Nikos, a good friend of this blog, has asked two questions—one involving monetary theory and the other regarding the role of the national question in the current crisis.
Nikos’ first question relates to a proposal made last year by the German Council of Economic Experts that the Greek government and other highly indebted European governments put up a portion of their foreign exchange reserves—gold and foreign currency holdings—as collateral for what would amount to loans in the form of euros. The proposal was rejected at the time by the Merkel government but supported by the Social Democratic and Green opposition parties.
Nikos actually has two questions about this proposal. First, does it indicate that gold is still money? And second, does this movement toward using gold as collateral point to a return to the gold standard?
Gold as world money
I would answer yes to the first question and no to the second. Among gold’s basic monetary roles is its role as world money. Traditionally, paper or banknote currencies circulated only within nation states. Insomuch as currencies were made not out of paper and ink but of gold coins—and silver coins in earlier times—these currencies were literally made out of money material. The coins could be converted into bullion—pure money material—by simply melting them down. In this way, gold and or silver bullion would wear the “uniform” of a national currency.
Because gold and silver coins were made of money material and could easily be melted down into bullion, they could circulate internationally. Their role as money did not depend on their being “legal tender” in any particular country.
Origins of the U.S. dollar
Indeed, what became the U.S. dollar had its origins in a Spanish silver coin—called the dollar—that circulated widely in Britain’s North American colonies. Now, because of the U.S. world empire, today’s paper dollar currency enjoys a sphere of circulation far beyond the borders of the U.S. itself. This is true even though the U.S. dollar is legal tender only within the U.S., Panama, Ecuador and the so-called “Commonwealth” of Puerto Rico.
But, in fact, the U.S. dollar has invaded the circulation of many other countries even where it is not officially legal tender. The role of the U.S. dollar as the world currency is shown by the fact that basic commodities and gold itself are priced in terms of dollars. As a result, more Federal Reserve Notes—U.S. currency units—are circulating outside the boundaries of the U.S. than within them.
U.S. world empire
What I call the dollar system—the widespread acceptability of the U.S. dollar as a means of payment well beyond the formal borders of the United States—is inseparable from the U.S. world empire. If the empire were to fall, the U.S. dollar would certainly cease to be the world’s currency. Similarly, any crisis of the U.S. dollar, defined as a sudden sharp loss of gold value, would bring into question the continued existence of the U.S. world empire.
Gold retains its role as world money under the dollar system
Under the dollar standard, gold fully retains its role as world money. The U.S. global empire has existed only since World War II, while gold’s role as world money goes back thousands of years. In addition, as we have explained many times in this blog, the U.S. dollar cannot act as a universal measure of value independently of gold, since the law of value requires that the value of a commodity be measured in the use value of another commodity.
A Critique of Crisis Theory 
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