How to Stop Revisiting the Illogic of a Gold Standard

Rather surprisingly, the following statement was recently posted online, nearly 80 years after the last significant country abandoned the gold-standard for a fiat-currency standard or, more accurately, a public-spending standard.

"The United States abandoned the gold standard, for an incomprehensible reason dreamt up by Franklin Roosevelt and a farm economist whose earlier scholarship included Alfalfa, An Apple Orchard Survey of Orleans, and Some Suggestions for City Persons Who desire to Farm."

Not at all. What this writer is missing is the difference between static & dynamic value. Public initiative is very dynamic, and essentially limitless, as shown by evolution alone (human populations and capabilities have both come a long way in the last 100,000 years, not just the last 200 years).

First, there's no way to efficiently yoke a constantly growing & limitless dynamic public capital (return on coordination) using a limited, slowly changing supply of any commodity. Alchemy failed, but public initiative hasn't yet.

Second, there's no way for rate of change of a commodity supply to match the agility of public initiative. WWII was a prime example. We mobilized incredible increases in coordination, alignment & output literally overnight, with no possible way to expand the world's gold supply at the same rate. Public initiative can & must drive currency supply at will, with any required tempo.

Here's my formal statement on the illogic of a gold-std.

“Why is state money better than gold?”
Because the highest return is always the return-on-coordination. Scaling up ability to explore large-group options requires scalable large-group agility, scalable large-group intelligence and coherent alignment to emerging options. Same reasons no species or armies are resource constrained. The bigger constraint is always organizational ability.

That means that only state-money denominations are agile enough to keep up with the kinetic demands of uncontrollable public initiative. Commodity-money was thoroughly tested, and was found inadequate. It’s valuation has to be constantly re-scaled, simply because populations & their options scale faster than the magnitude of any commodity store. If that’s the case, just simplify and cut the commodity out of the re-scaling loop that links organizational ability to group outcomes.

Why don't we teach this in elementary school?  It's as obvious as teamwork on sports teams, music orchestras, dance teams or music bands.  (What's more valuable, hoarding equipment, or learning team play, and staging, linking & sequencing actions?)

You also need look no further than warfighting doctrine to see the difference between static & dynamic capital.

1) "success follows the quality [& tempo] of distributed decision-making"
USMC on Warfighting

2) "we generate tempo by decentralizing decisionmaking"
USMC on Campaigning

3) We decentralize decision-making by adequately distributing training, resources & practice.
 (me, paraphrasing common sense)
A resilient democracy means anyone can be easily replaced by people who've already practiced the duties and activities of the person lost.

Lesson: National growth involves continuous transition from hoarding of static assets to accumulating coordination capabilities. Most just call it teamwork, and find it's value to be obvious once practiced.  It's what all social species do.  They trust in the return on extending distributed credit, by fiat.  It's a scalable policy choice that defines human tribes, cultures, nations and markets.

We forget that coordination is also one of the forms of capital, and the most valuable one of all.