Whether intuitively or analytically, we all know that the dollar is not such a great form of money. That’s putting it lightly, though. A dollar is a terrible form of money when you take a closer look. Those who have lived longer on this earth tend to grasp this reality more clearly. Like trying to walk up a downward-moving escalator, the momentum of a falling dollar is always against you. This becomes clearer when engaging in economic planning. Whether it’s starting a business, making an investment, saving for retirement, putting something away for a rainy day, or simply making ends meet on a week to week basis, all of us have to work against a falling dollar (or fill in the blank with your fiat currency of choice.)

If that’s true, why do we keep using it? Granted, you are forced to pay your taxes with dollars. And yes, technically it is illegal to use anything else for “canceling debts.” But neither of those artificial props actually forces you to think in dollar terms. They certainly have an impact in conditioning you to think in dollars, but as of yet, your mind is still not totally enslaved by the State. You are free to think in terms of a better money. Of course, we think gold is the best money. In fact, here is why you should leave dollar-thinking behind and start thinking in gold terms.

Money is commonly and inadequately defined as the “common medium of exchange.” But where the rubber meets the road, this definition doesn’t tell us anything about whether the common medium of exchange is a good one or bad one. By good or bad we mean whether it helps or harms human flourishing and civilization. Economic planning is necessary for human flourishing and civilization. Planning in a good form of money, as opposed to a bad one, makes a big difference.

Carl Menger, often dubbed the father of the Austrian School of Economics, preferred to define money in terms of its “saleability”or “marketability” relative to other economic goods. Marketability refers to the relative ease that particular good could be used in a market exchange. There is always a cost to bring and exchange products at the market. Therefore, we can say that the most marketable economic good was the one that permitted mutually beneficial exchange at the lowest possible cost. The most marketable good in any economy eventually becomes money. It is important in Menger’s paradigm to remember that marketability precedes becoming the common medium of exchange. The “money-good” only becomes the most common medium of exchange because more and more people wake up to the fact that it works better than what they were using before. It makes it easier to execute more effective economic planning that is more seamless, precise, and accurate.

Stop Thinking in Dollars, Start Thinking in Gold, 6/1/16

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