Why not return to gold as the national currency? Since that question has come up often on this blog, a chapter from “Web of Debt” addressing it is posted below.
Chapter 37
THE MONEY QUESTION: GOLDBUGS AND GREENBACKERS DEBATE
“You shall not crucify mankind upon a cross of gold.”
– William Jennings Bryan, 1896 Democratic Convention
At opposite ends of the debate over the money question in the
1890s were the “Goldbugs,” led by the bankers, and the “Greenbackers,” who were chiefly farmers and laborers.1 The use of the term “Goldbug” has been traced to the 1896 Presidential election, when supporters of gold money took to wearing lapel pins of small insects to show their position. The Greenbackers at the other extreme were suspicious of a money system dependent on the bankers’ gold, having felt its crushing effects in their own lives. As Vernon Parrington summarized their position in the 1920s:
To allow the bankers to erect a monetary system on gold is to subject the producer to the money-broker and measure deferred payments by a yardstick that lengthens or shortens from year to year. The only safe and rational currency is a national currency based on the national credit, sponsored by the state, flexible, and controlled in the interests of the people as a whole.2
The Goldbugs countered that currency backed only by the national credit was too easily inflated by unscrupulous politicians. Gold, they insisted, was the only stable medium of exchange. They called it “sound money” or “honest money.” Gold had the weight of history to recommend it, having been used as money for 5,000 years. It had to be extracted from the earth under difficult and often dangerous circumstances, and the earth had only so much of it to relinquish. The supply of it was therefore relatively fixed. The virtue of gold was that it was a rare commodity that could not be inflated by irresponsible governments out of all proportion to the supply of goods and services.
The Greenbackers responded that gold’s scarcity, far from being a virtue, was actually its major drawback as a medium of exchange. Gold coins might be “honest money,” but their scarcity had led governments to condone dishonest money, the sleight of hand known as “fractional reserve” banking. Governments that were barred from creating their own paper money would just borrow it from banks that created it and then demanded it back with interest. As Stephen Zarlenga noted in The Lost Science of Money:
[A]ll of the plausible sounding gold standard theory could not change or hide the fact that, in order to function, the system had to mix paper credits with gold in domestic economies. Even after this addition, the mixed gold and credit standard could not properly service the growing economies. They periodically broke down with dire domestic and international results. [In] the worst such breakdown, the Great Crash and Depression of 1929-33, . . . it was widely noted that those countries did best that left the gold standard soonest.3
The reason gold has to be mixed with paper credits is evident from the math. As noted earlier, a dollar lent at 6 percent interest, compounded annually, becomes 10 dollars in 40 years.4 That means that if the money supply were 100 percent gold, and if bankers lent out 10 percent of it at 6 percent interest compounded annually (continually rolling over principal and interest into new loans), in 40 years the bankers would own all the gold. To avoid that result, either the money supply needs to be able to expand, which means allowing fiat money, or interest needs to be banned as it was in the Middle Ages.
The debate between the Goldbugs and the Greenbackers still rages, but today the Goldbugs are not the bankers. Rather, they are in the money reform camp along with the Greenbackers. Both factions are opposed to the current banking system, but they disagree on how to fix it. That is one reason the modern money re-form movement hasn’t made much headway politically. As Machiavelli said in the sixteenth century, “He who introduces a new order of things has all those who profit from the old order as his enemies, and he has only lukewarm allies in all those who might profit from the new.” Maverick reformers continue to argue among themselves while the bankers and their hired economists march in lockstep, fortified by media they have purchased and laws they have gotten passed with the powerful leverage of their bank-created money.
Is Gold a Stable Measure of Value?
There is little debate that gold is an excellent investment, particularly in times of economic turmoil. When the Argentine peso collapsed, families with a stash of gold coins reported that one coin was sufficient to make it through a month on the barter system. Gold is a good thing to own, but the issue debated by money reformers is something else: should it be the basis of the national currency, either alone or as “backing” for paper and electronic money?
Goldbugs maintain that a gold currency is necessary to keep the value of money stable. Greenbackers agree on the need for stability but question whether the price of gold is stable enough to act as such a peg. In the nineteenth century, farmers knew the problem firsthand, having seen their profits shrink as the gold price went up. A real-world model is hard to come by today, but one is furnished by the real estate market in Vietnam, where sales have recently been undertaken in gold. In the fall of 2005, the price of gold soared to over $500 an ounce. When buyers suddenly had to pay tens of millions more Vietnamese dong for a house valued at 1,000 taels of gold, the real estate market ground to a halt.5
The purpose of “money” is to tally the value of goods and services traded, facilitating commerce between buyers and sellers. If the yardstick by which value is tallied keeps stretching and shrinking itself, commerce is impaired. When gold was the medium of exchange historically, prices inflated along with the supply of gold. When gold from the New World flooded Spain in the sixteenth century, the country suffered massive inflation. During the California Gold Rush of the 1850s, consumer prices also shot up with the rising supply of gold. From 1917 to 1920, the U.S. gold supply surged again, as gold came pouring into the country in exchange for war materials. The money supply became seriously inflated and consumer prices doubled, although the money supply was supposedly being strictly regulated by the Federal Reserve.6 During the 1970s, the value of gold soared from $40 an ounce to $800 an ounce, dropping back to a low of $255 in February 2001. (See Chart, page 346.) If rents had been paid in gold coins, they would have swung wildly as well. Again, people on fixed incomes generally prefer a currency that has a fixed and predictable value, even if it exists only as numbers in their checkbooks.
The tether of gold can serve to curb inflation, but an expandable currency is necessary to avert the depressions that pose even graver dangers to the economy. When the money supply contracts, so do productivity and employment. When gold flooded the market after a major gold discovery in the nineteenth century, there was plenty of money to hire workers, so production and employment went up. When gold became scarce, as when the bankers raised interest rates and called in loans, there was insufficient money to hire workers, so production and employment went down. But what did the availability of gold have to do with the ability of farmers to farm, of miners to mine, of builders to build? Not much. The Greenbackers argued that the work should come first. Like in the medieval tally system, the “money” would follow, as a receipt acknowledging payment.
Goldbugs argue that there will always be enough gold in a gold-based money system to go around, because prices will naturally adjust downward so that supply matches demand.7 But this fundamental principle of the quantity theory of money has not worked well in practice. The drawbacks of limiting the medium of exchange to precious metals were obvious as soon as the Founding Fathers decided on a precious metal standard at the Constitutional Convention, when the money supply contracted so sharply that farmers rioted in the streets in Shay’s Rebellion. When the money supply contracted during the Great Depression, a vicious deflatio-nary spiral was initiated. Insufficient money to pay workers led to demand falling off, which led to more goods remaining unsold, which caused even more workers to get laid off. Fruit was left to rot in the fields, because it wasn’t economical to pick it and sell it.
