OK, this one is eating at me, because the common misunderstandings surrounding the terms value and "intrinsic value", especially as it relates to hard specie, is a topic that makes me very angry.
Intrinsic value has NOTHING to do with marginal utility, how a thing is "valued" by others, or its multiple and varied uses or anything else.
Intrinsic
1. of or relating to the essential nature of a thing; inherent
Intrinsic is actually clear enough. It is the word value, especially as it relates to gold and money, which drops most people unnecessarily down a rabbit hole.
If you look up value, most of the definitions will relate to
desirability, usefulness, exchangeability, worth, merit, importance, etc.,.
And why would we not look to these definitions? We are talking about gold, after all, and especially as it relates to money? Isn't it all economics? And that's where we become idiots, having completely lost our way, because our language has been diluted and confused by common, lazy usage, which gets exploited and further distorted by a combination of sophistry, ignorance and irrelevant references that do little more than obfuscate -- often deliberately, but mostly out of ignorance.
The Founders were not so confused when it came to their usage of the word value. There was a specific meaning to the word "value" which can be clearly deduced from context. When referring to "value" of hard specie, look to the coinage Act of 1792.
Section 9. And be it further enacted, That there shall be from time to time struck and coined at the said mint, coins of gold, silver, and copper, of the following denominations, values and descriptions, viz.
There is a whole listing of these, each of which has the above three elements, but let's look at the dollar only, from further down in that same section:
DOLLARS OR UNITS--each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver.
The Founders looked to the Spanish milled dollar, which was already widely in circulation (
now "current" - which is where we get the term "currency"). They weighed them, assayed them, and averaged them out to find their "value". Not price. Not exchange rate with anything else. Not usefulness or utility. MEASURED CONTENT ONLY. They took an average, and declared that average as a constant, and that was ONLY as a matter of convenience, to make the new currency more easily FUNGIBLE with what was already in circulation.
The "UNIT" or "DOLLAR" was a denomination of "value" based ONLY
weight and purity. Specifically,
of silver. It could not be a matter of weight only, because that did not describe the purity, and that is why we get two definitions for a basic dollar in the Coinage Act. It was either 371 grains of "pure" silver, or 416 grains of "standard" silver - each of which would be roughly equivalent in silver content, based on the technological limitations of that time.
What the "VALUE" of the dollar really described, as defined in that Act, was a coarse description of the number of silver atoms that would comprise ONE UNIT. Or ONE DOLLAR.
It was that simple.
So, back to the common contemporary misuse of the word "value", with the common mistaken applications of alternate definitions of ZERO relevance, and the only definition of value that is relevant to "intrinsic value" is the MATH and PHYSICS definition.
VALUE
6. maths
a. a particular magnitude, number, or amount: the value of the variable was 7
Intrinsic value, therefore, is only the known physical characteristics, or attributes inherent to a thing in terms of
property (e.g., silver of X purity) and
quantity (X grains).
It is nothing but a quantification - a measurement based on known physics. That is not political, social, economic, individual, or anything else.
Someone might say,
"This 1 gram nugget of gold, at .999 purity, has intrinsic value." That is actually a strange way of putting it, because the weight and molecular composition
IS its intrinsic value. In this case, because mass was employed as a unit of measurement, rather than weight, such a nugget would have that same "intrinsic value"
anywhere in the universe, not just on, or in, the Earth. In fact, in the absence of the entire human race, it would still have that same intrinsic value - because all it means is that there are a discrete number of gold atoms connected to a single blob!
In that respect, fiat money ALSO technically has "intrinsic value" - as in the "value", or physical properties, of anything used to represent it, and apart from what it represents as a promise, or fiction - whether paper, base metals, or bits in a computer. That's completely separate from all other definitions of value. The Keynesian-spawned muddle-heads want the focus to be only on personal utility, or individual or aggregate perceptions of value in economic terms only.
So when you say to a Keynesian or other fiat-defender that gold has intrinsic value, remember that you are referring to value in objective, non-normative math and physics terms. They will counter-argue apples against oranges using their preferred definitions of value, all of which are subjective. You aren't making claims about WHY intrinsic value has other "value" according to other definitions of the word. Only that gold has certain physical properties which are not "intrinsic to" un-backed fiat currency. And that is a fact that is not in dispute, because it truly is indisputable.
If they try to rope you into the "value derived from perceptions" trap, agree quickly, because that's both irrelevant and not in dispute. What is usually in dispute is their unwillingness to have that value, based on perceptions, altered by competition. To that you answer, "Then you have no faith in other people's perceptions of fiat money's value in the presence of gold as an untaxed alternative. If you think its value would erode if people are given a choice, then you're on the right track to understand it's REAL value - even according to perceptions."
