Proposals for monetary reform are ubiquitous, but Murray N. Rothbard argued that only one reform makes sense in light of sound theory, history, and practical political reality: the 100% gold coin standard. In this article, Rothbard argues for this reform as against proposals by F.A. Hayek and others who favor commodity baskets and other schemes. Anyone can attempt to market a good as money (examples litter the web). But as Rothbard reminds us: “Issuance and acceptance are two very different matters.” [More]
Source link: http://blog.mises.org/1937/the-case-for-a-genuine-gold-dollar/
The Case for a Genuine Gold Dollar
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An excellent topic of Mises Institute researchers is to examine the economic consequences of Rothbard’s proposal for immediate gold-backing of the dollar, perhaps in comparison with Hayek’s more gradual step of abolishing legal tender laws, and what political consequences such economic effects would have (or how to mitigate same). It is easy to proclaim yourself dictator and instantly fix our economic troubles, but that is not reality, where the recessionary shock of immediate transition will run your government out of office at the next election. The Fed itself wasn’t established in a day, as Rothbard himself excellently described.
It occurs to me that there is a way to implement Hayek’s plan. Why couldn’t a bank merely allow accounts that are denominated in gold? Using your debit card or a check (acceptable as a unit of exchange in our economy) would result in a debit of your account in ounces of gold. Am I missing something?
Joe Calhoun
I’ve never understood Murray’s insistence that people would go on using fiat US dollars even if they had the option to use gold backed certificates once the legal tender law was abolished.
Beyond the orbit of Mars lies the Asteroid Belt which includes many multi-million ton heavy metal asteroids. On Earth these metals tend to sink to the centre & so are rare where we live.
If any of these asteroids run to even 1% gold (almost certainly a gross underestimate) the first guy to mine it would be able to buy Bill Gates with small change.
Since I think that getting into space is the most important thing the human race could be doing I am not absolutely opposed to this but going back on the gold standard is setting ourselves up for a massive inflation when it happens.
I doubt that very much. One reason gold is so expensive is the difficulty in mining it. Mining gold ore on an asteroid doesn’t sound too easy to me.
Whatever unit a government offers to pay with for the goods and services it requires will be dominant in that government’s domain.
The volume of purchases by even the smallest government in the world is so large in relation to the economy of that government’s domain that its exchange unit will tend to push out all others.
The government’s officials, employees, contractors and suppliers all being paid in the government’s choice of unit, and others wishing to sell goods and services to them in their private lives, that unit will dominate.
Have you noticed that, as unpopular as the “Susan B.” is, no one with something to sell refuses to take them?
Joe Calhoun writes: “Why couldn’t a bank merely allow accounts that are denominated in gold?”
See http://www.e-gold.com. (I don’t have any experience with this company. I was just pleasantly surprised to discover something like this already existed.)
I think the real problem is that everyone is already set up to do their accounting in terms of dollars. Call me cynical, but I think it’s going to take the collapse of the dollar to get people to switch. Call me cynical but I don’t think this is a remote possibility. And if you haven’t already, also see:
http://www.currentconcerns.ch/archive/2003/04/20030409.php
‘Twas written, “Whatever unit a government offers to pay with for the goods and services it requires will be dominant in that government’s domain.”
And, just as if not more importantly, whatever unit the government demands for payment of taxes!
Subject: Re: The Case for a Genuine Gold Dollar
I have to disagree, and for good cause……first, for the reason:
“Give me the right to make a nation’s currency, and I care not who makes its laws.” Mayer Amschel Rothschild, 1743-1812.
Nothing new under the sun here…..
