And Another Thing – This “The US Dollar Must Have Intrinsic Value, Or Else” Argument is Absolute Nonsense

At least once per day I hear the ridiculous argument that we need to get back on the gold standard, because gold has “value” and that would give the US dollar “value”. In other words, the US dollar is worthless and needs intrinsic value before it can be valid “money”.

No, it does not. That is a lie. I will hear in reply, “A fiat dollar is as worthless as toilet paper!” That’s true, yet you really want to get your hands on some of those “worthless” dollars, don’t you? Let me explain something here: The US dollar doesn’t require intrinsic value to safely and soundly act as “money”.

Let’s assume that the US government gives up issuing the US dollar forever. In its place, the US government now declares that it will issue purple business cards with numbers printed on them and that will be the new national currency. Next, the US government declares, “I will issue a tax that is payable only in these new business cards that you can only get from me, the US government. If you do not pay the tax, I will send you to prison.”

How are you going to pay the tax? Your former US dollars won’t work. Neither will gold. You really need to get ahold of these new business cards to avoid jail time. If you are a business owner, you immediately offer to sell your goods and services to the government. In exchange, the government gives you the business cards. Before you know it, everyone has these business cards and spends them buying stuff and paying employees. They circulate because the US government taxes; the liability payable only in the government’s business cards.

The business card is intrinsically worthless. The tax creates the demand for the business cards. Thus, when it comes to fiat US dollars, federal tax enforcement is why Walmart is willing to accept your US dollars for groceries. Walmart has to pay tax and cannot do so without US dollars.

So, are you trying to argue that a car has less value when purchased with a fiat dollar? I suppose apples taste better if they are purchased with a dollar that’s pegged to gold? Yes, by pegging to gold, you’ve made the dollar scarce, thus more “valuable”, but because you’ve made the dollar scarce, fewer consumers can get ahold of dollars now and so, fewer goods and services can be produced and sold. So, what will you do; hope you can make your gold-pegged dollars stretch for a decade while waiting for the deflationary depression to end?

The US dollar doesn’t require a gold peg to operate as “money”, nor would gold make it easier to buy things. What is it that you do not understand? The goods and services created from real resources have value. We just use US dollars to consume what we find valuable.