Fools' Gold (Arguements Against Gold Standard and Bankers)

Independent Media Center ^ | 17 February 2002 | by Robert Carroll

[Vigilant1]

d:
"You have said FRNs are not fraudulent but over-issuance is…I agree. You said:"

d, quoting V1:
"Please cut & paste from any of my posts where I said that "FRNs are not fraudulent". I don't believe I've ever said any such thing."

d:
"In post 152 you state (and I concur):"

d, quoting V1:
"A suspension of redemption is…a criminal fraud, as the notes claim right on them that they all can be redeemed at any time, which is a lie under such circumstances. At least FRNs make no such fraudulent claim."

d:
"Where shall I deliver the crow you ordered for dinner?"

I said only that FRNs do not make the fraudulent claim that they are fully redeemable in specie. You falsely morphed me noting they don't make that sole claim into me saying "FRNs are not fraudulent" - period. So are you being disingenuous here, or merely dense? Either way, it's you that's dining on crow, bud. Please try to stick to what I actually say, instead of making stuff up for me, m'kay ???

[Deuce]

So you think FRNs are fraudulent? In what regard?

[Vigilant1]

d:
"Before I address your post to me, I must address your exchange with Inquest below."

d, quoting i:
"The purpose of [The Coinage Act of 1792] was to define the value of the dollar, not "fix" the price of anything."

V1, responding to i:
"This is mere semnatics. Whether you call it valuation of the dollar or price fixing of gold, either way the price of a commodity, namely gold, is fixed by government edict in relaton to the dollar."

d:
"This is central to the differences in our povs."

False. The central difference between us is your putting scarcity integrity above all other factors, and my thinking that is wrong. Our other big point of contention is whether having the phoney 'gold standard' made our economy more or less vunerable. The valuation vs. price fixing point is a mere ancillary semantics debate, as I said, and unimportant to the main points of the debate here.
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d:
"The dollar is a standard of value like feet or hours."

Minor correction: it was a standard of value before 1932.
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d:
"Therefore, it must be defined (certainly you will acknowledge that the Founding Fathers felt that way even if you don’t). The Act defined what a dollar is so that it could be used as a unit of measurement. A fiat standard has no unit of measurement."

You are belaboring the obvious. I know the difference between a floating and 'fixed' currency.
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d:
"A fiat system with scarcity integrity, however, could still be used and could be consistent with the principles of democracy and free enterprise. This requires either rigidly fixing the number of units or by growing the number of units by a pre-specified percentage in a pre-specified way. The current system has zero scarcity integrity. A handful of un-elected people acting in secret, together with the banking cartel, has been give the very undemocratic un free enterprise special privilege of changing the amount of this precious construct by whim."

I don't see any obvious objections to this system. It has the advantage of being realistically achievable, likely without massive disruption of the economy. However, the need to do this is based on your insistence that we must have scarcity integrity, a case you have thus far failed to make. You seem to take the idea of scarcity integrity being necessary as a given, and expecting us to do the same. Sorry, but it's not a given.
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d:
"On a minor note, in another post to Inquest you state:

V1, quoted by d:
".... you seemed to be proposing that if money leaves the country and is held by foreigners, the money supply in the US shrinks and dollars should change in value. 'Taint so." d:
"Actually, ‘Tis so. If it is not recorded on the books of a domestic commercial bank (even if it is on the books of a foreign subsidiary of a US bank) it IS NOT counted in the money supply. Now if all you meant is that it should be counted, then you are agreeing with what Inquest is saying."

First Inquest wasn't stating anything on this issue, he was asking a question, namely why the value of the dollar doesn't change as the trade deficit shrinks the domestic money supply. Second my "'taint so" referred to this part of my sentence:

V1:
".... and dollars should change in value."

From you statement here, I infer that you wrongly thought my "'taint so" applied to this part of my statement:

V1:
".... if money leaves the country and is held by foreigners, the money supply in the US shrinks...."

Sorry if I failed to make myself clear.

[Vigilant1]

V1:
"Since massive deflation occured cyclically while we were on the 'gold standard', and hasn't occured at all since we got off it, I'd say history's lesson is undeniable."

i:
"But that's not answering my question. I asked you how (i.e. by what mechanism) fiat money has been able to eliminate these deflationary cycles. When you see the answer to that question, you just might see a certain amount of "deniability" in history's lesson after all."