To further clarify these points, here is a hypothetical. You are shipwrecked on a desert island . . . .
Shipwrecked with a Chest of Gold Coins
You and nine of your mates wash ashore with a treasure chest containing 100 gold coins. You decide to divide the coins and the essential tasks equally among you. Your task is making the baskets used for collecting fruit. You are new to the task and manage to turn out only ten baskets the first month. You keep one and sell the others to your friends for one coin each, using your own coins to purchase the wares of the others.
So far so good. By the second month, your baskets have worn out but you have gotten much more proficient at making them. You manage to make twenty. Your mates admire your baskets and say they would like to have two each; but alas, they have only one coin to allot to basket purchase. You must either cut your sales price in half or cut back on production. The other islanders face the same problem with their production potential. The net result is price deflation and depression. You have no incentive to increase your production, and you have no way to earn extra coins so that you can better your standard of living.
The situation gets worse over the years, as the islanders multiply but the gold coins don’t. You can’t afford to feed your young children on the meager income you get from your baskets. If you make more baskets, their price just gets depressed and you are left with the number of coins you had to start with. You try borrowing from a friend, but he too needs his coins and will agree only if you will agree to pay him interest. Where is this interest to come from? There are not enough coins in the community to cover this new cost.
Then, miraculously, another ship washes ashore, containing a chest with 50 more gold coins. The lone survivor from this ship agrees to lend 40 of his coins at 20 percent interest. The islanders consider this a great blessing, until the time comes to pay the debt back, when they realize there are no extra coins on the island to cover the interest. The creditor demands lifetime servitude instead. The system degenerates into debt and bankruptcy, just as the gold-based system did historically in the outside world.
Now consider another scenario . . . .
Shipwrecked with an Accountant
You and nine companions are shipwrecked on a desert island, but your ship is not blessed (or cursed) with a chest of gold coins. “No problem,” says one of your mates, who happens to be an accountant. He will keep “count” of your productivity with notched wooden tallies. He assumes the general function of tally-maker and collector and distributor of wares. For this service he pays himself a fair starting wage of ten tallies a month.
Your task is again basket-weaving. The first month, you make ten baskets, keep one, and trade the rest with the accountant for nine tallies, which you use to purchase the work/product of your mates. The second month, you make twenty baskets, keep two, and request eighteen tallies from the accountant for the other baskets. This time you get your price, since the accountant has an unlimited supply of trees and can make as many tallies as needed. They have no real value in themselves and cannot become “scarce.” They are just receipts, a measure of the goods and services on the market. By collecting eighteen tallies for eighteen baskets, you have kept your basket’s price stable, and you now have some extra money to tuck under your straw mattress for a rainy day. You take a month off to explore the island, funding the vacation with your savings.
When you need extra tallies to build a larger house, you borrow them from the accountant, who tallies the debt with an accounting entry. You pay principal and interest on this loan by increasing your basket production and trading the additional baskets for additional tallies. Who pockets the interest? The community decides that it is not something the tally-maker is rightfully entitled to, since the credit he extended was not his own but was an asset of the community, and he is already getting paid for his labor. The interest, you decide as a group, will be used to pay for services needed by the community — clearing roads, standing guard against wild animals, caring for those who can’t work, and so forth. Rather than being siphoned off by a private lender, the interest goes back into the community, where it can be used to pay the interest on other loans.
When you and your chosen mate are fruitful and multiply, your children make additional baskets, and your family’s wealth also multiplies. There is no shortage of tallies, since they are pegged to the available goods and services. They multiply along with this “real” wealth; but they don’t inflate beyond real wealth, because tallies and “wealth” (goods and services) always come into existence at the same time. When you are comfortable with your level of production — say, twenty baskets a month — no new tallies are necessary to fund your business. The system already contains the twenty tallies needed to cover basket output. You receive them in payment for your baskets and spend them on the wares of the other islanders, keeping the tallies in circulation. The money supply is permanent but expandable, growing as needed to cover real growth in productivity and the interest due on loans. Excess growth is avoided by returning money to the community, either as interest due on loans or as a fee or tax for other services furnished to the community.
Where Would the Government Get the Gold?
In the real world, with no treasure chest floating ashore, a government that tried to switch to an all-gold currency would face another challenge, and this one would appear to be insurmountable: where would it get the gold? The metal would have to be purchased, and what would the government use for this purchase if Federal Reserve Notes were no longer legal tender? In the worst-case scenario, the government might simply confiscate the gold of its citizens, as Roosevelt did in 1933; but when Roosevelt did it, he at least had some money with which to pay for it. If gold were the only legal tender, Federal Reserve Notes would be worthless.
Assume for purposes of argument, however, that the Treasury did manage to acquire a suitable stash of gold. All of the above-ground gold in the world is estimated at less than 6 billion ounces (or about 160,000 UK tonnes), and much of it is worn around the necks of women in Asia, so acquiring all 6 billion ounces would obviously be impossible; but assume the U.S. government managed to get half of it. At $800 per ounce (the December 2007 price), that would be around $2.4 trillion worth of gold. If all 12 trillion dollars in the money supply (M3) were replaced with gold, one troy ounce would have a value of about $4,000, or 5 times its actual market value in 2007. That means the value of a gold coin would no longer bear any real relationship to “market” conditions, so how would this laborious exercise contribute to price stability? If the goal is to maintain a fixed money supply, why not just order the Treasury to issue a fixed number of tokens, declare them to be the sole official national legal tender, and refuse to issue any more? The government could do that; but again, do we want a fixed, non-inflatable money supply? As long as money is lent at compound interest, keeping the money supply “fixed and stable” means the lenders will eventually wind up with all the gold.
Some gold proponents have proposed a dual-currency system. (See Chapter 35.) The fiat system would continue, but prudent people could convert their funds to gold coins or E-gold for private trade. The idea would be to preserve the value of their money as the value of the fiat dollar plunged, but what would be the advantage of trading in a gold currency if the fiat system were still in place? Why not just buy gold as an investment and watch its value go up as the dollar’s value shrinks? The gold could be sold in the market for fiat dollars as needed. Again, you can capitalize on gold’s investment value without having to use it as a currency.
The “Real Bills” Doctrine
If using gold as a currency is plagued with so many problems, why did it work reasonably well up until World War I? Nelson Hultberg and Antal Fekete argue that gold was able to function as a currency because it was supplemented with a private money system called “real bills” – short-term bills of exchange that traded among merchants as if they were money. Real bills were invoices for goods and services that were passed from hand to hand until they came due, serving as a secondary form of money that was independent of the banks and allowed the money supply to expand without losing its value.8
The “real bills” doctrine was postulated by Adam Smith in The Wealth of Nations in 1776. It held that so long as money is issued only for assets of equal value, the money will maintain its value no matter how much money is issued. If the issuer takes in $100 worth of silver and issues $100 worth of paper money in exchange, the money will obviously hold its value, since it can be cashed in for the silver.
