I would like to see an analysis of the following article in the light of the Austrian school of economics:
http://www.zerohedge.com/article/fofoa-golds-focal-point-or-silver-money-too
http://fofoa.blogspot.com/2010/12/focal-point-gold.html
In particlular about the idea of decoupling the store of value property of money from the medium of exchange property. In the above article is assumed that a medium of exchange must be able to grow in supply and (therfore) in velocity.
alex3000: In the above article is assumed that a medium of exchange must be able to grow in supply and (therfore) in velocity.
In the above article is assumed that a medium of exchange must be able to grow in supply and (therfore) in velocity.
If the medium of exchange didn't grow, prices would fall as production would rise. Why would anybody think low prices are a bad thing?
I'll give it a shot. I'm using the Fofoa.blogspot.com article. My comments in bold, the original article in normal font.
It begins with a long intro about game theory which is not relevant, so we can ignore it.
There are two simple, but seemingly, apparently impossible-to-comprehend concepts. The first concept is why money not only can be split into separate units for separate roles, one as the store of value and the other to be used as a medium of exchange and unit of account, but why it absolutely must and WILL split at this point in the long evolution of the money concept.
Myth number one. That the money concept has gone through a long "evolution". This is meant to make one think that what we use for money today is "better" and "more evolved" than in the past, and that it will "evolve" further as time goes on. It just ain't so. There are two kinds of money, that which has intinsic value, and that which doesn't. The latter has been pushed on the public at various stages in history, always finally "evolving" to it's final value, zero, as time goes on. For some reason, this "absolutely must and will" stuff reminds me of Marx's absolutely must and will fairy tale of the Communist paradise. But that's just me.
This means no fixed gold standard, or any system that attempts to combine these units/roles into one, making easy money "less easy" and hard money "less hard." And by "must" I do not mean that we must do this, I mean that it is happening today whether we recognize it or not. And the second concept, once the first is understood, is how and why gold and only gold will fill the monetary store of value role. Not gold and silver. Not precious metals. Just gold. People often ask why I don't mention silver. They assume that when I say gold I really must mean gold and silver, or precious metals. So let me be clear. When I say gold, I mean gold and only gold.
Nothing of substance in these two paragraphs. Money's most vital function...
in the author's unsubstantiated opinion
...in our modern world is lubricating commerce, or more specifically, keeping the essential supply lines flowing – supply lines that bring goods and services to where they are needed. Without it we would be reduced to a barter economy, eternally facing the intractable "double coincidence of wants." This is the problem whereby you must coincidentally find someone that not only wants what you have to trade, but also, coincidentally, has what you want in return. And in the modern world of near-infinite division of labor, this would be a disaster. [2]
Yes, this is true, a well known concept. But note the presence of that very common sign of an economic error about to be foisted upon us, the use of imagery.
Money is a "lubricant". Well, we all know that the more lubricant, the better, right? The author has "proven" his point right here, that we need more and more money. Sorry, Charley, money is not a lubricant. Don't try to use an image to substitute for a valid line of reasoning.
So we need money, and lots of it.
Aha! just as I suspected. The word "So", meaning that the author is drawing a conclusion. But from what? That we need money follows from his argument about the limitations of barter. But from what does it follow that we need lots of it?
In fact, we need money in unrestricted amounts! (I'll bet you are surprised to see me write this!) Yes, I said it, we need unrestricted money in order to fulfill this most vital function in our modern society – lubrication!
Again. "Lubrication! What more need I say?", imples the author. "I gave you an image, and that's all you need."
But here's the catch: we need the right money in order to perform this seemingly impossible task. Let me try to explain. Money is debt, by its very nature, whether it is gold, paper, sea shells, tally sticks or lines drawn in the sand. (Another shocking statement?) Yes, even gold used as money represents debt. More on this in a moment.
Nonsense. Money is not debt. You better be sure to have more on this in a moment, dear author. and it better not be an argument of the "lubricant" variety. For this reason,...
