a currency.
So when you have salt as a currency, you canat any time decide, well, I need salty food right now.
And I need salty food so much that I wouldrather have salt as a food than as a currency.
Andat that point, you take some of the salt out of your money bag and put it into your potof stew.
And by doing that, you've actually done atransaction with yourself.
You've used salt the moneyto buy salt the food.
And you lost the salt the money, and you gotthe salt the food.
So you actually did atransaction with yourself.
You traded something you viewed as less valuable,salt money, for something you viewed as more valuable, salt food.
And you consumed the salt.
So what is important to note there is thatthe salt was a currency, and now it's a food.
It was never both at the sametime.
And so this idea of intrinsic value has nobearing on a currency.
It may form sort of a lower bound, right? Because ifthe asset becomes worth less as a currency than it is as its intrinsic value, then it'sno longer suitable for use as a currency.
If salt becomes so cheap that everyone wouldrather just view it as food than as currency, such as the modern world we find ourselvesin today– nobody views salt as valueable as money anymore.
It's so cheap, you just– it's food.
You don't use it as money.
It's not sufficiently rare.
Then salt is no longer useful as a currency.
Its intrinsic value outweighs its value asa currency.
And so we don't view it as a valuablecurrency.
We can also see this in certain prison economies,right? People use cigarettes as money in a prison.
Andwhen the supply of cigarettes in the prison becomes so big– there's cigarettes flowingin from outside all the time.
And eventually, there get to be so many cigarettesthat each one is so cheap that people just start smoking them.
Because they're more valuable at that pointfor the enjoyment of smoking a cigarette than they are as acurrency.
And again, when you smoke that cigarette,what you are doing is you are actually buying a cigarette forpleasure at the cost of a cigarette for money.
And so you're doing a transaction with yourselfto convert it from a currency valued resource to an intrinsicallyvalued resource.
And again, it's only one or the other.
It's never both.
So that's the concept that I wanted to addressin this video.
Please let me know in the comments what youthink.
Was this interesting? Was it informative? Would you like to hear more things like this? I also got a question on my previous videoasking if I wanted any translations of my videos.
So also let me knowin the comments if you would like this video translated into some other language or ifyou know someone else who would like that.
And let me know what language.
And if there's a lot of interest in that,then I'll see about getting translations of my videos.
Thank you very much.
And I'll see you next time.