MONEY, A COMMODITY OR A SYMBOL

Until the beginning of the twentieth century the most popular and
universal medium of exchange was gold and silver coins.

Currency was considered to be as flexible as any other
merchandise. People responding to their own particular needs
demanded the coins and also offered them, thus their market
value was established daily.The debate that divides the
defenders of gold and silver and their adversaries is not new, it
has been going on for more than three centuries.

Today money is represented by pieces of paper as non-
redeemable official notes whose quantity can be increased at
will.

This symbolic money originated from private contracts or
promises to pay issued by goldsmiths and later by banks.

Money is a symbol and not a commodity:

"It is the denomination of the currency of the money that men
regard in bargaining, not the quantity of silver. It is the public
authority upon the metal that makes it money" (Nicolas Barbon,
1696)

"Money is a symbol of a thing and represents it" (Charles-Louis
de Montesquieu, 1748)

"Money is the symbol of all commodities" (François-Veron de
Forbonnais, 1776)

"All monetary functions which are usually performed by gold
and silver coins, may be performed as effectively by a
circulation of inconvertible notes having no value but that
ficticious and conventional value... they derive from law"
(John Fullarton, 1848)

Money is a commodity and not a symbol:

"Silver and gold, coined or uncoined, though they are used for a
measure of all other things, are no less a commodity than oil,
tobacco, cloth or stuffs" (Josiah Child, 1689)

"Money is not a mere symbol, for it is itself wealth; it does not
represent values, it is their equivalent" (Guillaume-François Le
Trosne, 1777)

"Gold and silver have value as metals before they are money.
The coins which today have a merely ideal denomination are in
all nations the oldest; once upon a time they were all real, and
because they were real people reckoned with them." (Fernando
Galiani, 1803)

"The false definitions of money may be divided in two main
groups: those which make it more and those which make it
less, than a commodity" (Wilhelm Roscher, 1858)

Some Common FALSE OBJECTIONS to Gold & Silver as a
medium of exchange

In any debate about gold and silver, certain objections are
repeatedly raised by opponents of monetary freedom, even
though those objections have been refuted many times before.
Some of these objections are:

· There is not enough gold;

· Russia and South Africa, since they are the principal
producers, will benefit;

· Gold is subject to undesirable speculative inf- luences;

· Gold will produce instability in prices.

The first objection, that there is not enough gold, is based upon a
misunderstanding of the price of gold. It assumes that the
present exchange ratio between a weight of gold and notes is
the exchange ratio that must prevail when the gold is made a
medium of exchange. Such obviously is not the case. To put it
simply, lower prices under gold currency will eliminate the
necessity for larger sums. One could buy a suit that costs 400
paper units with 20 gold equivalents at a different exchange
ratio.

The second objection, concerning Russia and South Africa is
equally groundless. It could be considered an advantage, in the
same way oil or a fertile soil could be equally, in comparative
terms. The amount of gold already taken out of the earth in the
last two thousand years is already superior to the known but
unminted reserves of Russia and South Africa. The unminted
reserves of Russia are estimated to be about 250 million ounces
which is less than what the United States already has in minted
reserves. The demand for gold as a medium of exchange will
release the existing hoardings, a process which is already in
vogue in most central banks.

The third objection, that gold is subject to speculative
influence and therefore too unstable to be used as a medium of
exchange, is also false. During the 70's, gold became a major
hedge against inflation. The run-up in gold prices from $35 to
$850 per ounce came as a result of fears about the value of
paper-money and developing international crises. People who
object to gold because it is speculative confuse cause and effect.

The real speculation is provoked by an irredeemable paper-
money system and people who logically want to protect
themselves from it.

The fourth objection says that gold will produce instability in
prices. Comparing prices in gold in the U.S. in 1833 with
1933, just prior to the abandoning of the domestic gold
standard, the index of wholesale commodity prices increased
only 0.9 percent in one hundred years! Since then the index
increased 350% by 1971 when President Nixon, declaring
international bankruptcy, announced that no more gold would
be given in exchange for dollars. In the last twenty years the
index has gone up around 400%.

Gold is therefore stable and fit to be money, and history has
shown us that there is no money more unstable or unfit than
paper-money.