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Is gold money?
In 2011 after second deluge of Quantitative Easing in the US, congressman Ron Paul challenged Federal Reserve chairman Ben Bernanke asking him, "Is Gold Money"?
Do you know what money is? Have you noticed that there are competing definitions? How could money have become so pervasive in our minds and relationships without being properly defined? How can we improve the technology of money when we don't even know what it is?
Economists usually answer the same way when you ask them what money is. They say it is "a medium of exchange, a store of value and a measure of value". So in a prison camp cigarettes might be money (or be used as money), but in more formal economies, money is almost entirely abstract and controlled to prevent you and I creating it.
But did you notice this definition is entirely functional? It is easy to understand what money does, but most Orthodox economists have a great deal of trouble saying what money IS. A functional definition is really only an after-the-fact description and it doesn't help us in the semantic quest to determine what is money and what is not. For example:
Money might not be such a concrete concept as Ron Paul's question implies. It would seem that, aside from a few ambiguous utterances by long-dead people like Adam Smith and Karl Marx, the profession has largely not bothered to define its most critical tool, indicator & metric.
But if the profession is unclear, the law is not. In law, bank notes and coins are Legal tender which means they are good for settlement of all debts, public and private. This formulation doesn't doesn't mention the word money, but considering the quantity demanded by the the government in tax and the banks in interest, it makes little sense to use anything else as money.
This idea that money and law are inextricable is expressed by the author of Modern Monetary Theory, Randolf Wray, in what I would argue is a tautological definition:
Anthropologist David Graeber puts it slightly differently:
This gets to the heart of the my problem. Having defined 'money' as a valuable token which can only be issued by the government and its friends; having passed laws which require that citizens accept the tokens at face value or their contracts will not be enforced; there's nothing right or true or just about legal tender laws; they are just inscriptions which, even before tax is collected, give the government exclusive power to extract produce from the marketplaces under their control.
So we should listen when people offer us novel definitions of money. Russia Today TV pundit Max Kaiser and financial warfare expert Jim Rickards tell us that 'Gold is Money', implying that fiat notes and coins might not be money. Of course anyone with a passing knowledge of economics knows this to be false. Money has not been linked to gold since the United States defaulted on its foreign debt and changed the rules of international finance during the Vietnam War. they are suggesting that the fiat regime since then has been some kind of con, a ploy by the printers to create and spend without limit.
Unfortunately this discourse, though it offers an alternative to the state power discourse, still has little to offer the majority of money users. Clearly not everyone can profit from a financial collapse, and very few people can afford to sinking their surpluses into an asset with zero yield.
There are no shortage of other discourses to choose from. When Georgian economist Silvio Gesell proclaimed that "Money is an instrument of exchange and nothing else" he was warning that our medium of exchange function of money conflicts with the store of value function. The same tokens are used for both measuring economic flows (payments) and for hoarding stored value, but the flow and the store functions work against each other; the more which is stored the less can circulate and vice versa. Furthermore, when money - an artificial commodity, is hoarded and made scarce, the price goes up! If money was only a medium of exchange it could be sufficient for the needs of the economy to exchange, and non-virtual commodities like gold should be used to store value.
Another helpful discourse is offered by acclaimed Canadian film-maker Paul Grignon when he alerts to Money as Debt. In a series of lengthy animations he explains how virtual money, which is 97% of money, is the money lent by banks because modern governments mostly only issue notes and coins. This leads to a number of problems including the need for perpetual economic growth as the money/debt must be repaid with interest, and the domination of the economy by those with the right to lend what does not exist. Grignon offers a solution, in the form of self-issued credit, which has been used many times in history.
UK campaign group Positive Money tell a similar story. They have worked hard to reveal exactly how money is created and to identify the real levers of monetary policy. Because banks profit from mortgages, banks have blown a bubble in the housing market. Meanwhile neoclassical economics has been saying that banks and money do not effect economy! Positive money suggest that control over money issuance should be returned through the government by updating an 1844 law which granted the Bank of England a monopoly on issuing bank notes.
So when considering the nature of this abstract thing called money that seems to shape our lives and
So now I hope you can answer for yourself Ron Paul's question. Gold is money if you want it to be, but perhaps telling other people what is money is a form of political coercion.