The Ridiculousness Of Demanding Government Return To A Gold Standard

Why in the world are libertarians running around demanding government return to a gold standard?  I have a couple of questions for libertarian goldbugs in the Ron Paul camp.

1.  What possible motivations would government ever have for doing so?

2.  What makes anarchists think the government would ever listen to their pleas?

The answer to the first question is obvious – it has none; therefore, it will never return to a 100% reserve gold standard.  It will simply never happen.  No amount of protesting, cajoling, rioting, etc.. etc.. will ever make the government return to a gold standard.  Historically speaking, a return to gold is only precipitated by the total destruction of the preceding fiat monetary system.  Markets can force a return to gold, but government never willingly returns to a gold standard of its own accord.

The second question is really why I’m writing this article.

By now it should be obvious to everyone, even to people who aren’t libertarians, that government never does anything that is in the best interest of the public at large.  It only serves selective special interest groups that are composed of various voting blocks.

For example, social security is robbing the youth of the nation blind while funneling all of the stolen booty into the pockets of old  people who happen make up the richest age demographic in the nation.  Social security doesn’t help the old and young, it only helps the old at the expense of the young.  Old people vote more often than young people so they constitute a special group of people that government looters pay attention to.

Since a government mandated return to a gold standard would “injure” more special interest groups than it would serve by way of providing a stable medium of exchange, is it not simply a massive waste of time and resources trying to get the government to institute a gold standard?

Let me put this another way – Is not demanding that congress abolish the Fed and return to gold the same as demanding that the Bonnano family abolish the Italian Mafia?

Could it happen?  I suppose it could happen; in the same way I could win the mega-bucks lotto.

Given that I feel the above facts are indeed facts and not opinions, it would seem to me that the proper way for libertarians to go about bringing a return to sound money is to simply start transacting in one.  If all the libertarians (which I figure make up around 10% of the US population) simply decided that they are going to start using and accepting gold as a currency in their daily transactions, it would rapidly undermine the official fraudulent currency.

This solution seems obvious to me, so why aren’t the goldbugs doing this?

What’s that?

Did I just hear you say that people have tried to create their own gold backed currency, like the Liberty Dollar, which resulted in them being attacked and looted by the Feds?

Did I just hear you say that gold is simply too difficult to use a direct medium of exchange because you can’t physically divide it up as you stand in line at the checkout counter?

Did I just hear you say that you can’t use gold for internet transactions because you can’t shove gold down an internet cable?

Did I just hear you say that as soon as you start representing gold with tokens or paper that those things suddenly become the target of counterfeiting, fraud, and a plethora of government regulatory attacks because they fall under Federal Securities regulations?

Did I just hear you say that gold backed private currencies constitute a centralized issuing authority that can be arbitrarily shut down by government or that the private issuing body could issue more notes than they actually have in specie?

Of course, you are absolutely correct on all counts, which is why people aren’t transacting in private gold backed currencies today.  I have to thank you, because you just made all of my arguments against the gold standard for me.

Hmmmmm…… so what is a libertarian to do?  I think most libertarians have come to accept the reality that laws do not actually solve any given problem within a society.  At best, they simply act as a band-aid or punishment to deter crime.  Murder laws do not solve the problem of murder.  Rape laws do not solve the problem of rape.  And government currency laws don’t actually help make the general population richer.

Only the industrious use of technology can actually solve complex social problems.  It is for this reason that one must remain open and alert for new technologies that can address the issues with gold that you just laid out for us.

It has really struck me that while libertarians make much hullabaloo about returning to a gold standard, they aren’t really interested in returning to a market driven gold standard.  They are only really concerned with with returning to a government mandated or granted gold standard, which is an utter pipe-dream.

Running around stamping your feet demanding government return to a gold standard or that government allow private mints to issue their own private currency is like demanding the mob stop robbing people.  IT WILL NEVER HAPPEN. There is only one way to affect the social change you desire, and that is by finding a way to address the issues that are preventing gold’s use as a private barter currency today through technological innovations.

What if I told you a global decentralized currency exists today that is not subject to any of the above burdens, while still retaining all of the monetary properties of gold?  Would you be interested in learning more about this currency – or would you dismiss it out of hand because it’s simply not gold?

Didn’t you just finish dismissing the gold standard in the above arguments?  I just can’t win with you people!

