The Folly of Digital Money, the Lasting Value of Gold

Who, today, doesn’t use a “symbolic” form of money, a credit or ATM card, several times a week (not to mention a day)? Those digital transactions, though convenient, don’t actually represent the transfer of physical cash from one hand to another. Instead, and in reality, digits are the only things that get transferred.

And not from one hand to another, but from one impersonal computer to another.

Consider this cautionary tale. A bank customer — let’s call him Dave — had recently accumulated 175,000 “bonus points” due to credit card purchases. These points qualified Dave to buy, or in bank terms exchange, points for a variety of valuable goods. 

At least until a controversy involving actual money surfaced. Dave had wanted a top-of-the line gold watch valued at 200,000 points. He only needed 25,000 more points — via more credit card purchases that he promptly made — to qualify for it…and that’s when the glitch surfaced.

A deposit error involving the computer input of a single zero left Dave short of his watch. Fortunately Dave was able to produce his actual paper deposit receipt to expose the bank’s digital error. Anxious now to keep its customer happy, the bank quickly “rewarded” him with the missing 25,000 “reward points.”

Apparently all it had to do to make things right was instruct someone to make a few keystrokes and the additional 25,000 points magically appeared on Dave’s very next statement. One second he was short of the 25.000 digits he had rightfully earned, the next he had gotten them all back.

All due to a few keystrokes.

Not long later, the bank “devalued” its point system, 10-to-1. What used to take 200,000 points now took just 20,000. Again, this seemingly complicated devaluation took place through the magic of a few keystrokes.

The point here? Instead of old-fashioned gold-backed dollars or gold coins deposited in a bank, person to person, our new digital money is added, subtracted and transferred by someone tapping keys on a keyboard. And by a digital network doing its thing. If a computer said you had $2.00 or $200,000 in your account, depending on which keystrokes were made, that’s what you had. After all, the bank’s computer said it was so, right?

You see, digits, in themselves, have no inherent value. They’re something like electronic fairy dust. It takes nothing but milliseconds to add or subtract them. Sadly, the same is mostly true of dollars: Consider the trillions of them have been produced by Washington in just the last few years. Sure cash may be a little less convenient to produce than digits.

But not by much.

Gold, on the other hand, is not reproducible. It’s a solid metal, has a nice hefty weight to it and won’t pass through a router no matter what a computer nerd does. When you own an ounce of gold, you get to own it until you put it into someone else’s hand.  No one can add, subtract or copy your gold by taping on a keyboard. No one has ever rendered it worthless. And, since gold is rare and can’t be printed in anyone’s press, there’s no danger of politicians diluting the precious metal as there is with the U.S. dollar.

Gold has been mankind’s physical money for thousands of years, outlasting history’s many flimsy paper currencies...and is certain to outlast today’s nerdy digital money, too.