In recent years, there has been a growing movement among economists and financial experts advocating for a return to asset-backed money. This push is driven by concerns over the instability and inflationary tendencies of fiat currencies, which are not tied to any physical asset. Advocates argue that an asset-backed monetary system can provide greater economic stability and reduce the risks associated with fiat money.
Advocates for Asset-Backed Currencies
Judy Shelton
- Background: Judy Shelton is an economist known for her advocacy of sound money and asset-backed currencies.
- Perspective: Shelton argues that returning to a gold standard or similar asset-backed system would provide more monetary stability, curb inflation, and reduce government debt. In her book Money Meltdown: Restoring Order to the Global Currency System, she outlines the potential benefits of such a system.
- Quote: “A sound money system backed by tangible assets can provide a stable foundation for economic growth and prevent the kind of speculative excesses that have led to financial crises.”
Ron Paul
- Background: Former U.S. Congressman Ron Paul is a vocal critic of the Federal Reserve and an advocate for returning to a gold standard.
- Perspective: Paul believes that fiat money leads to irresponsible monetary policies and inflation. He argues that an asset-backed monetary system, such as one backed by gold, would limit government spending and provide a stable store of value.
- Quote: “The case for gold is the case for a stable and sound economy. Without a gold standard, there is no way to protect savings from confiscation through inflation.”
Lewis E. Lehrman
- Background: Lehrman is a monetary historian and investment banker who has written extensively on the gold standard.
- Perspective: Lehrman advocates for a return to a gold standard, asserting that it would constrain government spending, control inflation, and promote long-term economic stability.
- Quote: “A gold standard would provide a self-regulating and balanced monetary system, eliminating the risks associated with fiat currencies.”
Steve Forbes
- Background: Steve Forbes is the editor-in-chief of Forbes magazine and a proponent of free-market economics.
- Perspective: Forbes argues that fiat currencies are inherently unstable and that a return to a gold standard would stabilize economies and currencies.
- Quote: “A gold standard is the best way to ensure that governments do not overspend and devalue their currencies. It would provide a stable foundation for economic growth.”
Arguments for Asset-Backed Currencies
1. Stability and Trust
- Argument: Asset-backed currencies are seen as more stable because they are tied to tangible assets. This linkage reduces the risk of inflation and currency devaluation, as the money supply cannot be increased arbitrarily.
- Example: The stability provided by gold-backed currencies in the past is often cited as evidence of their effectiveness in maintaining purchasing power over time.
2. Inflation Control
- Argument: By tying currency to a fixed asset, governments and central banks are limited in their ability to print money excessively, helping control inflation.
- Example: During the Bretton Woods era, inflation rates were generally lower and more stable compared to the post-gold standard era.
3. Discipline in Government Spending
- Argument: Asset-backed currencies impose fiscal discipline on governments, as they cannot easily finance deficits through monetary expansion.
- Example: Advocates argue that this discipline could prevent the accumulation of large national debts and promote more responsible fiscal policies.
4. Global Economic Stability
- Argument: A universally accepted asset-backed currency could reduce exchange rate volatility and promote international trade and investment.
- Example: The predictability and stability of gold-backed currencies in the past facilitated smoother international economic transactions.
Economic Stability and Asset-Backed Currencies
Since the abandonment of the gold standard, fiat currencies have been marked by volatility and inflation. The transition to fiat money, particularly after the Nixon Shock in 1971, led to economic challenges such as higher inflation and financial instability. President Nixon’s decision to decouple the U.S. dollar from gold allowed for greater monetary policy flexibility but also introduced significant risks.
Quote: “We are all Keynesians now,” Nixon famously declared, signaling a shift towards policies that favored fiat money over the gold standard.
The immediate aftermath saw economic turmoil, including the oil shocks of the 1970s and the stagflation of the decade—high inflation combined with stagnant economic growth. Many, like Paul Volcker, who served as Chairman of the Federal Reserve, had to implement high-interest rates to curb rampant inflation, highlighting the difficulties of managing fiat-based economies.
Seeking Stability: The Need for Asset-Backed Currencies
Given the volatility and inflation experienced under fiat currency systems, many economists argue for a return to asset-backed money to provide stability and confidence for sustainable economic growth. Governments are continuously searching for reliable reserve assets to stabilize their monetary systems. The growing interest in cryptocurrencies like Bitcoin, which some consider “digital gold,” reflects the broader search for stable financial systems.
- Source: A report by the World Gold Council highlights that gold continues to serve as a critical reserve asset for central banks globally, noting that “Gold plays an important role as a diversifying asset in the reserves of central banks, providing stability and confidence.”
How Central Ura Addresses This Problem
Central Ura offers a modern solution to the challenges posed by the fiat system. Operating on a credit-to-credit model and backed by real assets, Central Ura merges the stability of asset-backed currencies with the flexibility required for contemporary economic transactions.
Asset-Backed Stability
Central Ura’s value is secured by tangible assets, primarily U.S. dollar-denominated receivables, ensuring stability and reducing the risk of devaluation. This asset-backed nature provides a reliable store of value, protecting against the inflationary pressures often seen in fiat currencies.
Credit-to-Credit Nature
Unlike fiat currencies that operate on a debt-to-credit basis, Central Ura functions on a credit-to-credit basis. This ensures that each unit of currency is backed by existing assets, preventing uncontrolled expansion of the money supply and maintaining value over time.
Controlled Issuance
Central Ura’s issuance is meticulously regulated, with each unit backed by tangible assets. This tight control prevents inflation and ensures a stable and reliable medium of exchange.
Use as Reserve and Complementary Money
Central Ura serves as both a reserve money for governments and a complementary money for communities and businesses. As reserve money, it provides a stable monetary base that enhances economic stability and investor confidence. As complementary money, it supports local economies by facilitating trade and investment.
Meeting the Standards of Money
Central Ura meets all the critical criteria of robust money:
- Acceptability: Widely accepted within the Central Ura Monetary System and gaining global recognition.
- Divisibility: Easily divisible for various transaction sizes.
- Durability: Backed by tangible assets, ensuring long-term value.
- Portability: Transferable in both digital and physical forms.
- Uniformity: Each unit holds equal value, maintaining interchangeability.
- Limited Supply: Issuance is tightly controlled and backed by real assets, preventing inflation.
Conclusion
The debate over fiat vs. asset-backed currencies continues to shape economic thought and policy worldwide. Advocates like Judy Shelton, Ron Paul, and Steve Forbes argue that asset-backed currencies offer greater stability, inflation control, and fiscal discipline. The post-gold standard era has demonstrated the flexibility and risks of fiat money, leading many to reconsider the merits of linking currency to tangible assets.
Central Ura provides a compelling solution to these challenges. By combining the stability of asset-backed currencies with the flexibility needed in modern economies, Central Ura offers a robust and reliable monetary system. Its credit-to-credit nature, controlled issuance, and dual role as reserve and complementary money make it a forward-thinking choice for promoting global economic stability and sustainable growth.
References:
- Shelton, Judy. Money Meltdown: Restoring Order to the Global Currency System. Free Press, 1994.
- Paul, Ron. End the Fed. Grand Central Publishing, 2009.
- Lehrman, Lewis E. The True Gold Standard. The Lehrman Institute, 2011.
- Forbes, Steve. Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It. McGraw-Hill Education, 2014.
- World Gold Council. Gold Demand Trends. World Gold Council.
- Federal Reserve. “What is Money?” Federal Reserve Education.
- European Central Bank. “The Role of Central Banks.” ECB.
- Investopedia. “How Cryptocurrencies Work.” Investopedia.