Monday, August 13, 2012

Money? What is that?

One of the major ideas in the liberty movement has been for sound money. Many in the movement understand the basic premise that inflationary methods employed by the federal reserve is bad for the value of our dollar. Most, though, still have trouble with understanding why we advocate a gold backed dollar instead of a nothing backed dollar or even an apples backed dollar. When trying to discuss this idea with others it becomes even more troubling, I know because I did as well. The conversation always goes to why gold or why hard money? What are the benefits of hard money over a fiat money system? First I'd like to discuss what money is and how it came to be then I'll discuss why it is better than fiat currency. Money came about when direct exchange of one good for another good was realized to not be efficient. Someone in history made note that a certain good was more easily trade able, let's say wheat, than other goods were and so it was in their best interest to trade for the wheat. This is because in the future it would be easier to trade that wheat for something else. As this became the norm for individuals acting in an economy certain goods beat out other goods as a good medium of exchange for indirect transactions. History shows that hard metals were typically used as the medium of exchange be it copper, silver, and gold. It should be noted that all the mediums of exchange that emerged are themselves commodities in the market that require labor to produce them. This is the inherent scarcity that is intricately within anything that is truly money, which in a human mind gives it value. Other characteristics of a "good" money is it should be easily divisible as well as not lose value when being divided, it should be recognizable, stable value, and it doesn't decay over time. Each of these play an important role in what people choose to be the dominant medium of exchange in any market and is why gold has been considered a medium of exchange for so long. The liberty movement notes that gold has been money for a long time and this is why we choose the "gold standard" but it must be said that gold doesn't necessarily need to be the medium of exchange, we must allow the market to decide that. Now why is fiat money so bad? I have no problem with paper money but I have a problem with paper money based on nothing, i.e. fiat, forced on individuals at the hands of the State. In a free market people would choose what types of mediums of exchange are to be used and the most efficient medium of exchange would emerge as the norm. If you chose to use hard money, paper money based on hard money, or fiat money it would be your decision and the market would play its role. Having the State force fiat money onto the populace has always led to inflationary policies that lessen the value of the money in your pocket, this is what we call the inflation tax and all taxes are theft. When the State gives a monopoly of the money supply to a private banking company it is illogical and naive to believe that this company has our best interests as they can print and continue to lend money to the government which puts more money in their pockets. At the very least let's legalize competition between money so that we can choose our own paths. In a free society, without the backing of the State, inflationary policies would not work and our money would have a stable value over long periods of time. Don't allow the American people to be slaves to those in control of our money but let's fight and demand control of the value of our money by individuals acting in the market, it's the only moral option we have.

1 comment:

  1. Philipp Bagus has an excellent video on money, watch for a more in dept analysis on money.