bottom of the barrel......., page-2

Not that his analysis hinges on this but...

The idea that fiat system is inherently flawed because the paper isn't back by anything physical is pretty simplistic.

I know I'm repeating myself here, but a choice in currency is just a social contract between parties to store value in that physical item. This choice is ultimately arbitrary. So long as everyone agrees then there is no problem.

A fiat system isn't completely without backing... it is backed by the assurance of a government that it will behave in a certain way with respect to a currency. The failure of a fiat system reflects - essentially - not a problem with the choice of money, but rather a failure of the political system, insofar as government is too weak to raise taxes, or too belligerant and arrogant and starts expensive wars or what-not. They then inflate.

A gold standard isn't going to protect you from this sort of political failure. Why? Cause when governments run into the obstacles they generally do - they'll just drop the standard. And that's what generally happens.

What Bill Murphy is certainly confused about is that gold is somehow more real a store of value than paper. But as I said - it's an arbitrary choice.