Are Currency, Gold or Credit money?
(an addendum to my essay, “Does Money Exist?”)
A Federal Reserve Note is a curious document. It is a three-way collision between church, state and market.
I leave aside its impenetrable inscriptions and baroque engraving; I leave aside the false advertising of a private unaudited bank calling itself “Federal”; and I leave aside the curious logic of fractional banking and money creation. What concerns me now is a prominent inscription: IN GOD WE TRUST.
This establishment of religion would be a violation of the First Amendment if the Federal Reserve were not a private bank, and money did not call the shots. This commercialization of the name of the Lord would be paganism; for surely a god evoked upon currency is a god of currency. But this raises no religious fuss, and again this is because money calls the shots.
As for the monetary reality of the FRN, I need only note its long-established tendency towards inflation. Let’s say 5%; which means an order of magnitude every half-century. And indeed I am often surprised, when reading texts from five decades back, to find that order of magnitude difference in prices.
Now consider gold. It is money only by being useless; in fact, that uselessness is precisely the ‘intrinsic value’ of gold! For proof of this, consider the ring that the Emperor Napoleon gave to Josephine. It was made of a metal rarer than gold or platinum; a precious metal fit for an Empress; aluminum. Later chemists discovered how to extract aluminum cheaply from common minerals, and now we use aluminum for baseball bats, lawn furniture, airplane bodies, and soda cans; a useful metal but certainly not precious. Has the intrinsic value of aluminum gone up or down? Now imagine the same happening to gold. Perhaps cheap extraction from seawater; or cheap safe alchemy; or a gold asteroid to reel in; whatever. So what would happen if gold were as common as aluminum? There’d be new uses for cheap gold; but gold’s value as pure valuta would fall. What is intrinsic value?
Now consider credit. Recently I encountered a strange kind of money; not valid Sundays or Mondays. You see, I recycle glass bottles at a nearby Safeway; a kiosk out in the parking lot accepts glass in return for a voucher, valid at the Safeway. Or so I thought, but found out that should be “valid at the Safeway when the kiosk is open”. I traded in glass on Friday, took the voucher home, and brought it back Monday. The cashier refused the voucher on the grounds that the kiosk was not open just then. I questioned the logic of this; she opened a looseleaf notebook full of brightly-colored pamphlets, and pawed through it frantically, trying to find the directive from Corporate that explained the logic of this. I mentioned that, in the time it would take her to explain that rule, she could have taken my money – which I thought this voucher was worth – and the money of the three people behind me. But all this was beyond her control or the store manager’s; so I took my business elsewhere. If a form of money can be of value intermittently, for arbitrary reasons decided cluelessly from afar, to what extent is that money not illusory?
Currency, gold, credit; all proport to be money, but tend to fail on close inspection. What if this is not their fault but money’s?