Now whatever virtues one may ascribe — undeservedly — to the modern variety of the greenback standard, there is one thing that it certainly cannot achieve. It can never become a permanent, lasting system of monetary management. FULL ARTICLE by Ludwig von Mises
Source link: http://archive.mises.org/10723/gold-vs-paper/
Gold vs Paper
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Yet, another 1953 article.
How about a 2009 article.
In 1953, the USA had a lot of gold, is it still true today ?
The authors of this 1953 article would be shocked at what the dollar has become today.
Back in 1953 one once of Gold was worth about $35.00 USD.
Now it’s worth about $1000 USD.
There is so much USD in circulation, if we were to make a gold standard, we would have to fix an ounce of gold at $10,000 USD or more.
And yet, dollars could be counterfeited for gold.
I say, get off the fiat currency system and get off the gold standard.
Pay directly in gold or in silver and forget about issuing promissory notes.
Blend and dilute gold into coins and pay with those coins.
I want hard currency, I no longer want money.
Gold Bog,
You might have a hard time getting that out of Herr von Mises.
Isn’t there a problem with actual gold coins in circulation being worn down and away? You are saying they can be alloyed where that is not a problem? Just curious.
56 years ago this was written, but when you study the pronouncements of “pundits” and “leaders” or talk to most members of the public it’s like LvM never existed. Just now I was sent a link to this little gem about the G20 meeting.
Link
Can you find a single quote in this article that isn’t meaningless drivel? Here are a couple of sweet ones:
“China also understands that its economic-growth model has some flaws. One of them is low consumption capability.â€
The “root cause is the yawning development gap between North and South,†[President Hu] said … referring to developed and poorer nations.
… it will take years for China to build a social safety net, with health care and retirement protections, that would reduce incentives for “precautionary†savings, said Nicholas Lardy, a China economy specialist at the Peterson Institute for International Economics in Washington.
Get it? The world economy won’t improve until the Chinese are separated from their savings and forced into ponzi schemes similar to American SS and British NHS. So much for “think tanks”.
I’m not a keen follower of these Gxx meetings but it strikes me that these pronouncements must be far below what is already a very low standard. If so then I conclude that the problems are so severe and so intractable that none of these politicians dares to slip into logical discourse for even one second – as if the laws of economics can be indefinitely suspended as long as they are officially ignored. I’m guessing that probably Politburo meetings in the Kremlin were a lot like this around the 1985-1989 timeframe.
mpolzkill,
I would like to pay in gold and silver, not in paper.
Gold could be kept in a bank and you could exchange through epayments, like in egold.com
But yes, gold could be alloyed to make coins and in that case, a coin, instead of being an ounce of gold would be a half-ounce of gold with let’s say a half-ounce of nickel so to help the coin not wear down.
“Isn’t there a problem with actual gold coins in circulation being worn down and away?”
I wonder how much of a problem that was for the 15,000 years gold was used as money before 1913.
This wearing down problem has got to be trivial and negligible compared to inflation, hyper-inflation, interest rates manipulation, high taxes, standing army, police-state, IRS spying on you etc.
I’ll trade my currency and my oppression for weared down gold coins anytime.
If you factor in the limited government, the extremely limited taxation, the nonexistence of inflation, the reduced police powers, the reduced military powers, the reduced government encroachment and the reduced intrusion of government in our lives, I bet it’s worth it’s fare share in a few scraches on my coins.
And if you look at your paper money and how worn down, cut, written on, disfigured, discolored and the fact that lots of counterfeit circulate….
I think I can forgive gold to be a little worn down for working hard keeping me free and prosper.
Guys,
Coins are obsolete! With today technology, you can weave gold filaments into kevlar and produce the most resistent notes (with pictures of Mises and Hayek). There are even simple spectroscopic methods for quality checks to eliminate fraud.
Only the will missing, the so called negative attributes of gold are just dead excuses.
Andras,
I’m starting to think that mankind is obsolete and that nature is about to let us know, cap n’ trade or not.
George Selgin makes a powerful argument against a gold standard in which gold coins are used as the only medium of exchange. He takes note that even if you dilute the gold coin, it would have to be extremely small in order to cover certain values. The only system that could really work is a system of parallel metallic standards (such as gold, silver and copper), where the ratio is maintained by the market (not by the government).
If the ratio is maintained by the market, then good money will drive out the bad. If the ratio is maintained by the State, then diluted coins will drive out good coins, because their value would be exactly the same and they would be easier to acquire. On the other hand, purchasing power guarantees that in a free market the issuers of currency would go through great strides to make sure they respond to demand with gold coins which are accurate in weight.
Jonathan, what about Andras’ idea above? A $5 gold coin would be extremely diluted, but it’s not hard to imagine a banknote with $5 of gold thread woven throughout. I’m no metallurgist but I understand gold is very ductile, so maybe even $1 or smaller notes would be feasible.
I never heard the idea of gold-threaded banknotes before, but it sounds like a viable alternative to the exchange risk inherent in Selgin’s multimetallism.
Gold vs Paper could be a misleading title because gold can be transfered by means of paper (bank notes), and also because fiat money can be transfered by means of electronic account money instead of paper. And too, all Fed notes could be changed for coins.
So we could have fiat money with no paper at all !
“If the ratio is maintained by the market, then good money will drive out the bad.”
Do you mean that worn down coins will be driven out, or something else?
If the price of the several metals is set by the market, any and all coins in good condition could trade side by side. It is only when one metal is artificially propped up in price by gov’t edict that the undervalued coins are driven out of the marketplace.
Gold vs paper.
Here is some inherent problems with the argument.
1. Gold is a metal. It is not used for food, shelter or clothing. So it is virtually useless.
2. Any monetary system has to be given a value. Whether you use a gold or tin coin, a piece of paper, or a clam shell. Gold only has value because we say it does.
3. The argument that we have to subsidize the poorer nations so that they can buy our goods. What difference will it make if their country has no gold?
In New Orleans right after Katrina if I were to offer someone 100 lbs of gold or a bottle of water and sandwich which one do you think most would take?
1. Gold is a metal. It is not used for food, shelter or clothing. So it is virtually useless.
Same applies to paper. Send me all your useless money!
“2. Any monetary system has to be given a value. Whether you use a gold or tin coin, a piece of paper, or a clam shell. Gold only has value because we say it does. ”
While you are correct, fiat money (a piece of paper), is printed by the government, gold is not. If you use gold as a currency, you won’t have the government devaluing your currency whenever it needs to pay its bills. Nor will you have the boom/bust cycles that comes with it.
The problem here is that it is also this same government that decide if the currency has to be in gold or else !
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