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Gold, Financial Illiteracy, and Amanda Marcotte

Posted on January 17 2011 2:00 pm
Rob Taylor has a Master of Arts degree from Wesleyan University. He blogs at Greenville Dragnet.

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About a week ago Amanda Marcotte wrote a rambling screed against people who want to go back to the gold standard. It consisted largely of different variations on the pejorative “teabagger” and some references to the Bible that tell us more about Marcotte than anything else. She seems to conflate people who want to get back on the gold standard with the so-called “gold bugs” who recommend investing in gold, and bizarrely claims that gold values are really based on people’s nostalgia and “sadism” which I’m pretty sure Amanda thinks means disagreeing with her.

Her theory on the idiocy of gold can be gleaned by wading through this passage of what she passes off as writing:

You get the same obsession, by the way, with English-only thinking.  The hope is that there is something solid and unchanging that has value and meaning outside of what humans imbue in it, a sort of final authority they can put their faith in. But just as the category “English” is actually not as rock solid as they think—language is ever-changing—and the Bible and Constitution are up for interpretation, so is it true that there’s no intrinsic value to gold.  It only has value for the same reason paper money as value, because we say so.

Er, not really. Amanda Marcotte is almost on to something, but like most leftists she sees wealth and value as something created in the mind. This view of wealth is the product of the Left embracing academic Marxist economic theories and more importantly urbanization, without which the idea of virtual wealth is not possible. It is true that paper or digital money has value because we agree that is valuable,  but our agreement that our money is valuable doesn’t insulate fiat currency from devaluation by forces beyond our control. Food inflation, for example,  is the product of not just several years of disastrous crop yields but of increasing worldwide demand and a collapse in our currency value when compared to other assets.

We have no say in any of those three factors, even though we all agree to use the dollar as a measure of value.

The fiat dollar, backed only by our agreement, has lost value against other currencies and more importantly the commodities we purchase with the dollar. The true value of any currency has always been its ability to make trading for things we need – commodities – easier. The dollar also historically benefited by being a reserve currency, meaning that other countries used our currency for trade with each other. But that status is being challenged, which makes our dollars less valuable.

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