[PLUG-TALK] What is money? (was Fair Use, etc.)

Dylan Reinhardt dylan at dylanreinhardt.com
Sat Mar 30 00:05:05 UTC 2002


> You are forgetting that the "tokens" as you call them,
> are credit - not money.

Quite the opposite.  I use the word "tokens" to refer to gold coins, bushels
of wheat, and any other medium of exchange that supposedly derives its value
from what it is made from.

Coins and bushels of wheat are tokens in that they are physically passed
from one holder to the next, giving each holder the full possession of their
value.

I use the term "tokens" to *specifically* denote that gold (or other material)
based systems assume scarcity, proximity, and a relatively fixed, steady
value for total economic output.

The difference between using gold for currency and using legal tender boils
down to exactly one thing: who/what you trust.  If you consider legal tender
to be valuable, it is because you have put your faith in the country that
issues it.  As you're no doubt aware, there are many examples where a country
has failed to live up to the level of trust required to sustain a valuable
currency and has seen the value of their currency collapse.

But gold isn't foolproof either.  It only has value to the extent that people
agree that it has value... and only so much value as people are inclined
to assign it.  You're welcome to empty your bank account and convert the
whole thing to gold... but good luck using it for anything.  I'd wager you
could have a gold coin worth hundreds of dollars and you still wouldn't
be able to buy a latte with it.  That's because you'd be hard pressed to
find anyone, anywhere, who is willing (or able) to properly accept gold
for payment of any size.

So which do you trust more?  The stability of the US economy or the persistance
of a cultural bias to overvalue a certain soft, shiny metal?  You and I
can probably agree that our country could be more fiscally wise... but do
you really think we're going to become the next Germany/Mexico/Argentina
case of runaway hyperinflation?  I doubt it.

As low a regard as I hold for much of our policy, I feel there is one power
I can truly depend on: greed.  I highly doubt that Microsoft, McDonald's,
Starbucks, Disney, et al have been able to transform their corporate holdings
into dubloons.  I believe this is obvious enough given that the worldwide
supply of gold is probably insufficient to cover MS's holdings alone.  As
incompetently as we approach economics sometimes, there are a large number
of very well-resourced entities who have a strong incentive to see the value
of their holdings endure.  In this, our interests and their interests
are well-aligned.

You point out, correctly, that hyperinflation is a risk of fiat currency.
The other side of that coin is that staggering recession and crushing depression
are risks (indeed, predicted outcomes) of metal-based money systems.

Some links are in order here:
http://econ161.berkeley.edu/TCEH/Slouch_Gold8.html
http://www.huppi.com/kangaroo/L-ausgold.htm
http://www.huppi.com/kangaroo/L-gold.htm
http://www.j-bradford-delong.net/Politics/whynotthegoldstandard.html
http://www.people.virginia.edu/~ago8f/econ202/depression.html

And that's just a quick sample of available readings... two minutes on Google.
The relationship between gold and recessionary economies is very solid:
notice how we haven't had *any* depressions since we fully abandoned the
gold standard?  The depression of the 1930s was only the last of several
economic crisies wreaked by the religious devotion to gold as the measure
of value... there were several others just in 150 years of US History leading
up to the abandonment of gold.

As for wondering how you convert your bank account to gold... well, it's
not that tough.  Start here (http://goldinfo.net) or any of 100s of other
places.  But be forewarned: when you take a few Krugerrands to the bank
to pay off your home/car loan, you might be surprised to learn that they
would actually prefer a check.

Dylan







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