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Friday, October 10, 2014

Gold is still money. Gold has always been money.

According to Aristotle, money is that which serves as a medium of exchange.  It is the measure of things that can be traded.  It equalizes those things which are by nature unequal.

Yet, also, according to Aristotle,  money has another function that is of equal importance: money must be a store of value. 

Money to the ancient Greeks was called Nomisma - from Nomos which is a custom or law.  In other words money must be accepted as "customary" for use in more than a single transaction.  The customary nature of money gives rise to the necessity that it be a store of value.

But beyond this, money can be more than the measure of a transaction.  Money can be the Goal of a transaction.  As the goal of a transaction it gives rise to the accumulation of Wealth.

Wealth can only be accumulated in the form of money as long as the money is a store of value.

There are two ways for money to store value.

First, money can store value as long as custom dictates it should.  This is the store of value we find in the US dollar which has the "full faith and credit of the US Government."

Second, money can store value through its own intrinsic value.

What is intrinsic value?

Intrinsic value is that which is Universally Customary through time, across cultures, and without the necessity of force of arms to enforce the custom.

In this only Gold and silver can be called money.  Even today, gold can be exchanged most everywhere for other things.  You can't buy a loaf of bread in a store with it, yet you can take it to many places in every city in the world (throughout all of recorded history) and exchange it for local currencies. 

Why?  It doesn't matter why.  It only matters that is has always been so.  And it is so today.

In the same way, we find that paper can never be money except in a most temporary time frame:  that time frame in which a particular govenment can, through the use of arms, enforce this custom.

The US dollar is money right now - as long as it is customary to respect the full faith and credit of the US Government.  And as long as the full faith and credit of the US government can be enforced.

How long will it be before there is a crisis of confidence in the faith and credit of the US govenment?

And what measures will the US government take to protect its money when that crisis of confidence occurs?

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