![](../style/all/img/bouton/guill2.png) Part 2
Let us agree that the most desirable qualities that money should possess are that it should be easily divisible, that it be accepted everywhere as final payment for all goods, services and debt, that it can be used as the unit of account in all matters and that within a very tight band, it retain its purchasing power forever and a day. Let us also agree that money firstly arose as an idea which led to many different physical representations of the idea. This shows that we can choose what we think will best meet our needs. Gold certainly meets the first 3 of the desirable qualities. However, if honest with ourselves, we will admit that the value of both gold and silver have experienced quite volatile moves in the past (as well as today) and there is no reasonable argument saying that it will not do so again before forever and a day.
Using paper to represent money removes this problem entirely and does so precisely because it has so very little intrinsic value. With paper there is no reason to fear that the discovery of vast new forests would do anything to the purchasing power of the dollar (aside from being able to buy more trees for your dollar). Nor, given recycling technology, do we need to concern ourselves unduly over the ongoing deforestation of our planet; well, at least insofar as being able to maintain the money supply goes. (It would also be possible to make each bill with shorter physical dimensions and/or reintroduce larger denomination bills such as the $1,000 if supply tightened, thereby maintaining the dollar supply with smaller/fewer bills.) The point is that by having for money a representation that cannot as a direct result of its physical composition have its all important purchasing power altered, paper is superior to gold, silver, copper, nickel and bronze. Indeed, it is superior to anything of greater intrinsic value for the very obvious reason that it is the least subject to fluctuations in value and has the ability to easily adapt to any conditions short of a barren planet that forgets how to recycle old bills.
Paper only addresses those few instances from the past when the currency either underwent great change or suffered total failure for no other reason than the actual stuff that was being used to represent money. On its own, paper can no more avert the abuses of government than gold or silver have shown themselves capable of in the past. And those are 98% of the cases. My solution for this vast majority of cases would not be quite as severe as the remedy proposed by OTE, but it would certainly consist of placing grave constraints on the ability of government to show a current account deficit. Those constraints would have to be immutable, with the harshest penalties allowed by law the automatic sentence for anyone trying to circumvent them. (Though a separate issue, it would be somewhat of an added layer of protection if our leaders got but one term in office and that no term be longer than 3 years.) Were it that we could actually get this part right, 98% of the problem would be solved. Paper solves the remaining 2%.
Not to put too fine of a point on this, but it does bear mentioning that regardless of what we choose to have represent money, its purchasing power vis-à-vis any particular good or service will vary over time due to such factors as improvements in production and the value placed on it by the marketplace. So, while the dollar may buy more of item A, it may not purchase quite as much of item B. The objective is that overall, it is worth in a thousand years what it is worth today. And that is what this has all been about. What is the ideal representation for that idea first formed millennia ago?
When first getting involved in precious metals, i was like many of you in that it seemed quite obvious that there was something very wrong going on and that the powers that control such things were playing fast and loose with our money. Gold offered a good port in the storm and it was not a difficult leap from there to believe that having a gold standard would be better for the discipline it would impose. But like OTE, i do not mind being wrong. What i mind is remaining wrong. And so by nature i find myself questioning the validity of my beliefs (as well as those of others). That process has led me to the understanding that something very wrong is indeed going on and that precious metals do offer a measure of protection from the frontal assault taking place against the purchasing power of the dollar. But i also appreciate that neither gold nor silver could have prevented the abuse we have been witnessing; not with these leaders who have no vision beyond the next election and not without immutable laws to curtail the harm they are capable of doing. Realizing that fluctuations in the market value of the substance used to represent money would have deleterious, possibly catastrophic effects on the money itself; it became clear that paper, by removing this wild card, is actually superior to gold for this purpose.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Other considerations are currently demanding my attention and so some of the unrelated things that came up and which i wanted to address will have to await another opportunity. It may be that i let it slide though, for this was the stuff having pertinence to the subject matter we come here for and the remainder is just side show.
Commented 4097 days ago |