The dollar has no intrinsic value

The U.S. dollar has no intrinsic value.  O sure you could use it for wall paper like people in the past have done with other failed currencies, but it would make for a very ugly wall.

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Havilah, where there is gold : a post-Sinaitic theology of gold

The name of the first is Pishon; it is the one which flows around the whole land of Havilah, where there is gold; and the gold of that land is good; bdellium and onyx stone are there. Genesis 2:11-12

Economist Nouriel Roubini says that gold has no intrinsic value.  He like many others, including Warren Buffet, take a utilitarian approach whereby the value of something is only what the market will bear at any given moment.  So in a Black Swan event, such as when all are dying of famine, a bag of gold could potentially buy a loaf of bread to stave off starvation.  In such cases, gold is only worth what people are willing to trade for it–so the thinking goes.

Others argue that silver is a better investment because at least silver has an industrial use.  But the gaping hole in this entire utilitarian argument is it misses an important aspect of gold: its aesthetic value.  Now, aesthetics is about an appreciation of beauty.  The gold-has-no-intrinsic-value cult thus downplays the ornamental and the artistic value of gold in jewelry, in works of art, and in religious artifacts. But since the dawn of history, these qualities have made gold one of the most desired elements in creation.  I would argue further, that God actually created gold to have this aesthetic value.  But let’s not make the opposite mistake as Roubini et al. and downplay the utilitarian value of gold.  Genesis 2.11-12, the first mention of gold in the Bible is making an implicit statement about why God created gold.

My very first undergraduate class in Bible was on the Pentateuch.  Prof. Darrel Hobson at Northwest College taught that the theology of the entire Pentateuch was post-Sinaitic.  If Moses is the essential author of first five books of the Bible–a traditional view–then he wrote everything from the vantage point which occurs after the Exodus and after his experience of God’s presence at Mt. Sinai.  The Creation narrative tells us that God made the heaven and the earth and everything which is in them.  He thus made the gold of Havillah and that gold was good–like everything else he created (see Gen 1).

This says something implicit about the function of gold in Moses’ time.  In those days, gold had its obvious aesthetic value to make beautiful things.  But it was also used as money.  Therefore, Genesis 2.11-12 implies that the utilitarian function of gold as a intermediary of exchange and a store of value, i.e., the monetary use of gold was good and an aspect of the creational purpose that God had for gold.

The Secret of Oz: Anti-central bank, anti-gold standard

This film was certainly interesting and well-made.  It is in favor of fiat money which is controlled not by central banks but by democratic government.  The title is based upon Hugh Rockoff’s allegorical interpretation of the 1900 children’s book Wizard of Oz, setting the story in the political controversies at the time of the author, L. Frank Baum (1856-1919).  According to this interpretation, the silver slippers are representative of silver money in competition with the gold standard, the Scarecrow, who is actually smarter than people think at first, is the American farmer who is destroyed by deflation, the Tin Man is the American industrial worker, who is in need of liquidity (oil), who comes along side the farmer in common cause and the cowardly Lion is William Jennings Bryan who was in favor of silver money and the US government issued greenback.  The wicked witches of the East and West were two major banks, and the water that kills the witch is the easy liquidity of the government’s own ability to create fiat currency which is not debt-based.

In my opinion the films successfully show how the gold standard can be manipulated by big banks and can have depressive effect on money–which can (1) stifle the growth of an economy and (2) create serfs out of people who cannot pay back their debts because of inadequate liquidity in the system.

The film fails to show how giving control of fiat currency to government can stop the government from politicizing the money supply and ultimately from creating hyperinflation.  The film also mistakes fiat money creation for wealth creation:  While it is true that wealth creation requires liquidity, it is a mistake to confuse wealth creation with the creation of fiat money.

I would conclude that restrained form of monetarism could be the best system in that it would grow the money supply in conjunction with economic production–but that all systems of money are open to manipulation and greed–and this is why the Austrians point out that all paper currencies eventually become worthless.  The advantage of a system of money which is based on precious metals is that neither a central bank nor a government can steal people’s wealth through the excess creation of money.  A stable currency would also encourage saving, as currency would be store of wealth.  The disadvantage of the gold standard is that liquidity can be dried up and there can arise situations in which money becomes too scarce.

The best of worlds: the anthropological optimism of liberals vs. anthropological pessimism of conservatives

One of the significant differences between today’s conservatives and today’s liberals is that conservatives generally have a dim view of human nature and a deeper faith and trust in God.  So we are anthropological pessimists and theological optimists.  On the other hand, liberals want to make government bigger because they think it possible for human agency to procure well being, while conservatives want government to be small–with the exception of the military, for we believe that power corrupts and therefore government needs to be severely limited in scope and size, but that being said, the military is necessary because the world is an evil place and we need protection from other human entities such as terrorists and hostile foreign powers.  The liberal, on the other hand, optimistically wants to put power into the hands of bureaucrats as the solution to human woes, sees nothing but benevolence coming from larger government, but wants to reduce the military, evidently because there is no serious threat of terrorism or foreign invasions–i.e., anthropological optimism.

Conservatives are increasingly longing for the gold standard and today are buying large quantities of gold.  Liberals tend to support Keynesianism.  The difference again comes down to anthropology.  Liberals believe it is possible for an all benevolent bureaucracy to control the money supply.  I would generally agree that Friedman’s monetarism, as a middle position between Keynesianism and the gold standard, is probably the best system, but only when guided by wise and prudent leaders.  But when manipulative control-freaks are in charge of government, monetarism is too easily manipulated to rob the population through inflation.  Therefore, I’ve concluded that a gold standard, while placing limits on growth, would lead to greater stability and prosperity.  The gold standard places limits on human manipulation.  It would therefore prevent inflation, because gold is scarce and cannot be easily made un-scarce, as can fiat money; and it would lessen the swings in the business cycle, for the ability to demand gold for bank notes would greatly limit the expansion of credit.  Keynesians actually believe that an all benevolent government can prime economies for the well-being of all.  It is the replacing of of faith in God who cares for his creation with faith in humanity.  The gold standard recognizes human corruption and therefore seeks to curtail the evil tendencies in mankind–this may also slow growth, but that is the price that has to be paid to prevent the money system from falling into the hands of inept (viz. Bernanke) or corrupt (viz. the Democrat party) leadership.

It all comes down to a basic principle of St. Paul in Romans 3.23:  “For there is no distinction, since all have sinned and fall short of the glory of God.”