Some libertarians are prone to argue, against the so-called “gold bugs” that gold is essentially a fiat currency. Reiterating the common accusation, Tony proposes that, “Gold has value for the same reason a dollar isn’t a mere piece of ink-stained paper: someone else values it,” and continuing: “During a famine, would you accept gold for a loaf of bread? A loaf of bread for gold?”
Whenever I see this sort of argument, I’m compelled to respond. It’s a sickness, I know.
During a hyperinflation, would you accept a billion Zimbabwe Dollars for a loaf of bread? A loaf of bread for a billion Zimbabwe dollars? That’s a straw man argument, if ever I’ve read one. Perhaps more importantly, the “Diamond-Water Paradox” was thoroughly destroyed over a century ago, based on the theory of subjective valuation, to which I believe Tony refers in the previous sentence.
The peculiarity in the argument is that libertarians are apt to complain when government interference in the market for (e.g.) sugar, artificially overvalues sugar as compared to other goods, or when government interference in the market for (e.g.) automobile manufacture, makes autos more expensive than they otherwise would be. But many libertarians turn a blind eye to the outright interference in the market for nik-stained scraps of linen and cotton, which government compels everyone to accept under penalty of law.
I responded thusly:
And the only reason anyone values an ink-stained greenback, is because behind it is a government gun. Labeling hard-money proponents as fetishists is kind of off-the-mark. What we want is not to impose “gold” or anything for that matter, we just want to be free to trade in any medium which is mutually accepted, without being penalized by the government.
The fact that fiat currencies are imposed and maintained by violence, deception, fraud, and theft, is *always* overlooked by people willing to apologize for fiat currency. *ALWAYS*
Until and unless you’re willing to defend that idea, you can’t – with any consistency or conviction – complain about specie advocates.
Tony redeems himself in closing, suggesting that we can argue “for gold” and “against fiat”, but bearing in mind that they are “separate issues.” I’d tend to agree with him, at least in part, in this conclusion. I write occasionally about gold, and its merits, but my real complaint is against fiat. As with every other arena, individuals should be free to choose, without a market distorted by government manipulation. I object to fiat, and use gold to illustrate the likely alternative.
Gold is free market money, or at least my best estimation as to what the market might choose, given freedom, based on the simple fact that gold has continually been valued by nearly every civilization during 5,000 or more years of recorded history.