Gold has lasting economic value. If used to back currency, it doesn not have to be static, becasu the gold content of the dollar can be changes to allow some elasticity.
Isn't this exactly what happens when the gold peg to the dollar is changed?
One criticism I read is that the scarce nature of gold could create a shortage of money, or allow easy consilidation by bankers through interest. Well, the scarce nature of a comodity like gold is exactly what would prevent unfettered inflation of currency!
Yes, both are correct. Those ARE the pros and cons of using gold exclusively as money.
Gold is not, per se, a hedge against inflation, only its coincidental rarity makes it so. When the Spanish brought over massive amounts of gold from the New World over to Europe, inflation occurred.
A Minister on Mining
The miner who digs a fortune out of the ground has the satisfaction of knowing that he has not robbed a soul, even though becomes a thousand times a millionaire. Then, too, there is another factor to take into consideration. The man who makes his fortune on the board of trade or the stock exchange, or in building a gigantic business, adds nothing to the store of the world’s available wealth.
People who engage in business are generally those who do
add to the store of the world's available wealth as long as their businesses manufacture goods and provide services. The Apple computer company adds to the wealth of the world in the form of more cool gadgets available for everyone, for example.
If money were in short supply, it would make it very difficult for these businesses to generate the wealth, because money - the lubricant of economy - is not present in sufficient quantity. Businesses would have to resort to barter for paying the people who work for them and that is certainly not going to work well.
If money were in *too much* supply, it would ALSO make it hard to justify operating such businesses, because the smart people would just go and do speculation. Therefore a *balanced* money supply is what you would theoretically want, and a balanced money supply
is exactly what central banks are supposed to be making their #1 goal.
You could, of course argue endlessly over how, why and if CBs are actually accomplishing this, but you have to realize that having a central bank is not in itself a bad thing, and that the dangers of the money supply in the hands of an unscrupulous few also occur in a gold money regime.
fiat money = threat of inflation, gold money = threat of hoarding. Take your pick.
Keynes taught us to prefer the previous alternative and it worked, for a while. Friedman came along and taught the central banks to not create money indiscriminately. The central bankers do listen to Friedman (they have to).
So now they have shifted to credit expansion instead of money expansion. It is not the central bank expanding the money supply. It is the "moneylenders" who are doing something nearly equivalent to it.
The gold miner is today the king of wealth of the country, and I honor him above all others. It is no dishonor; it needs no apology to emulate his example or assist him in his efforts. There is the whole story in a nutshell.
The main thing the gold miners give us are more yellowish lumps of heavy metal which is currently of secondary importance in industry, and which derives most of its value from sentiment and nostalgia rather than any objective measure.
However, in earlier times, when bankers tend to hoard the gold, it makes sense to exhort people to increase the money supply and dilute the value of the bankers' holdings because such inordinate control has an oppressive effect on the people.
