The Dollar: An IOU Nothing

Throughout history, humans have used seashells, salt, cows, cigarettes and printed paper as a medium of exchange, what we call money. Amongst these mediums, gold has been the most enduring as it meets all five of the qualities for an ideal exchange mechanism as outlined by Aristotle, the fourth century B.C. Greek philosopher:

1) Durability -- will not rot, spoil, disintegrate or rust.

2) Divisibility -- can be spent in fractions.

3) Convenience --can be carried and easily exchanged.

4) Consistency -- uniform weight, look and feel.

5) Alternate uses -- seen in jewelry, industry, medicine and art

In 1971, President Richard Nixon cut the tie between the Dollar and Gold, resulting in Dollar to float from its then-price of roughly $35/oz, to today’s $1834/oz, reflecting a nearly 50X gold appreciation in Dollar terms in 50 years, or, stated differently, paper dollar has decreased in real value by almost an astounding 98%.

For a fuller discussion on the topic, read Steve Smith’s 2/4/19 Member Monday topic “Full Faith and Credit.” Meanwhile, I believe human evolution is in the process of adding a sixth condition to Aristotle’s list: the requirement for a universal decentralized global smart digital currency, based on a new technology called Blockchain.

Still in its infancy, Crypto currency is in its Wild West stage of development, but it is important to start taking note of the fact that, when it comes to money in general, and the Dollar as an international fiat currency, “The King is dead; long live the King.”