What is money? The coin and currency that you have in your pocket? The balances you have in your checking, money market or savings account? How about the value of your stocks and bonds? The government (mainly the Federal Reserve) provides numbers about the money supply — M1, M2, M3 and M0, which only goes to show that there is no simple definition on which all agree.
The economist-technologist-philosopher George Gilder, who has written many bestselling and provocative books, including “Wealth and Poverty,” “Microcosm,” “Telecosm,” “Sexual Suicide” and “Knowledge and Power,” has now produced a remarkable essay titled, “The 21st Century Case for Gold: A New Information Theory of Money.” In sum, Mr. Gilder argues that money is information, and that at some point a bitcoin-like non-government money will emerge on the Internet whose price will merge with that of gold, becoming bitgold.
Mr. Gilder notes that there are seven international units and measures, all grounded in basic constants of physics. These metrics are the second of time, the meter of extent, the kilogram of weight, degrees Kelvin of absolute temperature, the ampere of electric current, the mole of molecular mass, the candela of luminosity. These units cannot float because the metrics provide the basis of all industry and construction. He argues “the second of time” is the most basic because it is immutable and irreversible. This leads him to then argue that: “Money as the metric and information bearer can be reliable to the extent that its value is also rooted in time.”
As with most other things that the government touches, it has managed to make a mess of money. The American Founders had intended money to be gold and silver coins, and the extremely stretched tie with gold did remain until 1971. The U.S. dollar, the euro, the yen and all other major currencies no longer have any tie with gold (or any other commodity). Mr. Gilder and others argue that only gold is rooted in time. (Justice cannot be done with this argument in a short piece such as this.)
The major central banks of the world have increasingly drifted away from providing “sound money” for their citizens and are increasingly focused on using monetary policy to provide cheap financing for government deficits — by artificially holding down interest rates which, in turn, is a non-legislated tax on savers. Governments have also become increasingly intrusive in monitoring all financial transactions under the guise of “fighting money laundering,” while their real motivation is to extort more taxes and exercise more control over the citizens.
Some people think the case for gold is archaic. But as Gilder points out, that’s so 20th century.
Paul Dupont is a legislative assistant for American Principles in Action.