Tuesday, July 13, 2010
Debtors v. Savers III - Back to "honest" gold money? Or forward on to Freegold?
Goldendome (8/3/06; 23:48:54MT - usagold.com msg#: 146353)
But of all the consequences of central banking and fiat money, war is the worst because it exacts the biggest price from citizens and foreigners and everyone else caught in the crossfire. That is why sound money — by which I mean the gold standard — is a key to peace and freedom.
-- Lew Rockwell
TownCrier (8/4/06; 13:14:41MT - usagold.com msg#: 146358)
Goldendome msg#: 14635, taking a HARDER look at fiat and war
Attractive as it would be to simply take Rockwell at his word regarding his association between the making of fiat money and the making of war (essentially saying that war could be abolished if fiat currency were abolished), history begs us to identify that notion as a utopian falsehood. Two handy examples from very close to home (in space and time) provide the necessary instruction on this point.
1) We launched into the U.S. Civil War despite our being on a bi-metallic (gold and silver) currency system.
2) We launched into World War I despite many of the participants being on a gold standard.
Sure, paper greenbacks and confederate currency came along to prominence in the Civil War, as did the abandonment of the gold standard and implementation of fiat currency in WWI, but this development misses a most important point.
That point being, if the metallic monetary standard fails to prevent the war in the first place, then all subsequent arguments about the nature of money go out the window. Because once a nation deems itself engaged in a struggle for its very survival, there is no power on Earth that can compel such a nation to cling fast to its metallic currency standard if the legislators deem that a fiat currency would be expedient to facilitate the war effort.
Here's the bottom line on it: In the very thick of it, the scale and scope of a nation's participation in war is not limited by the extent of the metal or paper fabric of a nation's currency, but rather by the extent of that nation's real resources. Throughout the affair, the role of money (whether in the form of gold currency or paper) is merely an accounting mechanism that the nation uses in the economic mobilization of its resources and production.
And as it all shakes out, the wealth of a nation in PEACETIME is ALSO determined in very much the same way -- upon the extent of its resources and the efficiency of its production and mobilization of capital. And the role of money is to help organize and lubricate the workings of the economy. To be sure, any gold metal within a nation is counted among the nation's total stock of resources, and very obviously, it need not (and ought not) any more than any other physical resource be enmeshed (underutilized) in the physical makeup of the nation's currency/banking system.
Given the structure of fractional reserve lending as the basis of our monetary system, the cold hard truth is that use of metallic (gold) currency propagates a nasty falsehood -- the coins are just a subset of the entire money supply but it nevertheless causes ill-informed participants to wrongly believe that the entire money supply is "as good as gold".
It is Another cold hard truth for some people to swallow, but in light of the preceding paragraph, the use of a fiat (paper) currency system is a much more honest means to represent the intangible "nothingness" -- the appropriate embodiment of the network of accounting which is the actual basis of a monetary system. 
Clearly, the conclusion to be had from all of this is that a nation's monetary/currency system does not represent the wealth of that nation. Money is merely a utility to be used, to be borrowed and spent. Again, think of it solely as a mobilizing lubricant within an economy -- it has value while in use, but none otherwise. The wealth of a nation, and of its people, is not in its artificial money, but rather in its various resources which can be mobilized for both local and international deployment. It makes little sense to "save" money, as money is an ethereal utility which can be mismanaged and hyperinflated into dysfunction.
Because of this difficult truth, "Your wealth is not what your money say it is," as Another used to say. Instead, your wealth, properly measured, is the tangibles you've accumulated, the store of resources you've saved. And among the world of tangibles, gold is globally the most liquid -- the most universally recognized, honored, and accepted.
In time of war, governments may (and history has shown they often do) recognize and declare that gold is too valuable to be wasted underutilized (undervalued) in the representational coinage of national currency. Therefore, fiat currency is adopted, and gold is instead mobilized in its fully-valued form -- a tangible resource uniquely and reliably suitable for any and all international settlements.
Our monetary system, in an attempt to be HONEST, chooses mere digits and PAPER as its representational currency. And consequently, in an effort to act WISELY, we unabashedly use this currency for immediate transactions, whereas we SAVE for our livelihoods by acquiring GOLD.
 Please read:
Gold is Money - Part 1
Gold is Money - Part 2
Gold is Money - Part 3
Gold is Wealth
Gold: The Ultimate Wealth Reserve