I blogged this on Mises.org:

"Was Rothbard an Auromaniac?"

One of the comments pointed to this video:

bullnotbull.blogspot.com/2007/03/jones-on-money-gold-and-silver.html

Although "Jones" fails to define money and therefore fails to explain why gold and silver coins are "real" money while fiat paper currency is not real money (I'll come back to this point), he mentioned a great piece of silver trivia I'd never heard before:

In 1964, 3 silver dimes could buy you a gallon of gas (about 27¢/gallon); At the current rate of silver, the metal value of 3 silver dimes would be about $3, just enough for a gallon of gas.

I checked the math. Silver was $1.29/ounce in 1964, according to Kitco.com. Today's spot price is $12.93, again, according to Kitco. According to 1960sFlashback.com, gasoline was 30¢/gallon in 1964. And according to MSN, a gallon of gas in Charlottesville today ranges from $2.27 to $2.59/gallon.

So if anything, gasoline has gotten cheaper. At least by the silver standard. By the gold standard ($35.10/ounce in 1964 versus $650/ounce today), we should expect a gallon of gasoline to cost $5.55 in present dollars, so by gold-standard prices, gasoline prices have fallen significantly.

But the official Consumer Price Index has it that inflation between 1964 and last year (this calculator only goes up to 2006) was only 636%, not the 1,000% of silver or the 1,850% of gold: "What cost $.30 in 1964 would cost $1.91 in 2006."

CPI is, of course, how the government tracks official price inflation, so according to the government, gasoline prices have indeed gone up since 1964 — by about 30%.

As to the assertion that Federal Reserve Notes aren't "real money" while gold and silver coins are, let me just quote Gary North:

I realize that old-time gold bugs go around saying "gold is the only true money" and similar slogans. These slogans reflect a lack of understanding of either gold or money. They are comforting slogans, no doubt, for someone who bought gold coins at twice the price that they command today, and held them for a quarter of a century at no interest while all other prices doubled or tripled. If he had instead made down payments on rental houses, he would be a whole lot richer. But the fact is, gold is not only not the only true money, it is not money at all. When you can walk into Wal-Mart and buy whatever you want with a gold coin or gold-denominated debit card, then gold will be money. Not until then.

To tell a gold bug this is to strike at his core beliefs. But his core beliefs are based on a lack of understanding of economics.

Money is the most marketable commodity. Gold is not the most marketable commodity. Given the lack of retail outlets where you can buy and sell gold, it is not even remotely money. Unless you are a central banker, gold is not money for you.

"The Re-Monetization of Gold", emphasis added

It's easy to argue that gold and silver would be better money, that Federal Reserve Notes are lousy money (although significantly better than some other governments' fiat currencies!), but this claim about the "reality" of government money — this insistence that paper money isn't "real" — is just laziness, both rhetorical and intellectual, and I dare say it gives ammunition to those who want to dismiss us as money cranks.

See also:

• "fiat metal"
• "pop quiz"
• "a buck is a buck is a buck"
• "The Fiat Dollars of Thurston Howell, III"