THE FALSE STANDARD

Richard_NixonArticle by Barbara Cornell

Syndicated by Barbara Cornell’s personal blog.

August 15, 2011 was the 40th anniversary of our official abandonment of all pretense of having a gold standard.

And marks the last substantive opportunity to avoid our nation’s downward spiral into bankruptcy. (We’ve had times when our government voluntarily refrained from spending more than those of us who apply our efforts to useful production could compensate for, but they were brief, fleeting anomalies).

The reason being that once a currency has no inherent value, it can be manipulated and devalued by political machines.

But, in fact, gold itself is a currency with no inherent value.

Gold has always been a «false standard» because gold has no inherent value. You can’t eat it, can’t make shelter out of it, it’s too soft to make functioning tools or weapons. It has a few, limited industrial uses but few of them can’t just as easily be accomplished by other materials. Its only value lies in:

It’s pretty, it’s rare and difficult to get to and: people agree to take it in exchange for things that do have inherent value.

investing-in-goldThe fact that it has consistently for many centuries been widely accepted as a value holder is why it’s the standard. Gold’s increasingly «false standard» is displayed in its comparative «value» to silver better than anywhere else. Silver has exactly the same inherent value as gold (it’s pretty…), and for many centuries gold and silver held approximately the same «value» (people accepted gold in exchange for inherently valuable commodities at approximately equal or up to twice the rate of silver), but gold has been increasing in «value» much much faster than silver. (As of today, gold sells for $1818 per troy ounce and silver for $40, a differential of 45 times.)

The difference between gold and currency issued arbitrarily by an entity (currencies haven’t always been issued exclusively by governments) is that its perceived value has maintained its independence from policy makers and was one step removed from its direct manipulators.

The only thing that can assure a population’s currency is not subject to manipulation is direct barter. And that sucks.

For centuries, the next best thing was gold.

But nearly anything is better than letting the value of your entire life’s work depend on Ben Bernanke’s morning bowel movement being satisfactory.

5 ответов на “THE FALSE STANDARD

  1. Anything can be used as a currency based on the same criterion, so long as people accept it as valuable, but it won’t be self-regulating unless it has inherent, non-currency value. Look at tulip bulbs in history, there have been times when a single tulip bulb would bring in 10 times its weight in gold because people got in their heads that they were «valuable» so they accepted them in exchange for goods that were valuable. The fact that they had no real value made them subject to manipulation by people with accumulated wealth of things with actual value. Eventually, people needed actual value (things to eat, places to live, things to wear, tools to build these things) and started having to trade «out» of their tulip «positions» and found it was all a house of cards. Gold has shown a higher resistance to this kind of manipulation, but it isn’t immune.

    • Well, tulip bulbs are perishable and reproducible.

      Gold is imperishable, and is inherently limited. Things would have to get incredibly bad before Gold failed to hold value. As soon as people are not actively starving, Gold will again become valuable as currency.

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