Around 1-2 week ago, Federal Reserves has finally announced another quantitative easing to ‘stimulate economic growth’. By printing more money and have US government to buy another bond and spending it on infrastructure, they said, somehow it will motivate middle class families to spend more which in turn will increase economic growth.
Since the first time I have my discussion about money management with my financial advisor, I was disturbed about so called the thing is called inflation. How and why does the inflation happen?
I found out that commonly used terms, such as ‘food price is increasing’ or ‘cost of daily needs is skyrocketing’ are very misleading. The terms like ‘increasing’ and ‘skyrocketing’ create impression in our mind that while the nominal values of our money are statics, the actual values of commodities (which can be bought by money) become more expensive everyday. I don’t know about you, but that is what I feel.
The reality is that the real purchasing value of our money become weaker and weaker each day. Especially now during this economic crisis, central banks around the world are printing more money for government to do more spending. All of these things are done despite the harm done to general population, knowing that value of our hard earned money will soon become worthless.
Then I read some articles which advocate United States to back to gold standard to solve this economic problem. Gold Standard is the system where paper money is assigned fixed exchange rate for gold coins or gold bars. The fixed exchange rate run in contrast to current paper money where the exchange rate against precious commodities, such as gold, food, and oil continue to drop.
The reason why commodities (especially precious metals, such as gold and silver) should be standard in economic transactions are because these commodities have intrinsic value that hardly can be manipulated by governments, banks, corporations or other big entities which try to cheat people. And also, the values of these commodities are universal. Virtually all cultures in the world perceive gold as precious entity for its intrinsic value as material for jewelry. And its supply is limited unlike paper money that can be created out of thin air. And unlike paper money, gold is immune to value depreciation since it cannot corrode. In contrast, the intrinsic value of paper money is zero.
Some Biblical verses actually support the principle of having stable measurement for commercial transaction. For examples, often quoted verses are about honest scales and warning against false balance:
- Proverbs 11: 1 – A false balance is abomination to the Lord: but a just weight is his delight.
- Proverbs 16: 11 – A just weight and balance are the Lord’s: all the weights of the bag are his work.
- Deuteronomy 25: 13-15 – Thou shalt not have in thy bag divers weights, a great and a small. Thou shalt not have in thine house divers measures, a great and a small. But thou shalt have a perfect and just weight, a perfect and just measure shalt thou have: that thy days may be lengthened in the land which the LORD thy God giveth thee.
In ancient times, evil merchants will try to cheat their customers by using several stones with different weights when they weighed their products in the scale. The weight of product on left side of scales will be compared with stone with supposed fixed weight. But it turned out that the real weight of stone is lighter than its stated weight. As the result, customer will get less products but they still need to pay same amount of money. It is a form of stealing which violates 8th of Ten Commandment.
In modern days, just substitute this stone scale with paper money. There’s you go. The exchange rate of your money will somehow increase or decrease depending on ‘economic condition’ but we are perfectly fine with it although we are strangely upset for false stone balance….
One of economic problem is manipulation of currency. To solve this problem, the very first thing to do is to use Gold Standard. But can it really be implemented? How can we fight against those central bankers and corrupt politicians who guard their interests? It is a good thing to be thought about….