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

[Jim Devine <jdevine03@xxxxxxxxx>]

Sean Andrews wrote:
> maybe this isn't the same thing, but it seems
> like, unless we are talking about some Platonic form of "gold," there
> is some room for fiat.

exactly!

the scarcity that makes gold a "natural" form of money (as opposed to
a purely state-created one) also creates the incentive to cheat. This
means that professional gold-assayers and the like get involved, but
that means that there's an incentive for them to cheat (as with the
bond rating agencies). So in comes the government. It also has the
incentive to cheat, but with any luck its leaders will understand that
sustained undermining of the currency hurts their interests too. In
any event, the ability to cheat is limited (since the lead inside the
gold coins is pretty obvious after awhile, etc.) But the use of gold
money requires a superstructure of social institutions to work. It is
not purely "natural," unlike in some _laissez-faire_ views.

Even with nonconvertible paper money, state officials usually see
running the printing presses as against their interests, especially
since they are usually in alliance with (or in the pocket of)
financiers, who hate inflation because it undermines the value of
their paper claims on debtors.

-- 
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.
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