Your Money's No Good HereDeflating the Legend of the Liberty Dollar

In my travels in the conservative blogosphere, and the blogads therein, I stumbled across this gimmick.

One universal desire of "The Right" is the return to the gold/silver standard and rejection of fed-issued greenbacks. Be they conservative Christians hoarding up for the end-times, a paleo-conservative Idaho militiamen rejecting the "Zionist" economy, fiscal conservatives worried about deficits/inflation/interest rates, or Rand-worshipping libertarians fawning over d'Anconia's monologue on the glorious nature of money, their common belief is that we'd all be better off trading in silver talents and gold shekels. This is one of the “conservative” viewpoints I don’t agree with, simply because it contradicts logic and observable fact.

First off, the NORFED/Liberty Dollar people are selling silver at $10.00/oz, when its market price is $7.00/oz. To their defense, NORFED/Liberty Dollar admits this markup. Their defense is that it’s selling transferable currency and not metals; they openly tell people to go elsewhere if they simply want to invest in specie. Despite some of the odd claims by "Mr. von Nothaus" on his website and the high possibly this could be an outright scam, I'm going to assume that this is a legitimate business. Any google due diligence shows only positive praise for the company.

However, NORFED/Liberty Dollar claim that their currency is not subject to the inflation that greenbacks are, and that their money will maintain it value while the dollar collapses. True, paper money is decreasing in value. True, our currency could collapse. But gold and silver are inflating just as fast, if not fast. Nor is the collapse of the greenback nearly as certain as the value of “precious metals”.

In 1975, silver was worth $5.25/oz. Now it’s worth about $7.00/oz—falling from nosebleed peaks in early 80s. A 35% return on a 30-year investment is paltry. But the investment is a complete disaster when you consider in the inflation you were trying to hedge against. In 1975, $5.25 would have bought the equivalent of $20.00 in 2005. Now $7.00 will buy the equivalent of what $1.87 would’ve in 1975. You lost 65%!

Granted, the “investment” hedged somewhat against inflation. The $5.25 would be worth $1.40 if you had left it under the mattress. But there’s good reason to believe that gold and silver could become base metals overnight, faster than any currency crash. Consider the famous wager between population-bomb eco-nut Paul Ehrlich and economist Julian Simon. Values for precious metals dropped across the board, even disregarding inflation. The possibilities for more gold and silver are limitless: sea-mining, space-mining, mining at the core of the earth, and sub-atomic generation are all possibilities. These possibilities are made more possible by our exponentially growing technology.

I don’t know the future of our dollar, but I confidently say that goods and services that the dollar chases are becoming more plentiful everyday. Our future will be wealthy one, regardless of the form in which that wealth manifests itself.