Dishonest Money by Joseph Plummer

Author:Joseph Plummer
Language: eng
Format: epub
Publisher: Joseph Plummer
Published: 2023-01-15T00:00:00+00:00

Commodity money

Cows, sheep, corn, wheat — all of these commodities had some intrinsic value, were highly in demand, and, as such, people were nearly guaranteed to accept them in trade.

For this reason, these commodities became some of the earliest forms of commodity money. But just as barter was limited, so too was the ability to easily “buy” using indivisible items, like a cow. Perishable food items had their limitations as well.

When mankind discovered metal and learned how to craft it into tools and weapons, the metals themselves soon took on the role of commodity money. Metal was superior in many ways. For starters, metal didn’t need to be fed, watered, and cleaned up after. And, unlike wheat and corn, you didn’t have to worry about metal going bad, becoming contaminated with bugs or mold, etc.

Perhaps best of all, metal was easily divisible. Compare the flexibility of purchasing something with iron versus purchasing something with a cow: Assuming a cow is equal in value to 100 pounds of iron, and an item is for sale valued at 10 pounds of iron (or one-tenth of a cow), the individual buying with iron has a distinct advantage. He can easily produce the exact amount of money needed.

The same cannot be said for the man who is attempting to purchase the item using his cow. Sure, he can divide the cow into 10 pieces, but the other nine wouldn’t be worth much for very long.

The value of metal ingots was originally determined by weight. Then, as it became customary for the merchants who cast them to stamp the uniform weights on the top, they eventually were valued simply by counting their number. … [I]n this form they became, in effect, primitive but functional coins.93

Just as barter led to the concept of commodity money, and that led to metal becoming the commodity of choice, centuries of experimenting with different kinds of metals produced a clear favorite around the world: gold.

Gold’s ability to function as a stable form of money is unmatched. (Though silver runs a close second.) When it comes to monetary stability, the Federal Reserve System has failed miserably compared to gold and silver. But knowing the real aims of those who crafted the system, we shouldn’t be surprised.

Some argue that our modern economy can’t use gold as money because “there isn’t enough of it to go around.” But that isn’t true. Buyers and sellers will ultimately determine gold’s purchasing power based on its supply. So, if there are only 10 million ounces of gold circulating in an economy, its purchasing power per ounce will be higher than if there are 100 million ounces. This basic economic truth applies to all money, regardless of the form it takes.

Explaining further:

The more money there is circulating in an economy (whether we’re talking corn, sheep, gold, or paper), the less purchasing power that money will have.

For example, if we create a community from scratch and give everyone an equal amount of money, say $10,000 each, prices for products and services within that community will be set based on the available money supply.

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