The great Austrian economist, von Mises, wrote that true money had to survive the regression test. Put simply, it must be established whether or not money had value before it was used as money; otherwise it is only a money-substitute which ultimately depends for its value on confidence. So we need to ask ourselves two questions: what value did gold have before it was used as money, and what value did modern currencies have before they were used as money?
The answer to the first question is clear. Anyone who has seen the Alfred jewel in the Ashmolean Museum in Oxford (over 1,000 years old), the Snettisham torc in the British Museum (over 2,000 years old), or Tutankhamen’s gold mask in the Cairo Museum (over 3,000 years old), regard these fabulous items with astonishment. They are simply priceless, being desirable beyond reckoning. There is therefore no doubt that gold, the major element in all these objects, survives von Mises’s regression test. Furthermore the Aztecs and Incas in the New World, completely isolated from Eurasian values, held the same human view.
Paper currencies do not survive this test. They started as money-substitutes for gold or silver and over time lost all their convertibility. As a result they now depend for their value on confidence alone.GoldMoney
Why gold is money
Alasdair Macleod
"The regression test." ROFL
