The rush for gold has assumed enormous proportions lately and in fact is nothing other than a referendum of wallets. More and more people mistrust paper currencies and are placing their assets in gold. According to the Dubai-based World Gold Council, the global demand for gold rose to more than 918 tons in the second half of 2011 alone. A steadily growing demand from India and China is especially noteworthy. But at top of the shopping list for the global players in the gold business are large-volume investment bars.

The average gold buyer is probably not an especially pessimistic client, he is more of a cool reckoner or well-to-do person who wants to play it safe with some of his money. But the hype surrounding gold is not only denying the “normal economy” considerable sums, it has also driven the gold price up and up. This means that the gold industry, perforce, becoming not part of an economic freedom movement but part of what philosopher Peter Sloterdijk calls the “bubble economy”. Only a very few rich people can afford the enormous speculative risks long term.

Consequently, gold is being hoarded for the time, nothing more. Even the numerous gold owners still do not enjoy the security, or to be more precise the freedom of an alternative economic circulatory system that could function in the event of an emergency. Owners are basically waiting passively for better times, and according to that viewpoint, “better” times will have arrived when, at least in theory, people trust the currencies again. The gold will then be resold and everything will continue back along normal lines. This simplistic outlook does nothing towards establishing a more creative or even an alternative kind of economy. Might there not be more creative potential in gold?

If a real crash should one day occur, then the simple ownership of gold will help relatively little, at least when it comes to daily needs. Gold would only be a genuine alternative allowing complete autonomy from paper money if other economic modalities were in place. This would require real and virtual marketplaces where people could actually use their own gold as a means of payment, something about which the mute gold-buying movement has no political idea, and perhaps not even the necessary basic political understanding.

Not that there isn’t a serious lobby calling for an end to a mandatory money system in Europe which in reality represents a forced payment system. Intellectual resistance is certainly alive in the home of the former deutschmark. The well-known FDP politician and Bundestag member Frank Schäffler has long being promoting the freedom to choose one’s means of payment. Only then, according to such lobbyists, could the gold movement – using its alternative, “good” money – exert pressure on politics so that rationality could return to finance. The end of statutory gold backing which propped up our currencies until 1971 was after all nothing other than the throwing-open of the doors of the great casino of global monetary politics.

Banks will only be able to keep blackmailing politics for as long as there is no alternative to the banking system. Gold brought intelligently into the market could certainly be part of such an alternative. But to do this, gold would have to assume a function, remaining not just a speculative object but becoming a means of payment for transactions and trade. For one billion Muslims there is of course another important function behind gold as a currency, which is the payment of Zakat.

The fundamental ethical problems of our currencies are the subject of growing debate in Europe. In my little book entitled Weg mit dem Zins (Away With Interest) I introduced thinkers from not only the Islamic but also the Jewish and Christian traditions. The prohibition of interest has once again become widely discussed, a topic about which religions are in fact highly rational and certainly enlightened. Authors such as the Christian monetary ethicist Jörg Guido Hülsmann, for instance, consider paper money and the constant expansion of the money supply to be a moral problem and an instrument of “false inflation”.

Using gold as a means of payment would make sense to all of these various authors and lobbyists. However, in practical terms a genuine emancipation from “old” money could be difficult. Global political movers are fatally disinterested in potential economic alternatives, even in times of dire need. The ties between politics and finance are too close. But the fact is, a means of payment which is accepted and secure, but which also works on a day-to-day basis, is of fundamental importance to any genuine economic alternative.

On the Internet there have been for some years attempts to use units of gold in payment systems. This principle, itself enabled by the Internet, would make the banking system in part unnecessary. Units of gold are sent globally in a matter of seconds, with very low fees. Mobile phones have also long been capable of handling such transactions. The Establishment views these gold-based service providers as bitter rivals. One of the best known networks in America, E-Gold, was closed down after accusations that it had violated money laundering laws. But despite this, a global network could not only replace old-fashioned banking, it could also effectively link free money with free markets.

Autonomous online payment systems are certainly one way of becoming independent from banks. But gold and silver could also play a greater role in the real marketplace. Laws in Europe still block the use of physical gold in the form of coins. Since such private coins are not an officially recognised means of payment, value added tax applies when you buy them, making their price as products uncompetitive. The gold movement should call for the end of such discrimination, as well as the anti-free-market preference given to government-issued coins such as the Krugerrand and Vienna Philharmonic Coin.

If value added tax were to fall away then we would enjoy not only the freedom at last to choose our means of payment, but also the possibility of circulating numerous regional silver and gold coin currencies more efficiently. These have an advantage over regional paper money currencies: coins have value in themselves, and do not exist solely because they are linked to the euro. This could spell an end to the passivity of gold ownership and precipitate active competition between different means of payment, an urgent necessity since without it, governments and their banks are hardly about to stop pumping more bad money into the market. No free market economy based on bad money can work long term.

Abu Bakr Rieger is a Lawyer and Publisher, based in Berlin.