Thanks to Graham for pointing out this article by Dominic Lawson promoting Austrian-school economics:
As the chief economic advisor to the Austrian government in the 1920s, Mises put his theories into practice and slowed down inflation in his native country (which, as a Jew, he later fled). He used his “cycle” theory to forecast that the “New Era” of apparently permanent prosperity in the 1920s was illusory, and that it would end in runs on banks and depression: The Wall Street crash of 1929 was exactly what Mises had predicted.
Mises believed that any currency which was not backed by gold was powerless to resist the depredations of governments and bankers addicted to the possibilities of limitless credit. Until the past few weeks, this has been seen as a bizarrely old-fashioned and eccentric outlook; but I would not be surprised if many young people – who have hitherto been comfortable with the idea of money as something which can just exist in the ether, travelling through the digital highway – now wonder whether anything of intrinsic value lies behind it all.
As far as Mises was concerned, even money made of paper, if it had nothing behind it other than the good word of politicians and central bankers, was inherently unsound; he lived just long enough to see the United States of America – where he ended his days – break decisively with the international Gold Standard.
And see also, in the Telegraph today, “Fear triggers gold shortage, drives US treasury yields below zero”:
The investor search for a safe places to store wealth as the financial crisis shakes faith in the system has caused extraordinary moves in global markets over recent days, driving the yield on 3-month US Treasuries below zero and causing a rush for physical holdings of gold.
Perhaps if money was backed by a real asset, it would serve as a real store of value and matters would be somewhat simpler.