Does Gold Really Matter?
Harry Pollard
[Reprinted from a Land-Theory online
discussion, 9 May 2000]
- A -- A measure of value, which should be a commodity with
certain characteristics trading normally in a price mechanism
controlled market (hereafter - the free market). I call the
measure of value "Money"
- B -- A purchasing medium, used for all exchanges - other than
barter - which in modern guise is authenticated pieces of paper,
created and destroyed as needed to facilitate exchange, by people
within the economy.
- C -- A standard piece of paper, produced by governments,
printed with a standard 'value'. We appear to spend most of our
discussion time on these standard pieces of paper -- yet, they are
least important.
The reason why C) continually invades the discussion is because they
have usurped the function of A) above, the measure of value.
However, instead of their value being determined by the market, it is
manipulated by the issuing government. The US dollar is held somewhat
to a commodity value, but to the bunch of them that comprise the
Consumer Price Index.
Greenspan watches the CPI, with an occasional look at the Gold
Market. So the value of the dollar is determined by the CPI which is
measured in dollars. This is a continuous balancing trick designed to
allow the dollar to depreciate a little over time.
Overwhelmingly, B) the torrent of pieces of paper, carries out most
of the exchanges in the economy. The Purchasing Media -- Fred calls
them money substitutes - are created as needed by check -books, credit
cards, debit cards, ATM cards, and the rest. The PM created is
destroyed once it has been used.
What "backs" money? Well, it all depends on what you mean
by money. In my economy when gold is "Money" (see above)
nothing "backs" it. Gold is worth whatever the market says
it is. Other things have a value in gold determined by the market. So,
if a BMW is worth 100 ounces of gold, and my boat is worth 100 ounces
-- we can say the BMW has the same value as my boat.
That's the function of a measure of value ("Money") -- to
act as a reference point - just like the yardstick in DC. No matter
how many yards you use up building your road, the yardstick is
unaltered and uncaring. No matter how many hot dogs you sell during a
day - the gold 'reference' remains unaltered and uncaring.
B) The Purchasing Media (PM) do need backing. It's the integrity of
the issuer. You will take the piece of paper for your bicycle because
you trust the person who signed it, and you trust the bank (or
whatever) to pay off.
If you are dubious about either, you won't sell your bike.
C) The standard government issue doesn't need backing. It's what you
use for small transactions. Whether its value goes up or down doesn't
bother you much. The crucial characteristic of the GI is the law
forcing you to take it. It has nothing to do with taxes, no matter
what Dan says.
This is what he does say, often repeated:
DAN: "However, someone had talked the government into having a
gold standard, which means that these people must pay their land rent
in gold or in bank notes."
The Art of the Non-Sequitur -- Dan is so skillful. I've never paid my
mortgage with gold, or dollar bills. I always write a check. Dan'l,
you simply don't comprehend the use of something as a measure of value
- something against which all other things are valued. The government
is not concerned in this at all. If they wish to issue their pieces of
paper and actually use them as a "promise to pay" with
integrity. that's their business.
If they aren't to be trusted to fulfill their promise, that means
they won't do much business. Unless, of course they force you to take
their stuff - but I think we should have a free society, where
coercion isn't allowed.
Dan seems to like the idea of paying in Latvian wheat. Perhaps
because he hasn't heard of purchasing media.
That's fair enough, because I can't understand what his problem is
with "gold hoarding". Can't imagine why people would hoard
gold in a free society. People might like to keep a few gold
sovereigns around - in case - but it is a costly thing to do.
Banks don't need to keep gold around the place - unless they have
good customers who occasionally want some. I would think that if a
customer wants some gold, they would ask him to wait a day or two
while they got some from a source (someone in the gold business,
supplying jewelers, or something).
Actually, Fred thinks having a bit of the yellow stuff is good public
relations. I go along with that -- but it's up to the bank.
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