Any monetary system is merely an illusion that everybody agrees upon, but I too am of the mind that tying money to some physical substance like gold or silver – something that we don’t have the ability to readily create – creates a stabilizing effect and helps keep government from making insane decisions regarding currency. Of course, they love making insane decisions so a return to a physical standard seems unlikely. With the trillions pumping through the world’s economy I’m not even sure that it’s completely possible, but something seems worth a shot.

(Of course, I’m aware that currencies fluctuated, and I hardly have doomsday on my mind for the U.S.)

We can visualize gold or silver being the basis for money, since our Dollar was at one time based upon gold and silver.

When the gold price climbs to $1000 per oz., the ounce of gold stayed the same, being a standard. What fluctuates is the value of the paper money, not the gold. An ounce of gold is the same now as it was in 1913. Gold is something of value that can be standardized and used and recognized everywhere.

I suggest one of those standards today is a barrel of oil. A barrel of oil is the same barrel of oil today as it was in 1913. When the price of a barrel goes up, it only represents the increase in the amount of paper Dollars it takes to purchase it.

A “Dollar” or a “Euro” or a “Pound” is not a standard, and their values fluctuate up or down, whereas the value of gold, silver or oil are constant.

At least that’s the way I see it.

As currencies are nothing more than stores of wealth (promises of redemption to demand the services/goods of another), they can take many forms. Historically they have been shells, tree bark, and other things that at the time were seen as valuable, limited in quantity, as storable by those that used them.

Gold/silver have long fit the mark. Since their supply is not easily able to be altered by those in power, they are a hedge against inflation. Looking at historical charts clearly indicate their ability to preserve wealth while the dollar declines.

But when I speak of alternative currencies, I not only refer to gold/silver, but any form of preserving one’s wealth. This might be the euro, or it might be a few bushels of wheat. Whatever the commodity, it should be something that will have demand down the road, so if you desire, you can get rid of it and acquire something else (the purpose of currency).

Looks like the Euro and pound are trading about the same. On today’s exchange rates, the Dollar would only buy 0.64 Euros and 0.51 pounds.

I was in Scotland (which uses the pound), which trades at just over two dollars for every pound.

I went to Germany in October 2001 (less than one month after 9/11) and my dollar bought me 1.15 Euros. I returned to Germany in 2004, and my dollar only bought me 85 cents. I then returned to Germany in the fall of 2007, and my dollar only bought 73 to 74 cents. Today, if I went, my dollar would only buy approximately 64 cents of a Euro.

This means my dollar has declined in value against the Euro by about half since 9/11.

This drop in value compared to the Euro might be caused by a number of reasons – - could it be that the Euro is getting that much stronger? Or is it because our Dollar is getting that much weaker?

I learned on my last trip in 2007, was that the Euro is also declining in value! A few different Germans all complained to me about their weakening economy, and I asked them how that could be true because of my experience with the exchange rate over the years. I was almost in disbelief that their economy was sinking.

I did a little study and found that my German friends were correct. The Euro is sinking in value. It just so happens that our own Dollar is sinking even faster than the Euro!!! So to say that my Dollar has lost half of its value against the Euro since 9/11 is really only part of the story! Compared to other factors in the world, my dollar has been devalued by even more than half since 9/11.

No wonder oil prices are $120 per barrel now. If one considers that it takes more than twice the numbers of Dollars to buy that same barrel of oil now, we can understand that our $3.70 per gallon gas should only be costing $1.80 per gallon or less (if you do just some simple estimates in the purchasing power of our Dollar on OPEC’s market).

Connor, you said you had to multiply the Euro price by 2 to figure out how many US Dollars it was costing you. Does that mean you were only getting about 50 cents to the dollar? Or were you just guesstimating the 2X factor for simplicity’s sake?