Monday, March 31, 2014

Paper Never Beats Rock

By Chris Rossini

What an interesting statement...and typical of the opposition.

If it were true, would it have to be said all the time? Do we walk around writing and tweeting that "Indirect exchange beats barter"? Of course not. It doesn't need to be said.

If the "paper beats rock" statement were true the next question would be: "When?" One cannot find a single instance in all of monetary history. Paper money has always been nothing more than just dust in the wind. Gold on the other hand? Money.

Today's freak show monetary system is no exception. Every few years, we find out that if there isn't some giant taxpayer bailout, everything is going to fall apart at the seams. Illusionary wealth (Bear Stearns, Lehman, and others) disappear faster than you can say the words "Quantitative Easing".

How long has it been since Nixon decided to hold onto the gold and stick the rest of the world with the paper? 40 years?

40 years!! That barely qualifies as dust in the wind.

The rest of the world holds onto the dying U.S. paper because if they didn't, the freedom fighters of the U.S. military would invade them. American citizens hold onto the paper because legal tender laws prohibit the use of anything else. 

One would think that using force against the whole world would be quite costly. Has that ever succeeded? Once again, not a single success story. Not one empire from the past has made it to this day. Pesky economics always ruins it.

Paper never beats rock.

Chris Rossini is on Twitter


  1. Chris,
    I love it when gold-haters, either through ignorance or outright deceit, fail to bring up legal tender laws and the monopoly conditions that result. The reality is that should fiat money be allowed to compete with any other commodity or commodity based currency, it would lose hands-down. This is exactly why there are legal tender laws. The state can't compete, and therefore makes that activity illegal.

    Then once that activity is illegal or heavily regulated by the state, state agents, state actors, and state supporters claim that the free market falls short and state intervention is needed to protect the public.

    The only thing that intervention does is benefit the interests of those behind the intervention at the expense of all others. The litmus test for the state is can it add value without making direct competition illegal? It never can, and hence the emperor wears no clothes. The state and its actors must always distort reality and pull the wool over the general public's eyes in order to exist.

    1. You do not know a whole lot about money apparently. Bad money drives out good. So if currencies are allowed to compete and the fiat currency loses, that means it's getting hoarded because it's superior to other currencies.

    2. Re: Jerry Wolfgang,
      -- So if currencies are allowed to compete and the fiat currency loses, that means it's getting hoarded because it's superior to other currencies. --

      No, that is not what happens. What drives money like any other commodity is demand. If the DEMAND for a fiat currency suddenly shoots UP making it more valuable, and the demand for some other currency comes DOWN, THEN you can argue that the fiat currency is being hoarded while the competing currency is being dumped into the market. But this is not an indicator of the superiority of one over the other, only a manifestation of consumer choice.

      The desirability of a currency depends entirely on consumer choice. So far, whenever the choice is given to consumers, metallic or commodity-based currency is quickly replaced in the market by representative paper currency because paper currency is much more convenient to carry and trade with, but that does not mean metal currencies are superior to paper while they'e being hoarded nor does it mean paper currency is superior to metal while is becomes more ubiquitous in the market.

      There are, however, artificial ways of driving a currency out of the market, and that is by government fiat (legal-tender laws).

    3. JW,

      You are distorting Rothbard in order to fit your twisted sense of alternate reality.

      "When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation."

      This is rightly or wrongly commonly shortened to: "Bad money drives out good".

      However, this only applies specifically when money is required by legal-tender laws to be accepted as having similar face values. Artificially overvalued money tends to drive an artificially undervalued money out of circulation.

      Hence, my statement about legal tender laws and how they are a problem. Commodity money that is allowed to act on the market unrestrained has none of these issues.

      Now since you obviously have a superior knowledge of money, you'll have an easy retort against this. Let me go put some popcorn in the microwave. Please don't disappoint.

    4. I meant to say Gresham's not Rothbard's. I was quoting Gresham's Law from Rothbard's "A History of Money and Banking in the United States" where Rothbard states: "But the important point to note is that the triumph of "bad" money is the result, not of perverse free-market competition, but of government using the compulsory legal tender power to privilege one money above another."

      I swapped the names accidentally. My bad.

  2. This logic only works in reverse: when fiat money replaces real money, gold and silver, people will hoard the real money, as they did when they hoarded the pre-1965 90% silver coins after the state replaced them with the cheaper metal coins we use today.

    1. I haven't spent a nickel or a pre-1982 penny in over 4 years for this reason.

      Check out for the melt value of US coins.

  3. I just love when people make claims based on some totally unrelated and meaningless thing, such as a stupid kids game of rock, paper, scissors. Argument by cute comparison. Good grief.

    Way to argue the issue, jackasses.

    1. Your dog looks like it needs anti-depressants.