Lysander Spooner, the great jurist, was addressing the issue of a gold standard when he wrote this, and I think his premise question is off (gold is a basis for money, a standard for nothing I think..), but it was part of his argument that made me think... returning to gold and silver coinage as money, people say there would be an actual shortage of coins, making commerce impossible (thus we need a bank to make bank notes, and a central bank to back up the banks.) But Spooner notes metals come out of the ground and are minted into coins, a people then recognize them, and then as needed, the coins come and go from coin to "plate, ornament and jewelry" as not needed.... to wit:
The first question, then, to be settled is this, - namely, what is that fixed or definite value (or something like a fixed or defi nite value) which gold and silver coins have, and which enables them to be used as standards for measuring the values of other things?
The answer is that the true and natural market value of gold and silver coins is that value, and only that value, which they have for use or consumption as metals, - that is, for plate, watches, jewelry, gilding, dentistry, and other ornamental and useful purposes. This is the value at which they now stand in the markets of the world, as is proved by the fact that doubtless not more than one-tenth, and very likely not more than one-twentieth, of all the gold and silver in the world (out of the mines) is in circulation as money. All the rest is in plate, watches, jewelry, and the like; except that in some parts of the world, where property in general is unsafe, large amounts of gold and silver are hoarded and concealed to prevent their being taken by rapacious governments, or public enemies, or private robbers. Leaving these hoards out of account, doubtless nine-tenths, and very likely nineteen-twentieths, of all the gold and silver of the world are in other forms than coin.
And as fast as new gold and silver are taken out of the mines, they are first carried to the mints, and made into coins; then they are carried all over the world by the operations of com merce, and given in exchange for other commodities. Then the goldsmiths and silversmiths, in every part of the world (unless among savages), are constantly taking these coins and convert ing them into such articles of plate, jewelry, and the like as they have call for. In this way the annual crops of gold and silver that are taken from the mines are worked up into articles for use as regularly as the annual crops of breadstuffs are consumed as food, or as the annual crops of iron, and cotton, and silk, and wool, and leather are worked up into articles for use.
And when the coins have thus been wrought into articles for use, they for ever remain so, unless these articles become unfash ionable, or for some other reason undesirable. In that case, they are sent again to the mint, and converted again into coin ; then put into circulation again as money; then taken out of circu lation again by the goldsmiths and silversmiths, and wrought [*5] again into plate, jewelry, and the like, for use. They remain in circulation as money only while they are going from the mint to the goldsmiths and silversmiths. And this route is a very short and quick one. An old coin is rarely seen, unless it has been hoarded.
Unless new gold and silver were being constantly taken from the mines, and old and unfashionable plate and jewelry were be ing constantly recoined, these metals would soon disappear alto gether as money.
All this proves that they have no true or natural value as money beyond their value for use or consumption as metals. If they were worth more as money than they are for use or consump tion as metals, they would, after being once coined, remain for ever in circulation as money, instead of being taken out of circu lation and appropriated to these other uses.
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