Daily Archives: May 25, 2007

Should We Go back to Using Gold as Money?

Many people these days are arguing for a return to using gold (or silver) as the primary exchange media.

This would be a mistake.

While commodities like gold or silver may have a role to play in defining the unit of measure of value, to revert to using such commodities as means of payment would create more problems that it would solve. (Part III of my book, Money and Debt explains the need to segregate the typical monetary functions and shows how to do it).

Credit money is a higher stage of evolution than commodity money (including gold and silver). For more on this, see my slide show on the Evolution and Transformation of Money.

Just because credit money has been monopolized and perverted, that is no reason to abandon it and revert to more primitive forms. Credit money instead needs to be liberated and perfected.

Demanding gold as payment means you are not willing to trust your trading partners. Sure, that trust must be well considered. It should be based on relationship history, past performance, prudent judgment, and a willingness to take some risk. By organizing this process within credit clearing association, we can liberate the “credit commons” and mitigate the risks of default, while at the same time, reducing our dependence upon the dysfunctional political money and banking system.