As a long time D&D and video game player, I am quite comfortable with using gold and silver coins as currency. While I normally use this imaginary loot to buy things like magic weapons and healing potions, I’m sure I can easily make the switch to buying gas and groceries with such coinage. If South Carolina representative Mike Pitts has his way, his state will switch to the same currency system used by Middle Earth and Azeroth: gold and silver coins.
Pitts seems to have three main reasons for his idea. First, he seems to hold that the replacement of gold and silver coins by Federal Reserve Notes is unconstitutional.
However, he seems to be mistaken about this. The federal law that allows the use of such notes seems to fall clearly under the Commerce Clause. Of course, an amendment could change that.
Second, he contends that if the federal government continues to spend and print money at its current rate, it will collapse the economy. He uses the examples of Germany in the 1930s and the Soviet Union to support his view.
While his claim does have some appeal, the failures of the German economy and the Soviet Union were not due to their failing to use gold and silver as their currency. While spending was clearly a problem, it seems unlikely that using gold and silver currency would have prevented their problems. Also, Germany did not recover by adopting gold and silver currency. As such, while he does have a reasonable point that over spending is economically problematic, it does not follow that gold and silver currency is the solution.
Of course, it could be argued that gold and silver currency would reduce spending. After all, the supply of gold and silver is limited and hence the spending would have to end when a government ran out of gold and silver. Of course, there is the problem of getting enough gold and silver to pay for needed services (like defense and infrastructure) and working out a economic system for the digital age based on currency from the iron age. While this might be possible, it seems likely that it would be rather challenging and it is not clear that a gold and silver based system would solve the economic woes.
Third, he notes that when the collapse comes, his state would be better off with hard currency that can be carried and bartered. After all, paper money from the federal government will be worthless then.
He does have something of a point here. After all, if the economy did collapse and paper money became worthless, people would probably revert to a barter based economy. People might accept gold and silver as currency-after all, a collapsed economy would probably create a situation comparable to certain times when gold and silver coins were used as currency. Of course, if it comes to that, then the most valuable barter items will probably be bullets and guns-one barters by getting people to hand over stuff in return for not shooting them.
This, of course, assumes that such a collapse will happen-which is quite an assumption. While an economic collapse is always a possibility, it seems to be an unlikely one. That said, perhaps it is time to start stockpiling weapons, ammunition and survival rations.
So, should we switch to gold and silver? If so, how will we get enough to run a world economy and how will the practical and theoretical problems be solved? Then again, it would be kind of cool to swagger into the local tavern, broadsword at my side, to slam a few gold coins on the bar and then demand a pint of ale and the location of the nearest dragon.
Yeah, I don’t think there’s enough gold for a world or a national currency; the population is, I think, too high at this point.
But gold and silver are only valuable for the same reason that paper money is valuable–we agree that it is. We accept money, in whatever form, in exchange for goods because money doesn’t rot, but the material has little intrinsic value. There is the aesthetic appeal of shiny metal, of course.
True. I also wonder how people will buy on the internet with gold and silver. eGold and iSilver perhaps?
Mmm, shiny…
In actuality, silver is a highly prized industrial metal used in practically all electronics, many chemical compounds used in medicine, photovoltaic applications, etc. Gold, however, is just hoarded in massive amount by the rich bankers who control out fiat currency…kinda hypocritical, if their fiat paper money (the vast amount of which is actually just numbers created out of thin air on a computer screen) is actually worth something. The fact of the matter is that metals have been valued as money since the beginning of time (and even now, central banks and governments often settle debts in gold). Fiat money is a recent invention that has failed numerous times (e.g. Argentina and Zimbabwe).
Gold does have some uses in electronics, but silver does seem to be far more useful.
I think there’s more to it than that. Gold is usable for many things, whereas paper that has already been printed on is not. (Please see my comment above as to why I am not a proponent for a return to the gold standard.)
http://usdebtclock.org/gold-precious-metals.html
The US government is sitting on top of almost 287 million troy ounces of gold – roughly 9 ounces for every 10 people in America. Trading in gold would not be a very worthwhile endeavor at a grocery store. However, silver and copper provide a decent alternative.
I agree to that in some points. But it has its advantage as well as its disadvantage. We also have to consider the supply of silver and gold if we will allow currency to change. It is not that we have abundant in supply that will last. I think it is only good in terms of investment.
A note on the idea that economic collapse is possible but not likely:
Argentina, 1993. Hyperinflation occurred after the Argentine central bank monetized central government debt and created loads of money to do it. At the moment, 70% of America’s federal debt is being monetized by the Federal Reserve. I.e., the fed is creating money at an abnormally high rate to finance our government. Also important to note is that because of fractional reserve banking, of the 70% of the yearly budget deficit that the fed funds, 9 times that amount goes into circulation. All we need at this point is for China to dump its collection of US bonds, and our currency will rapidly inflate. Silver and gold do not inflate like paper does, and the short term volatility is offset by the long term security. Also important to note is that silver prices have been artificially suppressed until recently by JP Morgan shorting ~twice as much silver as was in existence.