Dr. Edwin Vierra Jr. clearly beat this man [Mises and Hayek] to the punch…..revoke the FRB Charter……but, most importantly is the realization, and not from a revisionist theory, that America never was never landed on a gold standard to begin with, rather a silver standard; and
Who cares if 5,000 diffeent competing fiat paper currency providers take it upon themselves to print and issue their currency, it changes nothing in relation to the value of property which it represents, except for $0.00, which is nothing different than the FRB today……too bad some people can’t think outside the box….if it doesn’t have numismatic or intrinsic value of its own clearly established by law, then it has no value and that means, property in its liquidated form [money] has no value either……regardless of who printed and circulated its [property(s)] liquid form…..ta ta! Qui Tam
Thant Tessman pointed out e-gold. There are also a half dozen other reputable “digital gold currencies” (DGCs) — and some less reputable (see http://gdcaonline.com/ for reputation service, http://garzoo.com/ for search), as well as NORFED.org in the US, who offer silver coins and silver-backed notes (they seem to have some strange ideas, but reports I’ve seen suggest they’re fairly widely accepted)
[Also worth noting is that http://cambist.net offers a cheque-writing service that you can pay for with various DGCs -- they mail out cheques in various national currencies]
I keep hoping mises.org will announce an e-gold account number for donations. DGCs are /far/ better (not to mention cheaper) than credit cards!
Ive thought about how to switch back to a gold based currency – without killing the economy in the process. Here is what I’ve come up with:
1) monetize all debts and deposit the proceeds into the lenders bank account.
2) tell everyone they have X days to deposit their dollars into a bank account or lose them forever.
3) total up all the dollars in bank accounts and divide by all the gold held by the government.
4) issue a new paper dollar until gold coins can be minted and used as currency.
it’s simple, yet effective. no massive deflation as all debts have been payed off/monetized, and the hyperinflation lasts a few days instead of the usual 2-3 years.
re Allan’s plan:
That seemed roughly Rothbard’s plan. Are you leaving out resolution of fractional reserve banking? If banks, with Fed backing, are allowed to continue lending at current rates, what do you do about the inevitable run on the banks? If fractional reserve banking is ended, in essence you are hiking “interest rates” substantially and immediately, numerous debt-laden businesses will terminate, many banks will fail, many depositors will lose their funds, US FDIC protection will require massive tax hikes to cover the “insurance”, the resulting further drain of funds from the private economy will further reduce economic activity, causing further loan defaults, bank failures, and FDIC payouts, and at some point in the cataclysm, politicians will have been voted into office who will undo everything.
Politically, it seems there must be a much more gradulist approach (such as the way the Fed got established in the first place). Perhaps first starting out with increasing reserve requirements 0.5 percentage points each year. As reserve requirements increase, banks will be compelled to attract real funds on extended maturities (CDs etc.). While debtors lose, creditors and savers gain from the increased return on their savings and not being crowded out by fake money.
But that could also be undone at any point by new politicians who leap at the howls of the credit-hungry.
Is the only way out to run the current system to its logical conclusion, a mass seminar on the nature of money, to get a sufficient number of people to realize fiat currency and fractional reserve banking are the root problems and the only redemption is through a commodity money?
First, thank you in advance for any comments on this.
Second: In response to Mr. White’s post about asteroid mining…it’s difficult, but not impossible. One of the basic ideas I’ve seen is to essentially blow it up, then melt it using solar mirrors. Not fast, but probably not real expensive.
But this brings up a wider matter: Some cruising around the web yesterday unearthed the fact that gold production is about equal to gold “consumption” (gold used for jewelry, other decorative uses, etc.) What if, either by “mining the asteroids” or filtering seawater (which has some gold dissolved in it, and might be possible in a few years when the nanotechnology revolution really gets going), gold is no longer as rare as it is now?
Third: HELP! If I understand Dr. Rothbard’s proposal, it’s basically the Fed’s M1 divided by the number of gold ounces the Fed holds. Can anyone recommend a site that shows the amount of gold the Fed has? (Funny…it’s not on their site). And the current (or most current) M1 total.
And Dr. Rothbard, may your shade be praised, thank you.
Be well all…
Apparently, nobody knows how much gold the Fed has. From what I’ve read, the last time it was properly audited was some time in the 1950′s, and they’ve been “leasing” out gold to so-called “bullion banks” at low interest rates, who sell it and invest the money at higher rates, but there’s no chance they’re going to pay the gold back: trying to buy it back would push the price up too high. But that missing gold is still on their books.
