Gold is becoming more and more popular in the mainstream. Only a few years ago, talk of gold was restricted to the fringe of society. With the dollar declining in value, gold reaching all time highs, whispers of bringing back the gold standard are getting louder. Whether you agree or disagree with gold as money, investment, or a hedge, chatter around gold is permeating our culture. How can gold be money? Is gold as money economically sustainable? To answer these questions, let us draw from nature, namely natural selection and natures use of resources.
Natural Selection of Gold as Money
Species survive through natural selection. Likewise, money survives through natural selection. We use money today to exchange for goods and services. I want organic heirloom tomatoes, so I go to the store to exchange it for my hard earned US dollar.
However, many centuries ago, before money ever came to existence, our ancestors used barter to exchange goods and services. If I wanted heirloom tomatoes, I would have to trade something I had grown or labored to get, say fish. I give you fish in exchange for heirloom tomatoes.
The problem with this exchange is that we would need to have a “coincidence of wants.” What if you did not want fish, but something else, say apples. I would need to first obtain apples from someone who wanted my fish, then trade those apples for tomatoes I wanted from you. You can see how barter can get tedious.
To alleviate this, eventually a common “want” became money. Historically, this was sea shells, tea leaves, and even gold. Money was naturally selected through the market process, and changed through time. Gold emerged as the common “want,” i.e. money. Its property of weight and malleability lead it to be easily stored and exchanged as the common “want.”
Natures use of Resources
Nature uses only the resources that it has. It lives within its means. A cactus saves water for itself now and for its future, as there is no telling when it will rain in the desert. Have we lived within in our means when it comes to our current monetary system based on fiat money? The short answer is “no.”
Fiat money is money that is made out of thin air. It never developed out of natural selection. At its whim, the Federal Reserve can print money, and has done so in attempts to get out of the economic crisis. We are living beyond our means. Spending is out of control, and saving is next to nil. Imagine if the cactus used all its water today, and just pretended to have water for tomorrow without any actually rain? It would eventually cease to exist.
Imagine another scenario, where we lived within our economic means. Our monetary system used to be tied to gold, i.e. have gold backing. Gold certificates could be redeemable for a tangible piece of gold. If you take out a bill, you will notice it is no longer redeemable in gold. Having that backing allows us to live within our economic means. It allows us to keep tabs on our savings and spending. We would continue to thrive.
Returning to Gold
Going back to gold standard would be a giant leap in the correct direction. We would return back to a naturally selected form of money. We would be able to utilize our monetary resources within our means. This may or may not solve all the worlds environmental or social sustainability challenges, but it sure will alleviate our economic sustainability problems. Go for the sustainable gold standard.