Monday, October 1, 2012
All that glitters
There are a lot of people who think putting the US and the world on the gold standard would solve our economic woes. Looking to history, we see that when we were actually on the gold standard, it wasn’t all love and roses. In fact, William Jennings Bryan’s, “Cross of Gold,” speech (1896) against the gold standard propelled him his party’s presidential candidacy. The basic argument was there was not enough gold in circulation for a healthy economy.
There are those who are strong proponents of physical possession of precious metals. Governments in the past have outlawed their possession. It’s happened in the past and it can happen again. I’ve no quarrel with those who point out that gold has been a traditional store of wealth for thousands of years. That’s assuming that governments or other criminals don’t take it away from you.
For day to day transactions, silver has a better track record. The average person could usually get his hands on some. It was useful for day to day transactions for ordinary goods. During the Argentine economic crisis of 1999 -2002, silver was commonly used to buy things. Silver is less valuable than gold, but valuable enough to be a good portable store of wealth.
Of course, past performance is no guarantee of future returns. Governments have called in all silver in the past too. For it to have value as a medium of exchange, there has to be enough of it around. There’s no sense in taking silver coin as payment when few other people have a use for it.
Other metals have done duty as mediums of exchange: copper, nickel, platinum, and whatnot. Then there are diamonds and other precious stones. Diamonds are the biggest joke. The only reason they are worth more than road gravel is because of the efforts put into making them artificially scarce. They have less intrinsic value than a dollar bill. At least you could use a dollar bill to blow your nose.
There’s some thought that future currencies will be based on food calories. At least you can eat food. The Samurai during Japan’s Edo period were paid in rice. Roman Legions were paid in salt. It worked in the past. At least with food there are physical limits on inflation. Calorie based economic systems actually work pretty well because food doesn’t store forever, unlike precious metals. The food has to be put back into the system and used to do work, generating economic activity.
There’s rumors going around that many of the rat bastards who’ve crashed our economy are now heavily invested in gold. They plan on having wealth long after they’ve destroyed everyone else’s. Of course, that’ll only work if we accept gold in payment for real things.
“I’m sorry Mr. Bankster Bastard, we are only accepting payment in potatoes today. Oh, you don’t have any potatoes? No problem, I’ll trade you a bushel of potatoes for your yacht. Don’t want to deal? No problem, come back when you are really hungry and we’ll see what kind of deal we can make.”
I’m not telling people not to buy precious metals. Do what you want. However, make sure you are squared away on real physical things first: land, water, food, tools, clothes -real things of real value. In fact, you probably are better off with good personal connections with friends and family. If people love and respect you, the’ll work with you and help you -unlike Mr. Bankster Bastard.