Likewise, if the issuer takes I.O.U.s for $100 worth of corn in the future and issues $100 worth of paper money in exchange, the money will hold its value, since the issuer can sell the corn in the market and get the money back. Similarly, if the issuer takes a mortgage on a gambler’s house in exchange for issuing $100 and lending it to the gambler, the money will hold its value even if the gambler loses the money in the market, since the issuer can sell the house and get the money back. The real bills doctrine was rejected by twentieth century economists in favor of the quantity theory of money; but Wikipedia notes that it is actually the basis on which the Federal Reserve advances credit today, when it takes mortgage-backed loans as collateral and then “monetizes” them by advancing an equivalent sum in accounting-entry dollars to the borrowing bank.9
Professor Fekete states that the real bills system works to preserve monetary value only when there is gold to be collected at the end of the exchange, but other commodities would obviously work as well. One alternative that has been proposed is the “Kilowatt Card,” a privately-issued paper currency that can be traded as money or cashed in for units of electricity.10 The nineteenth century Greenbackers relied on the real bills doctrine when they contended that the money supply would retain its value if the government issued paper dollars in exchange for labor that produced an equivalent value in goods and services. The Green-back was a receipt for a quantity of goods or services delivered to the government, which the bearer could then trade in the community for other goods or services of equivalent value. The receipt was simply a tally, an accounting tool for measuring value. The gold certificate itself could be considered just one of many forms of “real bills.” It has value because it has been issued or traded for real goods, in this case gold. Some alternatives for pegging currencies to a standard of value that includes many goods and services rather than a single volatile precious metal are discussed in Chapter 46.
The NESARA Bill: Restoring Constitutional Money
One other proposal should be explored before leaving this chapter. Harvey Barnard of the NESARA Institute in Louisiana has suggested a way to retain the silver and gold coinage prescribed in the Constitution while providing the flexibility needed for national growth and productivity. The Constitution gives Congress the exclusive power “to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.” Under Barnard’s bill, called the National Economic Stabilization and Recovery Act (NESARA ), the national currency would be issued exclusively by the government and would be of three types: standard silver coins, standard gold coins, and Treasury credit-notes (Greenbacks). The Treasury notes would replace all debt-money (Federal Reserve Notes). The precious metal content of coins would be standardized as provided in the Constitution and in the Coinage Act of 1792, which make the silver dollar coin the standard unit of the domestic monetary system. To prevent coins from being smelted for their metal content, the coins would not be stamped with a face value but would just be named “silver dollars,” “gold eagles,” or fractions of those coins. Their values would then be left to float in relation to the Treasury credit-note and to each other. Exchange rates would be published regularly and would follow global market values. Congress would not only mint coins from its own stores of gold and silver but would encourage people to bring their private stores to be minted and circulated. Other features of the bill include abolition of the Federal Reserve System, purchase by the U.S. Treasury of all outstanding capital stock of the Federal Reserve Banks, return of the national currency to the public through a newly-created U.S. Treasury Reserve System, and replacement of the federal income tax system with a 14 percent sales and use tax (exempting specified items including groceries and rents).11
The NESARA proposal might work, but if the government can issue both paper money and precious metal coins, the coins won’t serve as much of a brake on inflation. So why go to the trouble of minting them, or to the inconvenience of carrying them around? The problem with the current financial scheme is not that the dollar is not redeemable in gold. It is that the whole monetary edifice is a pyramid scheme based on debt to a private banking cartel. Money created privately as multiple “loans” against a single “reserve” is fraudulent on its face, whether the “reserve” is a government bond or gold bullion.
Precious metals are an excellent investment to preserve value in the event of economic collapse, and community currencies are viable alternative money sources when other money is not to be had. But in the happier ending to our economic fairytale, the national money supply would be salvaged before it collapses; and what is threatening to collapse the dollar today is not that it is not backed by gold. It is that 99 percent of the U.S. money supply is owed back to private lenders with interest, and the money to cover the interest does not exist until new loans are taken out to cover it. Just to maintain our debt-based money supply requires increasing levels of debt and corresponding levels of inflation, creating a debt cyclone that is vacuuming up our national assets. The federal debt has grown so massive that the interest burden alone will soon be more than the taxpayers can afford to pay. The debt is impossible to repay in the pre-Copernican world in which money is lent into ex-istence by private banks, but the Wizard of Oz might have said we have just been looking at the matter wrong. We have allowed our money to rotate in the firmament around an elite class of financiers when it should be rotating around the collective body of the people. When that Copernican shift is made, the water of a free-flowing money supply can transform the arid desert of debt into the green abundance envisioned by our forefathers. We can have all the abundance we need without taxes or debt. We can have it just by eliminating the financial parasite that is draining our abundance away.
Any system that allows fiat interest is inherently unstable.
I agree with the above. I think it’s wise to realize that the problem is the fiat creation from nothing, however. Charging in interest of money conjured up from pen and ink is an abomination. On the other hand, if a borrower puts up collateral, then there really is no loan in the market sense but a simple bank monetization of the “borrower’s” assets. The more wealth I bring to the table for a “so-called loan”, the more interest I will pay under current conditions. Nuts !
This is where the idea of a flat fee monetization service would make some sense. The backbone of the liquidity creation (currency) would still go back to real economic productivity that has been done in hindsight and is not a speculation for the sake of diciplined currency supply creation.
I wonder if people may eventually agree on what asset would be best used for the collateral of the note creation ?
the whole point of public debt-free money is so that there is no “fee” paid for the use of legal tender to engage in trade, which also takes out the chaos and erratic supply of “free market” currency based on such things as beaver skins, tobbacco, grain, and spanish gold notes. not only is there no fee, the government spending the notes into circulation means no taxation. having money creation replace taxation isn’t socialism, it is stopping the redistribution of wealth from the producers to the non-producing banks and the non-producing government.
There should be a fee for loans but it should not be set by banks. It should be set by agreement. The fee should reflect potential risk of any perceived future value of the money used in the loan. In the case of fiat that was once created from nothing, there is always a greater amount of inherent risk due to currency inflation (supply). This reference is to a true loan, however, based on currency already in circulation and not a credit creation “loan”. (eg … you personally lend me dollars for a house down payment) In the case of a rare commodity such as gold, the tendency would be to have very low and stable rates, by comparison. Nobody’s going to print gold.
