“Paper money has no intrinsic value, it can’t be redeemed for gold or silver, you can’t even make jewelry out of it. There’s nothing behind it but the people’s confidence in it, and when the government keeps changing its appearance, as it has with the successive redesigns over the past several years, that confidence is undermined.”

This argument has been made since long before we went off the gold standard, though if you write for the New York Post you don’t know this happened 75 years ago. Gold is an abysmal backer of money. It is ridiculously economically ignorant to think that any major economy today could operate smoothly on a gold standard. The price of gold has more than tripled in less than a decade. Seriously, what would the price of gold be if all the world’s major countries were hoarding enough gold to back their currencies?

The Wikipedia entry on the gold standard lists a number of disadvantages with using gold to back currency. However, these are no longer disadvantages but rather reasons why gold can no longer function in this manner. First off it states that there isn’t enough gold. I want to point out that this particular argument is incorrect. So long as the price of gold is allowed to fluctuate in a free market it would simply rise in price such that a dollar would be backed by a smaller amount of gold as the price rises. But if the value of gold is managed, then who gets to manage it and how should it be managed? If we are to manage the value of gold, then we might as well just manage the value of the paper money, which is one reason countries dropped the standard in the first place.

Perhaps the greatest problem, however, which is missed entirely, is that in order for it to work every country we trade with must be on the same standard and share a common value for gold. If the value of paper currency is tied to the value of gold and one country has no gold, then their currency is worthless and they cannot buy goods from our country. With a gold standard there has to be a conversion to gold associated with any transaction across countries on different currencies. Otherwise, we’re reduced to an inefficient barter system.

In medicine, the barter system is dying off as well. Patients used to come to the office, and if they could not pay, they would offer their services such as landscaping, contractor services, or a good deal on whatever they sold. Sometimes patients would do this on top of their payment so the physician would treat them better and take that “extra” step to make sure they were OK. But now as we come to this modern day in medicine, we see patients mostly concerned with the amount of copayments. Front office personnel are more concerned with payments and insurance status. There is a veil between the physician and the patient when it comes to payments and negotiations.

It is really a shame because these days many doctors are turning away patients who do not have insurance or who have bad insurance. I can tell you that there is no greater feeling than to see a patient without direct financial compensation and then have him do a favor for you that is in his line of work. It’s a win-win for both parties, and better yet, it leapfrogs the entire financial system. One patient gets his medical care and one doctor gets something in return. Even if the values are not commensurate, it gets down to the true values of a barter system – people exchange their own products and goods because that is all they have to give.

Next time you visit your physician, perhaps this is something to consider. I know a lot of doctors that would happily work “pro bono” to get something they need.

Editor’s Note: The word “free” in the title is in quotes because, according to Robert Heinlein, “There Ain’t No Such Thing As A Free Lunch” (even in the non-scifi world).