So that would make it an IOU between you and the bank and no it is not for a hunk of gold it is backed by all the collateral of the bank. More importantly, the person accepting it is not interested in the gold, they are interested in buying future goods and services. It is an accounting device that boils down to a generalized IOU that is its only value to most people.

Yup, We went through 9 days off the grid after Irene blew through. Forget going to the stores, there was no fuel station to even get gas if the roads were clear enough to drive on. We had a very full freezer and generator plus 25 gallons on stand by and had a blast feeding half the neighbors who had nothing. Nice and warm with the coal stove and gas stove top to cook on. Those dependent on electricity from the lines were screwed. After the many dinners we sat and watched the TV via the satellite just like nothing ever happened.

A banknote is a contract, a hunk of gold is not. That's the difference. I'm done.

It is no different than a banknote.

Glad you liked it, sad truth is most city folks wont have a clue how to take care of their families if the grocery stores are closed more than 3 days, or the streets arent safe to be on. I was in Ft. Lauderdale when cat 5 hurricane Andrew came through in 93, lots of folks were just waiting for someone to help them cause they did`nt know how to help themselves. Hurricanes and bad guys are very much alike, both will test your survival skills.

I refer you to the second article on definitions. Rising prices with a fractional reserve fiat currency based on worthless paper is not inflation, it is devaluation of the currency. By using the incorrect word it causes people to look in the wrong place for the problem. The sheeple then suspect (because they are directed to do so by the fiat bankers) that the fault of rising prices is because of the corrupt businesses and the failing of the free market system, not their corrupt system of currency, where people can charge whatever they want. 50 Years ago I got the idea to compare prices in costs of ounces of gold. My dad could buy a house for $10,000 dollars (standard 1200 square foot home) and he made $4,000 a year from the gas station he owned. Gold was $35.03 an ounce. The house cost 285 ounces of gold, similar home in similar small town today is $250,000 or 215 ounces of gold. The price has gone down! Similar comparisons were done with durable goods, not only has the price gone down (in ounces of gold) the products are better than what could have been purchased in 1955. My dad earned a little more than 114 ounces of gold per year. If I were to earn the same amount and have the same purchasing power I would have to earn $132,500 per year. Before being 'retired' by the recession I was earning $85,000 a year, which when compared to my dad's income of $4,000 sounds like I was making a lot more, when compared to actual costs and amount of buying power earned (73 ounces of gold) I made far less. Any money (as opposed to fiat currency) needs to be based on some type of commodity that is not destroyed or consumed to be the most effective. Salt was used by the Roman armies (salis - salary) as money. It was a recognized needed commodity no matter where they were. Once used though its value diminished greatly. Oil is a commodity, once burned it would be difficult to trade. Gold and silver became popular for money because of their qualities. Keeping gold or silver does not make you wealthy, it merely stores the value of your labor to be spent later. Fiat currency can be devalued while you hold it, bury it, keep it in a vault or be declared worthless by the issuer. I see this article posted occasionally here and it distresses me because its assumptions are completely false.
My late friend noted that it seems that we understand the value of something in that the cost of things does not change much when compared to how much gold would be needed for the purchase, but we fail completely to understand how fiat currency is manipulated and used to steal our labor and efforts away.

Certainly agree on the value of firearms and ammunition in an ultimate emergency. I'd add knowledge to the things that are most valuable.

It proves money/gold is not wealth.

What, exactly, does your deserted island example prove? As far as I can see, it does not prove that gold is an IOU – an actual claim on someone else’s goods or labor. It does not prove that gold is merely a medium of exchange. It does not prove that gold has no value other than its use as money. It does not even prove that gold is worthless to a person on a deserted island – for example, it may have aesthetic value to a lone individual, even if it has no utility as an immediate survival need. All the deserted island example appears to show is that gold (or anything else) cannot be exchanged for other goods if there is no one to exchange it with.

Ditto

Then it is worthless, because the owner of the gold coin has no interest in it. I already proved that by the deserted island example.

