pitzerwm
Active member
At one point in man’s agrarian past, cows and goats were a form of money. The Chinese traded cowry shells before moving on to swatches of deerskin. Native Americans used beads made from clamshells. They were all an accepted medium of exchange. But were they good money?
No.
Good money, as Aristotle first laid out in the 300s B.C., must meet four criteria: divisibility, durability, portability and scarcity (another word for Aristotle’s “intrinsic value”).
Cows and goats are divisible to the degree that you could exchange a side of beef for, say, a bushel of wheat. And they were portable in that you could walk your goat over to the chap selling you the wheat. But pestilence and drought limited the durability of livestock, and it’s not like cows and goats have ever been terribly scarce.
While deerskins are divisible, clamshells and cowry shells aren’t. More important, all you have to do to increase your personal money supply is go out and kill a few deer or stroll along a beach... and suddenly you’re rolling in riches! Easy access to more currency doesn’t make for sound money.
Today’s Western central bankers operate much like beachcombers — only they’re dredging the shoreline with an armada of backhoes and dumping the shells into a wampum economy. The dollars, euros and yen they create are about as scarce as fleas on an outdoor cat. Their value is based solely on faith that the pieces of paper — for the time being at least — are tradable for groceries, gas and bubble gum.
But what about gold?
Divisibility certainly is possible. Durability and portability are unquestioned. As for scarcity... well, miners around the world produced just 76.8 million ounces of gold in 2010, according to the U.S. Geologic Survey — the equivalent of about a quarter ounce of gold for every American.
Fed Chairman Ben Bernanke with his double-barreled quantitative easing campaigns created through fiat a combined 1.7 trillion dollar units — enough to fatten every American wallet with an additional 5,452 dollar bills.
Which is scarcer?
The Difference between Money and Currency
Money is real because its scarcity gives it intrinsic value.
Currency, however, is not so real.
Currency is not a tangible item you can physically hold. It is an invention of the mind we use as a stand in for something else — money. Currency can be an excellent stand in for money, so long as real money always stands behind the currency.
The U.S. dollar, British pound, French franc and German mark (before the invention of the doomed euro) were all at one point backed by gold — the so-called gold standard. But monetary authorities removed the gold. What remained were currency shells.
That’s why today’s currency looks like money. And smells like money.
But it is not money. It is a shell that we ascribe value to at the moment, but then again today’s U.S. dollar bills could just as easily be tomorrow’s cows and goats.
Money — gold, a tangible item — has not lost any value. But the currency — dollars, pounds, yen — most certainly has. The dollar’s spending power has eroded by 50% since gold was freed entirely from government price manipulation in 1973. In the last decade alone, the period in which Congress began spending with criminal disregard for the country, the dollar has lost 4.2% each year on average.
In terms of gold, however, the dollar has lost nearly 85% of its value.
No.
Good money, as Aristotle first laid out in the 300s B.C., must meet four criteria: divisibility, durability, portability and scarcity (another word for Aristotle’s “intrinsic value”).
Cows and goats are divisible to the degree that you could exchange a side of beef for, say, a bushel of wheat. And they were portable in that you could walk your goat over to the chap selling you the wheat. But pestilence and drought limited the durability of livestock, and it’s not like cows and goats have ever been terribly scarce.
While deerskins are divisible, clamshells and cowry shells aren’t. More important, all you have to do to increase your personal money supply is go out and kill a few deer or stroll along a beach... and suddenly you’re rolling in riches! Easy access to more currency doesn’t make for sound money.
Today’s Western central bankers operate much like beachcombers — only they’re dredging the shoreline with an armada of backhoes and dumping the shells into a wampum economy. The dollars, euros and yen they create are about as scarce as fleas on an outdoor cat. Their value is based solely on faith that the pieces of paper — for the time being at least — are tradable for groceries, gas and bubble gum.
But what about gold?
Divisibility certainly is possible. Durability and portability are unquestioned. As for scarcity... well, miners around the world produced just 76.8 million ounces of gold in 2010, according to the U.S. Geologic Survey — the equivalent of about a quarter ounce of gold for every American.
Fed Chairman Ben Bernanke with his double-barreled quantitative easing campaigns created through fiat a combined 1.7 trillion dollar units — enough to fatten every American wallet with an additional 5,452 dollar bills.
Which is scarcer?
The Difference between Money and Currency
Money is real because its scarcity gives it intrinsic value.
Currency, however, is not so real.
Currency is not a tangible item you can physically hold. It is an invention of the mind we use as a stand in for something else — money. Currency can be an excellent stand in for money, so long as real money always stands behind the currency.
The U.S. dollar, British pound, French franc and German mark (before the invention of the doomed euro) were all at one point backed by gold — the so-called gold standard. But monetary authorities removed the gold. What remained were currency shells.
That’s why today’s currency looks like money. And smells like money.
But it is not money. It is a shell that we ascribe value to at the moment, but then again today’s U.S. dollar bills could just as easily be tomorrow’s cows and goats.
Money — gold, a tangible item — has not lost any value. But the currency — dollars, pounds, yen — most certainly has. The dollar’s spending power has eroded by 50% since gold was freed entirely from government price manipulation in 1973. In the last decade alone, the period in which Congress began spending with criminal disregard for the country, the dollar has lost 4.2% each year on average.
In terms of gold, however, the dollar has lost nearly 85% of its value.
