Comment: You're obviously no dummy

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You're obviously no dummy

on the subject and I won't resort to insults. But the idea of debt free paper money is a utopian impossibility. No government controlled currency would be able to continue indefinately as the natural progression of human corruption would eventually lead to having a lender of last resort and then back to a currency that is debt based and manipulated simply because you cannot trust the management of your currency to a centralized group of fallible human beings. The integrity of the money would be under constant assault by politicians looking to convert it to something that they could manipulate. This unfortunate patern of human conduct is so overwhelming that no rule could be written that an inevitable legislative majority or panic in an economic catastrophe would not eventually overturn. This sounds cynical, but the prospect of a monetary dictatorship will always be too tempting for ambitious aristocrats.

As far as the idea that demand for gold would deflate to the point of hurting the common man is a little bit flawed. We need to remember that when we are dealing with a free market currency such as gold that is what it is, a currency, and not a commodity. People do not hoard currency, at least not enough to truly make a significant difference in the market, so the extremely violent swings would not be nearly as much of a factor as what you described. Whatever currency gets stored will eventually make its way back into the market and periods of deflation would do little more that increase the wealth of those who were frugal until inflation picked up. The normal range of money in circulation would be determined by the market very quickly after a free currency was installed and would deviate throughout the business cycle. There is no historical evidence to support the idea that the currency would deflate to the point that it would no longer be viable to continue to use gold as money.