Thursday, July 12, 2012

A witty reply to goldbugs

Noah Smith via Brad DeLong:
It is simply not the case that we can cheaply and easily buy things with money because it is valuable. It is, instead, the case that money is valuable because we can cheaply and easily buy things with it. One way into the tangle of understanding why it is wrong is to ask each of us why we are happy accepting money in exchange when we sell useful commodities. Hint: it's not because we are looking forward to going down to the bank, exchanging our bank notes for the little disks of gold usually decorated with pictures of bearded men on one side and allegorical female figures on the other with lettering saying things like "Fecund Augustae" or "Concordia Militum" or "Fides Exercituum" on them, taking our little disks home, and feeling happy looking at them. That's not why we accept money. We accept money because if we don't have any money we have to buy commodities with other commodities, and when we do so we are unlikely to receive the cost of production for what we sell. Have you ever tried to buy a latte at Peets with a copy of Ludwig von Mises's Money and Credit? It does not go well. The fact is that your wealth is only worth its cost of production if you are liquid--if you can wait to sell until somebody willing to pay full cost of production comes along, which is not every minute. The use-value of money is that it allows you to time your other transactions so that you can realize the full exchange value of what you sell, rather than having to sell it at a discount.
But there are those people love them that Concordia militum...


  1. You prefer concordia militum to fecund Augustae?

  2. Anonymous6:27 pm

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    1. Anonymous11:05 pm

      How this constitutes a critique of the 'goldbugs' is problematic to say the least.The important point to remember is that those 'little disks of Gold' are money, that is REAL money. Indeed, those 'little disks of Gold' have been 'money' for quite a long time in human history.
      And that history indisputably shows that those 'little disks of Gold' retain their real purchasing power much better than the printed fiat currencies do. The reason? The supply of Gold cannot be simply printed into existence out of thin air by various governments.(E.g. in 1913 when the Federal Reserve was created, Gold was priced at $20.67 an ounce. Today it is nearly $1600 per ounce.) What would have been better to hold for the last 100 years? The $20.67 or the ounce of Gold. What would buy you more real goods today?
      The facts are that the 'goldbugs' are smarter than the fiat currency holders. Case closed, the 'Goldbugs' win!