What reason? That money is debt? That money is lubricant?
the money used as a store of value must be something completely separate and different from the medium of exchange. It must be so, so that the store of value unit can expand in value while the medium of exchange unit expands in quantity and/or velocity. You may be starting to encounter my thrust. Expand… and expand. Unrestricted by artificial constraints.
Oh I get it. We need more and more lubricant. [I have already noted that this is a non proven, and indeed silly, statement. Read Rothgard's What Ha Govt Done to our Money for the rebuttal. It's a short, easy book, and available free. But let's hear him out]. But lubricant made out of solid gold is expensive. So we better come up with inexpensive valueless lubricant, like paper money, and not care if its value [=purchasing power] goes to zero. That way we can have as much as we want.
On the other hand, what of all the unfortunates who have their life savings destroyed when their paper money becomes worthless? Well, for them we will have another kind of money, that will expand in value.
Hmm, I wonder how we can do that? OK, let's read on and find out.
Compare this concept to a gold standard in which you fix the value of gold to the dollar at, say, $5,000 per ounce. The assumption is that this is where the price of gold will stay for a long time, if you manage the system properly.
No, you got that wrong. That is not what you do at all. You DEFINE a dollar as, say, a thousanth of an ounce of gold, and make sure all your gold dollars have that weight of gold in them. Your paper money will be redeemable also at the same rate, one dollar redeemable for a thousanth of an ounce of gold, the metal. [This is not the place to discuss the arguments about the practicability of such a system. That's what google is for.] Of course, you cannot print more paper dollars than you have gold in your vaults. That would be fraud.
This way, the dollar will ALWAYS be worth $1,000 an ounce, because a thousand dollars is by definition an ounce of gold. How can the dollar price of gold go up or down with dollars defined that way?
So what is the result? You artificially constrain the expansion of the medium of exchange fiat currency
The correct statement is "You constrain the expansion of the medium of exchange, and ELIMINATE fiat currency". A gold standard is the OPPOSITE of fiat currency. Muddle headed thinking here, dear author.
Also, why do you call this constraint "artificial"? Is fiat currency "natural"? Is the constant money printing that destroys what value money has "natural"? Does fiat currency occur in nature? Does inflation?
while also restricting the value expansion of the store of value.
Big big mistake, and historically untrue. From the 1800's until we went off the gold standard, the value [=purchasing power] of the gold dollar rose and rose. Why on earth would the value expansion be restricted? Prove what you say, dear author.
You are locking the two together. Do you think this works and makes sense?
It worked fine every time a country had sound money, and makes sense to me. Oh, you mean do I think, given the Bizarro World assumptions you are making, that locking the two together makes sense? It's a nice question to think about in my spare time, maybe after watching soem Twilight Zone.
BTW, I'm still waiting for you to make your case that money is debt, and that money is lubricant, and that we need more and more of it, like lubricant. But I'll be patient.
I said...
Oh, I see. that's your proof. You said it. End of discussion.
we need unrestricted money in order to ensure the lubrication of the vital supply lines in our modern world.
And here's the other proof. Money is lubricant, so we need more and more, like a machine always needs more lubricant. Way to have a serious scientific discussion.
This is it. This is what really matters. If we have a major monetary and financial breakdown, what do you think will be the worst consequence? Do you grow all of your own food? Do you make – or know someone who does – all of your own stuff? How long could you survive without any stores? Do you trust your government to be sufficiently prepared to take care of you with no supply lines flowing?
What are you saying here exactly? That if we don't print more and more money, all the time, that these horrors will get us? Austrian Economics makes a convincing case that on the contrary, money printing is what will bring these horrors, like it did in the Weimar republic and Zimbabwe and Argentina.
So you are just scaring us without presenting a logical line of reasoning. It's a logical fallacy called Appeal to Emotion. I thought you were better than that.
Have you ever stretched a rubber band until it breaks?