I’ve seen it suggested that the Fed might not have even a single ounce of gold.
According to Wikipedia’s article on the dollar, there was around $540 billon (face value) worth of US currency circulating in July 2000. Wikipedia also states that “if all the gold held by the US government was again required to back the circulating US currency, gold would be $25,000/ounce.” Unfortunately no source is given, but a simple calculation would tell us that the US Government holds about 21.6 million ounces of gold.
Looking at the Fed’s asset report, they claim to have $11 billion worth of gold holdings. But as the footnote indicates, they are valuing this gold at $42.22/oz. This works out to 260 million ounces of gold.
This is off by a factor of ten from my previous post. My error or Wikipedia’s?
mike,
there would be no deflation as step 1 is monetizing all debts – public and private. so all businesses start off debt free, the national debt is “payed off”, and mom and pops mortgages and credit cards are also monetized. no debt makes deflation impossible. imports such as oil will be expensive until we begin making things in the usa that the world wishes to buy, but that pain is nothing compared to the alternatives.
as for the banks, i think that they should regulated as such: all banks are able to offer 2 types of accounts. checking and savings.
checking accounts would be payable (in gold or silver) on demand. the banks would be required to have a 100% reserve on checking accounts, and be required to charge the depositors for the costs associated with their checking accounts.
as for savings accounts (time deposits) the banks should offer a proportional return depending upon the banks investment returns over a specified time period. let the banks have a 0% reserve ratio on time deposits and let the individual banks print paper tokens with a specified date of reimbursement.
require banks to carry private insurance, and that bank stock owners are liable for bank failures. let depositors take their claims to court if the bank fails.
no fdic, no government interventions of any kind – just box the banks in so they provide the public services neccessary, and at the same time are unable to goose the money supply and economy beyond stable possibilites.
the current monetary system is going to mushroom into hyperinflation sooner or later. gold and silver will once again become money. the only question is are we going to do it the easy way or the hard way?
A bit over 260 million ounces, less whatever isn’t really there! See http://www.gata.org/fedsact.html for some information on the leasing carry-on. Greenspan claims the US Fed doesn’t lease gold, but he may be playing word games: he says the Fed /can’t/ lease gold because it doesn’t own any – which is true, it’s “owned” by the US Treasury (well, it was stolen from private US citizens, but Treasury /claims/ to own it), which isn’t the Fed – but he doesn’t say the gold isn’t being leased out.
Thank you all, especially Mr. Horpedal. The 260 million ounces figure does seem to be consistent with the other stuff I’ve found.
I am a little worried though…no audit since the 50′s? Hmmm…
Seriously, my thanks again.
Just to correct footnote [9], post-WWII pre-Euro Luxembourg was in a monetary union with Belgium, and both Luxembourgish and Belgian currency was legal tender in both countries (even though most of Belgium refused to accept Luxembourgish currency out of ignorance). The low prices of certain commodities (such as oil products, tobacco and spirits), due to significant lower taxation rates, incited (and still incites, even though the European Union has forced up rates of taxation) many Belgian, French and German nationals to buy these goods in Luxembourg. Most shops in the French and German border regions would accept (and price their goods in) the neighbour’s currency, but at a worse rate than could be obtained in a bank. Luxembourgers themselves, however, would not accept nor use anything else but Belgo-Luxembourgish francs, so it is a bit exagerated to claim that three government currencies—those of France, West Germany, and Luxemburg itself—circulate[d] side by side.
As an interesting aside, two private banks (Banque du Luxembourg and Banque Internationale a Luxembourg, if I recall correctly) continued to have the right to emit bank notes until the arrival of the Euro.
what about stocks and bonds. They are effectivly a private curency since real value is behind them. They can be traded on the open market, and it is not too much bother to convert them to cash which than can be used to purchase whatever else you want. It would be only a small step when stocks and bonds are traded directly for goods.
