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News Link • Space Travel and Exploration

Asteroid Worth So Much Money… that it will sink the economy?

• http://www.thedailybell.com

Don't you hate when so much extra wealth is added to society, that the economy tanks?

Wait, what?

Yes, that is what The Daily Star says would happen if an asteroid made up of nickel and iron was harvested and brought back to Earth. They claim the asteroid's materials are worth $10,000 quadrillion.

This would be enough to cause the world's economy – worth $73.7 trillion – to collapse altogether.

They don't bother to explain why these extra resources would sink the economy.

But let me try to interpret their economic illiteracy.

They could be under the impression that money and resources are the same thing. If that amount of fiat dollars were added to the economy, it would certainly cause the economy to crumble. Hyperinflation would be so severe that money would be worthless. Metrics of wealth would be wiped out. The economy would have to start fresh, depending on actual resources, as opposed to financial accounting tricks.

Previous work you did, represented by saved dollars, would be eliminated. It would be like current Venezuela, except much worse. To account for the influx of purchasing power, without any corresponding increase in the supply of goods to be purchased, prices would have to rise dramatically. But before prices had a chance to settle, the global supply of goods would be wiped clean, purchased by rapidly inflating dollars. Either that or people would realize that having the material resource is more valuable than having the worthless money. Either way, you wouldn't be able to buy necessities.

But people don't use iron, or really even nickel as currencies. They use them as materials in manufacturing.

If the asteroid were made up of gold, The Daily Star's prediction of economic turmoil might be slightly more accurate. That is because gold is historically accepted as a currency and a store of value. Flooding the gold market would have a similar effect as flooding the market with cash. Gold stores would become worthless, and the value stored in gold would be lost.

But even then, gold has a material value, even if most of that value is based on scarcity. If the asteroid were made up of gold, it would upset the economy by removing the scarcity value from gold. But whatever the actual value of gold as a material for creating goods would be added to the economy.

It would just be very bad for anyone who currently stores value (such as the reward for previous labor, services, or goods) in gold, because the value of their savings would be extremely diluted. That is because the current value of gold is based more on scarcity than the actual usefulness of the metal.

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