Wednesday, January 27, 2010

The Barbaric Metal

Money is anything used as a medium of exchange, and if it can be finely divided suits the purpose of money even better. Real money is regarded as a value in itself, like gold that can be used for jewelry or on circuit boards. Paper is not money. Paper money is a money substitute. Paper money will always be inflated because it's easy to print. It doesn't matter whether it's backed by gold or government fiat. One advantage to gold-backed currency is that you can protect yourself from paper inflation by using the gold coinage and eschewing the paper. Another advantage is that a government can't "borrow" endlessly. The jig is up a lot quicker when too many gold "notes" are printed. A government that is constrained in its spending can't keep waging wall-to-wall wars or finance a welfare state. That's the problem with America right now. "Bubbles" are a consequence, a symptom of the paper inflation, not the cause. People are quick to blame the banks or Wall Street for this depression, but there are only two real culprits in this mess--government and the private Federal Reserve Bank. Giving a private bank a monopoly on counterfeiting was a really bad idea, and I'm amazed it took a century for the chickens to start roosting. We'll never know how prosperous America might have become if we still had a gold standard. What we have now is a broke country where people are so overextended that their net worth is on the minus side.
Not many people read this blog. I like it that way. I write very slowly and I'm not at all witty or eloquent. The purpose of my writing is to clarify my own understanding of how the world works. If you care to comment, please keep in mind that I'm a carpenter and not a particularly great thinker. If you push me up against a wall with bullyragging or arguments like, "You're a moron for saying that", you'll just get the same back. And neither of us will learn anything.

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