Since collateral represents real wealth already created, as a measure of currency creation supply disipline (just as gold is) a person putting up collateral is not really borrowing money at all, but simply having his/her assets “monetized” by a credit creation service. That fee should be flat and should not be tied to the amount of capital involved. In reality, there is no loan. Why should I pay more in total interest cost for bringing $100,000 of real welath to the table versus someone who only brings $5,000 ? Should I be punished for having worked harder and for having saved ?
As for money being conjured up from thin air and spent into circulation by zealous politicians, it’s utter madness and a complete blind leap of trust, IMO. Only when legislation is soley in the hands of the people, via direct participatory democracy would this work and we are not there yet. Again, this involves the all important element of structure, something people tend to overlook. If you think today’s political system attracts crooks and psycho’s, just allow politicians the ability to spend money into circulation and see how crazy the system gets. Utter madness ! We’ll have to get well beyond the Age of Grace before this will happen in proper order.
There’s a great difference between idealism and actual practice of “good ideas”. Good ideas are a dime a dozen.
Jere …. Any form of hierarchical or centralized currency system will lead to totalitarianism. You think it’s a monetary issue but if you look deeper, you’ll see that it is predicated on a structural issue of centralization or hierarchy.
All fiat systems that are predicated on the monetization of debt, regardless of the interest that may or may not be levied MUST have centralization because of the writing of IOU’s.
Only assets can be decentralized because the weath creation (real economy) takes place before any representative derivative (currency) is created.
It’s centraliztion that leads to dictatorship. Structure is the guiding issue that creates the focal point for greed and consolidation of power. This has been ever present in society going right back to the original formation of supply chains at the beginnings of modern history. We had to eat. The structural die was cast and we have operated within a form of power consolidation ever since. This was simply a matter of capability/incapablility and could only be overcome within the information age. We’re here.
It is only now that asset based currency can be decentralized with efficiency. The creation of the fiat dollar, ironically , has everything to do with this development because a distinct measure that works in real-time had to be developed. That is fact, not theory. You could say that the development of the pure fiat dollar was a “necessary evil” in order to create a real-time measure. The USD may act as a currency within the fiat paradigm, but within a real-time gold paradigm , where the gold is money, the dollar still has an important role as a measuring tool for weight. keep in mind that things are priced in currency and there must be a “bridge” for payment in gold weight.
you missed the forest for the trees. the point is for the currency to maintain stable valuation. centralized issuance allows for the quantity and thus value to be regulated. allowing the bankers to control the quantity is a recipe for disaster.
Stable valuation is based on supply dicipline as per the laws of the market. Trust my understanding of this. I was actually born on the 4th of July.
Stable valuation has never been governed well by the elite or any small exclusive group in a hierarchical or centralized structure…. not for long. The issue of private versus public is a red herring. Greed and temptation get in the way on the basis of structure, not whose playing at the apex of power within the structure.
To think that politicians are more noble that banksters is a leap of faith on your part and your choice. This is a structural concept and it’s quite unavoidable if we maintain structures that consolidate power.
The solution is to decentralize power and let the whole market decide the issus of supply and demand. This is why asset based money works best …. if and only if the asset based nature does not take away from the issues of liquidity, however. It has in the past. Historically, gold systems of the past have had a great challenge with logistical issues and liquidity. Thanks to the age of information, this has been overcome in the last 20 years.
Weighted gold title (ownership) is now digitized and used as currency.
The World of Oz
The dilemma of currency is that most countries seek to “manipulate” its value to gain political advantage over their rivals.
Fiat (paper notes) could be utilized IF, and ONLY IF they were always redeemable in hard money like pure precious metals like gold or silver. “Payable to the Bearer on Demand in Gold or Silver”.
Imagine fiat note denominations in weight of gold or silver, say from .25 troy ounce to 100 troy ounce notes would be universally exchanged across political borders as long as the issuing government remained in good redeeming standing. The notes would have to be established, recognized and redeemable without fear of government defaulting, otherwise people, businesses, and countries would refuse their UNIVERSAL use. The countries with unimpeachable credentials and an unassailable redemptive track record would become the new Reserve Standard Bearers by world choice default.
Business could be conducted in the US, Mexico, Canada, Germany, India, China etc. using both these gold and silver notes or coinage denominated in precious metal weights and not in national currencies denominations, thus all goods and services would be priced universally in gold or silver exchange weight.
I envision people across the world having pockets full of both notes and coins denominated in universal troy ounce weight currency issued by multiple governments across the world, a system of currency that has universal value and merit and “mostly” free of political chicanery, i.e. central bank forgery and counterfeiting.
Sorry you currency speculators would simply be out of luck.
I believe most all people and cultures would have no objections to holding and exchanging currency denominated say for example… 10 German 0.5oz gold coins, along with 15 French, 0.25 oz gold coins, 10 1oz silver Greek coins, 3 Indian 2oz gold notes and 5 Chinese 1oz Pandas etc., all redeemable at any private or public bank or exchangeable at your local convenience store or big box retailer for likewise priced and denominated merchandise.
Private bank accounts would be denominated in gold or silver weight, i.e.your balance is 123 oz Silver and 51 oz Gold and you have a 250oz gold line of credit available.
A multi-metal system would be naturally self regulating in that the scarcity or abundance of any particular metal would drive out the weaker metal by common demand and supply forces
Essentially precious metals would continue to be the universal currency as they have historically been for the past 5 thousand years.
Ellen,
You truly DO have my sympathy! I bought and have read your book and must say that it is one of the clearest exposes any person could ever hope to encounter in charting the murky depths of what should be a simple subject, ‘monetary theory’. Yet, when I read the comments here, I am absolutely baffled as to the thick headedness of the average person.
It’s simple! The problem is NOT fiat money! Money is a ‘tally’ of who-sold-what-to-who. Nothing-more-nothing-less. “It’s an accounting mechanism dim wit!”
Should we place some imaginary intrinsic value on pencils and paper due to their roles as ‘stores of value’ in the accounting process? (I’m sorry, I’m dating myself, we should be talking about electrons now shouldn’t we. Nobody uses pencils and paper to do accounting.)
Based on what I have read both in your book and in your articles, it is clear to me that we are in full agreement as to both the problem and the best solution(s) to the problem, but how can we have any hope of success when the average person can’t even read and understand what, in my mind, is the simplest concept?
Gold? Boneheads, why don’t you fashion an anchor out of it, tie it around your necks then jump into the ocean! You’d be doing yourselves and the rest of us a favor!
Ha! thanks.
John …
Since fiat currency is created from “pen and ink” and therefore, must have centralization, how on earth can you entrust a small group of people with that responsibility ? We’re dealing with the absolute power issue here.
When the accounting numbers get so large in proportion to real economy, the system fails ….. and they always have. History has proven this and is doing so again. Ellen wants to simply change the cast on the same stage and possibly move the stage. That stage still has centralization at its core. Decentralization needs to be brought right down to the individual for a currency to work properly on a long term basis.
