Free Market Money

At Samizdata in a thread about the Lakota Bank, commenter llamas says the following, about gold and silver:

For the umpteenth time – gold and silver have no intrinsic value any greater than any other commodity. They are not somehow magically ordained to be ‘real’ money…they are just as easy to manipulate, just as easy to devalue, as any other medium of exchange. Just look at the graphs.(Graphs: 1, 2)

Given the astronomical money supply expansion that has taken place over, e.g., the past 30 years, isn’t it possible (probable!) that the money prices to which he refers are indicative of inflation, and that a not insignificant portion of the rise in prices is reflective of the greater supply of money? I’d reference the CPI from 1800-2007, paying particular attention to the last 100 years or so. Note the big spike when the Fed was created, trending upwards again after WWII and Bretton Woods, and blasting to the motherscratching Moon after Nixon severed any pretense to a gold-peg in 1971 and flooded the world with funny money.

Another commenter, Mastiff says the following about Mises:

Money, at its root, is an obligation for someone else to provide you goods or services in the future. How you keep track of the debt and to what standard you peg it determines its present value on the secondary market (i.e. all of modern currency transactions), but ultimately, money is obligation between persons.

I shudder to think about how someone could’ve so thoroughly misread Mises. I suggest Mastiff start reading The Theory of Money & Credit (PDF) again, starting with page 1.

Money is, at it’s root, a universal or near-universal medium of exchange. I do not feel the need to re-state the Regression Theorem, but suffice it to say that at no point during the historical regression of money as a general medium of exchange, does it ever represent a debt. It is generally given in exchange for goods or services already rendered. In the past. The “money” to which Mastiff refers, is fiat credit money, and fiat money is a pure debt obligation. Ironically, the only type of “money” most of us have ever known.

In a free market, there is no “standard” to which a monetary unit is pegged. One unit of money is the same as any other unit of money. There may be, in the case of money substitutes like banknotes, a standard or several floating standard measures of value, which would be pre-defined by obligations in the form of bailment agreements.

Gold is free market money. It doesn’t have to be, it’s not a metaphysical requirement, and you don’t have to like it. But that doesn’t alter the facts of reality.