I thought I made myself clear, but I guess not. I'll try again.

Tying the value of the currency to the value of a commodity (gold or anything else) makes the currency vunerable to massive deflation, a downward deflation spiral into depression. A large speculation bubble bursts, and gold & the dollar (whose values are tied together) start to drop in value, and prices are forced down to get people to buy goods. Wages must follow suit and drop as well, as businesses are getting less dollars for the same goods & services. This puts even more downward pressure on gold and the dollar, the cycle repeating and worsening until prices (commodities, services, properties and securities), wages, gold and the dollar begin seriously collapsing in an accelerating downward spiral. This is how our historic depressions occured. Removing that relationship by floating the currency removes that currency vunerability, breaking this downward deflation spiral that previously occured in so many of our economic disasters. That's why we've had many of the same trigger factors as previous depressions, speculation bubbles bursting, loan defaults, big bankruptcies, stock price crashes, etc., yet we've had no currency collapse, massive deflation or depression. I can't put it any plainer than that.
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V1:
"Your 'speed of light' analogy in inapplicable, as the speed of light is a constant, and gold is a commodity who's value fluctuates with supply and demand."

i:
"And the value of the dollar, under the Act, was to fluctuate right along with it. You seemed to be implying that the Act was somehow mandating that this fixed quantity called a "dollar" was to be used to tie down the value of gold regardless of what the market tries to do (which the essential element of a "price-fixing scheme"), and I was simply pointing out that you were putting the cart before the horse. It's no more a price-fixing scheme than saying that a dollar is worth four quarters is a price-fixing scheme."

That's fine, I don't want to get into another meaningless semantics debate. Call it what you please, it still has exactly the same effect as a price-fixing scheme.
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V1:
"You didn't check out the links on electronic currency I posted, did you? If you had, you would know that the statement you made above is false. More than half of the US currency in circulation today is purely electronic, and has no physical existence."

i:
"I didn't check all the links, no. But that's fine. So what does that raise the total money supply to, 1.3 tril? 370 billion (or more) leaving the country every year is still a lot in comparison. (and that's why I chose my words the way I did: that the money we're sending out is "at least comparable" to the money that's in circulation here, "in whatever form". That statement stil holds true)"

And as I pointed out, the value of the dollar doesn't change if the money is in foreign, as opposed to US hands; why would it?
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V1:
"However, we would be hemmoraging money regardless of whether we had a specie-backed or fiat currency. That's what happened during the Revolutionary War, we hemmorraged just about every bit of gold we had out of the country to pay for the war."

i:
"Umm, yeah, it called an EMERGENCY?! When you need supplies, you need supplies. In today's more normal times, if we had a stable money supply, and we were running the trade deficit we're running now, that would mean that somebody, somewhere, on this side of the ocean is losing money without getting any new cash flow to replace it. How long do you suppose he'd be willing to keep that up, unless his supply was being replenished by a particular source for whom, shall we say, money is no object?"

If I correctly read what you're saying here, the Fed is adding $hundreds of billions$ every year to replace trade deficit losses. If your assumption is true, then why isn't that reflected in money supply stats? And why isn't there massive inflation ??? Your assumption would mean the Fed would have to lie and somehow magically fool everyone as to what the real money supply is. I can certainly buy the idea of the Fed lying, but not a successful coverup of such a huge amount of currency being pumped into circulation every year. That couldn't be covered up.
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V1:
"One more point. I gave your response a little more thought, and you seemed to be proposing that if money leaves the country and is held by foreigners, the money supply in the US shrinks and dollars should change in value. 'Taint so. The amount in global circulation determines the money supply. Who holds it at any given moment is largely irrelevant to the value of the dollar (as long as they don't take a very large amount of it out of circulation for an extended period of time)."

i:
"You'll need to explain yourself a little more clearly here. Whether a dollar is being spent by Chinese among themselves, or whether it's being held in a vault by those same Chinese, it still has zero effect on the U.S. economy, unless it makes its way back into the U.S. economy. If it doesn't, that dollar is completely invisible to the U.S. economy, regardless of what's being done to it. The conclusion I would draw is that your parenthetical "as long as" is in fact, largely the case. Otherwise we would be seeing those dollars coming home. Dollars made from selling us stuff are going to be useless to these people unless they use them to buy something back from us."

