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Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown by Detlev S. Schlichter

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Epilogue: A Return to Commodity Money

Everywhere we look, signs point toward the inevitability of a complete currency disaster. While this outcome is extremely likely, it is not, in the strict sense of the word, inevitable. In the history of the U.S. dollar and British pound, the authorities have returned their respective currency repeatedly from being “off gold” back to commodity money. There is no practical reason why this couldn't be done today. The obstacles are mainly ideological, not factual.

One sometimes hears the view that there is not enough gold around to resurrect the gold standard. This statement has no basis in fact. It has been shown that, within reasonable limits, any amount of gold is sufficient to function as money. No economy operates better or worse because of the available amount of money. The notional amount of currency that is to be backed by gold and the quantity of gold held by the financial authorities or the public at large naturally determine what the new exchange-relationship between the two should be. It is true that if gold were chosen today as the monetary asset of the United States, the gold price would have to be adjusted upward, or the purchasing power of the dollar in terms of gold downward. This, however, is simply a single administrative act, a currency reform that establishes a new relationship between dollar and gold. How much gold one U.S. dollar represents is immaterial. The important point is that the dollar would again be a form of commodity ...

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