Hell Jason,

Firstly, this is a very good article (as always) and I enjoyed reading it. This debate is much like the old question – do you see the glass as half full or half empty? Beneath the surface of this century old debate is a much important idea – how you intend to use that water.

If we are looking at perennial long term inflation adjusted growth (which in itself is unrealistic), both the systems are ‘forced’ to conform/adjust to demand and the naturally limited supply side of resources. However, fiat currency creates a lot more mess when it ‘corrects’ itself if there is excess leverage and money supply. The question we need to ask is: which system is conducive to adjustment as a means of exchange in a way that curbs financial mess? However, it’s ironic to seek this system (whether it’s fiat money or gold) while you still harbour other demand/supply distortions such as subsidies, lobbies, tax codes, policies etc., if at all the intention is to put a lid on the mess we may create in future. The concept of fiat money looks appealing if we are looking at everlasting growth, which is why it’s here. Also, I agree it’s hard (or random?) to assign an intrinsic value to gold. We still need a system that promotes laissez-faire market so we have a balanced demand and an incentive to seek alternatives much before bubbles are created. I think we still need to arrive at the real reason of this debate.

Regards,

Jimmy