The Social Deterioration of Funny, Floating Money – An Ode to Gold!

From Nathan Lewis at forbes.com

…Money used to be managed according to rules. The most common rule was: the money was to be worth a specified amount of gold. For most of U.S. history, this was 23.2 troy grains of pure gold, or, as it is usually notated, $20.67 per ounce of gold. Lending, employment contracts, and other agreements would be reached with an exact and definitive understanding of what each side was responsible for delivering.

After 1971, the U.S. dollar has been subject to the whims and ignorance of a succession of Federal Reserve boards. What the U.S. dollar will be a decade from now is unknown. What it will be ten minutes from now is unknown. In principle and in practice, it is completely free of any rule-following whatsoever. Everything is provisional, and subject to short-term perceptions of benefit – for example, last month’s employment rate. As is often the case in these sorts of situations, little new wealth is created. More commonly, it is destroyed. But, we aren’t supposed to think about that, because “in the long run we are all dead,” as John Maynard Keynes assured us.

Most of our important relationships with other humans are monetary in nature. We have employment contracts, lending contracts, pension agreements, annuities, welfare, taxes, and, more broadly speaking, the prices paid for goods and services. The basis for all of these relationships is money. When the money becomes “immoral,” all of these relationships also lose their moral character. Instead of investors, builders and producers, we become traders: trading assets; trading jobs; trading money for favors; trading spouses; trading our supposed “beliefs,” for short-term gain in a zero-sum, and in fact negative-sum society. (We all know the real return on the “risk-free” U.S. Treasury bond is negative.) A “promise” is just a marketing strategy, no better than Ben Bernanke’s “promise” that the dollar will hold is value. What is this “promise” supposed to mean? It doesn’t mean anything.

The most basic foundations of a society crumble. The notions of Right and Wrong are seen as obsolete, replaced by a different notion: You Get What You Get. Some traders are better than others.

Read it all here …