"OK, so how will it be valued for exchanging goods and services? If those holding the gold don't ever give it up, how is the economy going to function. You can't eat gold."
Our 'money' exists as bank deposits. The value of those deposits relies on the banks capacity to pay out those deposits. That depends on the borrowers ability to pay back loans to the bank. The entire banking and monetary sytsem is one big Opes Prime.
Historically the last time the system went into meltdown they confiscated the gold. Notice the right has column that says 'PRISON FOR GOLD HOARDERS'.
To answer your question about how the economy will function Jim Sinclair suggest gold will re-enter the monetary system in the form of a 'gold cover clause'. http://www.jsmineset.com/
