| | I am now focused on the economic distortion of using a rare commodity to represent all the world's wealth, and whether it makes such use impractical/undesirable. Obviously the 1 pound example is extreme, but I can't tell where you get off the slippery slope. Is there a certain mass where you can just say the economic distortions are minor enough not to matter? How would it be determined?
Per http://en.wikipedia.org/wiki/Gold, there is 20m cubed of Au extracted in the world. Your physical traits figures are correct (troy ounces), 20m means (2/3)^3 of your figure for mass, so roughly 1/3.3 times as much. Per http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt, US M3 is roughly $9.8T. I don't know if that's the best of myriad ways to measure money supply, but I don't know of one better offhand. I've read (long ago, no link) that US accounts for 15-25% of the wealth in the world.
So depending on the figures SWAG world money supply now at $39T-$65T, and value representable by all gold in the world at current spot price as $2T-$7T. If 100% gold backed currency were adopted worldwide, I'd expect gold to acquire roughly 10 times the buying power (in goods and services, assuming dollars are gone) that it has now. That's certainly not enough that people are going to harvest moon dust or create gold atomically, but it does seem like it would lead to immense new investment in producing more gold. Do you expect the economic effects of say an order of magnitude difference to not be enough of a concern to worry about when moving to commodity backing for currency?
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