It is true that companies can always issue new equity up to a limit, but this is not creating a money from thin air, since new shares are then sold on an open market and money from sale goes back to company. Even tho existing shareholders loose share in company when company issues equity, value of them company increases by enough to ofset the loss in ownership of existing share-holders. In essence value behind a share cannot be created or destroyed arbitrarily bo someones decision do do so.
Bonds are nothing more than debt in dollars, but their value is independenty of US goverment and is based on peoples expectation od profit from the bond (and this would presumably include expectation of inflation of dollar), therefore value of corporate bond is independent of goverment. It is true that value of a bond will go down if company decided to issue huge amounts of new debt, but bonds are freely tredable and company that is recless with it’s credit would soon be unable to get any.
While I have nothing against the Gold Standard, and believe it could serve man very well. I think F.A. Von Hayek was on to something and we should give it some more consideration. Hayek’s semi fiat currency economy was started by printing paper notes, putting them in circulation by purchasing different commodities. While I understand why he didn’t want to limit the commodities being purchased for the sake of liberty. If I were issuing “Kozi’s,” I would put them in circulation by purchasing gold, because I believe I could maximize my profits by purchasing gold rather than any other commodity. So in essence, my currency would be backed up by gold. But not a certain weight of gold, rather a constantly changing weight of gold. The reason why I believe gold would maximize my profits, is because if my paper notes started to lose value because of over circulation, gold would most likely appreciate faster then any other commodity in the long run. Meaning my basket of gold would be increasing in value as my Kozi’s were losing value, so I would sell my gold and hoard my Kozi’s taking them out of circulation. Thus reestablishing their value. Yes, the very reason why I want to consider Hayek’s ideas is to accomplish justice by price stabilization.
I believe that this semi fiat currency demands competition, it won’t work in a monopoly unless the person operating the monopoly is an absolutely just man without exception. Like the gold standard, this economy will not work with a fractional reserve banking system, nor will it work with a central banking system competing against it. So I purpose that banks be simple brokers, charging a fee to people who have money, to find people who need money and evaluate what kind of risk they would be to loan money to. The borrower and lender would be free to negotiate an interest rate based of course on supply and demand, but also risk. Let all contracts made be transferable, so both the borrower and the lender can sell their end of the contract to a different party at any time. Though premiums and/or discounts would be in order, if there was a change in either the interest rate since the original contract was made, or the risk rate of the original contract.
I think that the interest rate which floats on supply and demand would be a good indicator of when the economy is in need of more or less cash. If interest rate is up, it is an indication that the economy could use more cash, if down, less. Now going by interest rate alone would get me in trouble under certain conditions. So we also need to monitor consumer prices. Now consumer prices can only be a good indicator if their change is from monetary reasons rather then supply reasons. So I would put more Kozi’s in circulation by purchasing gold only when; 1. Interest rates have gone up. 2. consumer prices are stable or down. 3. If consumer prices are down, it’s not because of an over supply of consumer goods. – I would sell gold for Kozi’s taking them out of circulation only if; 1.The interest rate is down. 2. Consumer prices are stable or up. 3. If consumer prices are up, it’s not because there is a shortage of consumer goods. Because I am not increasing and decreasing the supply of money when consumer prices change for supply reasons, I am not misallocating any capital. Yet, since monitoring consumer monetary inflation is more of an educated guess then it could ever be an exact science. This is the biggest obstacle to the best economic system designed to accomplish price stability.
Now achieving price stability gets very interesting if the wealth per person in a nation is increasing. Because if we have more goods that we can buy, and we want to keep the value of the dollar the same, salaries are going to have to increase, and consumer prices (because some entrepreneurs will only be able to get an increase in salary if some consumer prices increase) are going to have increase or decrease. How can we increase salaries and consumer prices without diminishing the purchasing power of the dollar? How can we have a decrease in consumer prices, without increasing the purchasing power of the dollar? In theory it only seems possible if we have a proportionate amount of decrease in consumer prices as we have increase in other consumer prices, where the dollar value of both the increase and decrease in consumer prices together would be equal to the dollar value of the increase in salaries and wages. So decreasing consumer prices in proportion to increasing other consumer prices, would be an equal and opposite movement, which would keep the actual purchasing power of the dollar the same or stable, as the supply of money is increased, to allow for the increase in goods and wealth. Now I believe this chain of events establishing justice would occur naturally in F.A. Von Hayek’s semi fiat currency economy.
