By Andrea Starr | October 26, 2019
I took in change something new or, if you prefer, something very old. It is actually something very old in concept, ancient even, but in a new form.
I accepted a Utah Goldback bill as change in a transaction. It looks like a sheet of mylar with a picture and printing on one side only. The sheet or note contains within it 1/1,000th of an ounce of pure gold. Gold’s spot price is running at about $1,500 per ounce these days, so, doing the math: $1,500/1,000 would have a spot value of about $1.50. Gold in a measured amount, in a durable form, such as a coin, or such as this note, would have a higher than spot value. Say about $2.50.
What Is Money?
For something to be “a money,” it must possess certain fundamental characteristics.
Money must be durable. One might be glad to take something perishable in trade, such as a pound of hamburger, a bushel of apples, or some pretty posies, but those things could not constitute a money. They are not durable. Those items might function as a “currency,” or something that passes “current,” which is to say something transitory or perishable whose value is in the moment.
Money must be fungible. That is to say, every unit of money should be equivalent to every other unit of money. One 1/1,000th of an ounce of gold is the same as every other 1/1,000th of an ounce of gold.
Money must be valuable. That is to say, it must be intrinsically valuable in and of itself. Beads and trinkets, cowrie shells, Monopoly money, or other printed pieces of paper might pass as currency, but lack the intrinsic value of a money.
(We should have a nice chat sometime about Bitcoin. I believe it to be a currency, but not a money. Am I wrong?).
Money must be portable. A ton of copper or iron is durable, fungible, and even valuable, but it is not very portable, not without heavy equipment anyway. A high value to weight (or bulk) ratio is necessary for portability.
Money must be acceptable. If nobody will accept your purported money in an exchange, as I did with this Utah Goldback, then it will not function as a money.
Why This Money?
The Federal Reserve Note (FRN) with which we are all familiar is not a money, it is a currency. It fails to be a money on account of not being intrinsically valuable and not being durable, i.e., not retaining its value over time (due to overprinting). It is a piece of paper backed only by legal tender laws.
For that reason, the FRN is frequently termed a “fiat” currency, from the Latin word fiat: “let it be done,” “by command,” or, if you will, “abra-ca-dabra.” Once upon a time it was backed by gold, but severed its last tenuous link to intrinsic value in 1973. That has allowed since for a steady devaluation through overprinting. The current dollar lacks even the spending power of 5¢ from 1973. That is where your “vanishing middle class” went. And the presses are running still.
The State of Utah passed its Utah Legal Tender Act in 2011. This allowed for gold and silver to be used again in Utah as an additional legal tender. The State of Utah may pay its citizens in gold or silver, and its citizens may pay the State of Utah, or pay each other, in gold or silver. Additional taxation, based upon gold or silver having been classed as commodities, rather than money, was cancelled.
And now Utah Goldback has arisen as a privately produced money, which was the original and proper state of things. It satisfies the provisions of the Utah Legal Tender Act. Having gold embedded within it, it will function also as a reliable store of value, as opposed to inflationary fiat currencies. (NH legislators take note!).
References:
Goldback. (2019). One Goldback: $2.60. Retrieved from goldback.com/
UPMA. (2019, July 24). Welcoming the Utah Goldback. Retrieved from www.upma.org/newsroom/2019/7/24/welcoming-the-utah-goldback
Tucker, Jeffrey A. (2012, February 7). It’s a Jetson’s World: 28. Halloween and Its Candy Economy. Retrieved from mises.org/library/28-halloween-and-its-candy-economy
Wikipedia. (2019, October 12). Fiat Money. Retrieved from en.wikipedia.org/wiki/Fiat_money
Wikipedia. (2019, October 10). List of Community Currencies in the United States. Retrieved from en.wikipedia.org/wiki/List_of_community_currencies_in_the_United_States
Wikipedia. (2019, August 23). Utah Legal Tender Act. Retrieved from en.wikipedia.org/wiki/Utah_Legal_Tender_Act
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