More imagery. Money is a rubber band. A lubricated rubber band that keeps the supply flowing. My guard is up now. I am going to treat what he says with suspicion.
You can feel the resistance grow gradually and observe the smooth thinning of the band until finally it loses its continuity and the two parts snap back stinging your fingers. A tiny observer of this exercise, perhaps a flea resting on your thumb (or an economist), one who doesn't really understand rubber bands, might swear that it could be stretched forever. The smooth change in the stretching rubber gives little warning of the abrupt (sometimes painful) deformation that is coming. This is where we are today. The dollar standard is like a stretched rubber band.
What exactly is "the dollar standard", when applied to the dollar? It's a meaningless phrase. But let's see what the author has to say.
It has been stretched and stretched, but it cannot provide the unrestricted money that we need today. They think it can. And that's why they are spewing it out in quantitative easy money boatloads. But it's not the right money. As I said above, we need the right money in order to perform this seemingly impossible task.
Well, surprise surprise. We agree on something. QE is doomed to failure. But I am curious what the right money is, that can be stretched forever, unlike the rubber band US dollar. I will read on. That resistance you feel is the artificial restraint built into the dollar system. It appears to be infinitely expandable, but it is not. It is just like the rubber band. Oh sure, you can print all the dollars you can imagine, to infinity and beyond! But it won't work. It won't do the most vital job, beyond a certain point. And yes, we are beyond that point.
I wonder what the 'artificial" restraint is? I always thought that the law of supply and demand is at work here. The greater the supply of a product, the lower its price. The greater the supply of paper money the lower its "price" [=purchasing power, the 'price" of money in this context]. And now I'm really curious, what magical money does the author have in mind that will overturn the law of supply and demand? Maybe the author also has plans for an anti gravity machine. I want you to imagine a tiny micro economy. Just two guys stranded on a tiny island. Let's call the guys Ben and Chen. They have divided the island in half and each owns his half. They each have a tree which bears fruit and three tools for fishing, a spear, a net and a fishing pole. For a while they both fished often. Fish were the main trade item between Ben and Chen. Sometimes Ben would take a vacation from fishing and Chen would provide him with fish to eat. Other times Chen would take a break. But after a while Ben got lazy, and Chen got tired of giving Ben free fish to eat. At first they used sea shells as money to keep track of how many fish Ben owed Chen.
Here the author keeps his earlier promise to us. He is showing us why all money is debt. And he shows it by making up a scenario where one guy is in debt, and they use lines in the sand and sea shells as a record of his debt. Nowadays we would keep records of loans on a computer or on paper, but in those bygone days on that little island they used sea shells and lines in the sand. And this little story is how all money on the face of the Earth got started.
I dunno. A made up story proves nothing. There are plenty of myths and fairy tales about the origins of things, and guess what? They are all wrong.
Not only that, didn't he say earlier that money was invented to get around the limitations of barter? If that is the case, which AE thinks is the case, then money has nothing to do with debt. Read up on how bottled water has turned into money in parts of Iraq. It has nothing to do with debt, all to do with getting around the limitation of barter. And to do that, the money had to have an intrinsic value. Lines in the sand won't do. Leaves from the tree won't do.
