We’ll have real money next time

Keith Hudson

To a blogger who wrote an article on financial regulation that was so complex that I doubt whether more than 1 in a 1,000 readers could understand it, I wrote the following:

If only money were real money again with its own intrinsic value then we wouldn’t have all these grotesque bureaucracies in nation-states.  Despite all the attempts at regulation all we are waiting for is yet another monetary crisis.  Greek and Chinese sea traders independently invented money as such at around 900BC and were the first to develop successful trading economies which adequately lasted for nigh-on 2,800 years until WWi.

There ought to be nothing simpler than money because it depends on a basic instinct of fair exchange.  Thus doesn’t preclude any amount of trickery but real money soon re-imposes self-correction.

I can’t help feeling that when the next crash comes — when perhaps the most insane monetary authority of them all, the Eurozone, collapses — the economic disarray will be so profound that business will once again have to re-institute a sound trading currency.  Many large firms are now giving Bitcoin’s block-chain technology serious consideration.  Given what could quickly become a world-wide paralysis, Google and only half-a-dozen more large multinationals could initiate a new currency that could spread fan-wise into the smallest food stores in days and for which governments would have to rapidly fix their own tokens in order to exist for more than a day or two longer themselves.

3 thoughts on “We’ll have real money next time

  1. Money serves only 3 functions. That is why it was invented in the first place and this is why there is nothing wrong with paper currency. The 3 functions, as we all well know are: medium of exchange; a store of value and a unit of account.
    It will be difficult to argue that a relatively well managed paper currency has any problem in dealing with any of the above 3 functions. The only requirement is not to have a very rapid depreciation i.e make sure that inflation is very slow and moderate. This is far more reasonable than the idea that I suspect Keith often favours, a return to the Gold/Bullion standard. That has not worked and it will not work unless we periodically increase the value of bullion in order to provide liquidity.

  2. Has not worked? Until the mid 20th C gold and silver backed currencies worked for centuries in many nations and in physical or coin between private parties in different countries. I prefer an energy based ( caloric) or basket of commodities backed currency, as they are the basis for most economic productivity. Even human labor ( all kinds) requires caloric input, nutrients, and water.

  3. “It will be difficult to argue that a relatively well managed paper currency has any problem in dealing with any of the above 3 functions.”; Well managed. That is the problem. Governments try solve economic/political problems by manipulating the money supply..

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