Replies

It is true that government credit relies on trust (as does credit in general) and that it is much easier to trust a government that cannot create money for any or no reason. It is quite easy for a government that creates money whenever it wants to queer the deal, that is, the promise that a dollar today has the same value a dollar will have tomorrow and that if the future dollar has a different value from the value today the changes will be predictable. That is, that a dollar is a "store of value", as they say.

Right now the dollar IS backed by gold in practice. Anyone wishing to exchange a dollar as value for gold is free to do so. Unfortunately for the private individual the value relationship between dollar and gold is not fixed. Making it fixed is, unfortunately for the individual, impossible without great effort, skill, and luck.

I would prefer an officially gold backed dollar in which a dollar can be exchanged at will for a fixed mass of gold. Gold is not perfect however. Gold production currently is at a very high rate for technical reasons.

A dollar based on a fixed quantity and quality of crude oil would work as well as one based on a fixed quantity of gold at least on a year over year time scale. Technology change is the wild card. Commodities in general will not work. John Law tried the time discounted value of real estate with disastrous results. The tremendous flow of silver through Spain from Potosi et al. in the 17th Century caused very destabilizing inflation in Europe. Destroyed Spain as a great power as well.

Commodity baskets have not been found workable either.

Right now the dollar IS backed by gold in practice. Anyone wishing to exchange a dollar as value for gold is free to do so.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

You might as well say the dollar is backed by the services of prostitutes (anyone wishing to exchange a dollar for said services is free to do so), or peanuts or speaking appearances by Bill Clinton or other forms of torture. In other words the dollar according to your words is backed by everything and therefore backed by nothing. It is fiat money any way you cut it and its only value is what people are willing to give it. I am not allowed to print my own money but the government can print any amount they wish even though therir money has no more actual value than what I might print. Whatever trials and tribulations might have resulted from using gold and silver as money pale in comparison to the results of issuing paper backed by nothing more than the hot air of political speech.