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But throughout the whole range of history, not only is there no evidence of the existence of a metallic standard of value to which the commercial monetary denom

But throughout the whole range of history, not only is there no evidence of the existence of a metallic standard of value to which the commercial monetary denomination, the “money of account” as it is usually called, corresponds, but there is overwhelming evidence that there never was, a monetary unit which depended on the value of coin or on a weight of metal; that there never was, until quite modern days, any fixed relationship between the monetary unit and any metal; that, in fact, there never was such a thing as a metallic standard of value. This is a very slippery argument. The overall point of the essay is to show that basing one's currency on a metallic standard is silly and destructive. In this quote, the author is correct in that rarely in history has the monetary unit been permanently and inalterably fixed to an exact weight of metal. But -- it has been the norm in history to have a substantial precious metal content in money, with that content being fixed in the short term, and any lessening of the amount leading to charges of debasement, and possibly even the refusal to accept the currency. The reason why precious metals have been an important part of money is trust -- an issue which the author fails to address. It takes a very strong government to make its subjects accept fiat currency. If the sovereign pays his soldiers in fiat currency, the soldiers know that the sovereign can infinitely dilute the currency, making the currency worthless. Whereas if the sovereign pays in coin containing precious metal, the soldier knows the precious metal is likely to be of value in many markets, no matter what the sovereign does. And by requiring money to be made from previous metals, it slows down the rate at which the sovereign can debase the currency (although of course the sovereign can and does slowly reduce the metal content). If you trust your a particular government (or organization, or corporation) completely, then the author's arguments make sense, and you can accept the scrip of that government as currency. But if you don't trust that government completely... then you need a more complete assessment of the pros and cons of different monetary arrangements.

adrianratnapala 9y ago
Yes, and the fact that we have successfully used fiat money for several decades is a testament to how well trusted modern governments are. It's a sign that things are going well. Though we can argue about what to expect in the future.
- skookumchuck 9y ago
  Overlooking that the value of the dollar stayed about the same from 1800 to 1914, and is now 1/25th of that value: http://www.usinflationcalculator.com/ http://www.usinflationcalculator.com/ There's also all the relentless propaganda saying that inflation is a good thing, and if it isn't, it's caused by speculators & greed, not the government. I don't invest in anything denoted in dollars (such as bonds).
  - colanderman 9y ago
    Who cares that the dollar gradually declines in value? Only fools literally invest long-term in the dollar itself (the "under the mattress" approach). And if you're investing in any productive asset of actual value, inflation doesn't matter. (I can understand being leery of non-inflation-adjusted bonds.) All that really matters is that the dollar doesn't significantly lose value between payday and tax time – which by definition, it doesn't, since tax rates are fixed in dollars a year ahead of time anyway. I won't bother to argue the virtues of inflation with you, since it seems clear you've made up your mind about that "propaganda". But to claim that controlled inflation is inherently a "bad" thing – for no reason other than that it causes a thing with no inherent value to decrease in perceived value – belies a misunderstanding of value.
    - freejulian 9y ago
      People want to store the value they’ve earned. If you don’t provide that functionality in your currency people will simply find an alternative. Today people use real estate to park their money. Personally I’d rather money provide that store of value.
      - colanderman 9y ago
        You're always free to buy gold with your money, if you think that's a better store of value. I don't think the government cares. (Personally I invest in productive assets and bettering my standard of living, but to each their own.)
neilwilson 9y ago
To be a sovereign you have a loyal gang around you. That allows you to impose a liability on any mere individual in your realm, then offer a token to settle that liability in return for some of the individual's time. If they refuse you execute them and confiscate their property. A total loss of time. Or perhaps just remove their liberty - which is still a significant loss of time. As the individual do you take the deal or stand the consequences? Nothing to do with trust. Everything to do with power.
- deleted 9y ago
  [deleted]
romwell 9y ago
>The reason why precious metals have been an important part of money is trust -- an issue which the author fails to address. The author does not fail to address this: >We find, however, the same pride of accuracy with the Roman mints; and also in later days when the coinage was of base metal, the directions to the masters of the mints as to the weight, alloy and design were just as careful, although the value of the coin could not thereby be affected. Accuracy was important more to enable the public to distinguish between a true and a counterfeit coin than for any other reason. The need for a strong government to make its subjects accept coins is also talked about in detail, e.g.: >There can be no profit from minting coins of their full value in metal, but rather a loss, and it is impossible to think that such disagreeable punishments would have been necessary to force the public to accept such coins, so that it is practically certain that they must have been below their face value and therefore were tokens, just as were those of earlier days. What you said is mirrored in the article.
goptimize 9y ago
Try to read the actual article. Your comment is based on a few paragraphs you found and defigured for your own satisfaction.

