According to economist and author Mike Maharrey, true money is not merely paper bills or digital balances. Drawing on the Austrian School of Economics, Maharrey asserts that sound money—typically gold or silver—emerges organically through free-market activity, valued for its durability, portability, divisibility, and scarcity.
The Origins of Money
Historically, commodity money arose as a solution to the inefficiencies of barter. In barter systems, trades depend on a “double coincidence of wants”—one must find a trading partner with reciprocal needs. Money eliminates this constraint by serving as a universally accepted medium of exchange.
Gold and silver rose to prominence across cultures due to their inherent properties: they do not decay, they are easy to transport and divide, and they are rare. Unlike fiat currencies, their value is not decreed but discovered through widespread, voluntary adoption.
Fiat Currency and Its Discontents
Fiat currency, by contrast, is government-issued money not backed by a physical commodity. While early paper money was redeemable in gold or silver, modern currencies such as the dollar, euro, and yen are supported only by government mandate and trust in institutions.
This shift away from a gold standard has significant implications. Since President Richard Nixon ended dollar convertibility to gold in 1971, the U.S. dollar has lost over 85% of its purchasing power. Meanwhile, the price of gold has surged from $35 per ounce to over $3,300.
In Maharrey’s view, this isn’t coincidental—it’s structural. “Inflation is not a flaw of fiat currency; it is the policy,” he argues. The design of fiat systems inherently favors currency expansion, enabling governments to finance spending without immediate consequences.
Inflation by Design
The U.S. money supply grew by more than 19% in 2020 alone, while the global supply of gold increased by only 1.4% to 2.2%. This imbalance leads to long-term erosion of purchasing power and asset inflation. Central banks aim to maintain inflation at levels that are politically tolerable, but the effects—rising costs, wealth redistribution, and distorted markets—are felt broadly.
Why Gold Endures
In contrast to fiat currencies, gold cannot be printed. Its scarcity imposes discipline, making it a natural hedge against inflation and currency debasement. Aristotle identified three traits of sound money—durability, portability, and divisibility. Maharrey adds a fourth: scarcity.
Gold meets all four criteria and serves multiple functions beyond money. In Q1 2025 alone, over 80 tons of gold were used in industrial applications ranging from electronics to aerospace. It is also heavily demanded in jewelry, accounting for nearly half of global consumption.
Its durability is legendary—The Perth Mint in Australia famously melts and recasts the same gold bar tens of thousands of times to demonstrate its resilience.
The Political Preference for Fiat
Governments favor fiat money because it expands their fiscal flexibility. With fiat systems, spending is decoupled from real assets like gold. This enables deficit financing, military spending, and expansive welfare programs without the political cost of tax increases.
Central banks, through interest rate manipulation and liquidity injection, act as enablers of this paradigm. As Maharrey puts it, “The Federal Reserve is the engine behind one of the largest governments in human history.”
While policymakers claim to fight inflation, critics argue that they actively depend on it to sustain government growth and service debt.
The Case for Gold in a Modern Portfolio
Despite criticism from high-profile investors such as Warren Buffett—who has called gold “unproductive”—its role as a store of value remains compelling. It doesn’t default, it doesn’t decay, and it has retained purchasing power across centuries and civilizations.
“Gold is not an anachronism,” Maharrey emphasizes. “It’s real money—not because governments say so, but because people across history have chosen it.”
In a financial system increasingly reliant on credit, promises, and central bank assurances, gold offers a tangible alternative. In the words of its advocates, fiat money may be smoke and mirrors—but gold is substance.
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