The end of money


Investopedia defines money as

"A commodity or asset, such as gold, an officially issued currency, coin or paper note, that can be legally exchanged for something equivalent, such as goods or services".

Joe Plummer offers a more interesting definition:

Fiat money is inherently worthless paper, backed by absolutely nothing, and because so, government must force people to accept it via legal tender laws.

The last twelve months has seen the world's favourite fiat money, the United States Dollar, resemble more closely Joe Plummer's description of money. Oil exporters have taken note. Kuwait has quietly removed the dollar peg. It is rumored (and one-year forward contracts support this rumour) that Saudi Arabia is on course to unhinge the Riyal from the dollar hook.

President Mahmoud Ahmadinejad couldn't agree more with Plummer. "They get our oil and give us a worthless piece of paper... the dollar has no economic value" complained the Iranian leader at the last OPEC meeting in Riyadh.

Americans ought to be concerned too not least because foreigners will snap up cheap American exports so rapidly as to raise the domestic costs of exported items (Rothbard, "What Has Government Done to Our Money?", 1964 ). What is the safest way out of a depreciating dollar?

Gold. Back in 1935 an ounce of gold at USD 35 could buy a decent suit. Today at USD 800, an ounce of gold can still secure a decent suit.

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