So in conclusion the deflation that is associated with the gold standard forces borrowers to pay back loans with money that is worth more then the money they originally barrowed. Which is the same kind of injustice that lenders get stuck with during periods of inflation, being paid back money that is worth less then it was when they originally lent it out. So the advantages of the gold standard is it takes no educated guesses or price index to manage it, it’s dummy proof. It’s disadvantage is an injustice. The advantage of a economic system that accomplishes price stability is true justice, but it’s disadvantage is that it is only as good as the educated guesses and indexes it takes to manage it.
Of course the injustice of the gold standard can also be mostly eliminated by returning to the Scholastic definition of Usury. Interest can only be charged on money that has earned a return. So the interest is forgiven on bad debts, and no interest is allowed to be charged on house loans or any other type of consumer loan. Though you can borrow someone money to buy a house etc. without charging them interest at all. So in the end only money borrowed and invested that received a return on investment can be charged interest. So when deflation occurs in the gold standard, only those who have made a profit will be stuck with the injustice of deflation. That definition of usury would make the economy more downwardly flexible.
Perhaps another way of eliminating most of the injustice in the gold standard would be to make loan contracts that reduce the principle debt of the loan at the same rate as the deflation rate?
Since justice is a divine attribute it is not surprising that it does not occur naturally in the economy of nature. In the spiritual realm not even the mercy of God was allowed to diminish the justice of God. Let us cultivate the earth and bring order to it, the divine order. Let us subdue our bodies and make them subject to the souls of ours that God breathed into us giving us His likeness. Let us subdue the nature that we have dominion over, so we can finally have a nation, an economy, with justice for all!
Then again the deflation rate in the gold standard would probably be a small percent per year, compared to the inflation rate of the central banking system. So the injustice of the gold standard could be absorbed better then the injustice in the inflationary central banking system. For to bring on deflation in the gold standard it takes (most likely the primary method) a increase of wealth produced per person, which probably does not occur on a large scale.
Anyway the primary reason to consider Hayek’s ideas is too inquire into weather an economy with price stability would actually establish an economy with more justice then the gold standard. I dabbled a little into the complicated readjustments that would occur in such an economy. Because I haven’t decided for sure, the question of the day is: Does the economy with price stability make all the necessary readjustments to an increase in wealth per person without creating an injustice? Or is the injustice we can observe in the gold standard, simply transferred to other persons in the many readjustments which would need to occur in the economy with price stability? Any thoughts on the subject?
Michael Koziolek
While I have nothing against the Gold Standard, and believe it could serve man very well. I think F.A. Von Hayek was on to something and we should give it some more consideration. Hayek’s semi fiat currency economy was started by printing paper notes, putting them in circulation by purchasing different commodities. While I understand why he didn’t want to limit the commodities being purchased for the sake of liberty. If I were issuing “Kozi’s,” I would put them in circulation by purchasing gold, because I believe I could maximize my profits by purchasing gold rather than any other commodity. So in essence, my currency would be backed up by gold. But not a certain weight of gold, rather a constantly changing weight of gold. The reason why I believe gold would maximize my profits, is because if my paper notes started to lose value because of over circulation, gold would most likely appreciate faster then any other commodity in the long run. Meaning my basket of gold would be increasing in value as my Kozi’s were losing value, so I would sell my gold and hoard my Kozi’s taking them out of circulation. Thus reestablishing their value. Yes, the very reason why I want to consider Hayek’s ideas is to accomplish justice by price stabilization.
