Gold as Honest Money

“He who has the gold, makes the rules.”

  I don’t think so.  Not at this time.  It will come to pass eventually but now the Masters of the Financial Universe have things firmly under control. They own the Aladdin magic lamp called a printing press and can “create” the value of whatever they buy.  The magic show is all theirs.  I do not see any inclination on the part of most citizens to reclaim the right to use an honest money or contract and trade in market based money.  Political money is still king. It seems, despite America’s obvious financial  problems for the last 7 years, that  less than 5% of the population cares at all about what money is.  It just exists, like government, and is just accepted as a fact of life. They will value their life’s labor and savings in a currency they cannot even define..  A dollar just is. They will work their ass off to get more dollars but they do not ask questions about how this incredibly important substance is created.  Like Mission Impossible, the task they have accepted, is to find a method to work for and accumulate as many of these dollars as possible so they can enjoy  “financial security” and the finer things of life.  Those who don’t work or choose unwisely, forego those possibilities. But collecting dollars for financial security may be a chimera.  The 1% have no such prosaic concerns, they are impossibly rich.  Money is a number for keeping score, so called ‘higher’ Maslow needs. 

  I became interested in gold on Sept-1-2007.  At that time I predicted gold at $2,000 by 2012 and $5,000 by 2017.  I have been wrong.  But that does not mean gold is worthless.   What I believed was that responsible  financial accounting had been neglected since 1995 (at least), and that the system was irretrievably corrupt.  The build up of debt in the banking system , much of it mis-priced, was going to lead to a system extinction event.  It has not occurred as quickly as I thought it would because the ability to create money at will has backstopped a boatload of lousy assets. Who can go broke when you can print money?  I thought the responsible government stewards would take down the high flying Wall Street  hustlers but it turned out  the government shills were bought and paid for by financial and corporate Elites.   The middle class had been sold out a long time ago.  Remember the giant sucking sound from Ross Perot?  

So what is gold’s problem?  Why is the crotchety band of gold aficionados so ignored, maligned, and generally irrelevant?  Gold bugs want honest money—  Why doesn’t everyone else want “honest money”?  It just doesn’t matter to them.  Purchasing power is what counts.  Everyone wants more but will settle for no less. So they don’t care if it’s honest, they just want more of it.  The discipline of gold is not desired by the caretakers of the monetary and political system because it undercuts the policymaker’s power to intervene comprehensively and effectively.  If gold were not IN their hands, then the solution would be OUT of their hands.  Their feeling of responsibility, their pride, and the need for control cause them to denigrate gold money and promulgate political money.  Society then has an essential choice: political money or market determined (independent) money.  When money can be created it is akin to being counterfeited.  Many express this idea as “credit” is not “money”.   Government passes a law against counterfeiting and then goes and prints as much as it needs for political reasons. This undermines the social choices all other economic actors have made. 

Mandated money (or legal tender) can perform an exchange function but is unjust when it does not function as a store of value or a proper unit of account .  Money should retain roughly the same value.  I think it should have a definition but it currently functions as an idea of value, not a fixed “thing”.  If the money fluctuates in value it loses much of its exchange usefulness. The expectation of constant value is a shared understanding of the parties to any contract.  Modern “monetary policy” radically infringes on the rights of property and liberty throughout American society with the victims more or less in the dark as to what is going on and without legal recourse even if they do realize their victimization.

“Radically” is the correct adverb, because in principle nothing prevents “monetary policy” from being employed to destroy completely the exchange-value of the FRN thereby extinguishing the value of all holdings of cash or bank-deposits and of all long-term contracts. This redistributes wealth on a massive scale and throws the whole economy into chaos.