The reality is gold can not become a currency of the resistance.  It just can’t.  It is too difficult to spend, too easy to confiscate, and too easy to control.  The only way to undermine the current tyrannical regime is to create a currency that is better than gold.  The only way to topple the regime is by taking its ability to confiscate resources away from it through technological innovation.  Only through technological innovations that eliminate the problems with a gold backed currency can real change be effected.

Most importantly, libertarians must accept that gold is flawed.  They have to look at the arguments laid out above and really digest the fact that gold just isn’t going to cut it.  They have to acknowledge that the physical limitations of gold combined with the violence of the State act in concert with each other to prevent its return to the markets.

There is only one currency in existence today that evades all of the problems with gold while retaining all of the benefits of a commodity currency – and that currency is Bitcoins.

Let us not forget that we should ultimately not want a commodity backed currency, we should want a commodity to be the currency itself. Backing a currency implies that some issuing body is responsible for auditing the issue of whatever is representing the underlying commodity.  History has taught us this way of thinking is folly.

So this is my plea to you, my dear voluntarists, stop demanding government effect change through laws and start effecting change on your own by seeking out technological innovations that undermine the State’s ability to rob people.

I’m not going to proclaim that Bitcoins are the panacea to the problems of gold, but I am going to proclaim that if it is not Bitcoins, then it is another flavor of electronic currency that operates on the exact same principles as Bitcoin.  Only a decentralized,  peer-to-peer, unreproducible, anonymous, and secure electronic commodity can solve the problems that gold fails to address.

Related articles:

The Economics Of Bitcoin – Doug Casey Gets It Wrong

How To Use Bitcoin – The Most Important Creation In The History Of Man

Libertarian Goldbugs Hating On Bitcoin – Free Market Money

The Economics Of Bitcoin – Why Mainstream Economists Lie About Deflation

The Economics Of Bitcoin – How Bitcoins Act As Money

Against The Gold Standard

  • MJ

    Agree that bitcoin should not be hated.

    But as for gold’s failing:

    Difficulty to spend has to due with  it’s value and divisibility, it’s true.  But that’s why there’s silver.

    Too easy to confiscate – as is bitcoins.  Gov’t can kick in your door, point guns at you and steal both bitcoins or gold as easy or as hard as they are to find.  Gold has to be physically stolen (unless the value is played with), where as bitcoins do not, as the recent MtGox hacking shows us.

    A downside to bitcoins is that you need connectivity.  One could think of extreme situations where internet accessibility is not available.  So every medium of exchange has it’s downsides.

    But I agree that we should strive for a mechanism of exchange without government influence. 

    • The storage of Bitcoins in exchange banks can be just as secure as any other normal bank.  Mt. Gox learned a lesson the hard way, but it is expected that new systems are going to be tested.  It is better to get it out of the way early so the holes can be found and plugged.

      Arguing that you need connectivity is essentially saying that if armageddon strikes and the internet is destroyed, your money will be worthless.  – Well I would argue that if the internet is gone, then you have much bigger problems to worry about than the fact that you can’t get to your bitcoins,.

      If the internet is dead, then the normal banks and ATMs wouldn’t work either, because they all rely on connectivity to access accounts as well.

      • MJ

        “The storage of Bitcoins in exchange banks can be just as secure as any other normal bank.”
        Could be, yes.  How many banks do you trust? 
        See I wouldn’t call banks safe when the government routinely freezes and confiscates accounts at real banks.  If your bitcoins were tied up in someone’s online Bitcoin wallet don’t think the gov’t wouldn’t grab servers or kick in the operators doors if they were located domestically.  Don’t think they won’t get some other governments stasi enforcers to do the same if overseas.  Bitcoins are not a friend to the health of the state.  This would effect accounts without the internet being shutdown (infact most users wouldn’t even notice, like the snatch and grabs that have been happening recently).
        “Well I would argue that if the internet is gone, then you have much bigger problems”
        Agreed, but take a Katrina type incident.  If you really needed supplies or a service you are pretty much limited to whatever of value you have on hand.  
        “All of the markets would be down. All of the exchanges would be down. ”
        Yes, except for physical exchanges, of course.
         I like bitcoins, I have them.  My point is nothing is safe, and there are pros and cons to every medium of exchange upon examination and nitpicking.

