Cobden Centre keeps hitting the relevant problems in the economy, and I chimed in on this debate with this point:
Mr. Musgrave sent us to a 1913 essay on money a few weeks back which demonstrated in history gold as a medium of exchange is in the minority, paling in comparison to vast complex agreements of economic import. Bankers broker the housing development here, the oil wells there, the farm in the country, the fishing fleet, the sweatshop and endless other cross referenced deals, and collect a tidy some, with nothing backed in gold, not even “money” by most definitions, all paper backed by paper. Just so.
The problem with some of these arguments is simply definitions. Paper backed by oil wells is not money, it is obligations, mere contracts. Why call such paper “money?”
Why not explain things as they are, which I believe is Mr. Baxendale’s brief. If it is other than medium of exchange, then it is not money. People need to understand what they are getting into when they make a deposit into a bank, with a paycheck from a company, both of dubious provenance.
Most of these economic transactions are appraised in something we call federal reserve notes, a document that does not have the word “money” on it, a phenomena I suspect is true world-wide for currency. Why do we call it money when the originators do not?
Is there not a simple solution? Simply ground any contract with a reference to liquidating in gold. End of story. In fact, it was once common. After the federal reserve act in USA, business people, knowing about funny money and inflation, protected their projects with gold clauses. Problem solved.
Until the government outlawed business protecting itself.
It is a problem of definitions, but also a problem of who gets to make definitions. Job one is to outlaw government making definitions.
Then we can start to clarify, for example, a gold standard that includes cheats is not a gold standard (the concern of wildly fluctuating prices is not a problem in a free market, merely more information, an early warning system. The problem with paper backing paper economies is the wildly fluctuating prices).
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