Sure. But gold, and diamonds and other pretty shiney things only have as much value as we place on them, the same as paper money.

@21echoes covers everything else I wold add on this.

The US currency used to be backed by gold up until 1934 [1], as did several other countries[2]. But as times have moved on, there are several other minerals which have become more important, I think it would become too difficult to rely on just a single precious metal these days.

[1] http://www.federalreserve.gov/faqs/currency_12770.htm [2] http://en.wikipedia.org/wiki/Gold_standard

> Sure. But gold, and diamonds and other pretty shiney things only have as much value as we place on them, the same as paper money.

Whenever I come across the argument that we return to a gold-backed economy, this is among one of the first things that comes to mind. Gold is worth so much because it's considered a precious metal and has numerous uses in industry. But besides the extensive history of its worth throughout the ages (which probably maps well to its chemical attributes, such as malleability), there's nothing that suggests it won't eventually become worthless if civilization values something else (salt, platinum, clean drinking water).

I used to think I was a little crazy whenever I'd have such an argument with my inner monologue, but now that I see the same point raised by others, I'm not so sure.

Maybe I still am crazy.

Yeah, that metal based economy worked out so well for 16th century Spain.

That's a very important case that is so fascinating because despite all the weaknesses of employing a precious metal as a currency; since the introduction of paper currency in the last centuries central bankers have managed to create hundreds more Spanish disasters in such small period of time!

Weimar, Austria, Zimbabwe, Argentina... It's a long list of 20th Century, central bank, paper induced economic disasters: http://en.wikipedia.org/wiki/Hyperinflation

Can you find any hard-money regimes like that?

Argentina's hard money solution to hyperinflation (pegging to the dollar) didn't end well either.

Yes. You should spend some time figuring out why.

Oh I'm sorry, you must inhabit that parallel universe where central bankers and their web of oligarchs are public-spirited socialists, and where in the words of Blankfein actually are "doing God's work".

Did it never strike you as odd that when the robber barrons were deposed by the class of disenfranchised oligarchs they were awarded the Federal Reserve as compensation.. Yes they were quite pleased.