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

[raghu <mraghu01@xxxxxxxxx>]

On Thu, Jan 29, 2009 at 7:22 PM, Shane Mage <shmage@xxxxxxxxxxxx> wrote:
> 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.


This may be true, but irrelevant. The peculiar nature of the money
commodity means that any workable currency system requires a certain
amount of fiat and a certain amount of trust, and this necessarily
means that the currency can be debased - especially by the institution
responsible for maintaining its integrity.

In other words, any commodity that has the properties of being
anonymous, fungible, storable, infinitely divisible cannot possibly
also be immune to debasing and counterfeiting.
-raghu.

--
Always remember to pillage BEFORE you burn.
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