Money is by definition:
Money is any object that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment.
Notice, no where does money have to be made of precious metals. Money could be made of precious metals. When it is, it has the added value of possibly being melted down to it's raw form and have the value of that material, in an alternate money system.
The political power of being able to create "money", in whatever form, is where immense political power is derived. It is no coincidence that throughout time, money is almost always made by governments, banks, or religious groups. Going back to my description of Money, there are flaws in each of us making our own "money".
However, anytime money is made by fiat, meaning it is declared face value with no commodity backing its value (such as gold), humanity has a tendency to destroy it's purchasing power.
Why? Because humans by nature are lazy and corrupt. Over time apathy sets in and the worst of humanity's excesses overcome the society. Fiat currencies aren't doomed for failure because they are fiat currencies. They are doomed because over time people are ABLE to destroy the system. The system itself allows apathy and corruption to destroy the value of money.
Every civilization who uses fiat currencies has managed to destroy their currency, and with it typically the organization that creates the money collapses.
I hope to do another post about credible, viable, long lasting money systems that I believe one of eventually will become the new money system. But for now I wanted to state clearly my position that tying creating of money to precious metals transfers the "power" behind money creation to two entities. The minting organization, and the precious metal mining rights holders.
Forcing all wealth creation to digging a shiny rock out of the ground, and mandating it is required to "capture" the value of work, is a path to ruin. I do not believe (prove me wrong) that gold based money standard has NEVER produced a long lasting wealthy middle class and lead to economic prosperity. I challenge anyone reading this post to give an example.
Putting money creation into the hands of the few, fiat or precious metal money, is folly for the masses. With that said, I do believe we run the risk across the world for everyone to rush to gold and silver as the last bastion of hope for money.
This video below shows that in some countries, islamic groups are printing gold dinars and silver durhams to store wealth. While I agree this does work, it will fail to produce a wealthy society if adopted across the board.
Thanks for Ryan Swan for submitting this video.