No, the currency markets that determine the strength of the dollar are global markets, and bank holding of US dollars worldwide are factored into the total worldwide money supply. Do you seriously think that currency traders don't know or don't car about any US dollars other than those in circulation in America ??? National economies don't work in isolation, they cannot and have not for decades, if not centuries.

[Vigilant1]

d:
"So you think FRNs are fraudulent? In what regard?

You've got to stop putting words in my mouth; it's unsanitary. What I said is that I made no statement at all on whether FRNs were or weren't generally fraudulent. I'm not even sure what that would mean.

Are FRNs a 'fraudulent currency'? They aren't counterfeit in the conventional sense of the world. Much the opposite, we spend a lot of resources to prevent that. They are backed by the full faith and credit of the US government. While you may laugh at that statement, you can't deny that our fedgov goes to great lengths to support public confidence in the US dollar. People will certainly trade goods and services for it. So I guess you can say it's a legitimate currency in that sense. You could also claim it is a fraudulent currency in that it is a fiat currency. In that aspect, I can't totally disagree. So is there a clear, definitive answer here to the question "is our currency fraudulent?" Not that I can see.

[Deuce]

Me:

The dollar is a standard of value like feet or hours.

You:

Minor correction: it was a standard of value before 1932.

Did Congress overturned the Coinage Act of 1792 in 1932?

[Vigilant1]

d:
"Your summary of panics and depressions may otherwise be accurate, but from my own knowledge I know that both the Panic of 1857 and the Panic of 1907 were severe but short."

I said in my list that they lasted two years. You seem to be merely agreeing with what I said. So what's your point here ???
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d:
"Furthermore, the cause of every single money panic of the 19th century was the unbridled creation of money for speculative purposes."

That is a simplistic and unsupported claim. The money supply was one causal factor, in some cases a major factor, but never the sole factor.

The Panic of 1857 was triggered by the loss of the steamer Central America, and the several $million$ gold shipment it was carrying to New York banks from the San Francisco mint. At the same time, the fact that the entire capital reserve of the New York office of the Ohio Life Insurance and Trust Company had been embezzled became public knowlege, causing the bankruptcy of that huge firm. Land prices had already been inflated by a land boom, and that bubble was in the process of bursting as land prices plummeted. These events in combination destroyed consumer confidence in the economy, leading to a run on banks and a collapse in stock prices. Since the gold shipment for the banks never arrived, the banks couldn't make good to their depositors and their assets, mostly land, had lost most of their value, thus many banks failed. Once banks began failing, the depression spiral was set in motion. Currency supply was not the major factor here at all. Bad investments by banks, the loss of a major gold shipment and a huge embezzlement scandal were the big causes here.

If you still insist that currency inflation was the primary causal factor in all the panics I listed (which, BTW, were stock panics, not "money panics"), then please back up your claim with some historical money supply data show this clear relationship you say exists.
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d:
"Elsewhere you accuse me of being insensitive to the pain and suffering of Americans. The money panics were the cure and the speculators felt the pain (as they should). Today, instead of the free market solution, everybody is required to give corporate welfare to bailout the large powerful global speculators."

If only speculators felt the pain, you'd have a point. But we both know that is not the case at all.
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Response to post # 174:

V1:
"Out of courtesy to the forum rules, I won't plainly express my opinion of your views [regarding the matter of deuce preferring cyclical depressions and the resulting economic devastation to Americans over having our current fiat currency]. I will just say that I'm glad you don't have the power to make economic human scarifies of us all to your demigod of scarcity integrity.

d:
"What forum rule would you have to violate to express your opinion of my views?

The 'no flaming' & 'no profanity' rules.

[Vigilant1]

V1:
"S&Ls were considered a pillar of strength in the banking sector right up until deregulation. I recall no stories of imminent S&L failures previous to deregulation, and the financial press makes its living on ferreting out and reporting such bad news. You will have to provide evidence of your claim if you expect me to accept it."

d:
"What proof are you looking for? Everyone knew the S&Ls financed long-term assets (30 yr mortgages at 7%) with short-term liabilities (deposits, that they had to pay 14% for). Where’s the mystery to you?"