Then they switched to leaves from the tree. Finally they just broke a stick off the tree and drew little lines in the sand. If Chen gave Ben a fish, Ben drew (issued) a line in the sand on Chen's side of the island. There were only two of them, so it was easy to avoid cheating. These lines sort of became Chen's bank account. Each one represented the debt of one fish that Ben owed to Chen. But after a while they started adding up, and Chen worried that he would never get that many fish back from Lazy Ben. So Chen cut a deal with Ben. Chen said he would keep accepting lines drawn in the sand for fish, but he wanted to be able to use them to purchase some of Ben's other stuff (since Ben didn't like to fish). At first he used them to purchase fruit from Ben's tree. But after a while the pile of fruit just rotted on Chen's beach. Next he started purchasing Ben's tools. First the spear, then the net and lastly the fishing pole. But at this point Chen realized that Ben would NEVER be able to repay those fish without his fishing tools. So Chen rented them back to Lazy Ben. Of course Ben was still lazy, and now he owed rent on top of the fish he already owed. The lines in the sand grew even more rapidly as lines were added to pay for rent even when Chen hadn't given Ben a fish. Then Ben had a great idea. Why even go through the charade of selling the fishing pole and then renting it? Ben could just sell Chen some "special lines" which had a "yield." For ten one-fish lines, Chen could buy a special "bond" that would mature into 11 lines in a year's time. They tried this for a while, but all that happened were more lines in the sand. So many lines! Nowhere to walk. Chen's "bank account" was taking up all of his real estate! Finally Chen had had enough. He called Ben over and said, "Okay, since you refuse to fish for yourself, let alone to pay me back, I want to use these lines to buy some of your gold coins." Oh, did I mention that Ben had a treasure chest of gold coins that had washed ashore? Of course these gold coins were the last thing that Chen wanted, because what good are gold coins on a tiny island with only two inhabitants? But actually, they turned out to be an excellent record of the debt Lazy Ben owed to Chen the fisherman. You see, at first, Chen bought half of Ben's gold with the lines he had already accumulated, transferring his "bank account" over to Ben's side of the island and consolidating his "wealth" into gold. It worked out to 100 lines for one gold coin, or 100 fish per ounce. But after a while, Ben realized that he was running out of gold. He knew it would only be a short matter of time until he ran out, so he closed the gold window. And once again, Chen started accumulating lines and special yielding "bond" lines. Finally, they agreed that the value of the gold coins had to be raised higher than 100 fish per ounce. Ben suggested 500/oz., but Chen saw the short-sighted flaw in his thinking. So Chen said that the value of ounces should float against the number of lines issued by Ben. This way, Ben would never run out of gold, and his lines would always and forever be exchangeable for gold coins. Finally, a sustainable accounting system!
No need to discuss this idle fairy tale. I will just mention a little flaw in the last paragraph. Chen is an idiot. The point is not, from Chen's point of view, to make sure Ben never runs out of gold. The point is to make sure that he, Chen, gets his fish back, or something of equal value.
He is doubly an idiot for aceepting something useless to him, gold, in exchange for his fish. What kind of retard is he, working hard to get something he has no use for? If he had an ounce of sense, he would long ago have said, "Ben, you chiseler, no more fish till you repay me for ALL the fish you already took from me. And keep those coins and bonds and other nonsense to yourself. I want fish, and only fish, because that is the only useful thing on this God forsaken island". Now I do realize the glaring flaws in this analogy I cobbled together. So spare me the critique. It is far, FAR from perfect. But it does help with a few good observations.
Not only is it far, far from perfect, it is fatally flawed at the very parts you are going to use to "prove" your absurd thesis, as we will see.
First, the lines in the sand and the gold coins are both money on this island. One is the medium of exchange/unit of account and the other is the store of value. The store of value is quoted at any given time in units of lines, but its value floats, it is not fixed, so it never runs out. This method of accounting forces Lazy Ben to part with something more substantial than simply issuing more lines via line-yielding "special bond lines."
Yep, just like I thought. See my above explanation of why Chen is an idiot, and no sane man would behave as he does. So that no normal person would ever let gold be money on that island [or any island], and certainly would never let its value float, as explained above. In this case it was the accounting of transactions between a consumer and a producer. But it works just as well between any two actors with unequal levels of production and consumption. Some people just produce more while others can't stop consuming. I'm sure you know a few of each type.
And you assume that the guy who produces more will just give away his wealth to the consumer. The mind boggles. Also, notice that gold coins and lines in the sand both represent the debt owed from Ben to Chen. And with gold, Chen can wait forever to be paid back (which, on this island, is quite likely).