A fair system must have decentralization to keep it honest and balanced. On the basis of decentralization, real assets must be utilized. We cannot all run around writing IOU’s. Look what OTC derivatives have accomplished.
You will have your day and eventually come to discover that the ultimate fate and intention of the free floating fiat dollar , post Bretton Woods, was/is to serve gold as a real-time measure for payment in bullion. Everything else in the dollar’s life cycle has been a process orientation of necessary evil in its destiny as a real-time tool for the 21st century …… just as “the script” called for.
No debt. Instant liquidity.
Rooster, we’ve rehashed this ground far too may times for me to believe you are sincere. You talk about so many things you either don’t understand or wish to deliberately obfuscate. Please read aloud the following, carefully pronouncing every syllable. You might surprise all of us.
“Fiat” currency is created by edict of law, or decree, by the “sovereign” taxing power in any given setting. That “sovereign” was one a king or queen, prince, duke, etc. The American Revolution was all about establishing that sovereign power belongs by and through God, to his created human beings: us. Stated another way, “fiat” money is simply “legal” money in any given area over which the issuing authority holds the sovereign trust of the people to issue edicts, laws, decrees, and assess taxes. The power to issue and control money has gone hand in hand with the power to levy taxes since the first archeological evidence of these things, many thousand of years before Christ.
Money and taxation can be tools, wisely to advance a culture or civilization, or greedily to greatly retard it.
Any foolish attempt to return to a gold standard, or any other commodity-based standard that can be manipulated or “cornered” is suicidal. It will enrich less than 1% of the wealthiest beyond imagination, and will leave the other 99% in varying degrees of debt poverty and slavery. That is the ultimate in Totalitarianism.
But if that is what you want, you are well on your way to having it “your way”. I hope you can stand your own poison. But millions will die without dramatic systemic changes. Please read Ellen’s book.
i think a lot of these people are just that brainwashed by the banker funded propoganda of the ludwig von mises institute and the various other funded stooges, such as the lew rockwell, g.e. griffin, ron paul, and the libertarian party [neo-feudalist party of the oxymoron of anarcho-capitalism], who were funded to catch and herd all the stray cats who recognize there is something wrong with the mainstream fraud.
they believe gold is “sound” and “honest” money… that owning god’s bounty and loaning it at interest, even fractionalized, is “sound” and “honest”… they believe in the free lunch of holding gold as it’s value increases due to demand as a means for storing wealth. they hate the idea of the state providing a free lunch, unless it is the state providing them a free lunch. and when you point out the deflationary faults of gold as money and the how a gold standard is debt paper based on fractionalized reserves of gold, they always resort to defending an anarcho-monetary system, where the free market will decide that fractionalized gold is the best money.
they believe in the redistribution of wealth through deflation but not the redistribution of wealth through inflation.
they believe that you can work hard and buy all the land, and have share croppers and buy humans as slaves just because you own god’s land and god’s gold through statist fiction known as title to god’s land and god’s gold. they believe the strongest and fittest shall own all the land, gold, and serfs not born into wealth.
Mr. Rooster,
Sorry I haven’t been back here for a few weeks. Hence did not see your reply.
“Since fiat currency is created from ‘”pen and ink”‘ …” Excuse me?
My friend, ALL currency is FIAT currency by definition:
“By fiat, I decree that this piece of shiny metal is ‘equivalent’ to 6 chickens, 1 cow or 2 pigs.” or
“By fiat, I decree that this piece of colored paper is ‘equivalent’ to 6 chickens, 1 cow or 2 pigs.”
It is the action of the government in the form of Legal Tender Laws (legal fiat) that causes something to change from being just another commodity to becoming currency (a medium of exchange).
Jere says that “fiat” money is “legal” money. I would state that everything that we in society recognize as ‘money’ is “legal” money. It is law that gives it recognition as money, period. Therefore, if we were to go back on the Gold Standard, it would be by “fiat” (law).
Everything else is barter, pure and simple!
Ms Brown,
I am baffled by the comments here. People appear to be agreeing with what you are saying yet it is painfully clear that they either have not really read the article or have done so and are suffering from Cognitive Dissonance. They still don’t get it!
I would have thought the 2 cute scenarios depicting the Basket Maker and his fellows on the desert island should have convinced most people that “sound money” is not/ should not be commodity based.
Clearly, the conditioning is too deep. I have become very disillusioned with my fellow humans. When given a choice they seem to have a knack for NOT choosing that which is in their own best interest. They are definitely their own worst enemy.
Oh well. I’m not sure any of this is going to matter. As I see things, in the not-too-distant future, a pound of corn seed (non-GMO, of course) will be worth more than 100 pounds of gold or a bushel of colored bits of paper. (although from viewing the photographs of Weimar Germany, I have learned that paper will facilitate starting a nice cheery fire!)
John, just to give you some insight into the mind of a “gold-bug”, I don’t feel cognitive dissonance here, as it’s clear that the free-market can provide better solutions than a centralised authority can. These two articles from The Daily Bell (link below), summarise the arguments against “greenbackers” more eloquently than I can.
http://www.thedailybell.com/496/Ellen-Brown-Web-of-Debt.html
http://www.thedailybell.com/548/Ellen-Brown-controversy-continues.html
Also, the first of the basket maker scenarios ignores the fact that the gold coin could be divided into smaller parts to satisfy demand. Other currencies could also spontaneously arise (such as shells, etc) and compete with the gold coins. It is the (assumed) centralising authority (limiting money to gold coins) that is damaging the economy on the island.
you might want to consult wealth of nations by adam smith for a debunking of commodity-based currencies.
it all goes back to who controls the quantity. who picks whether gold or sea shells are used. who picks what banks can fractionalize. who picks what is for payment of debt and taxes. who profits on what is picked.
commodity-based currencies favors those who own the land which sea shells or gold is found. commodity-based currencies favors the bankers who issue it as debt. commodity-based currencies are at the expense of the producers of others commodities and services who must pay their debt and taxes in the chosen and annoited currency by government and banks and the market. a public debt-free currency benefits the public as a whole since the tax payer owes less taxes to the government and less interest to the bankers. it prevents the special interest of collecting interest on national debt by wealthy interests who lobby government for wasteful deficit spending so that their “investment” is secured with the force of the government paid by the tax payer, whomever is engaged in profitable production.
Keith,
Good to see there are still thinking humans out there. You have hit on the two main issues:
- Who gets to decide? and
- Which device will “represent” the REAL value: that of traded goods and services.
I notice in your profile you list Computer Science as your degree so I’m sure you will agree that “Electrons” would make the best “representation” for the value of all traded goods and services. This is especially true considering the fact that we are already doing it all around the world.
