A friend asked me the other day why I’m such an adherent to the idea of a gold standard. No major country or economy is on it anymore and surely there simply isn’t enough gold available. It just couldn’t be a possibility any more than time travel.
Well, I advised him to read Rothbard’s short essay “The Case for a 100 percent gold dollar” for starters.
we should keep in mind that money, in any market economy advanced beyond the stage of primitive barter, is the nerve center of the economic system.
Perhaps nothing so eloquently and perfectly sums up money’s importance to a modern, industrial, advanced economy. Thus, and for that simple reason alone, money ought be inviolate. It ought to be truly “good as gold”, ought to be “the gold standard” of exchange media.
For all the great expositions on the necessity of gold backed currency, the Austrian School has so much valuable and insightful literature that must be read, I would argue that most important reason is also the simplest.
And it is this: if your money isn’t backed by anything, it isn’t worth anything.
I’m positive that that’s already been written with far greater detail, but it really is the heart of the matter. When you give someone a dollar, it absolutely must be backed by something. It must be a true store of value, a real unit of measure. It cannot be arbitrary, must not be uncertain.
A dollar isn’t really a dollar, but a representation of a dollar worth of something. Period. When I accept a dollar for payment in exchange for my labor, when I give that dollar to someone as payment in exchange for goods and services, the two must be equivalent as determined by some precise and set device.
They might have relatively different values, as I desire the good more than the dollar, for instance, or one might desire my dollar more than their good or service.
However, when the money isn’t worth anything, as with our current fiat system, it completely changes the calculus. Then, neither side desires the dollar at all but prefers it in a sort of intertemporal equilibrium until they can dispense of it, always with great haste.
Worthless fiat money distorts our actions, time preferences, and decision making and valuation processes. In doing so, the government through force and coercion, as we cannot by law use anything other then their filthy lucre, alters our behavioral patterns.
Print more and more money, debase the currency, and destroy 97% of the value of a dollar over the life of the fed.
It ought to be said. 100 percent gold is not only the proper and only course for sound economics. It is also a moral course. A fiat currency, a fractional reserve banking system, is immoral. It is a lie, and forces people to live what what is basically a lie.
We are all forced to believe that pieces of paper with green ink and a couple of signatures are somehow desirable and valuable. We in turn pass these pieces of paper off to others. And so the cycle goes.