Oh, you noticed that too, that Chen will probably never be repaid? But you think Chen hasn't noticed?
The gold doesn't spoil, and Chen's possession of it doesn't interfere with Ben's ability to fish or eat fruit. But notice also that the more lines in the sand that Ben issues, the more the value of the gold (representing a debt of fish) rises. So the longer Ben runs his trade deficit, the more debt he owes for each ounce of gold that Chen holds.
This is not so dissimilar to the special bond lines, with a few notable differences. The bond values are not only quoted in lines, they are also denominated in lines. So the principle amount paid for the bonds drops in value as more lines are issued to lubricate the vital trade.
Again with the lubricant. Why is the trade vital for that sucker, Chen? What vital interest does he have in giving his fish away for lines of sand and other garbage?
To counteract this "inflation," interest is paid by drawing more lines without the reciprocal delivery of fresh fish. But these additional "free" lines also dilute the value of lines, which leads ultimately to infinity (or zero value) in a loop that feeds back on itself. The more fish Chen supplies to Ben, the more lines he receives, the more bonds he buys, and the more lines he receives in service to interest. Eventually Chen will be receiving two lines for each fish, one for the fish and one for the interest. And then three, and then four. And so on. Wouldn't you rather just have one gold coin that floats in value? I know Chen would.
Do I really have to refute this imaginary scenario that has no connection to reality? is this your best shot, dear author? Making up a story with many many admitted flaws, and expecting us to believe that it somehow explains or proves something? I am used to seeing a logically presented, well thought out, line of reasoning as proof of a point. But I guess I don't watch enough television or something.
Another observation is that the medium of exchange on our island devolved into the most insignificant and easy to produce item. A simple notation in Chen's "account." Is that so different from what we have today? And Ben could issue them with ease as long as Chen let him. Once Chen had so many lines, he wasn't about to just abandon the system, was he? Wipe the (beach) slate clean? No, Chen wanted to get something for his lines. Something compact that didn't interfere with Ben's ability to work off his debt should he ever decide to do so. Something durable. Something physical from Ben's side of the island. Something… anything other than those damn-stupid lines!
Soory, I've walked away from that island long ago.
I hope that this little analogy...
Analogy. Not logical reasoning.
helps you visualize...
Visualize. Not understand logically.
the separation of monetary roles, because those talking about a new gold standard are not talking about this.
We agree on that.
I understand that sometimes you have to speak in terms familiar to your audience in order to not be tuned out, but I also hope that my readers come to understand how and why a new gold standard with a fixed price of gold, no matter how high, will simply not work anymore.
Oh that's what that island was about. Terms familiar to us.
The full explanation of why it will not work is quite involved, and I'm not going to do it here.
You dissapoint.
But the short answer is that the very act of defending a fixed price of gold in your currency ensures the failure of your currency. And it won't take 30 or 40 years this time. It'll happen fast. It wouldn't matter if Ben decided to defend a price of $5,000 per ounce, $50,000 per ounce or $5 million per ounce. It is the act of defending your currency against gold that kills your currency.
Huh? My currency IS gold. A dollar is a thousanth of an ounce of gold, as explained above. I'm not "defending" anything. Why does this ensure the failure of my currency? You can defend your currency against other currencies… using gold! Yes! This is the very essence of Freegold. But you cannot defend it against gold. You will fail. Your currency will fail. Slowly in the past, quickly today. If you set the price too high you will first hyperinflate your currency buying gold, but you won't get much real gold in exchange for collapsing the global confidence in your currency, and then you will have to empty your gold vaults selling gold (to defend your price) as your currency heads to zero. And do you think the world trusts the US to ever empty its vaults? Nope. Fool me once…
All he says is true when the govt commits fraud and prints more dollars than it has gold to back them up. We are not talking about that. That is not a gold standard. that is fraud. If you set the price too low, like, say, $5,000/ounce, you will first expose your own currency folly with such an act and have little opportunity to buy any of the real stuff as the world quickly understands what has gone wrong and empties your gold vaults with all those easy dollars floating around. You will sell, sell, sell trying to defend your price, but in the end, the price will be higher and you'll be out of gold. Either that, or you'll close the gold window (once again), sigh, and finally admit that Freegold it is
All of this falls away when a dollar is defined as a thousanth of an ounce, as above. Yes, the gold price must… WILL go much higher. The world needs MONEY! And by that, I mean recapitalization.