We conduct trillions of dollars in trade every day on secure systems and the cost of the exchange (“the money”) is practically zero! Electrons are cheap!
Yes, on occasion security can be compromised, but overall it works and there is very little money lost to theft or fraud from hacking in proportion to the total volume of trade conducted.
they don’t read the articles. they just assume if you support anything that lincoln supported and don’t support everything that ron paul supports that you’re a communist, socialist, nazi, and anti-christ. they believe the “free market”, ironically enforced with the statist fiction known as title to land, is everything that is good, and that the government is everything that is evil. they believe cults, tribes, colonies, banks, and corporations shall rule, or perhaps that government shall rule, depending how much of a free market they’re trying to promote. they believe there is nothing wrong with charging a toll to walk down a road, nothing wrong with having private police forces and private courts, and nothing wrong with owning all the land… but there is something wrong with zoning laws :O
I gotta weigh in here.
I live in the Yukon. Every time I go to Dawson City, I see the effects of the gold standard: long valleys of centipede-like rock piles with barely a few scragly willows trying to grow. Those rock piles were left there by the big placer mining companies about 90 years ago, and still nothing will grow on them. The dredges were powered by electricity (yes, in 1902!) created by a dozen power dams that each destroyed a salmon river forever. All this for what?
Right now, there is a new gold rush going on in Dawson City. They may have found the mother load finally. Mining people always say “we don’t do it like we used to” but there are still ecological disasters wherever they go, and the public is always left with the bill for the cleanup. Why do this for a metal that we get almost no practical use from, and which is sitting unused in vast reserves, consuming public resources around the world to protect it from theft.
The Saalish (where Vancouver is now) used special sea shells, which had to be collected by free diving in the ocean, as their main currency. There was also obsidian and oolican grease on the coast (the oolican are dead now) – valuable and transportable – which were used as trade media. The early traders used various tokens that represented stock (the real kind of stock) in their trading post. Canada’s first currency was a coin (with the beaver that’s still on our nickel) that equalled the value of one top-quality beaver pelt. The idea of pegging a currency to some sort of consumer price index is intriguing given modern technology.
Gold fever is an incredibly destructive disease, both to the inflicted and to the planet. Get over it. Gold is no more a “real asset” than lead or moon dust, and it doesn’t light a fire like linnen-paper.
As to the decentralization of money creation – sounds great. Still, if the government controls and regulates the creation of money (which hasn’t happened for some time), then that creation is no more totalitarian than the government is. Preventing totalitarianism is all about ‘education’ rather than ‘indoctrination’ of the masses – which also hasn’t happened some time.
And when critisizing dictatorships, always remember that a benign dictatorship is the best government any of us could ever hope for. If we could only figure out how to set it up reliably… And the majority usually isn’t right, at the end of the day.
You can’t trade unless you’re digging gold out of holes in Dawson City and poking it down into holes in New York City! How dare you want to trade a loaf of bread for a dozen eggs without having gold!
“We are digging silver out of certain holes in the ground in Nevada and Colorado and poking it down other holes in the ground in Washington, New York and San Francisco. We are spending great sums in useless ‘public improvements,’ and are paving pensions under a law which seems framed but to put a premium upon fraud and get away with public money.” — Henry George
As already pointed out – and is clear from Web of Debt – money is simply an accounting mechanism: there is nothing special about gold. What matters is the productive capacity of an economy. The issuance of credit should be about realising that productive potential and paper is fine for that.
The real problem as I see it from a reading of Web of Debt – and looking around me at the state of the world economy – is trusting the issuance of credit to the private sector. This privilege should be considered as important as the defence of a nation: not something to be left in private hands.
If the private banking system has a choice between sound management of an economy for the good of all over 50 years and making a million a year, or crashing it overnight for a billion, what’s it gonna choose?
The private banking system serves shareholders – any benefit to the economy is incidental.
I understand concerns over Government corruption, but at least Government is more accountable than the private banking sector, and as pointed out in Web of Debt the effectiveness of the public sector has perhaps been unfairly reported.
Hopefully the world’s public will begin to see the power to issue credit as the responsibility of Government and not a private banking sector intent only on maximising shareholder value.
Paper is not fine at all, Michael. All fiat currencies in history have failed. The paper you refer to has to be issued by someone or some entity and it’s the structure of that entity to consolidate power that creates the “power craze” in the final outcome. Only decentralizating the structure can overcome this consolidation problem. History doesn’t lie.
On the basis of needing a free market and a decentralized powerbase (the whole market), assets like gold simply become an effect of that need. Structure is key. The choice of currency simply becomes the effect.
What you see as a “private problem” is a actually an issue of structure. You can change the faces but if it still employs a centralized fiat system, you just repeat the problems of history and mankind remains on the karmic wheel …. round and round and round.
Currency exists and has value solely due to the existence of society. Take away society and all fiat currencies become worthless. Without society, commodity based currencies would only be worth the salvage value of the commodity from which they are made.
Because all currencies have additional value only when they are accepted as currency by a society, only the society’s governing bodies can bestow the privilege of creating the currency. Like it or not, currency can only exist when there is enough centralization to form a coherent society. But recognizing that currency and money exist because of society as a whole, no private entity has the right to create and control the currency. Instead, it must be managed by the governing authorities for the benefit of the society. Otherwise, private entities, operating for their own benefit, will quickly abuse the privilege and harm the rest of society.
Although centralization may contribute to our current economic problems, private control is a bigger problem. Pivate banks only lend (create) money when they believe the borrower will pay them back, in full, with interest. During times of inflation, it is easy for economic losers to repay loans, so Banks will lend even to high risk borrowers. This further inflates the money supply. During deflations, even the most trustworthy, highest credit scoring borrowers will have dfficulty repaying loans, so Banks refuse to lend even to the lowest risk borrowers. Thus, further deflating the money supply. In this case, individual actions that are in the best interests of the Banks and their shareholders, are opposed to the best interests of society. Only government, by exercising its money creaion powers, can overcome this problem.
we were on a gold standard during the great depression. the dollar increased in value during the great depression. gold has a terrible history.
That was very much a function of having a fixed peg. That was not a gold problem. That was a pegged problem.
the greenback didn’t fail… it traded on par with gold when it was demonetized by the bankers, causing a deflationary depression since it also coincided with the demonetization of silver.
expensive money has a history of failure. cheap money as a history of helping through difficult times and building empires. copper and brass coinage built the roman empire. gold coinage destroyed it.
and one can never seem to pinpoint a goldbug into whether they support “free market” of currencies or a hard currency, whether the hard currency can be fractionalized, who determines what commodities are accepted for payment of taxes and debt (depending on banking charter laws), whether wal-mart can dilute the money supply by offering a new monetary product based on the value of wal-mart. they seem to advocate a deflationary hard currency on one hand and an inflationary free market of currencies on the other hand, while ignoring all the key questions, such as what is accepted for payment of taxes. goldbugs are slicker than bill clinton. they didn’t have sexual relations with gold, they’re for a free market of currency, depending on your definition of fiat.
