Fiat Money

The quest for gold in today's economy seems to rival Cortez and his band of 190 Spaniards in the early 1500's. Every other advertisement on conservative talk radio is pushing the wisdom of acquiring gold in lieu of investing the failing US dollar. As a good investment it is arguable, but no one can challenge the wisdom of the gold standard.

A true gold standard came to fruition in 1900 with the passage of the Gold Standard Act and came to an end in 1933 when President Franklin D. Roosevelt outlawed private gold ownership (except for the purposes of jewelery). The Bretton Woods system was established in 1946 to allow governments to sell their gold to the United States treasury at the price of $35/ounce. The system ended on August 15, 1971, when President Richard Nixon terminated the trading of gold at the fixed price of $35/ounce. At that point, for the first time in history, formal links between the major world currencies and real commodities were severed.

This brings us to today and fiat money, which is defined in economic journals as "money that is intrinsically useless; is used only as a medium of exchange." So, that means that every dollar represents nothing. Basically, every buck that we surrender to a store clerk or the Salvation Army at Christmastime is an empty promise, so to speak. It's frightening that our dollar is shrinking everyday and our prominence as a powerful nation is diminishing at an equally brisk pace.

Yesterday I was working on a song with Gary when we took a short break. Gary opened a package from an aspiring songwriter who carefully submitted neat lyric sheets and printed music to accompany a CD which contained the recorded songs. It was impressive, save for one thing: when Gary opened the CD case there was no CD in it. The comical moment sadly reminds me of our dollar--it looks impressive but there's nothing inside.