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:
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.