The International System of Units (SI), commonly known as the metric system, has seven basic units of measure.
- the kilogram (kg), for mass
- the second (s), for time
- the kelvin (K), for temperature
- the ampere (A), for electric current
- the mole (mol), for the amount of a substance
- the candela (cd), for luminous intensity
- the meter (m), for distance
Other units of measure, called derived quantities, such as area, volume, speed, acceleration, force, pressure, etc., are defined in terms of the seven basic units.
The basic units act as a global common language for defining the standards for science, industry, and medicine. Scientists, engineers, physicists, and medical researchers require a common standard of reference for measures such as weight, length, mass, matter, temperature, time, energy, power, and speed to translate scientific discoveries in common terms. A luminous measurement of 50 cd (candela) is the same value in any laboratory by any scientist anywhere in the world. The absence of such standards would result in a chaotic approach to consolidating and building upon scientific breakthroughs across the globe. The basic units of measure are a foundation for the advancement of mankind through scientific progress.
History is the arbiter of standards. Standards are derived in a trial and error process. English evolved as the international language. An accepted international standard for language also creates a reference for global progress. Without a worldwide standard for language, international air travel could only exist with multilingual pilots which would significantly reduce the pool of eligible skilled pilots. International travel would become more chaotic and less efficient. Standards of reference are essential for global progress in every realm of society.
In the same trial and error method that selected English as the international language, history long ago selected gold as the monetary standard of reference. Gold has acted as money for thousands of years. Early explorers discovered that indigenous people used gold as money prior to contact and assimilation of trade between separate continents. This occurred organically without decree or legislation.
Gold’s role as a unit of account is what distinguishes it from all other currencies. All currencies act in varying degrees of reliability as a means of exchange and store of value, but only gold acts as a stable standard of reference—a unit of account. We can’t say that gold acts as a standard of reference in terms of a mathematical constant defined by the international system of units. Yet, there has to be the assumption that gold is stable in value to underpin the logic for a monetary standard of reference. There is nothing else in the monetary realm that acts as an accepted standard of reference. In this regard, there is wobble to the value of gold. Gold’s discovery is metered non-scientifically, but over thousands of years, this wobble resolves itself. It is gold’s lack of a capital component combined with its monetary properties that establishes gold’s stable value. As technology and population increase, the discovery of new gold increases with proportional difficulty. This negates advances in technology to increase gold production. This is only true for gold. The addition of capital and technology influences the value of all other commodities and industries. Where placer mining in the 1800s sifted gold in surface streams, today massive tunnel borers extract gold deep below the earth. The result is that, on average, gold is still found today at the same rate of total annual production as during the days of a lonely miner with a pick and shovel.
The North Star, the Polaris, acts as a standard of reference in the celestial realm. Like gold, there is wobble in the North Star’s fixed position. Over thousands of years, precession with the earth’s axis will shift the North Star’s relative position. Despite the known wobble, the North Star’s fixed position is unequivocally superior to any other celestial reference. We accept the North Star as a true celestial reference in the same way mankind accepts gold as the true monetary reference.
Economics is a behavioral science. Yet, it is the desire of economists to mold economics into a hard science like physics. As a hard science with all humans treated as identical molecular structures, economists need only input their economic theories into defined mathematical equations and voilà!; their desired theoretical economic outputs emerge as the equation’s solution. From this pseudo-scientific mumbo jumbo, economists attempt to plan economies. In the real world of practical application, their theories blow up in their faces, and wage earners and pensioners are left to deal with the deleterious results. The Royal Swedish Academy of Sciences routinely awards the Nobel Prize in Economics for the latest effort to apply economic theories as hard science.
Economics as a hard science was the basis for Milton Friedman’s advocation of monetarism—that the supply of money could be metered at a determined mathematical rate and would in return, smooth out the traditional boom-bust of the business cycle. It was Friedman and his acolytes’ advocation of monetarism theory that created the intellectual foundation to abandon gold. With the end of Bretton Woods, Congressional Joint Economic Committee Chairman Henry Reuss predicted gold would fall to $7 per ounce. Instead, within a decade, it rose to $850 per ounce. Friedman viewed gold as a commodity no different than pork bellies; no doubt, a barbarous relic that prevented the scientific advancement of economics. The last 48 years of monetary instability and chaos is the direct result of the abandonment of gold as a monetary reference. With the PhD standard of fiat creation by whim, the world has reverted to the equivalent of central bank witch doctors defining the value of currencies.
If the value of the seven basic units constantly changed, it would lead to chaos in science and engineering. For the same reason, defining currency without regard to a standard leads to chaos and decline in the financial world. It is impossible to imagine that the length of a meter could be changed daily at whim for the benefit of the scientific world. Yet, a change in the value of currency occurs continuously in the financial world. The technological chicken wire of $5.3 trillion of derivatives churned daily at the expense of the productive is what holds the global financial system together. To control this chaos, central bankers increasingly enact ad hoc policy that manipulates the value of fiat currencies, commands interest rates, regulates banks, and expands liquidity. This chaos is the result of a global financial system untethered from a monetary standard of reference.
Standards of reference become refined and more precise with advances in technology and knowledge. A meter that was once defined as 1/10,000,000 of the distance from the Earth’s equator to the North Pole measured on the circumference through Paris is now defined as the distance traveled by light in a vacuum over a time interval of 1/299,792,458 of a second. Despite the dismissal of gold in government monetary policy, gold remains the monetary standard of reference. Cryptocurrency promises to work in conjunction with gold to advance the world toward a new global monetary stability. Out of self-interest, elites may dismiss gold as a barbarous relic, but for those who understand, gold will remain the foundation for the future wave of technological monetary stability.