This is a note sent to Paul McKeefer with regard to a video he did on Ayn Rand’s support for fractional reserve banking. it is here,

Greeting. I was led to your youtube video and appreciate the effort you’ve expended in the cause of freedom. There are however, a couple of things about it that I see a little differently. Your explanation makes me think our views differ somewhat. What follows is not an attempt to criticize as much as my conclusions from reading and thinking about the money speech and trying to integrate things into a cohesive belief for myself.

I agree that money in general can be any number of things that have the ability to hold value and over the years many different things have served that purpose. That gold won out over the others is due to, yes, its scarcity, its divisibility, and its inherent difficulty to counterfeit. I believe the untarnishing luster is also a factor as worn jewelry is a statement of ownership that cries out, ‘over my dead body’  to a thief.

On the issue of intrinsic value in gold I somewhat disagree and I think you are placing too little importance on the link to effort. I believe everything derives its value from the effort required to produce a thing in the first place. To elaborate, everything starts as an unwanted and unclaimed resource locked up in nature. In some cases things are unwanted due to no one yet knowing what to do with a thing, ie. petroleum before the mid 1800s was considered a water-system pollutant and didn’t gain a value until someone discovered that it could be a source of light by way of refining into kerosene. Of course the rest is history.

Further, a geologist might see a copper mine where the vast majority of us would only see an interestingly colored rock. If we were able to have a private property politically organized system, say laissez-faire capitalism, there would be a claims-honouring system of contract, funded by the claim holder. In a free market society a thing discarded, ignored or not claimed would be available for any citizen to lay claim to. The costs in today’s system being skewed by way of royalties, taxes and a variety of other government expropriations, a free system, in essence fully competitive, would eventually drive the value of all things down to the cost of the effort required to make a thing.

The same would hold true for gold. Any field of enterprise that generates a high reward will attract participants, lots of them. Therefore the actual value or purchasing power of our money would still fluctuate as new production processes would lower the cost of extraction and add quantity to a hard money supply. This is simply a fact of life, that there can be no guarantee that some thing’s valuations will be retained over time as things change, valuation stems from the current desire of others to want what you have.

That said, money is a unique thing in that money is not a prime pursuit. We all work for what money can do, be to acquire basics like food and shelter or ski trips or the thrill of overcoming an obstacle such as going into space or building a bridge. As Ayn Rand once said, money is frozen effort. And earning and saving large amounts allow one to do large things.

That brings me to the right to participate in the market system. One’s entitlement to a thing is based on having produced it, of having expended one’s own effort in acquiring or adding value to a thing. Exchanging the thing for gold is your desire to forgo the immediate gratification that production entitles you to. The value in the IOU is the effort you put out but declined to cash in at the time.

When the IOUs are printed without restriction, without any production to back them up, they are counterfeit entitlements. The cashing in of these false entitlements to purchase goods and services, falsely drive up the price for all the legitimate holders of the justified IOUs. It is as you say, a form of theft, unidentified and even unnoticed by most people. I applaud your determination to break through the ignorance.

The violation of property rights is the act that is taking place and failure to link money with property is what makes the situation possible.

Wishing you well, garret seinen