Gold – an independent money?

Occasionally, someone will describe me as “a gold bug”. I shouldn’t be surprised. My usual answer when someone asks me why I always have an ounce of silver in my pocket is, “I can’t afford to lose an ounce of gold.”

The truth is that the debate over commodity-backed money is just one of the axes along which scholars of money and banking take different views. A good money must have a number of important qualities — durability, divisibility, recognizability, portability, scarcity and an appropriate value-to-weight ratio are often given — but the quality whose absence substantially caused the present economic crisis is scarcity. The UK money supply tripled through new lending between 1997 and 2010. The resulting economic imbalances are the kind of phenomenon that, for example, Ferdinand Lips predicted in Gold Wars.

Maybe Bitcoin is a good money and a contemporary way of producing a currency which regulates itself through the trade and commerce of the world, but gold and silver were the historic choices. In this video, Money Week’s Dominic Frisby sets out the case for gold as money:

Not convinced that gold has held its purchasing power where the dollar and other fiat monies have not? Take a look at this chart and this site,

On a day where the highly-regarded economist Roger Bootle writes in the Telegraph A dose of inflation could start to look like a cure for our current ills so soon after another round of “quantitative easing” which barely registered in the public consciousness, I’m reflecting that ideas which were once the preserve of monetary cranks are now the norm. One of those is the notion that debasing the currency will solve problems built up during decades of currency debasement.

I’m optimistic about humanity’s potential but a bright future requires honest money which holds its value. I’m increasingly convinced that will mean backing by gold and silver.

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Comments & Responses

3 Responses so far.

  1. Nick says:

    Look at the Euro and Greece. They are locked into a currency against which they can’t devalue. Exactly the same as the gold standard. You can’t devalue a gold standard based currency. They are in a mess as a result.

    What does that tell us? It tells us that it isn’t the currency that is the problem, its people like you who can’t control your spending habits. You can’t control the debts that you have run up.

    So why are the big state debts hidden and a state secret? That’s the action of a fraudster like Bernie Maddoff.

    What for example, is the present value of the accrued state pension liabilities?

    • Hilton Gray says:

      Nick, when a country borrows 30 billion Euro’s to pay what amounts to government salaries then you are in a world of hurt – no matter what currency system you are using. No private company could think of borrowing money to pay its salaries on a long term basis, yet this is precisely what most European countries including ours have done! And more stupidly they’ve banked on being able to use our children’s tax revenues to pay the money back, none of these ‘Einsteins’ politicians ever thought than maybe their largess would drive massive emigration from Europe.

  2. Nick Heath says:

    “..locked into a currency against which they can’t devalue. Exactly the same as the gold standard. You can’t devalue a gold standard based currency. They are in a mess as a result.” Nonsense.

    The eurozone is in a mess simply because their constituent countries have borrowed too much; it is not a problem with the Euro per se, although their problems stemmed from the fact that all eurozone countries were considered equally credit worthy, and so there were no external brakes on the amount of money to be borrowed by the gov’ts.

    If anything the one saving grace of the Euro is that it can’t (at the moment) be devalued, thereby causing the overstretched borrowers to default, and returning to real growth and prosperity more quickly (I appreciate that’s a little simplistic).

    State pension liabilities have little to do with currency debasement.