It's not a claim on future goods and services, it's an item of value that under normal circumstances can be exchanged for future goods and services. A claim requires a person or legal entity that is required to fulfill that claim. No one is legally or morally obliged to honor your "claim" for their merchandise if they don't wish to exchange it for your gold coins. A gold coin is not an IOU, it is a tangible entity with an owner.

Nicely put. The market is indeed the place where value is determined.

I agree with you, "worth" is different than "value".
If I have no one to trade with, you don't need a means of exchange.
Currency doesn't exist for my sole use. I think the deserted island analogy isn't valid.

Nice write up in your attached link! I would not have been in the freaking basement and anyone kicking my door in is in serious trouble. Cops have guns not to protect us but to protect themselves! Better than half the cops running around on our streets belong to the gang that can't shoot straight so just duck for cover.

Which means that it is a claim on future goods and services, an IOU.

True, as long as there is also confidence (speculation, really) in the issuer to redeem the note at face value. The difference between a note and a physical item is the presence or absence of that confidence versus an actual utility - thus the controversy between fiat and non-fiat currency.

Thanks for the correction - sometimes my fingers, the keyboard, and my brain are in different places :-(

I would caution against making an overly broad statement and assigning your values to the values of others. How one chooses to apply one's time is wholly an act of faith/speculation in how valuable such an act will be - not only in the future to someone else but also to that person individually.

If the person who is alone on an island spends twenty years mining gold and stockpiling it, it is only wasted effort in the mind of someone else if he could not eventually trade that wealth with someone else. What you overlook is that there are some simple joys that come merely in the expenditure of effort without necessarily anyone else exchanging value for such. I take the example of one who enjoys gardening and caring for plants. It is unquestionably less efficient than the production of a professional farmer. Art is another such example. I would venture to say that nearly every human being has a hobby or diversion of some sort out of which they derive little or no pecuniary satisfaction yet which they would not give up because of the personal satisfaction they derive from such!

When we have an exchange, we come to an agreement about the value equivalency of some past effort. We may weight that value according to the sunk costs involved and assign some moderating factor as to the expediency of acquisition (or retention). We see such in the after-holiday sales of candy at the local supermarkets: they have gauged the stocking costs of maintaining the inventory past a given day to devalue the actual production cost. We also see consumers (often called "early adopters") willing to pay huge premiums for something that is "new" or "novel" regardless of its true value - for example in clothing (especially shoes) but also in technology with smartphones. Are these people universally foolish for paying premiums or foregoing revenue? I think the issue is nowhere as clear-cut as you contend.

An IOU can become a medium of exchange if someone will accept it in exchange for a good or service. However, what distinguishes an IOU is how it is brought forth into existence: it is a debt instrument in which one party agrees to repay in the future for something he has presently received, on terms agreeable to his creditor. It is the contractual debt formation, not how the debt is subsequently used, that makes an IOU an IOU. There is no contractual obligation on the part of anyone to the holder of unencumbered gold, silver, or any other commodity, thus they cannot be part of an IOU debt-contract, although many people may stand willing to accept them in payment for their goods and services.

There are two SHTF worlds, self sustained and dependent on utilities for the basics - unless you have the proper equipment, drinking out of streams, etc. is a bad plan. Live in town - decide what to carry and how far you must carry it to a defendable place. Live in the country with a well and alternative power, then youre already where you need to be with what you need to stay there. The folks in the former situation have big problems - remember the helicopter footage from the L.A. riots after "cant we all just get along"? This piece I wrote a few years ago touched on the issue - http://4thestatemedia.com/?p=269

The wording on Federal Reserve Notes was changed in 1963 under President Kennedy, not under Nixon.

The entire concept of money, IOUs or otherwise, would be meaningless for a single individual on an otherwise deserted island. The concept "medium of exchange" presupposes the existence of other people to exchange goods and services with. Your article dealt with the nature and function of money within a social context, not on a deserted island, and that is what I and others are addressing in our responses.

Not quite. If you had a ton of gold on a deserted island all that "proof of worth" is worthless. The same would not be true of a boat or a fishing net, for instance.

True, but you do not want gold. If you had a ton of gold on a deserted island all that "proof of worth" is worthless. The same would not be true of a boat or a fishing net, for instance.