People start increasingly to exchange their fiat money (which isn’t redeemable into anything) for sound money media such as gold and silver.

July 08, 2011 – “People start increasingly to exchange their fiat money (which isn’t redeemable into anything) for sound money media such as gold and silver, thereby driving down the exchange value of fiat money (even to the disappearing point).” That, says Thorsten Polleit in the Ludwig von Mises Institute’s Daily Mises, is what inevitably happens when government policy fails and market forces take charge of monetary reform.

Inflating credit in a never ending cycle of lowering interest rates and printing cash “will not, and cannot, solve the problem that has been caused by monetary expansion in the first place,” Polleit says. More important, such interventionist government policy “will increasingly undermine the free-market order.”

Bernanke’s policy of injecting mountains of fiat money into the economy serves only to further devalue the dollar “without solving the underlying root cause of the problem,” Polleit says. The logic behind the Austrian School’s belief that monetary reform must follow the principles of a free market is inescapable, yet the preponderance of current thought runs contrary to the idea.

The problem lies with the stranglehold central banks have on the field of economics. Current ideology is deeply entrenched in our universities and careers can be ruined by contrarian opinion. That “has reduced the numbers of supporters who effectively make a case for sound money to a tiny group whose voice is easily lost,” says Polleit. The public, with but a meager understanding of economics, is justifiably biased against that case even when the voice is heard because people have yet to understand all they will gain from a sound money policy.

None-the-less, Polleit warns that “finding an economically viable solution to the problem at hand is a challenge that the societies that have adopted fiat money will not, and cannot, escape.” As news such as the latest jobs report – a pathetic 18,000 net jobs added when forecasts called for 125,000 – keeps piling up, there are increasingly stronger signs that the public is beginning to understand that the government cannot, or will not, initiate any real reform. From there it is but a baby step to taking matters into their own hands.

When people start buying gold and silver en masse, it will be only a matter of time before the markets declare the metals to be the only acceptable medium of exchange.

Shannon King

Senior Staff Writer –

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