This blog is for my buddy Jim.
When I switched my major from business to economics, I had no idea the change it would bring to my life. Perhaps I was naive. I thought economists were a bit more progressive. I thought that economists were legitimate “thinking outside the box” folks. So, when I received a B on a paper about how a sustained rise in energy prices would lead to unchecked inflation because this idea was “completely ridiculous”, I was a bit disheartened. I wrote this paper circa 2003, long before the effects of rising energy prices were felt a couple years ago. But I digress.
Getting back to the gold standard… This caveman style of money fits right up there with having king rule. It is practically the same principle. He with the most gold rules. The gold standard comes from the innate human desire for shiny objects. A piece of shiny yellow metal that has relatively little utility compared with other natural resources, should not dictate the value of a country’s currency.
Now, back in the day (when the world was obsessed with shiny yellow metals), a gold standard would make sense. During those times, it was important. Today, gold has limited economic use. The high price of gold today is merely because of speculation about the USD and belief that the antiquated gold standard has merit.
The reality is that a country with little gold but an abundant supply of other natural resources and production and consumption of goods and services or advancements in science is far more valuable than a country that has tons of gold and little to no production.
Back in the day, kings didn’t have vast computer systems and economic tracking abilities. So, they did things the easy way. I’ve got gold. I’ve procured more gold. I am a better king. Today, we could smart bomb the king and take all his gold. The gold wouldn’t make our currency more valuable, but the smart bomb would.
Economic, political, social, medical, banking, and other infrastructure systems should (and arguably MUST) evolve with technology. Currency values can and should be defined by the value of a country’s output and consumption. Awaiting Jim’s Austrian theory of economics response 😀