are people really aware?, page-35

Very nice idea.

"it is curious to me that so many libertarians are dead set against any form of currency other than gold when history has made it abundantly clear that a gold standard can not be maintained.

Consider that as soon as gold is represented by paper (or digital account balances), all the checks against inflation of the money supply that gold provides are lost. In order to argue that gold can not be inflated, one must also argue that all transactions in the economy must take place using physical specie.

Clearly this presents a problem in our digital age. Imagine trying to buy something from Amazon.com. You would have to place an order, and then mail your gold bullion to the seller. There could literally be no digital accounts of gold at all if one wanted to ensure that the money supply could never be co-opted and inflated. Obviously this would require the imposition of State rules to prevent people from digitally representing gold for its use as a money.

Clearly in order for gold to function as a currency in our modern age, it must be represented either by paper or digital account. Which means it is ultimately of no more use in preventing inflation than if the government simply created rules today outlawing the inflation of dollars.

Inflation of the money supply under a gold standard is replete throughout history. The US banks did it, European banks did it, every one did it! In fact, fractional reserve banking itself is a direct by-product of the gold standard. The first instances of fractional reserve banking came into existence when banks began issuing more receipts for bullion than they actually had in reserve. Nothing physically prevented them from doing this. They might have to face market consequences for this fraud, but obviously it would be better if the monetary system simply prevented them from committing this fraud in the first place!

Really think about this for a minute. If the government made a law today that eliminated fractional reserve banking and froze the number of dollars in circulation at a fixed level, how would that be functionally any different than a gold standard? Would it even matter if those dollars were backed by gold or not if the money supply could not legally be inflated?

The arguments in favor of a gold standard all revolve around the idea that physical gold can not be “printed up”, which limits the ability of governments to inflate the money supply. But since all gold must ultimately be represented by paper in order to be useful as a money, obviously this undermines the check against inflation that gold brings to the table.

Another problem with paper representing gold is that paper is easily destroyed while gold is not. This represents an accounting problem for banks issuing the paper. If paper is destroyed, the gold that is represented by that paper still exists, but now that gold is in a state of limbo. There is simply no way for the bank to know with any certainty that the paper was really destroyed. Every bill that is lost puts the gold behind that bill permanently out of circulation (assuming the bank abides by standard accounting rules). In a large banking system, this dilemma represents a real problem."

I would like to had this. Imagine I guy crossing the border from one state to the other and having to go to a money exchanger every time he does that.