Hard Money

What Is It? Do We Need It? And Why?

I think that before we get too deeply into this discussion, we need to define the word money. Money is a medium of exchange. It came about thousands of years ago when mankind began to exchange goods and services with his neighbor. Exchanging goods occasionally was made difficult because the people involved in the exchange did not share similar wants or desires. Maybe I want to trade a sheep for a cow, but you already have all of the sheep that you need. I have nothing else of value to trade so I have to find someone else that needs a sheep and has something to trade that you would like to have.

At some point we began to trade precious metals or jewels. They had value because they were fairly rare. There was always a market for gold, silver and precious stones. Gold and silver eventually became the standard because it was easy to carry, it was easy to form into coins, it was easy to measure, and cutting or changing it's shape did not radically affect its value as is the case with precious stones.

Hard money then is something that is generally accepted as having intrinsic value. Gold and silver are the two obvious choices, but we are certainly not limited to these two. Copper has also been used for centuries. It too has intrinsic value, so too do a number of other metals.

When you hear of people expressing the desire to return to hard money or hard currency, it is usually someone wanting to return to the days of gold and silver.

Do we need to return to hard currency or gold and silver? I believe we do. You see once a government decides to replace hard money with paper or counterfeit money, it becomes very easy to increase the supply of money to pay for whatever those in power want.

The government convinced us a long time ago that we needed them to have control of our money. They created the Federal Reserve to manage (read manipulate) the printing of paper money. Then in 1971 we just decided to end any relationship our paper money had with the gold stored in Fort Knox.

What has been the result? We have run budget deficits every year since. Our government initiates new programs with no regard for where the money will come from to pay the bills. We are engaged in the greatest case of empire building the world has ever seen, but we do not have the funds to pay the bills.

Our current Fed Chairman, Mr. Bernanke, states that we (the government) have printing presses and we can run them 24/7 and print an almost limitless supply of money for next to nothing.

The only problem with this solution is that it eventually has to end and there has never been a time in history when it ended well. In fact it has always ended badly for the country that went down the road of massive currency inflation. You know the saying, "Those who do not know history are destined to repeat it." Our government needs to spend a little time learning history before it is too late.

Hard currency prevents this from happening. Scientists have not been able to create gold. There is no way to artificially inflate the supply of gold in circulation. So there is no way for the government to spend beyond their means unless they convince the people or private investors to loan them money.

Imagine using money that doesn't lose its value every year. You would be more inclined to save than to spend. You would increase your wealth by saving part of your earnings every year. Dealing with money that loses its value (a tad over 95% at last count) year after year encourages spending. And excessive spending encourages debt. And debt can be a killer and we are all going to find that out in the near future. Not only as a country, but individually as well.

Get out of debt now, while the getting is good.