Here is an interesting mental exercise:Kshartle wrote: I advocate no use of force. Therefore, no standard. The standard should be only what two individuals agree on. I'm confident that together people all over the world will discover what works best as money. I'm certain it won't paper backed by nothing. That is laughable. It might be gold, might not.
I like the following little chart from page 70 of Browne's book yada yada:
Advantages of Gold and silver as money: Advantages of paper as money:
1. Durable 1.
2. Divisible 2.
3. Convenient 3.
4. Consistent 4.
5. Accepted Value 5.
Let's say that you were the chief on an island and you needed to set up a currency system to facilitate trade among your subjects (let's assume you have already decided you wanted to do this--you can't say "I wouldn't do that as island chief").
You have vast holdings of commodities and finished products and you are trying to figure out how to convert some of that property into a currency that will facilitate trade. You know of two other islands that you could trade with for possible acceptable forms of currency.
The first island has vast supplies of gold that they would love to sell to you in exchange for some of your commodities and finished products. The gold you could get from this island would be plenty to seed the currency system on your island and make the economy run more efficiently.
The second island has vast supplies of guns and paper that they would love to sell you in exchange for some of your commodities and finished products. To sweeten the deal, they would even print up "island chief notes" in various denominations for your use as your island's currency. If you selected this option, you might find that once it was in place other islands would also be happy to accept your island chief notes in exchange for their goods and services if you provided a guarantee that you would use your guns to protect their islands as well from foreign aggressors.
You think about the two islands and the pros and cons of each transaction. Which one would you choose if you only had those two choices?
Consider that if you took the guns and paper you would have the ability to provide strong protection of your island against any potential foreign aggressor, which would potentially provide your economy with much more stability. OTOH, if you took the gold, your island would now not only be less safe against foreign aggressors, but it would also suddenly have a lot more portable and liquid wealth sitting around that might make it a bigger target for foreign aggressors.
Which would you choose?