Wednesday, February 14, 2007

Yeah I don't give a damn about the Greenback Dollar...

Ah... libertarians. You get so close to respectability, then you pull something like this:

Welcome to the Liberty Dollar: Remember when gas was only 25-cents a gallon? You could take a dollar down to the gas station and buy four gallons for a buck! At that time our dollar was backed by REAL money, real silver. Guess what? That same amount of silver still buys four gallons of gas! That just shows that real money like gold and silver holds its value and it is the green paper money that is now worth a lot less. As a matter of fact, when you think about it, you realize that gas, food, and almost everything else has NOT gotten more expensive. It only seems that way because the value of the green paper money is worth less and less and so it takes more and more of it to buy the same goods and services. Most people think prices have gone up, but in reality: it is the value of the US dollar that has actually gone down. Luckily, now there is a simple and profitable solution to the coming inflation - good old-fashioned, REAL money as the Founders intended.

The "Liberty Dollar" was created to "compete" with the United States dollar (its murky legality is based in the fact that it's technically a commodity). The libertarian preoccupation with backed currency is, in my view, insane.

Yes, inflation can be a problem. It is the primary duty of central banks to keep inflation under control - which in developed countries they've gotten remarkably good at. But moderate, expected inflation is a simple side effect of economic growth and has largely neglegable effect on the economy at large. The author nostalgically remember when gasoline was 25 cents a gallon, but everything back then was lower, including wages. This argument shows a fundemental fallacy people often make when looking at inflation.

Use this thought experiment: let's say that tomorrow, the Federal Government announced that starting at the end of next year, the prices of everything (prices, wages, etc) would double. Would anything real about the economy have changed? No! What is a danger is unexpected inflation, which is another post for another day.

Radical Libertarians see Gold and Silver as "real" money which has value, unlike the dollar, whose value is only the small amount of paper and ink that is used to print it. And yet, what makes Gold valuable? Human perception, which is exactly the same thing that makes the Dollar valuable. If I was fending for myself on a desert island, I wouldn't want either an ounce of Gold or a suitcase of Benjamins - because at their core both just have value as a unit of exchange, as a currency.

And if you have the most powerful government in human history backing the Dollar, why go through the trouble of mining for some shiney stone in Autralia?


Kirsten said...

You are the second greatest geek I have ever had the pleasure in encountering. and one day I will read all of this but my boss just gave me the thumbs up to go... so I'm out of here~!

Happy Valentines Day!

Kirsten said...

You silly boy!

Gold has worth not only because of our perception. Yes, we give it that value but if you have ever read anything you have heard, Gold, the money man can trust."
and why would you say that?
Because it's worth never inflates.
Gold is the standard by which everything else is measured.

It takes a long a gruelling process to extract 99.999% gold per troy ounce. (Side note: The last 3 nines started the little phrase'Three nines are fine')

and because I had time and am not the most articulate student, I copied and pasted something I found.

"What gold does have is a store of value. Going back in history shows that one ounce of gold during Roman times purchases just about the same in goods and services as one ounce does today. If the paper currency we have now continues to erode in value gold will still buy its owner the same amount of goods 5, 10 or 20 years from today."

For some gold serves no purposr in your life, for others Gold is the means on which you live.