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The Money Problem

The Money Problem
by Alex Merced

 While people like me definitely see the virtue of a gold standard, even a gold standard in any of it's historical incarnations still have one fundamental problem, they are a monopoly. I can discuss how the gold standard restrains government which promotes peace and limited government, or that the problem with previous attempts at the gold standard was allowing fractional reserve banking which many see as fraud.

 Although, all of this is only a band aid on the greater problem of money traditionally being a monopoly product of a government, and like any legally protected monopoly results in drops of quality and increases in prices, in this case the increases cost being the extra labor needed to earn enough money to retain purchasing power as the currency is devalued by it's monopolistic issuer.

 Money, like any good needs to be allowed to have a market and competition. While many think you have competitions between nations, politics of government leads to a race to the bottom like you see now where every government compete to see who can provide the worst product instead of the best like when enterprise competes.

 An important aspect of developing such a market is the ability to use multiple currencies and goods as legal tender, instead of the ultimate legal control of legal tender laws which even on it's worst day force people to have some level of demand for some currency. If people could have multiple goods that they could use as legal tender, they could diversify their monetary portfolio like one diversifies their stock portfolio.

 For example, if the US dollar were to collapse owning other currencies and goods would be meaning less since they can't be legally used to tender debts. So at the end of the day, a sound money is great but would probably naturally occur in a competitive market for currency separated from politics (business issued money, not government issued).

Posted Oct 22 2010, 10:49 PM by Alex Merced