… they seem to advocate a deflationary hard currency on one hand and an inflationary free market of currencies on the other hand, while ignoring all the key questions, such as what is accepted for payment of taxes. Keith Gardner
The question of taxation is very important. I suggest a way which would allow fair taxation and private money supplies is for government money to be pure fiat and only be legal tender for government debts.
Good comment. I suspect some gold-bugs are inadvertently tools of the banking establishment they suppose they oppose.
Zarepeth …
Your analysis of needing centralization is bang on for the history of mankind prior to the age of information. Now, however, we have the opportunity to create a new structures , altogether, ones that weans out the “greed factor” at the apex (center) of power. Power corrupts.
Thanks, also, for the admission that inflation and deflation are huge problems. This is based on the whole “money from nothing” ability that debt currency allows. It matters not whether the currency is centralized under private or government control. Again, power corrupts ….. and centralization will attract those who hunger for power.
Your idealism needs real world review against the backdrop of history. We are literally in “bad shape”.
You cannot pour new wine into old wineskins.
I think his argument is overly harsh toward Greenbackers though. Congress taking back the issuing power would be a step in the right direction.
Here are a couple of websites that argue against the Greenback philosophy.
http://www.lewrockwell.com/north/north891.html
http://www.garynorth.com/public/department141.cfm
Enjoy.
Any philosophy that centralizes the issue of fiat currency is Keynesian and leftist …. or it will arrive there. The only way to decentralize the power is for money to be asset based (or asset backed). That requires the actual creation of work (real economy) BEFORE currency is issued …. that or a rising currency price for the assets already on reserve, thus the need for a free floating system. (and the severing of the fixed peg @ $35.00/oz)
Split the responsibilities ?
Let the centralized power structure create the paper (measures) (as they do now) and let the market create the weight (as it does now). Now all we have to do is set the example that weight is the real money and the measure had to be created as a form of free floating currency, regardless of its illigitimacy, in order to arrive at its true real-time purpose …. as a measure for the commodity money. The whole issue revolves around real-time, so you can buy a stick of Juicy Fruit with bullion.
There was no way to create real-time gold backed digital currency without first developing real-time debt based fiat currency. If so, I want to hear it. Debt currency creation was a process, not an end ……. and a necessary evil.
Read the script ! Never forget the gifts of the Magi !
I submit that the “real bills doctrine” is bogus if the money issued is the government enforced monopoly money supply.
Ellen, in your debate with Gary North, you might question if he is in favor of a government enforced gold coin standard. I think North claims to be a libertarian so any support for a government privileged money supply by him for the private sector would be pure hypocrisy.
You go girl! I am a libertarian myself so I think government and private money supplies should be separate. That should satisfy anyone worth satisfying,imo. In other words, government money should be legal tender for government debt ONLY, imo. However, if I had to pick between a government enforced fiat currency, I would chose pure fiat (paper or electronic bookkeeping entries) over gold any day.
Good luck in the debate.
More extremely solid systems dynamics (ala MIT) based research squarely debunking the notion that debt-free money is inherantly inflationary, unstable:
http://www.youtube.com/user/AmericanMonetaryInst#p/u/6/AfiKM1F1KBA
Professor Kaoru Yamaguchi’s work demonstrates the workability of the American Monetary Act (and a debt-free money economy generally…).
His system dynamics analysis is what economists use to evaluate economic proposals. They rely upon them deeply. Professor Yamaguchi’s study of the American Monetary Act specifically, drew some key conclusions. In particular, that using the American Monetary Act would pay off the national debt and allow for infrastructure (jobs expansion) to go forward WITHOUT INFLATION. You should realize that this wipes out the main objection that so-called economists minds and the poor people they’ve influenced have been programmed to argue “That would cause inflation!” Yamaguchi’s scientifically-based model answers “The American Monetary Act does these things without inflation.” And he continues, stressing the importance of debt-free money to economic well-being.
Joe Bongiovanni and Peter Young : brief interview with Professor Yamaguchi, which is now at the AMI YouTube site: http://www.youtube.com/user/AmericanMonetaryInst#p/u/6/AfiKM1F1KBA.
I most go on record as stating that I am in favor of the “debt-free” government creation creation of money, especially for the purposes of certain “public works’ type projects and the funding of “Public Utilities”, etc.
However, what has not been stated in any of the arguments favoring this paradigm is that it is NOT free. It is the equivalent of a hidden tax on all citizens of the country.
When the government pays the newly created money into the economy, it will be eventually be spent on various goods and services that are now demanded by those that the government paid originally with that money.
Extra effort must then be expended by society to create those “demanded” goods and services.
The only and the true benefit of this paradigm is the lack of interest to be paid. This is, of course, a huge benefit, but society will still end up paying for the new road or power plant that was constructed with the “debt-free” money.
Hopefully, society as a whole, will benefit from these “public” assets.
i just bought a pair of 512mb sticks of 45 ns pc800 rdram for my dell dimension 8200 off ebay for $45, and they’re more rare than gold. i can buy 2 gb of high speed ram for $90. your gold dealer is ripping you off. internet explorer can’t run on gold.
Precisely why gold is such a good form of money, Keith.
Should a society consume that which it chooses to use as money …….. or should money stay in circulation to serve its function in greasing the wheels of trade ? Think about that.
Gold does not get its monetary value from its non-financial utility (economic use). It gets value from the fact it has intrinsic value on the basis that a finished coin or wafer is only created from real work and the laws that govern supply and demand. This inability to inflate the gold supply is what makes gold so ideal as a currency. It’s a free market safe-guard.
The historical problem with gold was liquidity. That’s now been solved since the trade value is allowed to fluctuate with market fundamentals and we can send gold ownership title (the gold currency) to each other via the internet. I can buy a stick of gum (or a RAM stick for my PC) with fully backed debt-free, gold based currency, by weight, in the twinkling of an eye. This is what gold payment processors support via the age of information and real-time floating relationships.
How do you propose to improve upon the marriage of debt-free store of value and the instant global liquidity of gold now ??? The only possibility is to find a better material that is intrinsic in value (a measure of hindsight economy) and has more “uselessness” (in the utility sense) than gold ……….. and who’s supply cannot be inflated. Good luck with that one ….. but I hope it happens !
he only possibility is to find a better material that is intrinsic in value (a measure of hindsight economy) and has more “uselessness” (in the utility sense) than gold ……….. and who’s supply cannot be inflated. Good luck with that one ….. but I hope it happens ! therooster
Two words, common stock.
