Measuring Value

With the new Republican congress taking office, there has been talks in the halls of power about returning to "gold standard", or the backing of US currency in gold bullion. The reason behind this is to prevent the Federal Reserve from just printing money and increasing inflation. While I can't outright say this is a bad idea, I strongly disagree with the entire premise on many fronts.

To start out with, we don't have an inflation problem. The rate of inflation has been going down over the last couple of years, mostly due to the collapse of the housing and financial markets. I don't understand the purpose of rearranging our monetary system in order to solve a problem we don't have.

Secondly, inflation is a good thing. When the cost of things go up, it means that we have reaped more value out of the world, and therefore our money is less valuable by comparison. This is how a properly functioning economy should work, therefore the lack of inflation is a reasonable warning sign that all is not well. As I already stated, the last few years are evidence of this.

Inflation, as it turns out, is a wonderful way of incentivizing reinvestment. There are really only 2 ways in which inflation is bad; when you hoard money away from the rest of the market, or when inflation of prices outpaces inflation of wages (which isn't really inflation, but rather another way to steal from poor people). The first of these two situations serves as the incentive to reinvest. If you bury your money in the backyard, it will be worth less over time. The only way to retain it's value is to invest the money in some way or another. This is a good thing for our economy, as it is the principal on which our entire economy is built. I feel the real reason Republicans are so anti-inflation, is because inflation penalizes those who have large sums of money that are not reinvested into the economy. Hoarding money in this way is bad for the economy, therefore inflation is a good thing. QED.

Lastly, what the hell is so special about gold? I've heard again and again about how you can buy approximately the same amount of goods with the same amount of gold as you could in Roman times, but I feel that is more because we have held it as such than by any divine law. Gold is simply another element on the periodic table and not particularly interesting at that. I should also point out that if we were to add up all the certificates for gold that are currently owned by people, the sum is much larger than the total amount of gold mankind has ever taken out of the Earth. If we were to base our system on gold, and then actually count, we would most likely find ourselves in an even greater recession than we are in currently. There is no way for me to prove the above statement, it is merely many people's speculation. However, I think common sense is on my side. If you were in charge of housing gold for people whom you knew were never going to actually cash in their certificates, you may not care if you have sold more certificates than you actually have. Consider this happening continually for hundreds of years, and I think any reasonable person will agree, we can't trust what the bankers say on the matter.

In the end, money and wealth are the same thing; a measurement of value. Furthermore, we have no way of measuring value directly, and we must rely on a form of popular vote to determine what something is worth. This is the basis of a free market, and while it's certainly not a perfect way to measure, it's the best we have. Changing the unit of measurement, or more appropriately, calibrating our existing measurement against what we assume to be a known value, does little or nothing towards helping our economy. We still need banks to continue giving loans, we still need housing prices to rebound, and we still need more jobs created. These are the things that will help the economy, not a more accurate unit of measurement.