What is Honest Money?

We live in a world full of dishonest money. Virtually every national currency on Earth — be it dollars, pounds, pesos, whatever — is plagued by a persistent decline in its value.

Honest money or sound money, on the contrary, is a form of money that, in the worst cases, tends to maintain its value — that is, the monetary unit will tend to buy you the same amount of “stuff”, year after year. More often, though, a sound currency will slowly increase in purchasing power, in time.

It's a little known fact that at certain periods of time, in certain places in history, the value of money actually increased over long periods of time. Despite all the hysteria over the supposed horrors of deflation, falling prices are good for almost everyone — when those price declines are the result of technological progress and increased economic efficiency.

Although possible, it is rare to see such price declines in an economy based on fiat (dishonest) money — consider the case of computers, having fallen in price drastically in recent decades, while at the same time increasing in power and usefulness. In an honest-money economy, this price-decline phenomenon can occur across the board, with virtually everything becoming a little bit cheaper, every year. As one example, there were long periods of time in 19th-century America where prices generally fell.

Although one shouldn't take lightly the fact that Bitcoin is a very young technology — it's still an experiment of sorts — we consider Bitcoin to be an honest form of money. Likewise, the precious metals (namely gold and silver) are honest monies, and are indeed the best known vehicles for wealth preservation, having proven themselves over the course of thousands of years.