From James Grant: Money is information, says Gilder. It’s a measuring stick, not a magic wand.” Wealth is knowledge and growth is learning. Prices should always trend down over the long-term in a capitalist economy to reflect continuous improvements in the technique of production. ….Researchers in Bitcoin and other digital currencies have shown that the real source of the value of any money is its authenticity and reliability as a measuring stick of economic activity. A measuring stick cannot be part of what it measures.
For more than a century, the U.S. Federal Reserve has manipulated the money supply, ostensibly with the goal of steering the economy away from extreme booms and busts. In practice, however, central banks exacerbate the very problems they purport to fix, spurring the misallocation of capital in the wrong sectors of the economy, inflating speculative bubbles, and doubling down on their mistaken strategy after the inevitable collapse and ongoing stagnation. At a recent event hosted by Atlas Network partner the American Principles Project (APP), renowned author George Gilder presented a strong case for replacing Fed meddling with a 21st century gold standard.“Government efforts to control money destroy wealth by inhibiting learning,” Gilder explained, noting that money serves as a channel that carries information about supply and demand to every market participant in every corner of the economy. Gilder’s new book, The 21st Century Case for Gold: A New Information Theory of Money, expands on that theme.“Manipulating the value of money, whether by printing currency or artificially suppressing interest rates, does not create wealth,” Gilder wrote. “Instead, it is the equivalent of manipulating the data of a scientific experiment after it takes place, distorting the information economic actors need to create new wealth. Understanding the new economic paradigm of information theory leads us to recognize that inflation is only one of many bad economic results of monetary policy that distorts the value of money.”
Atlas Advisory Council member and APP Chairman Sean Fieler introduced Gilder’s remarks and helped to frame the ensuing discussion, which also included financial publishers Steve Forbes and Jim Grant. The event highlighted how Gilder’s fresh take on the currency debate could help make the need for sound money politically salient in the coming year.