Tuesday, April 19, 2011

Gold: The Great Equalizer

I'm not a big fan of sovereign currencies. At this point, banks use sovereign currency exchange as a huge source of fee income. on top of this, most currencies have no intrinsic value and are backed by slowly deteriorating sovereign credit. Plus most countries have legal tender laws that prohibit the use of other valuable commodities/currencies for the purposes of taxation. These legal tender laws create barriers to capital flows and promote the use of depreciating currency as a means of exchange.

A gold standard does not necessarily do much good when there is a sovereign currency. As Bretton Woods proved, a government will deface its currency in spite of a stated exchange rate. Sovereign currencies collapse because governments are inherently financially irresponsible. A gold currency however makes sense since gold is valuable as a store of human effort which is what currency represents anyways. So in a way I'm in favor of a one world currency that would level the playing field and reduce the number of games that sovereigns can play to oppress their own people. Gold is the liberator of individuals from their tyrannical governments and is the Great Equalizer in trade and capital flows.

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