Gilder’s “New Information Theory of Money” Fixes the Meaning of Money

dollars-426023_1280George Gilder’s new monograph, “The 21st Century Case for Gold: A New Information Theory of Money,” offers a revolutionary alternative to today’s “deeply flawed understanding of the nature of money.” Drawing attention to the relationship between money and information, Gilder redefines and contextualizes the role of money in the 21st century as an information carrier in an information economy. Money is a “measuring stick” of economic activity, and nothing does this job better than gold.

Information is key to enterprise and innovation. “Money,” Gilder says, “is the channel that carries the information to investors, workers, small businessmen, major corporations and entrepreneurs.” Tampering with money distorts the information conveyed to people and organizations. That carries unintended consequences.

One such outcome is the all-too-cozy relationship between government and banks. The Federal Reserve has lured banks away from innovation and into the world of “proprietary trading” — the get-rich-quick plans that define the “new Wall Street.” Constantly changing currency allows banks to “thrive by serving government rather than entrepreneurs.” This does wonders for the profits of large financial institutions but robs the productive sectors of the economy of financial capital. The “new Wall Street” does not produce learning and hurts the truly productive members of society.

Because floating money creates big problems for an information-based economy, Gilder proposes an old solution with a new twist: defining the value of the dollar as a fixed weight in gold. Gold has long been the ideal monetary element for a number of reasons like its low melting point, resistance to decay, and natural relative scarcity. Gold is the “least imperfect” measuring stick of value, Gilder states, because of its relationship to time — one of nature’s  infinitely scarce and irreversible resources. This insight is seen through the lens of Information Theory.

Gold is stable over time. It always weighs the same and keeps the same physical composition. Gold also requires people and resources to produce, just like everything else of value. Compare the scarcity and substance of gold with the paper dollars that can be printed at the whim of a central bank.

Gold is the monetary element because it is the most trustworthy carrier of information. Turning currency into vouchers for a specific weight of gold would restore security to the decision-makers in today’s information economy. Translated: Gold-backed money is good for everyone who works, saves, invests, and does business.

The 21st Century Case for Gold: A New Information Theory of Money succinctly addresses the problems with today’s monetary system and beautifully maps out a path to the future of money in the Information Age. You can download a free copy of George Gilder’s The 21st Century Case for Gold: A New Information Theory of Money here.

Noah Muscente works for American Principles in Action.