I honestly don't see the contradiction. Intrinsic means "belonging to the essential nature or constitution of a thing." The government constitutes the "thing" (fiat money) and imbues it with value by printing denominations on it. People worldwide recognize that value. You're getting hung up on the fact that nobody would trade anything valuable for a plain piece of paper, but of course a piece of paper is a different "thing" when it has a government's markings on it.
More importantly, I think it's rather lame of you to parachute out of the discussion based on a single paragraph highlighting our different interpretations of a rather murky concept like intrinsic value. You made some debatable claims earlier, and in my response, I highlighted what I saw as weaknesses in your argument. If you simply didn't feel like defending your claims, then that's fine, but it's pretty low-rent to bail out based on the notion that I'm not thinking for myself or don't understand what I'm talking about, and therefore can't be reasoned with.
And, not for nothing, but I never said or implied that libertarianism was a premise. I said it was a world view, but of course world views are often arrived at after careful study and consideration, and I don't doubt that's the case with you based on our previous interactions. If I felt otherwise, obviously I wouldn't have wasted my time engaging you on this topic.
OK, fair enough.
The thing is, legal tender laws are in place precisely because paper with numbers printed on it doesn't have any inherent, or "intrinsic" value to speak of. Governments need the legal tender laws precisely *because* the paper has no intrinsic value at all. Without the force (literally) of law, nobody in their right mind would accept a piece of paper with numbers on it for an actual tangible thing. One thing nice about commodity based monies is that the ARE themselves, actual tangible things of usefulness and value. This is what I mean by "intrinsic" value. Another way to look at it is this: without laws (which can happen during war or civil collapse), does the paper have any value? It doesn't, and history shows this repeatedly. But the gold or silver coin does, and a gallon of diesel fuel or a bag of rice does. This is an enormous difference.
So when you say that the "intrinsic value" of paper money comes from its legal status, you are really completely missing the point. There is no intrinsic value, there is only compulsory legal value. It does not become intrinsically valuable just because the government "says so". Its value is strictly due to the willingness of other people to accept that paper for goods. The real wealth is in goods, not money. Just like a person is not a slave just because the government says so, the piece of paper is still just a piece of paper, and eventually that cold, hard reality becomes self-evident.
Now, that wouldn't matter all that much in times of peace and responsible fiscal governance, but neither of those conditions apply to US dollars. The kind of reckless money printing going on right now is exactly the kind of thing that starts the death spiral of a currency collapse.
Inflationary money printing (distinct from the consequent rises in prices) is essentially counterfeiting. The recipients of the newly-printed money get to go buy things at today's prices, without having actually done anything valuable to get that money. That literally robs society of the things that that ill-gotten money purchases. Ultimately, that currency makes its way through the rest of the economy and WILL result in higher prices - eventually. It has, mostly in the stock and bond markets at the moment, which makes sense because the beneficiaries of this counterfeit money are large banks to use it to buy stocks & bonds (often to buy T-bills and then use that deposit to inflate even more by lending out -- creating -- about 10x more money in credit, pocketing the rate difference). This is just horribly dishonest, I would say criminal, and immensely destructive to people who have actually saved money.
Making matters worse, the same idiots like Krugman and statists everywhere will try to "fix" the inflation problem (when it reaches consumer goods) by imposing price controls. This will happen in the US, and evidence of this is the price controls imposed during hurricane Sandy. The combination of legal tender laws (forcing people to accept pieces of paper for actual goods) combined with government-set low prices causes "shortages". In reality, there are no actual shortages, but goods stay in warehouses rather than being shipped to stores and sold at a loss.
All of this is before us.
You seem very willing to just blindly accept the "party line" on all of this. This 2% inflation target is one example of your credulity. Why is it OK to steal 2% of people's savings every year? That's literally what inflation is, when you understand how it is created. Why not 10%? Perhaps the most booming industry in recent memory is computers, which is characterized by extreme *deflation*, yet you never question the "wisdom" of this nonsense.
The reality is that central governments like inflation because it allows them to finance government expenditures without raising taxes. They just don't want to admit it. As Henry Ford said, "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." What, exactly, do you think he was talking about?
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