adrianratnapala 9y ago

Yes, and the fact that we have successfully used fiat money for several decades is a testament to how well trusted modern governments are. It's a sign that things are going well. Though we can argue about what to expect in the future.

skookumchuck 9y ago
Overlooking that the value of the dollar stayed about the same from 1800 to 1914, and is now 1/25th of that value: http://www.usinflationcalculator.com/ http://www.usinflationcalculator.com/ There's also all the relentless propaganda saying that inflation is a good thing, and if it isn't, it's caused by speculators & greed, not the government. I don't invest in anything denoted in dollars (such as bonds).
- colanderman 9y ago
  Who cares that the dollar gradually declines in value? Only fools literally invest long-term in the dollar itself (the "under the mattress" approach). And if you're investing in any productive asset of actual value, inflation doesn't matter. (I can understand being leery of non-inflation-adjusted bonds.) All that really matters is that the dollar doesn't significantly lose value between payday and tax time – which by definition, it doesn't, since tax rates are fixed in dollars a year ahead of time anyway. I won't bother to argue the virtues of inflation with you, since it seems clear you've made up your mind about that "propaganda". But to claim that controlled inflation is inherently a "bad" thing – for no reason other than that it causes a thing with no inherent value to decrease in perceived value – belies a misunderstanding of value.
  - freejulian 9y ago
    People want to store the value they’ve earned. If you don’t provide that functionality in your currency people will simply find an alternative. Today people use real estate to park their money. Personally I’d rather money provide that store of value.
    - colanderman 9y ago
      You're always free to buy gold with your money, if you think that's a better store of value. I don't think the government cares. (Personally I invest in productive assets and bettering my standard of living, but to each their own.)

neilwilson 9y ago

To be a sovereign you have a loyal gang around you. That allows you to impose a liability on any mere individual in your realm, then offer a token to settle that liability in return for some of the individual's time. If they refuse you execute them and confiscate their property. A total loss of time. Or perhaps just remove their liberty - which is still a significant loss of time. As the individual do you take the deal or stand the consequences? Nothing to do with trust. Everything to do with power.

deleted 9y ago
[deleted]

romwell 9y ago

>The reason why precious metals have been an important part of money is trust -- an issue which the author fails to address. The author does not fail to address this: >We find, however, the same pride of accuracy with the Roman mints; and also in later days when the coinage was of base metal, the directions to the masters of the mints as to the weight, alloy and design were just as careful, although the value of the coin could not thereby be affected. Accuracy was important more to enable the public to distinguish between a true and a counterfeit coin than for any other reason. The need for a strong government to make its subjects accept coins is also talked about in detail, e.g.: >There can be no profit from minting coins of their full value in metal, but rather a loss, and it is impossible to think that such disagreeable punishments would have been necessary to force the public to accept such coins, so that it is practically certain that they must have been below their face value and therefore were tokens, just as were those of earlier days. What you said is mirrored in the article.

goptimize 9y ago

Try to read the actual article. Your comment is based on a few paragraphs you found and defigured for your own satisfaction.