I believe that this semi fiat currency demands competition, it won’t work in a monopoly unless the person operating the monopoly is an absolutely just man without exception. Like the gold standard, this economy will not work with a fractional reserve banking system, nor will it work with a central banking system competing against it. So I purpose that banks be simple brokers, charging a fee to people who have money, to find people who need money and evaluate what kind of risk they would be to loan money to. The borrower and lender would be free to negotiate an interest rate based of course on supply and demand, but also risk. Let all contracts made be transferable, so both the borrower and the lender can sell their end of the contract to a different party at any time. Though premiums and/or discounts would be in order, if there was a change in either the interest rate since the original contract was made, or the risk rate of the original contract.
I think that the interest rate which floats on supply and demand would be a good indicator of when the economy is in need of more or less cash. If interest rate is up, it is an indication that the economy could use more cash, if down, less. Now going by interest rate alone would get me in trouble under certain conditions. So we also need to monitor consumer prices. Now consumer prices can only be a good indicator if their change is from monetary reasons rather then supply reasons. So I would put more Kozi’s in circulation by purchasing gold only when; 1. Interest rates have gone up. 2. consumer prices are stable or down. 3. If consumer prices are down, it’s not because of an over supply of consumer goods. – I would sell gold for Kozi’s taking them out of circulation only if; 1.The interest rate is down. 2. Consumer prices are stable or up. 3. If consumer prices are up, it’s not because there is a shortage of consumer goods. Because I am not increasing and decreasing the supply of money when consumer prices change for supply reasons, I am not misallocating any capital. Yet, since monitoring consumer monetary inflation is more of an educated guess then it could ever be an exact science. This is the biggest obstacle to the best economic system designed to accomplish price stability.
Now achieving price stability gets very interesting if the wealth per person in a nation is increasing. Because if we have more goods that we can buy, and we want to keep the value of the dollar the same, salaries are going to have to increase, and consumer prices (because some entrepreneurs will only be able to get an increase in salary if some consumer prices increase) are going to have increase or decrease. How can we increase salaries and consumer prices without diminishing the purchasing power of the dollar? How can we have a decrease in consumer prices, without increasing the purchasing power of the dollar? In theory it only seems possible if we have a proportionate amount of decrease in consumer prices as we have increase in other consumer prices, where the dollar value of both the increase and decrease in consumer prices together would be equal to the dollar value of the increase in salaries and wages. So decreasing consumer prices in proportion to increasing other consumer prices, would be an equal and opposite movement, which would keep the actual purchasing power of the dollar the same or stable, as the supply of money is increased, to allow for the increase in goods and wealth. Now I believe this chain of events establishing justice would occur naturally in F.A. Von Hayek’s semi fiat currency economy.
So in conclusion the deflation that is associated with the gold standard forces borrowers to pay back loans with money that is worth more then the money they originally barrowed. Which is the same kind of injustice that lenders get stuck with during periods of inflation, being paid back money that is worth less then it was when they originally lent it out. So the advantages of the gold standard is it takes no educated guesses or price index to manage it, it’s dummy proof. It’s disadvantage is an injustice. The advantage of a economic system that accomplishes price stability is true justice, but it’s disadvantage is that it is only as good as the educated guesses and indexes it takes to manage it.
Of course the injustice of the gold standard can also be mostly eliminated by returning to the Scholastic definition of Usury. Interest can only be charged on money that has earned a return. So the interest is forgiven on bad debts, and no interest is allowed to be charged on house loans or any other type of consumer loan. Though you can borrow someone money to buy a house etc. without charging them interest at all. So in the end only money borrowed and invested that received a return on investment can be charged interest. So when deflation occurs in the gold standard, only those who have made a profit will be stuck with the injustice of deflation. That definition of usury would make the economy more downwardly flexible.
Perhaps another way of eliminating most of the injustice in the gold standard would be to make loan contracts that reduce the principle debt of the loan at the same rate as the deflation rate?
