1. we don't live in a world where there is just one labourer, and I didn't get rid of the current currency system in my example. I simply gave myself the global farmland and the other guy all the gold, the rest of the economy remains intact and the current money system is still in place.
2. the other guy wouldn't be spending his gold directly, every month he would just convert some to cash to feed himself and his private army he would need to defend his gold.
3. That's the other thing, people point out that other real assets have holding costs and risks, as if gold doesn't.
The fact is the more gold you have the more you have to pay to secure it, offcourse you can just hide it in your house for free, but then your risk goes through the roof,
4. So I don't think you can say gold has no risk, while also saying it has no holding costs.
1. I couldn't be sure from the context. It implied that one guy had only gold to offer and you owned all the farmland and that was all that mattered in the economy. So, I am going to assume now that we are in the actual economy with the exception that you own all the farmland and one guy (with private army) owns all the gold. He must consume from your farmland directly or indirectly.
2 and 3. Got it. Except that he could hold it all via ETF, PMGOLD type of thing, or essentially lease off central banks spread all over the world as it currently is. No armies there, that are visible to me anyway. There is also a cost to storing USD 8tr in cash (whether under you house or electronically) or having to defend the entirety of the farmland in the world which is essentially a monopoly by definition over a vital resource (more vital to life and death than gold).
4. I never said gold was riskless. I have said it is a form of currency ('currency in waiting'), has been a form of currency, acts as a store of wealth and is a commodity. None of that is riskless.
So, to expand the gold vs productive asset example where the guy with the gold eventually exhausts his gold supply in favour of the guy owning a vital source of production (you)... if the guy doesn't do anything productive at all (ie. earns no income whatsoever) he will run out of gold in favour of the rest of the population and, if you only accept gold as payment for your goods, you will come to own all of it. It is just a question of time if you can protect your franchise. No problem with this example. It would be true if the guy was, say, retired and held his entire nest egg in gold.
By the same token, if all this guy has was cash, the same outcome would occur. All his cash would effectively end up in your massive pocket. In that respect, gold and cash serve the same purpose and have the same properties. You seem to be prepared to accept cash or gold (in some form) as payment. This has to be so if you are to own all the gold at some stage. It is thus money for any real purpose between you and the guy, albeit intermediated. He should just pay you in gold at the farm gate, in reality.
For your example to hold, gold is serving as a form of currency. If no-one else thinks of it that way in our economy, then you could reasonably argue that worn-out, brown shoes could also serve as currency. Currency is what people think is currency.
If you are to end up with all the gold in the world, but the guy chips his gold into cash to buy your stuff as you say, then gold stays in circulation. If he needs to convert to cash to buy stuff and, as you believe, gold is not a monetary asset at all but a commodity like others, when you acquire all the gold, no-one values it as a monetary asset because it is no longer in circulation, you are presumably not selling rights over it at a gold backed currency, and the value is essentially indeterminant...it's worth whatever you want to trade it with yourself. To others, it is worth real jewelry and industrial value only...and you trade at far far below current levels given 80%+ of the demand would vapourise. Gold would approach such values as it become less traded and thus less of a monetary asset. It would actually suffer a form of hyperinflation. But I don't think this has ever occurred, whereas fiat has suffered it many times.
Ironically, if you actually wanted to get value for your gold, you would release it progressively as if a mine but whose resource base is fully known and fixed. Then it would become a proxy currency again with time and the value of it would inflate far beyond that for industrial purposes.
By the same token, if the guy had all the rights to produce holes in the ground in all the world and has the machine called 'productive hole producer asset', but the value of his production cannot fed him at the margin, you will see two productive assets in play. But one will dominate, the guy will starve as per the gold example and you will obtain the total value of production from his output prior to expiration. Having productive assets on one end of the transaction doesn't mean anything for the case against gold or currency. You can end up with everything that is produced by another productive asset as well. Everything is relative. Currency is a relative concept. Gold is as well.
Will gold always underperform a productive asset? If the asset is sufficiently profitable relative to capital expended in order to overcome the supply demand dynamics of gold, then absolutely. Except..you only really know that an asset has been productive after it has produced. When over 90% of new businesses don't make it past the first year, at least some choices of productive assets and claims thereon are probably a worse bet than cash at bank or gold. Of course, you'll be able to point to those which have done well. But they survived. Perhaps your stock selection is sufficiently strong that you can jump from asset to asset successfully as they pass production peaks and move towards oblivion. If you do believe that, forget about gold!
Alternatively, why not pick a productive asset where you could lay a legally enforceable claim to the earnings from 1500BC. Are more than 10 still with us? Gold is. How about 200 years ago? How many still alive? The above concepts have already been discussed extensively in this thread. I'll refrain from adding further to it.