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To: Enigma who wrote (22855)	11/11/1998 2:00:00 PM
From: Alex	Respond to of 116795

What is Sound Money? by James Turk Money, like speech, is central to society. This observation explains why money can be defined as a means of communication. Money fulfills a very important need. We use money to communicate our own individual and subjective views on value with other members of society, and we do this because we are constantly making decisions in a market economy and free society as we lead our lives. What do we need? What do we want? How much can we afford? And since we cannot afford everything we want, what do we buy, and what do we forgo? As participants in a market economy, we are forced to make decisions like these everyday. We live in a world in which resources are limited, and we therefore have to choose. The division of labor has enabled beneficial specialization in our work with the development of experts in many diverse and distinct tasks, from baseball players to gourmet chefs to automobile assembly workers. If there was no money, society as we know it would not exist, which is a certainty just as clear as the essential role of speech in our society. We need money and speech to communicate within the social interaction that is society, and this shared attribute of communication explains the nature of sound money. Our words are defined and unchanging. When we speak of bread or hammer or child, everyone knows what those words mean. They meant the same thing yesterday, and they will have the same meaning tomorrow. But suppose their definitions were to change overnight. Suppose bread instead were to mean flower, or from now forward hammer was to mean table, all because of decisions taken at meetings behind closed doors by the government's "central word-smiths". It would be very confusing, wouldn't it? How could people possibly be expected to communicate if word definitions were constantly changing? So too with money. How can we be expected to communicate value with one another if our money is ever changing? To explain this point, the term one barrel of crude oil means the same thing today that it did thirty years ago. The language has not changed. And so too with Gold. When we say one gram of Gold, we know for a certainty that this term is unchanging. It is a constant definition, and it is sound money. But you cannot say this about the US Dollar (or most other national currencies). Though the name of this monetary unit has not changed, the nature of a Dollar is very different today than yesterday because the Dollar's essential nature is constantly changing. Crude oil and Gold are commodities, and as such are assets when in one's possession. The Dollar, however, is exactly the opposite. It is a liability, which is demonstrated by the balance sheet of any bank. Dollars are liabilities of banks. Therefore, the monetary unit of account that we call a Dollar is dependent upon the assets that give these liabilities circulating as Dollar currency their value. And because the quality and substance of the assets on the balance sheets of banks are changing constantly, so too is the Dollar constantly changing. Now don't be misled by this observation because "constantly changing" does not refer here to price changes. It is not prices that establish the definition of money. The definition of money is not what its buys, but rather, what it is. It is this fundamental point that has caused so much confusion about money in recent decades. The Keynesians and even the Monetarists fail to recognize that a money's substance does matter. In fact, its essential nature is the focal point upon which any money should be evaluated, and it is this issue of substance that sets Gold apart from the national currencies. A gram of Gold is a known and knowable unit, easily understandable by everyone. A gram of Gold is an unchanging unit, and the constant and unchangeable essential nature of this unit (i.e., the weight and unique matter that together comprise its substance) make it a reliable monetary unit of account. Not so with the Dollar because the assets that give it value are constantly changing. Because the substance of the Dollar varies, the Dollar is not a consistent unit of account (though it did have some consistency until 1971, because up to that time the Dollar was defined as an unchanging weight of Gold). It is essential that society have a sound money so that everyone can communicate using an identical unit of account established by the same definition. What happens if we don't? This answer should be clear from our recent experience. People who are good at understanding the changing definition of the Dollar — currency speculators, for example — can make a fortune if they guess right, but it is not a fortune created by the delivery of useful goods and services to society. Those benefiting from the monetary and currency turmoil created from today's unsound money make their fortune at the expense of others who do not understand the constantly changing definition of an unsound money and who are as a consequence left at a disadvantage. This is the vast majority of the population. Money that is not sound creates an unfair advantage for some where there should be none. Sound money levels the playing field, making completely honest the economic interaction between individuals that is the foundation of our society. So the logical conclusion is clear and unmistakable. To have a just and fair society, we need sound money, and Gold is sound money. goldmoney.com