Criminal defense in Austin Texas.

There is no safe store of value.

Posted By on February 8, 2009

Alan Greenspan (1966):

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value… The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.

Money – whether in the form of gold, or of currency – is a claim on a proportionate part of the productivity of an economy.  Put another way, it’s a claim on the product of people’s work.  If you want to consume, without working, money is the way to accomplish it.

When people talk about money as a store of value, this is what they mean – the ability to consume, without producing.

Money is, and always has been, however, only a temporary store of value.  This is because it is not wealth itself, but only a token.  And like all tokens, its value is subject to change.  It can even go to zero.

As an example, consider a nation, all of whose people save up vast sums of money for the day when they can all retire.  When the day comes, however, they find that all of their cash (or gold, or whatever) is worthless.

It’s worth nothing, because real wealth is the ability to induce other people to do work for you.  If there are no workers, there is no wealth. Money may be a store of value, but it’s only a store.

The work must be done by real people in real time, and the work itself can’t be stored up by any method, much less in gold bars.  There is no “safe” method of saving up the work of other people, because their willingness to do the work depends on a social contract, the terms of which are perpetually subject to change.

Moreover, a social contract, the terms of which require one group of people to do the work, another group reaps the rewards, is not likely to last.   And the more unbalanced the situation becomes, the less likely it is to continue.

The mistake Alan Greenspan made in 1966 (and I think he’d repudiate it, today), was to confuse the form with the function.  Gold is only the symbol of the thing.  It is not the thing itself.

***One other note: Gold is no protection against inflation.  Anytime anyone finds another nugget, the value of all other gold is reduced proportionately.  The only way to protect against this form of inflation (or “confiscation”) would be to prohibit anyone anywhere from finding any more gold.


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