Wednesday, July 24, 2013

The gold compromise

The monetary standard we have, one ruled controlled by politicians and manipulated by banks, is the worse standard to have, none. The optimal option would be a free market in currency.

However, I have been accused of being unable to compromise, since I advocate for what is best instead of slightly better than the worst. I will support any effort to increase freedom and justice even if it is not the best option. Any tax reduction, even a small one I support, any reduction in government control of people's live, I support and any move towards a better currency.

There seems to be 4 options for our currency. We have the worst option, where money is not determined by the desires of people but the desires of government.

A better option is a gold standard, a standard that many libertarian leaning individuals support. This is not ideal since it forces gold alone to be split between its uses  in consumption and production. But it takes control of the money supply away from government and politicians making it more optimal than the current fiat standard.

Milton Friedman was originally a supporter of a gold standard but eventually advocated for a bimetallic standard, i.e. gold and silver. This is the standard the US had through much of its history. A multi-metallic standard, where 2 or 3 or more metals are used as currency, is better. If the additional metals have uses that are valued less than the value of gold as a currency, these metals can be substituted as currency increasing total welfare.

Lastly, the optimal standard would be a free market standard. A free market standard and is floating which allows any item whose value in exchange is greater than its value in use to be used as currency. Only this standard, that chosen by voluntary and peaceful interactions, will maximize social welfare.

In theory, a paper standard could be optimal. How ever, if the standard can be manipulated to benefit one group at the expense of others, such a standard cannot be shown to be optimal. As such, I would support efforts to change our money to a gold based standard even though such an option is not optimal.

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