In today’s post, I want to talk about why US dollars are not money, and actually gold and silver are.
Now, Money is typically defined as a store of value (meaning it can be saved), unit of account (meaning its used to value goods and services) and medium of exchange (meaning people can use it to buy and sell goods from another so no need to barter). Right now, in my opinion, the dollar is failing to meet the definition of “Store of Value”. Something cannot be a store of value if it depreciates each year. Every year consumers lose more and more purchasing power b/c of inflation (One Way to Solve Excessive Government Spending). We know too middle class and especially poor people are hurt disproportionally by this.
Gold and silver are real money. They are a storer of value, meaning they don’t depreciate. They are also a medium of exchange as they can be used in transactions. And it is a unit of account, meaning it can be used to value items.
Now, a lot of people argue against gold and silver being money. This is because many say it’s not a great medium of exchange, especially when compared to cash and credit cards. Personally, for me I believe this could easily be solved by having decentralized businesses that issue gold and silver backed money. So, your precious metals are held there, with no fractional reserve banking at these places and they issue you a debit card. There simple role is to store your precious metals and deduct from your accounts whatever you spend. They could have something similar to FDIC insurance- ran by a private company-, but unlike FDIC there’s no massive leveraging so the only way one of these could fail is if there was a burglary and all the metals were taken.
Critics will argue that this won’t allow the Fed to stimulate the economy, but I think we need to let the business cycle play out its natural course. Only spend what you have. Recessions happen and we need to rely on technological innovation (How technology boosts economic output- read here) and productivity increases to boost the economy. Not free money.
So, Gold and silver are real assets and are always going to have its intrinsic value. They should be used as money.