  • DrGizmo

    Mike you hit it again, yes on all points now we need the Luddites to get the technology, to understand BTC is software, it is labor /it is the value of energy to create them (BTC) like (mining) it has utility value much like sliver, it can be used for other technology, it… perhaps

    Here is intriguing Idea …The BTC can act as a stock, see in away…it is the best way so far I have found or thought of to monetize the billions of words and ideas on the web, and as commerce grows, (the tip jar economy)  it will grow in value with the expansion of the web.

    IAW Metclaff’s Law…the law of networks, more value to a network …the more nodes that are added… and the value will grow exponentially for a while.  It sure will feel good to be on the other side of the wave.  It the BTC can then grow like a stock, gaining value the more it is used, Im not sure anything like this has existed before … well yes before the FED,  and FRB your money would be shares in growth of a nation… well I think BTC is shares in the growth and development of a global economic system that will supplant most other systems in the free world.

    Guys who understand numbers and web (security) technologies, get it … the rest will eventually …and that is as it should be… P to P. 

    all Fiat money is steeped in debt of their creators… and all fiat eventually fail default for the same reasons …

    BTC will not fail for that reason… maybe something else but not that… LVon M. would love this SW were he to be alive, im sure.  
    BTC proves him right… all his theorems of HA are right. BTC is the perfect Austrian currency much better than gold… BTC will prove to the world LVM had it right all along… he was ahead of hid time, and all he needed was BTC and internet(WWW)
    BTC has no debt, never, no way, no central authority, no one to put it in debt… this fact alone should be enough for most Libs … we will see…LHRockwell Jr is a very smart, honest, and reasoned man, he will get… and he will get it soon…  he may be the guy that sells this BTC idea to RP and the synthesis of RP running on BTC, and only on BTC, and getting elected with no $ from the FED spent on his campaign… Imagine that…how beautiful would that be…one last thought,… talent is the ability to hit a target no else can hit… Genius is the ability to hit a target no one else can see…

    This monetizing  thing will really catch on,  I Think, especially with Google, …you like the BTC we leave you for you time to time… right? keep up the good work… and the Tips will keep coming…plus those tips will be worth more and more over time too…now how good is that?

  • Stevoblevo

    another excellent article Mr. Suede.

    proof read:  “gold is simply to difficult”  should be too not to.  and “Bitcoins are thee panacea” should be just an italicized ‘the’ not thee.  Thee is the accusative (direct object) of thou which is singular you.  I love thee.  Thou lovest me.

    No need to be offended by my corrections.  It’s only that I enjoyed the article and your site that I offer them.

  • Another terrific piece from the prolific Michael Suede. Thanks, Michael.

  • Carolmcgovern2004

    Social Security & Medicare have been funded HEAVILY by those “OLD PEOPLE”. It currently RETAINS 2 Trillion Dollars in the funds. The Social Security Fund was set up to be vested, it was thrown into the general budget. Bush funded both the Iraq & the Afganistan invasions with THAT MONEY. Those two wars were kept off-budget for precisely that reason. The Libya “war” is currently being financed the same way. And finally, Social Security, & Medicare were never investment funds, they were meant to provide a safety net for people. You understand what an insurance plan is, don’t you??

    • I’ve never heard of an insurance company using coercion to fund their insurance programs before.  So calling SSI an “insurance” program pretty much makes me laff my pants off.

      What is it insuring? That I have no retirement savings?

  • Just a few thoughts.  I am a long time precious metals fan.  I, like many others saw the potential for government default back in 2000.  My portfolio of precious metals has appreciated considerably against the dollar.  I do see your point about gold, and initially I was a big fan of bitcoin, but the more I learned about its weaknesses and that fact that it is NOT anonymous the more I felt that I should wait for some other e-currency that is more secure.  Oh and by the way, if you don’t think that government(s) would effectively shut down the internet in order to save themselves from collapse from lack of funds, then you don’t understand exactly how warped Statists are and how far they will go to protect themselves and their racket.  Personally, I am preparing for a systemic collapse of government in general.  In that situation I believe gold, silver, and food plus items for barter will be the best investment.  I hope I am wrong but the handwriting on the wall just seems to be getting easier to read everyday.

    • You know I have absolutely NOTHING against holding gold as a store of wealth or even using it as a money.  My point is simply that a government mandated gold standard is an impossible standard to keep.

      The only way to keep government from inflating the money supply is to create a money that is literally impossible for government to take over and inflate.

      Gold does not meet that requirement as a monetary unit because it must be represented by a receipts in order for it to be a viable modern currency.

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