American Economy: The Veil Of Money

While we are told that the rising price of oil is due to increasing global demand, for example, it is also true that a large part of the increase is due to a decline in the value of the currency used to purchase oil – i.e. the US dollar. Likewise, the current turmoil in the real estate market stems from causes having nothing to do with the specifics of the real estate market. In fact, both the boom and subsequent bust in real estate were both due primarily to monetary factors and not to anything specific to supply and demand for houses. The reason why prices went up so much in the first place wasn't because there was a sudden increase in demand for housing but rather because the Federal Reserve, in order to avoid recession in 2000, reduced interest rates to unprecedentedly low levels, thereby enabling the speculative frenzy whereby every Tom, Dick, and Harry was getting rich by simply borrowing money, buying property and flipping it.

All economic values are relative and interdependent. It is just as legitimate to say that a barrel of oil is worth 200 packs of gum as it is to say that its worth a hundred dollars. There is no true standard measure of economic value. Over the course of human history, man has searched for the perfect monetary "measuring rod", and at different times gold, silver, tobacco, cattle, and sea shells have been used to approximate this never-to-be-found ideal money. But no matter what item is chosen, the instruments themselves are subject to unpredictable and uncontrollable changes of value and are therefore highly imperfect in their roles as currency.