I've been wondering for some time now why people don't currently use gold, silver, platinum, bananas, or whatever as a medium for exchange instead of dollars, euros, yen, etc. Are there laws in place forcing people to trade in dollars? There are plenty of other things available that could be used as a medium of exchange which are not issued by the government. Why doesn't my employer pay me in gold bullion or why doesn't the grocery store accept silver?
In my view, using a commodity to trade is superior to using paper currency, but I can't figure out why it's not done. Why can't I go to Foot Locker with a couple of silver coins and buy some new shoes? I mean... with a big enough pile of silver, I surely could, but that doesn't make much sense to me that a vendor would charge me a higher price if I were offering a superior currency.
Someone suggested to me that it may be due to the fact that companies must report their taxes in dollars, so accepting something else as payment would require them to do a valuation in dollars to pay the government. Which, of course requires additional labor - an expense. I'm wondering what the Austrian prospective is.
Honestly, I don't see a reason why governments need to be involved in money at all, except perhaps in preventing fraud (ex. someone using deciet to pass off something else as gold, etc.). People needn't even carry coins if they didn't want to... companies could transfer bullion from one individual's account to another person for a fee. Checks or (in more modern terms) check cards could be used if people didn't want to carry around bullion.
Because the government will not back up any contracts in gold. In fact, it requires everyone in the country to accept dollars as payments, which completely crowds out good money, which is the consequence of government setting exchange rates. If you make a contract in apples, then the courts will decide how many dollars you should accept.
The Economics of Legal Tender Laws (by Jörg Guido Hülsmann)
And also check out the last five minutes of the Q&A of this older version of the lecture:
The Economics of Legal Tender Laws (by Jorg Guido Hulsmann)
I think it is simply that the vast majority are not aware of these monetary concerns at all. Buying stuff with Dollars is just what you do. Actually you have to be a pretty educated libertarian economist to even be aware that there is an alternative at all. And even those who are aware of different monetary policies and such don't neccesarily contemplate that government monopoly money is a peculiar situation, not the obvious norm.
As for why government needs to be involved in money, because then they can print it. It's a racket. Essentially a government is a local monopoly on printing money. And they are going through a lot of trouble to maintain their monopoly - from laws that ban the use o other methods of payment to schools that keep people from understanding monetary issues.
Buying stuff with Dollars is just what you do.
Yeah, but I believe that even though markets can be fooled for a while... you can't fool them perpetually. In other words, I don't believe that governments could perpetually trick their populus into using an inferior currency. Just like they can't forever trick their population into using any other inferior product perpetually. Eventually, they have to employ violence to maintain control - propoganda only goes so far.
So, I expect that there is some sort of law that makes it extremely difficult to use anything but dollars. Perhaps it's tax law.
Wow, that's a fantastic lecture. Thank you.
this is great if you didnt know.
Legal tender laws (as mentioned) and capital gains taxes. If you hold 100oz of gold and you want to exchange them for $ so you can buy something, you must first pay tax on any $ capital "gains" on the value of your 100oz of gold. So you're foced to pay taxes on non-existent gains: You had 100oz gold before and you have 100oz gold now -- where is the gain? One could easily circumvent legal tender laws by switching from gold to $ and back as needed, but the capital gains taxes incurred from all those "transactions" would make it prohibitively costly.