Money and recapitalization are not the same thing. Recapitalization means having better means of production, better tools, factories, etc. And for that, the businessmen need to have money to buy the tools etc. But what has that do do with gold? And does he think that by printing more money, they will be able to afford to buy what they need? printing more money will just raise the price of what they need [except for the friends of Obama who get the newly printed money first].
Unfortunately the dollar is not the right money. And printing boatloads of it will no longer recapitalize anything. Today we are getting a negative real return on every dollar printed. That means, the more you print, the more you DEcapitalize the very system you are trying to save. Less printing, decapitalized. More printing, decapitalized. Freegold… RECAPITALIZED. Yes, it's a Catch-22, until you understand Freegold.
We agree on that. i wonder what Freegold means though. He's mentioned it at least 3 times already.
OK, I'm going to cut out some of his excess verbiage here. You can read the original if you are curious. Here's how I read the above description. Precious metals have a high economic value. But because of investment demand, they also tend to have a price higher than it would be on its industrial merits alone. Gold and silver carry some additional sentimentality for their past coinage. In other words, precious metals are industrial commodities with an elevated price due to levitation from investment demand. Fair enough? Now to understand Freegold, I think there are two issues that need to be addressed. The first is the difference between money, or a monetary store of value, and an industrial commodity levitated by investment demand. And the second, once the first is understood, is whether silver belongs in category with gold as money, or with platinum as an elevated commodity. You see, the very key to understanding Freegold may actually lie in understanding the difference between gold and silver with regard to their commodity versus monetary wealth reserve functions. So from here, I will explore the valuation fundamentals of money versus levitated commodities. And then I will explore the history of silver as money and ask the question: Is silver money today? First, money. Money is always an overvalued something.
Huh? Who are you to decide for everyone whether something is overvalued? AE teaches us that the value of an object to an individual is an individual thing. It is what he feels, at that moment in time, it is worth it to him to pay for the object. So what do you mean money is overvalued?
Usually a commodity of some sort. But it can be as simple as an overvalued line in the sand, or a digital entry in a computer database. But the key is, it is always overvalued relative to its industrial uses!
Hmm. A banana has no industrial use. Its industrial value is zero. Should Walmart be giving it away for free then? Are they ripping us off charging money for it? And what about a Picasso painting? Or a diamond? What industrial value does it have? The point is, a thing can have value for many reasons. It is absurd to decide that industrial use is what counts.
That's what makes it money! If it was undervalued as money, it would go into hiding, just like Gresham's law says, be melted down, and sold for whatever use valued it higher than its monetary use.
Gresham's Law is not talking about a gold standard, where a dollar is defined as a certain weight of gold. If a new use was found for gold that created a great demand for it in industrial use, then the value of the gold coin would rise. What money would the factory owners use to pay people to melt down their gold? Gold?
The rest of the article is a long historical piece, irrelevant to anything. He concludes from the stories he told that because debtors wanted money that loses value, that therefor "the people" [whoever they are] want money that loses value constantly. We all want our salaries and our savings and our pensions to become worthless.
He also argues that because gold seems to retain its value [which some people want], and paper money seems to constantly lose its value [which some people want], but silver fluctuates, that therefor nobody wants silver as money. The mind boggles, baby. What a non sequitor. Not to mention that gold fluctuates plenty.
Ok that's all I got.
