Why gold? As a 'standard' it's essentially useless.

• Author: Adams, Tucker Hart
• Position: [the] ECONOMIST - Viewpoint essay

I was in New York City a few weeks ago and had a chance to tour the New York Federal Reserve Bank. One of my graduate fields was in monetary theory, so I was excited to visit the place that is the heart of monetary policy execution.

Decisions made by the Open Market Committee of the Federal Reserve Board to buy and sell treasury securities--the Fed's tool for affecting interest rates--are carried out by the New York Fed.

However, the tour ignored that aspect of the Fed's responsibilities. Everyone but me was there for one purpose--to visit the gold vault five stories underground where hundreds of billions of dollars in gold bars are stored. After a visit to the coin collection and a movie on how cash is handled, we headed down 80 feet to Manhattan bedrock and the gold.

Close to $300 billion in gold bars belonging to several dozen central banks, foreign governments and official international organizations are stored in 122 cages labeled with a number identifying the owner. Bars weigh 27 pounds and are moved by hand, an arduous task. As I looked at the hoard and watched other tour members stick their finger through the mesh cages to touch a bar, all I could think of was "Why?"

Gold coins were last minted for circulation in the U.S. in 1933, and paper currency has not been hacked by gold since 1971. The U.S. dollar is only as good as the full faith and credit of the United States government. Except for the small amount used for jewelry, decorations and filling teeth, gold is essentially useless. You can't eat it, drink it, use it to keep you warm or protect you from the elements. If you were unfortunate enough to become locked in the gold vault, which cannot be opened until the timer allows it, you'd have enough oxygen for 72 hours but nothing else of any use.

I was reminded of the stone money of the Island of Yap, For several centuries the Yapese used giant stone wheels called rai to execute certain exchanges. Rai were made from a special limestone quarried several hundred miles away and shipped to the island.

Although 10 percent of the adult male population was employed in the money-cutting business, the stones had no significance other than as a representation of value. They weren't functional, spiritually...