On Money and Currency and Fear and Trembling

Money, the status achieved by a commodity so tradeable and widely valued that it is universally tradeable and acceptable as payment for anything because it can be offered for payment of anything.

Whether anything achieves this status in any measure of time and space (history) is a matter of the particularities of that time and space.

Money is not necessary. Barter and direct exchange are the alternatives in trade. The indirect exchange that money makes vastly increases the quantity of exchanges and so by implication vastly increases the satisfaction of uneasiness that motivates exchanges.

Currency is legally defined by states money substitute. The value of legal money substitute is relative to two distinct factors: first, the coercive territorial monopoly that restricts exchanges to its currency increases the value of the currency relative to its restriction. Outside of total autonomy and self-sufficiency each individual needs exchange in order to survive. Mandating restrictions on what can be used in those exchanges artificially relative to the threat of violence boosts the value of the currency. Second, and distinctly, the value of the currency is relative to what that currency stands for or is a substitution for.

What to do about the difference between money and currency and the increasing distance between their relation which is a hierarchically natural relation? In reality (that is in the long-run), it is money that gives currency value. In the short-run threats of violence can give almost anything value. But what to do if those who are threatening with violence the use of other currencies and at the same time devaluing the value of the currency mandated in relation to what it is a substitute for?

This puritanical libertarian makes no investment advice. He merely reports what is occurring occasionally in his minding of what is happening around him. That the super-duper powerful still collect gold as a store of value is notable. That the value of a quantity of currency has decreased relative to any other valued commodity over the past 100 years is a good historical data set leading to the recommendation that one avoid holding excess currency unneeded for some time (savings).

As a single (and so not conclusive) data point: Take Roosevelt’s paying the going rate of $20.67 for an ounce of gold when he demanded privately held gold be turned in to the state and then promptly raising its price to $35 after he held it. The price now rests at roughly $1800 an ounce. This is enough for he who wants to mind what is happening to ask what has changed, the gold or the dollar? Answer: the latter.

There is fear and trembling in divesting of currency and taking up that commodity approaching universal tradability. First, there is no guarantee that any commodity will remain money. Status as tradable changes over time. But there is pedigree at least as far as recent history is an indicator (and Hume rings in my ears in is claim that past experience (history) is all I have or the testimony of others (written history)). Second, all my conditioning so far (or most of it) has been in the tradability of currency. To hand it over for commodity feels like a loss. It requires something like courage for he who has only witnessed the value of paper currency to bet on something else maintaining tradability better (see the above single data point when fear and trembling approach).

This puritanical libertarian has acquaintances holding land, rare books, or invested in capital goods. This puritanical libertarian is what the state classifies as a teacher. He practices the conversion of currency into precious metals. He does that in two forms: shares in mining companies and physical product.

In order to avoid short-term catastrophe this puritanical libertarian only converts long-term savings into these commodities. In the short-term anything can happen. If the value of the commodity is needed in the short-term, their may be loss if the conversion must be made in a price slump. My bet is a long one. It is one that ignores daily fluctuations. But I only make that bet with long-term savings.

Still it is not an easy trade. So, the puritanical libertarian engages in self-dialogue in order to convince himself of the reasonability of his exchange of currency for commodity. First, because of the state mandated savings in Social Security there is a portion of his long-term savings that is un-exchangeable. It is in the hands of those who devalue currency and cannot be protected. Second, this puritanical libertarian has a pension-plan with his employer. Again, a significant little chunk of his long-term savings will be returned later in the form of retirement. BOTH OF THESE forms of savings are likely to be devalued before they are returned to the puritanical libertarian. This means that what might seem like the value relative to the chunk taken out of the pay-check is a bit of a mirage. Because of likely continued devaluation that currency returned won’t be nearly as useful as it portends to be ignoring devaluation. The upshot? The puritanical libertarian must work even harder to find money that will retain its value over time.

This motivates the targeting of left-over in addition to the above sources of savings currency that is still under control for conversion into a more stable harder to devalue more universally tradable commodity. So, gold and silver. It feels more than ever like gold is going out of fashion. For that reason the puritanical libertarian plans on walking in that direction. It is like the walk of Abraham, up a hill toward the altar, son tied, knife sharpened, sticks collected. Fear and trembling.

Published by Purilib

Anonymously interested in grasping the good life.

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