Why I'm not a goldbug

Via ZeroHedge, Phillip Bagus talks about the problems with the Euro — and by extension all state-operated currency — and ways to approach it.  Among those is effectively to ditch the euro entirely (which in itself makes sense: establishing a central currency without unifying fiscal policy across the nations involved was and always will be stupid, period) and switch to a gold backing by backing all money in existence by gold, adjusting the price of gold accordingly.

Now, as a particular method of stabilization there is merit. But the strategy itself has nothing particularly of value to spontaneous market order.  To say that X is worth Y amount of currency is still to set a fixed price, even if the variable X is replaced by a quantity of gold; in other words, there is nothing particularly Laissez-faire about such a policy. Even if you claim a policy that the value will henceforth NEVER for any reason be changed, politics will always find a way to change it — and honestly, the total freezing of value doesn’t strike me as inherently making sense anyway.

Gold, in my interpretation, is not itself an intrinsic use, but a signal, a canary in the proverbial coal mine — if people more want to hold shiny rocks than currency, then your currency and the economy that goes with it is screwed.  What I fall back on effectively is an open market in currency that in practice pegs itself to labor, because what I see as the most important issue is not that money fluctuates.  Of course money fluctuates, it even did so before its creation at all, as different people engaging in barter valued different things as equivalent to different other quantities of different items.  Money moves, that is unavoidable.  The true issue, from my interpretation, is why money moves (currently it moves in ways designed to serve state-connected banking interests, which the mainstream Left then inaccurately thinks of as private, thus the result of the free market gone crazy), and how well or not it tracks productivity.  In a rapidly moving economy with explosive growth, faster than usual expansion of money strikes me as reasonable, as long as it tracks with the pace of activity.  If, in contrast, activity is limited to shuffling around of the same few lumps of debt, as is the case now with modern state-capitalism, with little or no attachment to growth, then no, the monetary supply should not grow, because nothing is being created.  As I’ve asserted previously, with a spontaneous market order with regard to currency, over time money would attach itself not to gold, nor to vague state promise that government swears to rob enough people to cover all denoted debts — which is impossible, as if they remotely attempted it there would be war (note how persistently across demands regardless of size debt balloons. You show people how expensive the modern state is to pay for all that is promised through it, they will balk at the price tag, period) — but to a measurement of labor, adjusted for efficiency by default simply to keep things honest.  Want more money? Make more shit.  Want less in the system?  Then eat more of what you kill.

Where we’re at right now, there is in practice a huge class divide where a few people have access to cheap money for gambling, while the rest of us are stuck with expensive credit to paper over bills, if anything.  Assertions that this is simply the way things are, as opposed to intentional result, are false.



About b-psycho

Left-libertarian blogger & occasional musician.
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