Just use smaller pieces. Ever seen bullion denominated in grains? You can keep it in a plastic bubble with the assay card right there on the package. Theoretically, you could use molecules of gold if you needed to. A vast network of interconnected computers that allow people to go to mises.org would have sounded fantastic, back when they used gold for money.
Huh?
But I think it’s important to note that this only might be the right solution. Perhaps the right solution is to switch to a different metal. The point is that the market will decide which is the correct solution so we don’t need to solve these technical implementation problems.
I didn’t understand why you said you oppose bi-metalism but I would like to point out that the correct reason to oppose bi-metalism is that it’s just a kind of price-fixing. Let’s say the government set the banana:apple ratio to be 1:2… one banana is worth two apples. Well, this will create some pretty serious problems. When the market price of apples rises to be greater than half the market price of bananas, people will rush to buy up bananas and then exchange them for apples ($1 for a banana = 2 apples for $0.60, net profit = $0.20). And when the market price of apples becomes less than half that of bananas the opposite will occur. Those who are holding apples will not want to trade them with banana-holders and will attempt to offload their apples overseas at market prices where they will not be forced to take losses. This is why dramatic inflows and outflows of precious metals occur under bi-metalist laws.
Clayton -
Sorry, I meant the less scarce, the more there would be. (Which automatically creates inflation when it comes to currency)
clayton, a law is not necessary to creat bi-metallism. there’s really no reason to oppose bi-metallism. people started needing a medium of exchange to escape the limits of barter. one money places these same limits if you ask me.
I’m always glad to reply to such thread whenever they come up. In short, if by a ‘genuine’ gold standard one means a standard where gold coins actually circulate for payment and aren’t just redeemable for paper, than the answer is clearly no. Gold is far, far too rare to circulate as coin in a modern economy. Gold advocates will have to do with fiduciary media, whether they like it or (more likely) not.
Buildings and factories are too cumbersome to circulate in the economy, too. Yet, property advocates readily exchange (paper & digital) ownership shares in them without conflicting claims to said property. A 100% reserve gold standard is perfectly compatible with paper & digital certificates of gold ownership.
"Gold advocates will have to do with fiduciary media, whether they like it or (more likely) not. "
Why? I agree that a “real gold standard” in the way that you’re talking about is impossible, but why is the alternative a large deal of fiduciary media? Am I misunderstanding you and are you saying that the only alternative to such a “pure” system is a system in which there is a system of money substitutes with a small amount of fiduciary media in circulation?
Sure, but that is not what I said. I said that no gold coins can replace all fiat currency, which would be a genuine gold standard. A 100% reserve is something else, you still have fiduciary media circulating in the vast majority of exchanges.
What I’m saying is that a gram for gold sells for round 55 dollars where I live. A gram is far, far too impractical to use, so you’d need 10 for a coin. So you cannot use gold in any transition of less than 550 dollars. In these transactions gold will have to be replaced by fiduciary media redeemable in gold. Say, whenever you present 55 paper dollars to some (all?) banks we’ll give you a gold coin.
That is still a gold standard, and perhaps even a 100% reserve gold standard, but is not, nor can it be, a genuine gold standard such as Rothbard wanted to achieve.
Ah, I see the misunderstanding now. I have never heard the term “fiduciary media” used in any way except that in which Mises defined it which was:
“If the money reserve kept by the debtor against the money-substitutes
issued is less than the total amount of such substitutes, we call that amount
of substitutes which exceeds the reserve fiduciary media.”
Mises termed what you are talking about, assuming that it does stay fully backed as a “money certificate”:
If the debtor—the government or a bank—keeps against the whole
amount of money-substitutes a 100% reserve of money proper, we call the
money-substitute a money-certificate.
I was unaware that Rothbard wanted to return to a currency in which gold was directly used. Do you have any sources which lead you to believe this?
Sorry, my bad, I used the wrong term. You will also forgive me or not finding the Rothbard quote (it was something to the tune of, I expect people to use gold coins, and only businesses to use gold certificates), but right now I can’t look extensively.
you can use grams of gold for currency. They already exist as bullion. How is this impractical?
Reputable outfits could easily issue copper coins or paper notes that carry (1/100)gr of gold in the middle.
Strange, I’ve thought about the same thing. Of course you could, and that would in principle count as a genuine gold coin. But would that be practical? Could you extract at a decent cost that gram if needed (if not, that is meaningless to do)? Still it’s an interesting possibility.
You misunderstood me. What I meant is this: if you need to buy a burger for, say, 5 bucks, and a gram of gold costs 55 bucks, how the hell are you going to get that burger with gold?
Of course, there are (will be) outfits (mints) that would be more than happy to provide that service for you, for a fee, or would have bid/offer prices for receiving/issuing 1/100gr coins/notes in bulk to the market. Moreover, it’s easy to conceive how “not-pure gold” coins/notes issued by reputable outfits (in any gram denomination) would be valued at a premium to uncertified/bulk piles of pure gold. An assay from a reputable outfit comes with a premium. Even today, an individual would find it impractical to extract the 1oz. of gold out of a Golden Eagle bullion (91.67% gold) by himself. That’s not stopping the market from valuing them at a premium to spot gold.
They could give you change in grains of gold. There are about 15 grains in a gram, which works out to $3.66 at $55/gram.
I’ve just realized that there is something smaller than the gram. I need time to let that sink in.
Incorrect. Bimetallism is always a political phenomenon.
Clayton -