But what about a government crackdown? No doubt that attempt will be made. Already, government agencies are expressing some degree of annoyance at what could be. But governments haven’t been able to control the cash economy. It would be infinitely more difficult to control a virtual currency with no central bank, with encryption, and with millions of users per day. Controlling that would be unthinkable.

Clearly government paper was failing. A digital alternative had to exist. But what gave Bitcoin its value? There were several factors. It was not fixed to any existing currency, so it could float according to human valuation. It was made from real stuff: the very 1s and 0s that were driving forward the global market economy. And while 1s and 0s can be reproduced unto infinity, the new coins could not, thanks to a system in which the coin and its public key were strictly controlled and the ledger updated for every transaction. Its soundness could be checked constantly through instantaneous conversion to other currencies as well as to goods and services. The model seemed impenetrable, the first digital currency that really addressed all the problems that had doomed previous attempts.

There's a new way to by-pass fiat currencies that governments can debase. From Euro Pacific Bank come two new cards, one gold and one silver. Instead of drawing from your cash reserves held in sterling or dollars or whatever, or of spending on credit and paying the bills in such currencies, these cards draw on bullion. You own gold and silver in a vault, and what you spend is converted into bullion and drawn from your stock:

This isn’t even about fiat money per se. Even if we’re talking about gold, once it becomes used as a medium of exchange, it achieves an exchange value higher than what it had in direct exchange, precisely because of its new role. In other words, the demand to hold gold goes up, once it acquires a monetary demand in addition to its industrial/consumption demand.

Pssst. Want to buy some Stossels? They're my own currency with my face on them.

Why should you trust them?

Because I promise to redeem them for gold. And I'm reliable. I have money in the bank and a job that brings in more than I spend.

But households and businesses still need a reliable means of storing value. They turned to financial markets to preserve their wealth, but here too, monetary inflation’s infection is evident in the boom and bust cycles of stock exchanges, as Keynes’s foe Friedrich Hayek explained. And with each bubble, monetary authorities create more inflation that, over time, erodes the very moral capital on which paper currencies depend. At present, this inflationary rush in the U.S. is serving to finance governments’ debt, and goes by the name of "quantitative easing."

So it should be no surprise that inflation—which is often confused with one of its consequences, namely a rise in consumer prices—leads to rising gold prices. Today’s gold price should serve as a warning to monetary authorities that if they continue down their inflationary path, sooner or later they will mete out death to their paper currencies. Gold will probably never coat the walls of public toilets, but it could one day be used to buy groceries.

Imagine holding money and watching it grow rather than shrink in its purchasing power in terms of goods and services. That’s what life is like under gold. Savers are rewarded rather than punished. No one uses the monetary system to rob anyone else. The government can only spend what it has and no more. Trade across borders is not thrown into constant upheaval because of a change in currency valuations.

Not so with gold, however. Unlike groceries, gasoline, and cars, people instinctively know that gold is different. When they see the price of gold soaring, they know that something isn’t right. They sense or hear from others that gold communicates what government officials are doing to people’s money.

That’s why government officials hate gold. They want to be able to spend to their heart’s content and print the money to do it without people realizing how they’re being looted in the process. That’s, in fact, why President Franklin Roosevelt nationalized gold and made it a felony offense for Americans to own it. He didn’t want Americans to see the spending, debt, and inflationary binge that the welfare-warfare state was bringing and would bring indefinitely into the future.