However interesting an idea it might be, there is a tremendous amount of verbiage and mental effort being expended here on the freegold concept, which is a fundamentally flawed view of the world, the law, nature, and civilization itself. People should probably stop wasting their time over there, not that they will.
Even so, some wrong-headed ideas are useful, and not a waste of time, when they serve as an occasion for deepening our own understanding, so I’m going to explain a little more about this freegold idea and then leave it.
What is the law? Why is the law important, if it is? What does the law properly have to say about money matters?
The law, insofar as it is relevant here, is a generally agreed upon set of rules governing civilized conduct. The operative word here is “civilized”. We speak of other kinds of law – the laws of nature, the laws of physics – and these may form part of the basis of reality, but they obviously do not form the basis for civilization. Just as discerning the laws of nature and the laws of physics is a process of discovery, so it is with the law that governs human conduct when human beings form civilizations.
So that’s why the law is important. It underpins and provides the foundation for civilization itself.
The law of civilized human conduct that we formulate for ourselves should properly be in harmony with the laws of nature and physics and biology and so forth, not in conflict with them. In the old metaphysical sense, this would place the positive, written law of civilization above the strictly natural laws, because it would incorporate those laws and yet add something to them – reason, and ideas of justice and fairness – so that while the lower order laws govern the physical world the laws of civilization govern human beings living in a civilized way with one another. Fairness, justice and reason have nothing to do with the laws of physics; those laws just are. But they are the very stuff of the laws of men and civilization.
The process of reasoning, all by itself, is complicated and even a little mysterious. Throw in justice on top of that. Then take into account observable reality, where the law will have to operate and have its effects.
All of this is involved in discerning and formulating the laws governing civilized conduct. This is not easy.
Thankfully, we do not have to begin with a blank slate. We have ancestors, we were preceded by other civilizations, and a lot of things have been written down and thought over. Plato, Aristotle (the original one), Aquinas, Hume Locke, just to mention a few. To a certain degree, of course, we are always re-inventing the wheel as new ideas come along and have to be evaluated against all of this, but we should not forever be starting from scratch. It’s too hard.
Now the law, as it happens, has a lot to say about money and pretty much always has, although nature herself serves up gold as a medium of exchange and a store of value, and no one had to pass a law for this. It can be discerned by each individual for himself. And it was, from long ago.
Where, then, does the positive, written law of civilization come in on money matters?
When trade and commerce flourish – as they do in civilization as opposed to primitive tribes, for example – people trade freely with gold or other common media of exchange. The law making authority – government – merely defines usable and universally understood quantities and then implements those definitions through bureaus of “weights and measures”. It says, for example, that a “dollar” is defined as 1/20th of an ounce of gold. And then someone brings their gold to the government bureau which can measure out an ounce and stamp it into a $20 coin. And this in fact is what historically happened. You didn’t have to have weight scales at every meat counter.
Then the dollar is divided into more useful quantities: the half-dollar; the quarter, dime, nickel and penny. The penny – 1/100th of a dollar – was and remains the smallest denomination of the currency. People were, of course, free to deal in even smaller quantities if they so wished. But this was the smallest the government was willing to go, for entirely practical reasons. There is no moral objection as such to ever smaller subdivisions of the dollar, but there are practical objections. Imagine if everything was haggled over to fractions of a penny. Trade would basically come to a halt.
It would not be going too far to say that this public service – defining a monetary unit of account and assuring its integrity through bureaus of weights and measures so that people can deal with each other justly and efficiently in commerce – is the very first duty of government. It is also a paradigm of what the government can do with the law, and do well (which is to say effectively) and also of good faith, honesty and integrity. It is the establishment of a clear and readily understood convention that applies to all equally, and favors no one. Just what every law should be, and really what every true law must be – and is.
To the extent the government departs from this important, basic and easily understood function in money matters it has become corrupt, then, in the most fundamental way – with regard to its first and foremost duty. There can be no doubt about this and no alternative conclusion. A government that does not – or worse, refuses to – establish and define its monetary unit of account is a fraud. Nothing about the law, government or civilization itself could be more certain.
Accordingly, unless one is in a position to do away with government altogether – and this is highly unlikely since historically there have always been governments, and in any case that would be another discussion entirely – the best you can do is to live only under a government that refuses to depart from this basic function – and defines its monetary unit of account. You may not live under such a government – certainly the people of the United States do not – but if you don’t your goal should be to fix that about the government of the place you live in, or seek another government to live under that better respects and adheres to that function. To the extent you are unable to do either, you do not have the law. You do not really have civilization, or at least such residue of civilization that you do have will become increasingly imperiled until at last it vanishes. Violently, most of the time.
The freegold idea imagines a bifurcated monetary system where on the one hand there is fiat money – that is, irredeemable, undefined, debt based money that is “legal tender” – and on the other hand physical gold that serves as a savings vehicle for the wise (wise being defined as those who follow the “freegold” ideology) and is only relinquished in “final payment” situations, and which cannot be borrowed or loaned. The last is a meritorious idea and should perhaps be legally established if possible.
The rest of this ideology is quite faulty.
The reasons for that are numerous, but chief among them is that the freegold ideology doesn’t address, much less solve, the problem of a rogue government, which is what you have when the monetary unit of account is not defined. This is not an economics problem; this is a very serious political problem threatening the foundations of civilization itself.
You cannot get away from a government by hiding gold bullion under your bed, or trading it in secret, or whatever else it is that freegolders imagine is going to occur upon the economic collapse. You cannot live a civilized life without the law, and you cannot have the law if the government will not define the monetary unit of account.
Rogue governments are notorious for not leaving people alone. And that is the problem with “freegold”: it is people who need freedom from their governments, not gold.