This article originally appeared in a newsletter called The Objectivist published in 1966, and was reprinted in Ayn Rand's " Capitalism: The Unknown Ideal"
...In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.
The problem with gold is that the quantities are basically set -- so we had global booms after the gold discoveries in California in 1848 and then in the 1890's in Alaska and South Africa. I believe that money needs to mirror the amount of stuff. Gold cannot. Of course, no state has ever over the long haul declined to debase its currency when pinched.
ReplyDeleteMy, probably naive, solution is to base currency on a basket of stuff including gold -- but also cotton, plywood, copper, tin, iron, wheat, rice, and other stuff where there is little labor component to the value.
I heard that the M3 monetary aggregate, which could have told us how the BIG money was moving - the M3 told us about the money supply - was discontinued in March 2006 by the Fed.
ReplyDeleteInteresting timing there, huh? No way of knowing what's going on now.
Whatever items of value (preferably gold) that our currency could be tied to, the fact that it is tied to NOTHING is Not Good.