If one accepted that inflation would automatically destroy the industry, as you seem to suggest here, then how do you explain their survival of previous inflationary periods? S&Ls have a lot more assets than just their outstanding mortgages. They own land, income-producing properties (office building and shopping malls), stocks and other securities, etc.. In inflationary periods, these assets usually increase in value and the income they produce can increase as well. Yes, inflationary periods hurt them, and the inflation of the early '80s was severe enough to really hurt them, but you are trying to isolate one factor and wrongly present it as the whole picture. To say that deregulation wasn't a huge causal factor in the S&L crisis is simply false.
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d:
"To parody Dylan: You don’t have to be a member of the financial press to figure which way the dollars flow. Your belief, in fact, that the financial press is vigilant could not be further from the truth. For example, in early March, 1932, as state after state declared “Bank Holidays,” the NYTimes reported these events on page six under such innocuous headings as “Banks protected in 6 more states.”

The NY Times is not the financial press. The WSJ and the like is.
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d:
"More recently, during the ENTIRE campaign of 1988, what news were you seeing about the S&L crisis. Bush Sr. (reminiscent of FDR before him) acted, however, in the first week of his Presidency to begin to stop the carnage."<;p> Your memory of events doesn't seem to match mine. It was one of the major campaign issues.
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d:
"What did you think the (silly) pre-text for “deregulation” was, anyway, if not to “rescue” the industry."

The operative word in that sentence being "pretext". You are taking the rhetoric of politicians as factual.
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d:
"Deregulation was a boon to those who feasted on the dying carcass (shady S&L operators, real estate developers, lawyers, accountants, but most of all Wall Street). Unfortunately, it did nothing for the industry: it had long since been declared DOA by anyone who gave it serious thought."

You seem to be agreeing with me here that deregulation was very bad for the industry.

[Vigilant1]

V1:
"You seem to believe that only increasing the money supply can cause inflation, which is false."

d:
"Webster and I disagree with you."

You're just full of meaningless semantic debates, aren't you ??? There is commodity inflation, land price inflation and market inflation, and they have nothing to do with the money supply. When economists describe wage or price increases as "inflationary", they are not referring to the money supply. You can stick to the classical definition if you wish. I will use modern popular usage.

[Vigilant1]

V1:
"[Inflation and] huge deflation can and has occured with no significant change in the currency supply."

d:
"Untrue. While I have already pointed out to you that the very definition of inflation IS an increase in the money supply, you prefer to use the certain effect of inflation and call it a cause. Very well."

Please see post # 189 above.
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d:
"I have taken the liberty to compile some statistics for you. The 1960s and the 1990s had very similar statistics: real growth= 28%, monetary growth = 44%, and the cpi up 30% during the two decades. The 1970s and 1980s had far worse stats: lower real growth (24%), much higher monetary growth (96%), and the cpi up 86%. That is stark realism. Source of figures for both cpi and real (i.e. constant dollar) growth was statistical Abstracts of the U.S. (available online) and the Fed was the source of M1 growth (also available online)."

Check this out:

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Money & Inflation Since 1960

Each bar in the graph represents an annualized rate of growth over the indicated five-year period.  The green bars show the growth in the M1 money supply relative to the growth in the real GDP.  The red bars show the growth in the consumer price index.

As can be seen, the average inflation rate grew through the 1960s and 1970s, then dropped steadily thereafter.  The rate of growth of the M1 money supply increased more or less steadily throughout the whole period. 

During the period when the inflation rate was growing, the money supply growth rate lagged significantly.  By the 1990s, the inflation rate had dropped to its lowest level in 30 years, while the money growth rate reached its highest level, and in fact exceeded the inflation rate.

M1 represents transaction money, consisting of checking accounts and cash held by the public.  One must conclude that whatever the causes of inflation during this whole period, an excessive growth rate in the M1 money supply had little or nothing to do with it. 

[Vigilant1]

d:
"The dollar is a standard of value like feet or hours."

V1:
"Minor correction: it was a standard of value before 1932."

d:
"Did Congress overturned the Coinage Act of 1792 in 1932?"

Has the value of the dollar been 371.25 grains of silver since 1932? If the US dollar is, in fact, still a standard of value, please define the standard.

And if you want to debate the constitutionality of presidental EOs, you won't get any debate from me. Regardless, they have the force of law in real-world America, like it or not.

[Deuce]

I have just read all your posts and there is much to respond to in detail OVER THE NEXT FEW DAYS (I will not be able to do anything tomorrow).

Quickly, however, 1819,1837,1857,1873,1893, and 1907 were all preceded by rampant money creation. I will direct you to specifics but they are WIDELY known. (see Chapter 3 of the online book Special Privilege

You appear to lack an understanding of what happened in the S&L fiasco (see Chapter 1 of above reference for some background)

I'll be back to respond probably by Sunday.

