So just accept the fact that there will always be paper money and credit and as was stated, use this as the unit of account. The watchers in the market will then adjust the price of bullion in reflection of the amount of money in circulation.

The missing point in the article is that bullion is not exactly money. The proposal of Hugo Salinas-Price suggests a way of making a precious metal coin act as money. A national mint is charged with making precious metal coins sufficient to meet public demand. The mint must purchase bullion to make the coins. A monetary value is assigned to the coins somewhat higher than the cost of production. This value is stable and does not decrease. But anytime inflation increases the cost of production, the monetary value of the coins can go up.

With this assigned monetary value, the coins could be used in commerce if needed. But mostly they would act as a store of value and a hedge against inflation.

Huh? How can that NOT be fraudulent? The banker’s assets have now increased without him having to produce anything of value. All he produces is counterfeit money.

Banks print money out of thin air, in fact almost ALL the money that exists was produced out of nothing, by the banks simply entering it into their balance sheets.

You advocate a gold standard: watch ‘The Return of Oz’ to see why that is a bad idea…

You highlight the benefit of fiat money as easier loans. Doesn’t this necessarily result in overstimulation of the economy creating a bubble? You say yourself that it is “inherently risky” and the price you pay for that is more failed businesses and wasted recourses, reducing economic growth.

Instead, it would be optimal for the economy if the market set the rate of growth. If you artificially create more growth than the market demands, your gonna have problems sustaining it.

The best thing for the economy is to get rid of fiat currency, thus fractional reserve banking, thus central banking. (fiat currency would be fine as long as no one has the power to manipulate its supply). Changing the money supply does not create real growth.

you lost me in that paragraph about the correct way to implement a gold standard. I just didn’t understand what you were talking about.

in was good to learn about the credit expansion in a gold backed system. didn’t know that.

With a gold backed monetary system, it’s entirely plausible that more old ladies wearing gold jewelry will be mugged on the street as their jewelry no longer needs to be pawned but can simply be melted down and converted directly into currency.

An obvious benefit of fiat money is the ease with which one can get a loan. While this is inherently risky, it also encourages entrepreneurial activity which leads to real innovation and the creation of wealth.

While this is by no means meant to be an absolutely definitive refutation of commodity-backed currency, it seems to me that the only benefit is to prevent inflation. It is true that this does have some costs on society, but which is greater: the cost of inflation or the benefits of innovation?