Ever since the first Electrum coins were invented, most civilizations joined the bandwagon and struck AE/ AR/ AV coins. This trend continued till 118BC, then God forbid the Han Dynasty, issued leather promisary notes/ primitive fore runner of paper currency. That was strike one/ strike two was the plastic money we call credit cards, strike three the "bitcoin". As a result, sovereign governments printed currency/ got into debt/ caused hyper inflation Then along came credit cards, causing the average joe to spend $ they did not have, resulting in owing the banks/ interest rates at 24%+ Now some wiseguy invented a "bitcoin" an imaginary form of currency with no backing/ worth 10K today/ ZERO next day I think King Ayattes must be looking down from heaven and wondering if we have gone mad.
Our most important currency is in fact trust. The material world has no intrinsic value. Gold and silver are worthless when economies collapse and people are forced to barter for commodities and services. It's the fact that we all trust each other that our cowrie shells are worth something, that make them valuable tools of exchange. Inflation is caused by various economic factors, but one of the most important is a glut of legal tender, whatever form that legal tender takes, be it gold or aluminum or paper.
I think we modern types miss out on how important people of the past considered the value of their money. Late Romans expected there to be the advertised trace of silver in their coins. Earlier Romans saw SC noted on their minor coinage assuring that the Senate had decreed this to be a worthy coin. Note (not always positive) was taken when standards changed and coinage reforms made new norms replace the good old accepted ones. This lasted a long time. On 19th century US silver coins we see arrows and rays recording changes in the intrinsic value of fractional coinage. When I was a boy, we knew that those blue seal silver certificates could be exchanged for a real silver bearing silver dollar. After that went away all we had left was trust. Today we hear radio ads assuring us that gold will always be worth having but we also hear people fearful that drinkable water might be more important in the future. What will be the currency of the future? Trust is difficult to mint.
On this topic I always recommend reading How an Economy Grows and Why it Crashes by Peter Schiff. It is an entertaining but instructive introduction to economics which can be read in a couple of hours. It can be found on Bookfinder.com for less than $5.
I think the currency of the future is here - electrons. How do you get any more ephemeral than electrons? The OP mentions bitcoin as an imaginary currency, but so is my bank account full of electrons telling me I have dollars.
I agree. Money of the future is already here in the form of digital notations of account that the government can fully regulate. Even the bits of linen was way too much for the government to let us control ourselves. Why else have they retracted all $500-$10,000 bills? Heck, I hear people complain that there is no LEGAL reason why anyone should own $100 bills. Today control of the money is control of the person, and no bureaucrat wants to lose any control they already have.
I guess those people have never heard of inflation. By the same logic no one should have needed a $5 bill (or coin) 100 years ago.
The Communist totalitarian regimes tried that....it failed miserably. The Chinese Communist People's Republic, saw the light, and moved China towards a "Free Enterprise" capitalist economy, even encourage their citizens to buy gold coins/ bullion. The US Federal Reserve, first confiscated private gold ownership under FDR's New Deal. There were a lot of Stalinist sympathizers in his govt. Later they removed the $500/$1000/$5000/$10000 dollars notes to prevent $ laundering/ however the digital bitcoin currency, allows huge money transactions with no govt. control or knowledge.
Right on... Between 1850-1933 the US Double Eagle was worth $20 Dollars/ contained one ounce of gold. Fast forward to 2018, it now takes $1300 to buy 1 oz. of gold. On my street a house that sold for 15K in 1965 now sells for 800K!
This may not be too relevant but thought I'd share it. One day at the local coin shop I heard one of the employees talk to someone about gold. They said "in the 1800's $20, or about an ounce of gold, would buy a really nice suit, and today $1000, or an ounce of gold (at the time) would be a really nice suit." Just something that stuck with me.
For several years in Rome, a denarius was a day's pay more or less for a low ranking soldier. Today a Private E1 charts at about $77 a day. Both soldiers also got benefits to cover some expenses over the base pay. For $77 today we can buy many denarii if we avoid the rarities and higher grade coins. An oarsman in the Athenian navy got three obols to a drachm a day (depending where you read). It would require very low grade coins to buy this amount today but this hemidrachm (3 obols) is close at $50 a decade ago.
If we had the gold standard now, gold coins would be melted down. The total amount of money in circulation just in the US, taking broad measure (deposits etc, not just notes and coins) is $75 trillion. The total value of gold ever mined is about $7.5 trillion. If that was all backed by gold, we'd need ten times as much as we've ever mined. And the US is only a quarter of the world economy. Demand for gold would soar, prices would go through the roof, and even the nicest Roman aurei would end up melted down. The silver price spike driven by the Hunt brothers' speculation caused a lot of coins and antiques to be melted for scrap. And when the price crashed, their ancient coin collection had to be sold. I think the gold standard would be a bad idea today, for lots of reasons. But that one seems especially relevant here.
An economist would point out taking broad measures of money in circulation versus a finite item like ounces of gold is a complete mismatch. Fractional deposits do not need to be accounted for by total ounces of gold, nor promissory notes, etc. In fact, this is the basis of the idea of fractional deposit banking. I am not in favor of tying our economy to any one commodity either, just pointing out your comparison is not really valid. I am sure it could be done without gold being valued at $20,000 an ounce, but would agree it should not be done. The idea that currency is no longer a store of value I can get, and am ok with it. Although to many here, that is exactly why they object to no backing of modern currency. My main issue is governmental oversight, and why governments are given permission to have total control and visibility of people's spending. It is the loss of Liberty and privacy that upsets me.
Actually, I *am* an economist! At least, I've taught economics at a major university and worked as an economist at a bank, though it's no longer my day job. You are right that you can have a gold exchange standard, which prevailed in the past. But it replicates exactly the problem of trust described in this thread, because the promise to redeem for gold at a given rate requires trust in the guarantor. Governments (or private institutions) can renege - as of course they did when we left the gold standard. I share your concerns about liberty and privacy, but I am very sceptical of the claims some people make for the gold standard.