[Orion78]

The Gold Standard, A Breakdown by Alan Greenspan

[Vigilant1]

d:
"I have just read all your posts and there is much to respond to in detail OVER THE NEXT FEW DAYS (I will not be able to do anything tomorrow).... I'll be back to respond probably by Sunday."

Okay.
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d:
"Quickly, however, 1819,1837,1857,1873,1893, and 1907 were all preceded by rampant money creation. I will direct you to specifics but they are WIDELY known."

A sweeping claim you've made several times, but have yet to back up. In the example I gave, the Panic of 1857, the historical facts are exactly as I presented them.
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d:
"(see Chapter 3 of the online book Special Privilege)"

So to back up your 'hard currency' claims, you post a link to a hard currency book by a hard currency advocate on a website or a foundation devoted to pushing the hard currency prinicple. That's like backing up Jesse Jackson's claims by offering the crap posted on the Rainbow/PUSH website as proof. I'm not impressed.
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d:
"You appear to lack an understanding of what happened in the S&L fiasco (see Chapter 1 of above reference for some background)"

More claims with the same biased source as 'proof'.

[inquest]

Tying the value of the currency to the value of a commodity (gold or anything else) makes the currency vunerable to massive deflation, a downward deflation spiral into depression. A large speculation bubble bursts, and gold & the dollar (whose values are tied together) start to drop in value, and prices are forced down to get people to buy goods. Wages must follow suit and drop as well, as businesses are getting less dollars for the same goods & services. This puts even more downward pressure on gold and the dollar, the cycle repeating and worsening until prices (commodities, services, properties and securities), wages, gold and the dollar begin seriously collapsing in an accelerating downward spiral. This is how our historic depressions occured. Removing that relationship by floating the currency removes that currency vunerability, breaking this downward deflation spiral that previously occured in so many of our economic disasters.

You're still speaking in generalities. I guess I'll have to make my question more specific. There doesn't seem to be anything special about "gold" that makes it vulnerable to deflationary cycles. Any fixed quantity of anything that's used as currency can be subject to the exact same pressures, if I'm not mistaken. I can't see any way in which this wouldn't happen with paper money, IF the paper money existed in fixed quantity. If the advantage of the current system is that the money doesn't exist in fixed quantity, where is that extra money coming from?

I also want to address something you said to Deuce after you responded to me: "Are FRNs a 'fraudulent currency'? They aren't counterfeit in the conventional sense of the world. Much the opposite, we spend a lot of resources to prevent that. They are backed by the full faith and credit of the US government. While you may laugh at that statement, you can't deny that our fedgov goes to great lengths to support public confidence in the US dollar." So it sounds like you're saying that you simply trust the government to do what's right. But earlier you were saying that government couldn't be trusted with a gold standard, when the gold standard has a built-in mechanism to help keep the government more honest. This is perhaps the biggest incongruity of yours that I'm trying to figure out.

That's fine, I don't want to get into another meaningless semantics debate. Call it what you please, it still has exactly the same effect as a price-fixing scheme.

It's not a semantics debate, it's far from meaningless, and the gold-standard does not have anything close to the same effect as a price-fixing scheme. A price-fixing scheme (when imposed by government) forces producers to give people something in exchange for less than its fair price. The gold standard does no such thing. All it does is provide definitions, no different than the dollar and four quarters.

No, the currency markets that determine the strength of the dollar are global markets, and bank holding of US dollars worldwide are factored into the total worldwide money supply.

This is a bit difficult to reconcile with your earlier statement: "The amount in global circulation determines the money supply. Who holds it at any given moment is largely irrelevant to the value of the dollar (as long as they don't take a very large amount of it out of circulation for an extended period of time)." But according to what you're saying now, even if it is taken out of circulation for any length of time, it still wouldn't have an effect on the value of the dollar, because that money, as you say, would be "factored into the total worldwide money supply." Which is it, pray tell?

[justshutupandtakeit]

Hamilton was the greatest thinker from the Revolutionary period in political theory, law and economic/financial subjects. His thoughts compared to Jefferson or Madison are in a completely different level.

His enemies were economic buffoons.

So it is good to see someone go to him for definitive examinations of e/f issues rather than throw up some irrelevant piece of nonsense from Jefferson.

