Sound money is money that is not prone to sudden appreciation or depreciation in purchasing power over the long term, aided by self-correcting mechanisms inherent in a free-market system.
The foregoing definition presents several implications about how we view sound money and how we should approach money in general.
Central banks across the world manipulate money ostensibly to “grow,” or “stabilize,” or otherwise achieve their desired interventionist goals for the economy. However, large swings of the purchasing power of a money, such as that seen with the Federal Reserve Note, result from the same money manipulation that purports to solve the very problem it causes.
A negative consequence of central bank control of money is the disconnect between the money supply and the demand for money. Economic downturns strike when changes in the demand for money are not met with an automatic adjustment in its supply.
In the United States, today’s monetary system is antithetical to sound money. Money, including its supply, is controlled by unelected bureaucrats operating a government backed banking cartel with no real constraints on its power.
Despite gold being a linchpin of the United States’ monetary system for most of our nation’s history, the U.S. severed its final link to gold in 1971.
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