Sound money?

The history of money is largely tied to the history of human government. Therefore, it is not a good history. And although there are many lessons to be learned from history, few people actually do. And for most people, it is hard to recognize that government is not necessary for the concept of “money” to exist in a society, or even between societies.

Prior to the invention and widespread use of printing, money was always in the form of some kind of metal. Gold and silver, in particular. However, copper and its alloys (bronze and brass), platinum, (and at one time aluminum) were also money. Government did not create the concept of metals as money, they simply recognized it and co-opted it. Then perverted it in many ways.

Robert Kiyosaki frequently refers to gold and silver as “God’s money.” Not only are they frequently referred to in the Bible, but they are also items that have many natural characteristics that make them easy to use and recognize. And difficult to counterfeit! Both gold and silver are naturally examples of purity, they are prized for many uses. Including uses discovered only in the past century and a half or so, with the invention of electrical systems and electronics. Not only that, but silver and gold are nicely but not horribly rare and easy to recognize and refine. These are a few of the many reasons that gold and silver make sense as a medium of exchange.

But that is why gold and silver (and even other metals) are despised (and feared) by governments. As an example, we can now point out that a a 2026 “US Dollar” (an FRN) is worth considerably less than the despised “Continental” first issued in 1775 (251 years ago!), even before it fell to a value of about 1000 Continental “dollars” to a standard 1-ounce Spanish milled “silver dollar. (At least in actual buying power, not the actual exchange rate.)

Recently, Tom Woods wrote: “The destruction of sound money around the world has laid the groundwork for the destruction of so much that is good and beautiful. There are so many bad trends — in fields as disparate as science, food, architecture, and family life, and a great many more besides — that can be traced back to bad money.

“And it is at the root of why no matter what we try, the world’s bloated regimes cannot be kept under control. [Something we at TPOL are fond of pointing out frequently.]

“This is why Ludwig von Mises said: ‘It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.’

“Yet not only does essentially nobody talk about it, but you are almost universally derided as a crank if you do.”

Tom (and Ludwig) is right, and just the last few months demonstrate that. What we have seen is that the massive inflation triggered by the Pandemic Panic and the wildly-out-of-control spending and borrowing in that period is continuing. And as someone recently pointed out, there is absolutely no possibility at all of returning to 2019 prices for anything! At least not under the current financial regime.

Once upon a time, it was thought that a new dollar, pegged at USN$100/ounce of 99.9% gold, could be used as a way to reestablish sanity. That now appears to be impossible. Indeed, even a dollar with a value of USN$1000/ounce is only a wish, not a hope. And the more we allow business as usual in DC and State capitals to continue the less likely that any correction is possible. At this point, it appears that the current system must collapse completely. No matter what else it drags down with it. (And it will drag a lot down.)

READ MORE