If our society accepts paper money, how can it be worthless?

If you read a bit of economics, you will eventually run across a phenomenon which is called "Intrinsic Value." Intrinsic value is defined as the "true" value of an object or service. The Intrinsic Value of an object will always be based on the object itself, and will typically involve the labor or time which was necessary to produce that object.

Based on above theory (which came from the great economist Adam Smith by the way), the most expensive things should always be things which took the most time and labor to produce.

This basically means that the typical skyscraper will always be more valuable than a bus, and gold and silver will always be more valuable than paper. The simple reason for this is because in both cases, it takes more time and men to build a skyscraper than it does a bus, and it takes more time and men to mine gold than it does to print paper dollars out on a machine.

Therefore, it is logical to say that those who are truly wealthy are those who own things which have a high "intrinsic value."

Just the same, those who are not very wealthy tend to be those who own things which do not have a very high intrinsic value. This means that a man who has $1 million dollars in the bank is not as wealthy as a man who has $1 million dollars "worth of gold" in the bank.

The first man could easily lose his entire fortune if the dollar suddenly collapsed, and due to inflation, his money is guaranteed to lose its value over time. Because the second man owns gold, a real commodity with a real intrinsic value, his wealth would stand the test of time, avoiding inflation.

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