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Keynesians and neoclassicals believe that prices, for the most part, should very rarely go down... to them, prices going down means that the market is failing... But Austrians do not concern themselves with this myth because the market NEVER fails...
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@Smiling Dave Thanks for your analysis. I appreciate it. But I do not agree that any commodity that can function as money need to have intrinsic value, in the sense that you present it. What really is intrinsic value? Can you define it? Can intrinsic value really be separated from the real (marginal) value? For example leafs have a marginal value (possibly negative), depending on the context. But take for example bitcoin. Bitcoin can be considered a virtual/digital commodity. People started to value bitcoins, and now they function as money. Is bitcoin a fiat currency? Well bitcoin does not have the coercive government fiat that the dollar has. Bitcoin has the non-coercive fiat of the bitcoin community. The traders and the generators value bitcoin.
By intrinsic value I mean this: assume the object was declared illegal to be used as payments of any kind. Would people want that object for some other purpose, enough to pay something for it? If no, that is what I mean by not having intrinsic value. Where I live, leaves are piled up in the street, free for anyone to take, but nobody does. Certainly no one will pay for them. So that where I live, leaves have no intrinsic value. Dollar bills, if declared illegal to use as money, would probably be dumped in the streets, too. So they too, have no intrinsic value.
Now it may happen that dollars will be worth money to someone, as wallpaper or novelty toilet paper, or to wrap fish, whatever. Maybe they will sell for ten cents for a pound of paper money, whatever the denomination. In that case, the intrinsic value is so much less than its current purchasing power that I would also say, though not with 100 per cent accuracy, that it has no intrinsic value.
As far as bitcoin, it seems to be based on something that has intrinsic value, idle computer time. One lets the network use ones computer and in return gets a bitcoin. So that the bitcoin is more a record keeping device, to keep track of how much time you have already given, and are therfore due something in return.
If a group of people would voluntarily get together and decide to use money that no intrinsic value, well that would be an interesting experiment. My guess is that the money would fall by the wayside.
that is why instead of using the term intrinsic value i suppose you could have said that fiat currency is fiat exactly because before individuals using it as money representative it did not have any serviceability.
Smiling Dave,
Your response was great to read. Do you recommend anything else on this topic other than Rothbard's "What has govt done to our money?"
"If a group of people would voluntarily get together and decide to use money that no intrinsic value, well that would be an interesting experiment. My guess is that the money would fall by the wayside."
well, fiat currencies do exist because of government monopoly and legal tender law, otherwise it would be highly unlikely for an individual to accept a piece of paper that does not have the whole package of properties which made gold the prefered medium of exchange.
congrats on the comments of the article. it is one very messy article.
TY for the compliments, JH and vaduka.
As far as a reading list, I am not one of the heavyweights here like, say, Esuric and Jonathan Catalan. I like it short and easy. So what I would do if I was looking for info on a topic is search through the articles and the multimedia here. I would type in a google search box "site:mises.org money" or some similar phrase. Then I would read what my favorite writers have to say on this. I find Rothbard and Walter Block and a few others very enlightening.
Some will laugh at me, and already have, but I find Peter Schiff a gold mine. He can get to the heart of an intricate topic in one common sense sentence. For instance, recently he refuted a claim by some some idiot politician who said that every dollar of unemployment money injects two dollars into the growth of the economy, due to some multipier effect. Peter's reply "Then we should fire everybody and give them all unemployment." Also, he has insight ot current events that many just lack. So I try to read and listen to and watch anything of his I can get my hands on. Goes without saying that I download his daily radio show. And I say download, as opposed to listen to live. Live, you get 40 minutes of commercials. Downloaded, the commercials are all deleted. The download is freely available about 10 pm every night, until the next day's show goes on the air.
Of course, there is plenty of repetition, but as the I Ching says "The lesson is only learned through repitition."
vaduka: that is why instead of using the term intrinsic value i suppose you could have said that fiat currency is fiat exactly because before individuals using it as money representative it did not have any serviceability.