Gold Is Money While Currencies Today Are “IOU Nothings”

Monday, April 2, 2018
By Paul Martin

by GoldCore
ZeroHedge.com
Mon, 04/02/2018

Gold Is Money While Currencies Today Are “IOU Nothings”

by Mr. John Exter (ex-New York Fed Vice President)

Now that the international monetary system we have long known has broken down, and the world is groping through monetary reform for a new one, it is time to consider some fundamentals.

What is money anyway?

First, it is a means of payment or medium of exchange. I prefer that first phrase. It is simpler. We all use money to pay our bills, to buy goods and services. We also accept money when we sell.

Second, it is a standard of value. We quote values of goods and services in terms of it. The resulting ratios are prices.

Third, it is a store of value. We hope to avoid loss by holding it. Money holds its value if it is scarce and remains scarce. Scarcity is the keystone of store-of-value money.

“Today no money in the world fully performs all three services. National currencies are being used as means-of-payment and standard-of-value money, but none in this inflationary age is an assured store-of-value money.

In fact, a foremost concern to voters and politicians everywhere is that so many currencies are so rapidly losing their value in terms of commodities and services. Commodities like gold and silver, which are being used as store-of-value money, are not being used as either means-of-payment or standard-of-value money.

“Thus the world we have so long known, in which most currencies were redeemable at a fixed price in a store-of-value money like gold, is in disarray. People are confused and wondering what money they can trust.

Sensing the instability of the system as a whole, they turn day by day from one means-of-payment money to another in the foreign exchange markets, and much more gradually to store-of-value money like gold in the London and Zurich gold markets.

Scarce Commodity

“If we carefully look into the meaning of this market churning, it becomes clear that store-of-value money, if it is to endure, must be a commodity, and a scarce commodity, too. Silver has long been a less satisfactory store-of-value money than gold, principally because it has been, and promises to continue to be, more abundant. Many of the currencies used as means-of-payment and standard-of-value money have not proved good store-of-value money chiefly because they, too, have grown too abundant. Since they are simply either paper (currency notes) or bookkeeping (deposits) promises to pay, i.e., debt obligations or IOUs, the confidence of people in them as store-of-value money depends heavily upon the ability of the central banks responsible for their issuance to honor those promises to pay in a commodity that is indeed store-of-value money. This is the issue of convertibility, which the Europeans, especially the French, are emphasizing today.

The Rest…HERE

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