Wealthy-ness

This post was written in response to Unambiguous Wealth, and quotes were taken from there. The intent is to elicit some conversation tangential to that post.

“Remember from Moneyness that the people's money throughout history has been credit denominated in something.”

Real Bills theory shows that there were two types of credit historically. One was credit based on consumption and the production cycle for consumption, for which Real Bills were issued. The other was credit granted for things not clear-able in a season. Things like houses whose credit was granted only from the pool of savings.

Conceptually we could still divide credit this way, even though the method of funding for the types of credit has become intermingled due to governmental borrowing requirements.

We do not consider credit of the first kind to be wealth, it is rather called consumables. (Of course a business of consumables could be used to generate wealth.)

Wealth could be said to be unconsumables. Things we produce that are not consumed forthwith.

An item's wealthy-ness is determined by it's durability and rarity and state of possession, or stated otherwise, the ability to preserve value over time.

Things like the Mona Lisa do well, a cheap copy doesn't. Gold is eternal and unconsumable and as the other type of wealth it's relative abundance makes it the ideal store.

“But today we use that credit, that debt or liability asset as our savings, not just for trade. “

The fact that the first type of credit is cleared by consumables is what will give relative stability to a currency under FreeGold. The stock of the flow of goods remains relatively stable.

Being that wealth will no longer be stored in inferior mediums, except at the margin, items that are currently used as stores of wealth in addition to their primary utility will lose the wealth storing function. A good example here is a house, which will thereafter only be priced according to it's utility and not have an additional component of wealth storage.

(This is also true of silver which is currently priced as perhaps $10 utility and $20 store of wealth)

All of this extra unnatural storage in the current system will flow from these things into gold.

The cash in that system ( base money) will be the float required to clear trade on credit issued on consumption, which will the include houses.

TF

Ps. For a quick intro on Real Bills for those unfamiliar with the topic and interested you can try 1 , 2 , 3 , 4. My intended audience should just take note that this was written before I came across the concept of FreeGold.