Of course, Hamilton realized that conditions prevailing at the time of the Constitution's creation would not allow using only metals as money since there was almost none in the new nation. He understood that the Continentals had collapsed from overprinting and suggested that one of the reasons for obtaining loans from France during the war was to back the currency. States not only over issued currency but refused to honor its debts issued in the War.

Jefferson was one who repeatedly suggested and defended defaults of those debts even to foreign nations.

A national bank was the mechanism H used to increase the money supply but it was not to do so by freely running printing presses. National debt was the engine he devised to provide an increased money supply since bonds, notes whose value was assured served the same function as money (specie). Not only did establishment of the funding system for the National debt essentially add millions to the capital available but it made that debt a better investment than that of any other nation.

Studying Hamilton's life and thoughts is a never ending source of wonder and profit. It is just too bad he could not afford to accept the Chief Justiceship when Washington wanted him to since John Marshall considered him his superior in legal acumen. Then, at least, he wouldn't have been murdered by that scumbag, Burr.

[rohry]

Hamilton realized that conditions prevailing at the time of the Constitution's creation would not allow using only metals as money since there was almost none in the new nation.

I appreciate the historical perspective that you've offered. Do you think that Hamilton was proposing something other than a metal-backed dollar? Although there was little gold and silver in the colonies/United States in the 1780's and 1790's don't you think there was an intention to trade with Spain and England to acquire "hard currency" (the Spanish Real and the English Pound)?

[justshutupandtakeit]

While I believe that Hamilton probably would have preferred metallic backed currencies all things being equal he was not an ideologue in any way and would gravitate towards what could be made to work. National banks responsibly run create capital for a nation and this was the intention for the one he created. While trade was clearly a source of specie it would only produce a net gain if there was a trade surplus. That I don't believe would have been the result from a primarily agricultural country. Intuitively I would say that a shipload of American products would not be as valuable as a shipload of English thus a deficit would be the result.

American economic development was stimulated by European investment until at least after the Civil War. So I see no possibility for an money supply totally consisting of metallic backed money.

Theoretically I can't see how it would be a positive economic force today because of two problems. 1) If we assume the supply of gold to be somewhat fixed then as the limit of supply is reached the price of gold would have to skyrocket this would mean that the price of everything else would then to collapse.

2)As population increases the per capita amount of gold shrinks thus, the money supply falls which is also deflationary.

Most of the banking difficulties of the 19th century came about through unwise State sponsored schemes to get around the major problem- lack of specie. That is why State bank regulation skirted outside the limits of safety.

Can you reassure me that my doubts are wrong in this respect?

[justshutupandtakeit]

While I believe that Hamilton probably would have preferred metallic backed currencies all things being equal he was not an ideologue in any way and would gravitate towards what could be made to work. National banks responsibly run create capital for a nation and this was the intention for the one he created. While trade was clearly a source of specie it would only produce a net gain if there was a trade surplus. That I don't believe would have been the result from a primarily agricultural country. Intuitively I would say that a shipload of American products would not be as valuable as a shipload of English thus a deficit would be the result.

American economic development was dependent upon plentiful European investment until at least after the Civil War. So I see no possibility for an money supply totally consisting of metallic backed money.

Theoretically I can't see how it would be a positive economic force today because of two problems. 1) If we assume the supply of gold to be somewhat fixed then as the limit of supply is reached the price of gold would have to skyrocket this would mean that the price of everything else would then to collapse.

2)As population increases the per capita amount of gold shrinks thus, the money supply falls which is also deflationary.

Most of the banking difficulties of the 19th century came about through unwise State sponsored schemes to get around the major problem- lack of specie. That is why State bank regulation skirted outside the limits of safety.

Can you reassure me that my doubts are wrong in this respect?

[#3Fan]

A mantra of gold money advocates is that alternative money systems, particularly "paper money," always fail. Historically, it is true; but it is also a case of selective historical facts, half-truth, and errant semantics. There is archaeological evidence that accounting systems existed before paper was invented. For example, clay tablets written in cuneiform that show evidence of debt accounting. Paper, per se, merely represented another more economical way of accounting. What is never admitted is that all money systems including gold money systems have failed.

Wrong. While the country that issued the gold coin may have failed, gold has never failed because there is always a large percentage of the global population willing to pay a high price to keep it and/or wear it. All paper money becomes worthless, gold never becomes worthless.