I’ve mentioned Sound Money a few times, and it’s one of the reasons I’m such a big supporter of Kinesis. But I’m not sure I’ve ever defined it.
Money Basics
In my first college economics class, we learned money has three roles:
- medium of exchange
- store of value
- unit of account
The currencies we use today serve well as mediums of exchange and as units of account, but they’ve failed horribly as stores of value. That’s generally what people mean when they say sound money – money that retains its buying power. As Merriam-Webster puts it:
sound money: money not liable to sudden appreciation or depreciation in value : stable money specifically : a currency based on or redeemable in gold
https://www.merriam-webster.com/dictionary/sound%20money
Are Our Currencies Sound?
I’d like to share a few memes that have been in circulation recently that I think summarize the ability of our currencies to maintain their value:


Both of these examples show us how inflation slowly steals the wealth we work so hard to acquire. The next meme is a bit outdated, but with the talk we’ve heard about wealth disparity in recent years this is relevant as well:

I believe it is fair to say that current currencies fail to retain value over time. Here in 2022, no currencies are sound.
Is Sound Money Possible?
Sure it is! There have been many periods in world history where prices were stable for generations – there are fluctuations, but in these periods it was likely the price your father’s father paid for food, land, or horses was within a few percent of the prices you would experience. Here are a few examples:
UK Inflation over 500 Years
Deutsche Bank was cited by this Business Insider Article, and this graph was included:

What we see here is periods of inflation spiking up towards 5%, then periods of deflation bringing price levels back down, for centuries. These price levels are much more stable than we are seeing here in the 20th and 21st Centuries. Here’s the currency the UK was using over this time period (image from Wikipedia):

The silver content in the coins went down over time as you would expect of any government-backed currency, but price levels were remarkably stable over this long period of time.
How about US Price Levels?
The US hasn’t been in existence for all that long, but we’ve still got good data. Let’s look at an image put out by the St. Louis Fed in an article about historical inflation:

From the Fed’s first summary of these charts (bold text added for emphasis):
- First, there appear to be at least two different “eras” characterizing the behavior of prices. Their precise boundaries are hard to establish, but the first era seems to have lasted from the founding of the U.S. until around the establishment of the Federal Reserve or perhaps as late as the entry in World War I. The second era begins around World War II and continues until the present day. The period in between is difficult to assign to either era, as things might have turned out quite differently had the U.S. not entered either world war. Overall, prices seem to move around a stable average during the pre-Fed era, while they have increased steadily since World War II.
Let me restate that more simply: From the founding of the United States until the Federal Reserve was established, we had relatively stable prices interspersed by periods of inflation and deflation. There are a couple of big wars that taxed the coffers of the US Government (most notably those that started in 1812 and 1861 – both easy to see in the chart). When the fed came along, that all ended.
What currencies were we using in the United States during this period of stable prices?


When the United States used gold and silver as money, prices were stable.
How about Energy Prices?
This chart made the Twitter rounds last week – this is the cost of a barrel of oil over time in mainstream currencies. That gold line at the bottom, with essentially no change in price and low volatility? That’s oil priced in grams of gold.

Sound Money for the 21st Century and Beyond
I hope the above has shown that commodity-based money – particularly money that is pegged to the value of gold and silver – has served as a much more effective store of value than any of the paper-based currencies we use today.
I do not believe we can move back to the old gold/silver standard nowadays, for a few reasons:
Coinage is obsolete. It’s nice to have a coin that has inherent value because it’s made of precious metal, and this simple technology has worked for currencies going back to Babylon – when I pay you, I’m giving you a piece of metal that has inherent worth and will maintain its value across generations.
But think about it: when is that last time you paid in cash for something? If you’re like most people, you shop online, or you pay at stores with a piece of plastic. It’s the same when you call an Uber, or pay your utilities – it’s all electronic.
While we can move back to gold and silver coinage that’s stored in the bank, and use debit cards the way we used to use paper dollars (as storage receipts basically – turn in your $20 bill at any bank for a $20 gold coin), there are still a couple of current problems….
Governments can’t be trusted to maintain sound money. Money is always debased by governments. I’m sure it’s generally for good reasons, and at the moment the decision is made it seems like the proper solution, but this always steals buying power from the people and gives it to government.
No government wants sound money. Printing money in a way that generates 5% inflation means that the buying power of the newly printed money is coming from the savings of the people – it’s essentially a 5% wealth tax, but people don’t see it so they don’t complain. This means government officials can use our wealth to buy votes, make themselves and their friends rich, or engage in non-ending wars using our wealth and we never notice it!
If at all possible, every government will try every other option they can before they adopt sound money, because sound money empowers the people, and loose monetary policy empowers the government. Government won’t give that up while they still have a choice.
Kinesis – Sound Money you can use NOW
That’s why I like Kinesis:
- You can start using sound money now – transfer your currency in and convert it to gold (KAU) or silver (KAG).
- Spend your gold- and silver-based money anywhere that takes those silly cards with VISA stamped on them. Or send it directly to another user – all it takes is a smart phone.
- Earn a yield on what you spend and what you hold.
- Your gold and silver is legally titled to you and is stored in an insured, secure vault by a third party vaulting service that is audited regularly.
- If you want it delivered, you can have it delivered. It won’t be in coins, but bars retain value the same way.
You can join Kinesis now and get the benefits of sound money that no government will willingly give you. The only downside is that there are fees of 0.22% to 0.45% when you spend, but that’s what pays for the yields. (And that’s certainly less than the 1% – 2% businesses are charged every time we use the VISA/MC network, and that 1%-2% is reflected in the inflated prices we pay.)
Sound money. The wealth-preserving power of gold and silver. Yields without usury or loans.
That’s the kind of money I want to use.