Commodity based money

[David]

I don't understand.  How would gold or silver being a commodity lead to its value disappearing?  The last 30 years have not seen deflation of gold, but inflation of cash.  In the 70s when gold and silver hit a record high, that was fear and speculation driven. 

[David]

Speaking of commodity based money, Germany once used cigarettes as money during a period of postwar hyperinflation.     They were relatively valuable, portable, could be broken down into smaller units, and were inflation resistant on both the supply and demand side.  On the supply side, if the cigs started losing value, they would cut back on their production or import into germany, from the demand side if they lost too much value they would just be smoked off as cheap cigs.   
This is my favorite example of money because it is so easy to understand by the non-economist.  I know I have repeated this at least twice before this. 

[John Edward Mercier]

I don't understand.  How would gold or silver being a commodity lead to its value disappearing?  The last 30 years have not seen deflation of gold, but inflation of cash.  In the 70s when gold and silver hit a record high, that was fear and speculation driven. 

And your assumption of the present value is that no fear or speculation has entered the price?
Things are valued in relation to something else.

[David]

Mr. Mercier quote<And your assumption of the present value is that no fear or speculation has entered the price?
Things are valued in relation to something else.>

Absolutely.  Or are you stating if there was a severely deflating fiat currency that the dollar amount of gold/silver would consistently go down?  I think in theory that would be okay.  Gold would become used primarily for jewelry, and the deflating currency would be saved.  The production costs dictate the absolute lowest cost of gold, or at least newly mined gold.  Once the cost of gold goes below production costs layoffs occur and mines shut down. 

[Russell Kanning]

I agree with you Ron .... I don't see a need for a standard ..... it would only restrict people in changing their minds. Why not just let everything ride up and down as people buy and sell.

[John Edward Mercier]

That exactly what happens right now. All the commodities including the various currencies 'float'.