PEN-L message, Re: [Pen-l] Gold money is fiat money too.

Re: [Pen-l] Gold money is fiat money too.

To: Progressive Economics <pen-l@xxxxxxxxxxxxxxxxxx>

Subject: Re: [Pen-l] Gold money is fiat money too.

From: Shane Mage <shmage@xxxxxxxxxxxx>

Date: Thu, 29 Jan 2009 22:22:53 -0500

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On Jan 29, 2009, at 9:16 PM, Sabri Oncu wrote:

Gold money is fiat money too, because gold is infinitely divisible at
the continuum level, not at the quantum level. But who cares about the
quantum level? You can create as much money as you like by
re-numerating any currency based on gold...

But it is gold (or silver or copper) that *is* money whenever debts are denominated in units of a precious metal. In 1933 the US currency became fiat money not because the dollar was devalued from .05 troyes ounces of gold to .284 oz. but because FDR arbitrarily canceled the gold clause in all *domestic* contracts while forbidding the private ownership of monetary gold (except for collectors). However, money internationally remained gold--uncleared international debts still had to be settled in gold until Nixon tore up the Bretton Woods settlement with all the effects we're ever more strongly suffering.

And this can only be done by
fiat.

Historically, governments have "created money" by clipping coins or by fraudulently mislabeling the amount of money-metal in each coin. Not until the French and American Revolutions did a government "finance" itself by issuing inconvertible paper and trying to make it money. Never in history was the resulting inflation ultimately (or, in the French/American cases even immediately) controllable. So people everywhere have a deep fear of fiat money, having learned by the universal experience of mankind that resort to fiat money always leaves a hangover far more painful than the troubles it had seemed to drown.

Aren't all moneys fiat moneys?

If all moneys were fiat moneys no government that owned a printing press or a foundry would have ever gone into debt, and Zimbabwe would today be the richest country in the world.

Shane Mage

This cosmos did none of gods or men make, but it

always was and is and shall be: an everlasting fire,

kindling in measures and going out in measures."

Herakleitos of Ephesos

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