Since justice is a divine attribute it is not surprising that it does not occur naturally in the economy of nature. In the spiritual realm not even the mercy of God was allowed to diminish the justice of God. Let us cultivate the earth and bring order to it, the divine order. Let us subdue our bodies and make them subject to the souls of ours that God breathed into us giving us His likeness. Let us subdue the nature that we have dominion over, so we can finally have a nation, an economy, with justice for all!
Then again the deflation rate in the gold standard would probably be a small percent per year, compared to the inflation rate of the central banking system. So the injustice of the gold standard could be absorbed better then the injustice in the inflationary central banking system. For to bring on deflation in the gold standard it takes (most likely the primary method) a increase of wealth produced per person, which probably does not occur on a large scale.
Anyway the primary reason to consider Hayek’s ideas is too inquire into weather an economy with price stability would actually establish an economy with more justice then the gold standard. I dabbled a little into the complicated readjustments that would occur in such an economy. Because I haven’t decided for sure, the question of the day is: Does the economy with price stability make all the necessary readjustments to an increase in wealth per person without creating an injustice? Or is the injustice we can observe in the gold standard, simply transferred to other persons in the many readjustments which would need to occur in the economy with price stability? Any thoughts on the subject?
Michael Koziolek
Joe Calhoun,
“It occurs to me that there is a way to implement Hayek’s plan. Why couldn’t a bank merely allow accounts that are denominated in gold? Using your debit card or a check (acceptable as a unit of exchange in our economy) would result in a debit of your account in ounces of gold. Am I missing something?â€
You are missing only one important thing: the dollar is the US currency and it is the dollar that is and will remain money in the eyes of US residents. Allowing competition against the dollar is not enough because the dollar cannot be dislodged as money in the US economy. Rothbard elaborates on why this is the case, and the root of the issue is revealed upon understanding of Mises’s regression theorem. Once a money is established, the people will cling to it. The dollar has been money for over a century. It’s here to stay.
Therefore, to get back on a gold coin standard, the dollar must be re-defined in terms of the gold that backs it up. This must be done formally by the state, as it was the state that removed gold conversion from paper in the first place.
Peter White,
“I’ve never understood Murray’s insistence that people would go on using fiat US dollars even if they had the option to use gold backed certificates once the legal tender law was abolished.â€
Step through the regression theorem and attempt to establish in your mind, where in the regression we are today. We are not at the barter market stage, we are over a hundred years into an established money, the dollar. Market prices are exclusively in terms of the dollar. There is no way for a competing money to emerge. The dollar today has value because there are prices for everything in terms of it today. This is the case because it was also true yesterday, and the day before. This regression goes back to where the dollar was a claim to gold money, and the regression goes back further all prices were in terms of weight of gold, because it was true the day before, and so on, all the way back to the very last day of a partially barter market, where gold emerged as the medium of indirect exchange to take care of non-coincidences of wants, and to enhance specialization in labor.
In all of this regression, there is no stage where a fully established money can give way to another new money. All prices are always in terms of the former, and no prices are ever established in terms of the latter. This is Rothbard’s argument.
Mirza Borogovac,
“what about stocks and bonds. They are effectivly a private curency since real value is behind them. They can be traded on the open market, and it is not too much bother to convert them to cash which than can be used to purchase whatever else you want. It would be only a small step when stocks and bonds are traded directly for goods.â€
Stocks and bonds are not really very similar to a currency. They are title to equity and debt, bought and sold for a price denominated in terms of money, which in the US, is dollars. Just as these securities are bought and sold in terms of money – the dollar, so is every other good and service as well. There is zero prospect for such securities becoming money, especially when you recognize that their prices are already given in terms of money, the dollar.
You all agree that the govt has approx one oz of gold per person? Then under you plan the price of gold/oz would be approx the mean net worth of the population? YES/NO?
Excuse typos. Make that price of gold per oz would be approx equivalent to the mean of the convertable assets of the population? If there was one oz of gold per person and the mean cash plus savings was $40,000 then gold would be $40,000/oz?
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