I’m tired now but i’ll post my reasons later.
Comon stock is forward looking and can’t be considered a tangible store of value. You would also have a centralized structure in the issue of the stock and that stock can also be inflated just as stocks are diluted on new isses in the marketplace.
Paper is paper. This is still a non-solution on the basis of inflation of stock supply. stock can be created fro thin air just like fiat currency.
Comon stock is forward looking and can’t be considered a tangible store of value.
Common stock has title to all the unencumbered assets of a corporation. It can easily have present value as well as future appreciation potential.
You would also have a centralized structure in the issue of the stock
Says who? Virtually anyone can form a corporation.
and that stock can also be inflated just as stocks are diluted on new isses in the marketplace.
Yes but the inflation is under the authority of the stockholders and the cost of that inflation is ONLY born by the stockholders unlike gold fiat, for instance, in the event of a new gold discovery.
Paper is paper. This is still a non-solution on the basis of inflation of stock supply. stock can be created fro thin air just like fiat currency.
Common stock is based on the rule of law. If we don’t have that then your gold will be less valuable than copper coated lead.
Why don’t we just skip the gold and use electrons? Electrons don’t cost anything to produce.
BTW, have you checked the “actual cost” of producing gold lately? It is around $550 per ounce. Therein lies the problem with using commodities as money. Their “actual value” (production cost) and their monetary value don’t always coincide. This is nothing more than a playground for the “Money Changers” to wreak havoc!
What the goldbugs refuse to consider:
Fiat money is a way to close out the “money out of thin air written” into their interest bearing gold based contracts. A private lender with government backed power to enforce usury in contracts is just as inflationary as any central bank or treasury department with the power of fiat money creation. Usury is not wealth creation. The Austrians did not “discover” the Time Value of Money Theory. They “invented” it to justify the oligarchy’s system of usury and indentured servitude.
What the greenbackers refuse to consider:
The power to create money by fiat is not safe in ANYONE’s hands. It is simply another form of taxation…almost always carried out without the consent of the governed.
How about this idea:
Drop the idea of issuing fiat money based on claims that such and such new government project is going to increase the wealth of society. MIT mathematics professors willing to issue projections that support someone’s claims are a non-inflation adjusted dime a dozen. Think LTCM.
Instead of running on credit or claims of future wealth creation, put all government projects on cash up front basis. Let governments enact and raise tax revenue FIRST and then “invest” the collected money in projects deemed worthy. Finance future projects out of new taxes collected or from revenues generated from previous projects.
If you absolutely feel the need to inflate the currency (rather than reward savers and pensioners with being able to buy more with their saved wealth) issue new money as a fixed (non-adjustable) percentage of revenue raised in user fees collected at the government built bridge or airport.
There needs to be a verifiable, fixed, self-regulating feedback loop in the money system, beyond the stated good intentions of people capable of rising to the top of any organization. Only if more real tangible wealth is actually created should their be any increase in “money.” Doing work alone (building bridges to nowhere) is not justification for new money creation. Nor is writing and swapping interest bearing contracts (mortgage and CDO fraud).
Wouldn’t it be best to have governments run on a pay as you go basis? Why argue over whether it is better to let the current ruling generation sell the future generation into servitude or rob the previous generation of its savings?
Government exists to serve the community. In a society as large and complex as ours, money is essential for trade. Together, these two things obligate government to ensure there is a proper supply of money for society.
Government can provide this money by either creating it, or delegating the creation to others. For instance, food is essential to society, so government has an obligation to ensure that enough food is produced to feed all its citizens. At this time, food production is held in private hands and works very well, we have more food than we know what to do with.
But how well would society function if money were created by anyone and everyone? Because it is so easy to create money, everone would simply create the money needed to buy the goods and services they desired and soon money would not only be worthless, but people would no longer accept it in trade for their goods and services. So some sort of restriction must be placed upon money creation.
But what restriction would work best? Limit money to some commodity? Prohibit all but a select class of people from creating it? Put creation into the hands of the government? The goldbugs want money creation restricted to the commidity of gold. We have hundreds of years of history telling us that this did not adequately serve all of society. The current banking establishment wants to retain their special privilege. For the past 100 years, they have proven that they are more interested in causing inflation and deflation for their own benefit than in serving society. Give it to the government? It has occasionally been tried. And despite bad press, the government has better served society with fiat money than the banking industry. And both have better served society than gold.
“Government exists to serve the community.”
Yes, in both theory and state run propaganda. Unfortunately, the crime syndicates and high priests who established state power in order to live off the community have rarely seen it this way.
It should also be noted that the largest use of fiat money by state actors has been to prepare for and conduct wars.
BTW: I am agreeing with you that the goldbugs solution is flawed at best or even an outright ruse promoted by dupes. However, let’s take a look at the cases where government has run food production (Soviet Union, Cuba, depression USA, etc.) and then try to demonstrate that having it run the money system (as opposed to facilitate through honest weights and measures) would work any better.
It’s simpler than that, Jim. We don’t trust hierarchies, regardless of who runs them. Bankers and politicians love to thrive in the apex of historical power structures. Gold allows for the change of structure via decentralization. We all have access.
How can you improve on a money system that features debt-free store of value that has instant global liquiidity ??? Answer that one for yourself.
Rooster: My improvement would be to have it recognized that while gold is a debt-free store of value it is not a cost-free store of value. Entropy applies to gold too. All commodities loose their value with time unless additional energy/work is added to the system. (While gold has a exceptionally long decay time, try leaving some of it on a table and see how long it lasts.)
The act of transferring your gold to another person’s hand does not create more wealth. To accept the opposite is to promote the process that got us into the fiat money mess in the first place.
Leave private parties to contract in interest bearing contracts if they wish, but don’t subsidize the usurious transactions with a police, court and debtor’s prison system. Also don’t allow the gold holding private bankers to establish a system of fiat money to give the illusion of being able to settle up on their interest bearing gold-based contracts.
Finally, don’t put the the major gold players in charge by requiring that all taxes be paid in gold such that people are forced to borrow it at interest. That is not a free market.
My question to you: Can enough new gold be brought into the market each year to cover all the fiat interest written into man-made contracts every year?
Jim …. You asked the following. Looks like a page of out Ellen’s book and the question is a great 20th century question dating back to Bretton Woods and beforehand.
Can enough new gold be brought into the market each year to cover all the fiat interest written into man-made contracts every year?
Your question is based on a pegged system for gold and dollars. There is no pegged system. The question is about 40 years late.
Let me clarify.
There are two ways to “balance the books” regarding the supply of gold required when using gold as money.
1) If the system is pegged, then you need to supply the market with more and more gold. Demand is met with the equivalent supply required for growth and liquidity.
2) Don’t supply the market with the physical gold that it requires (because you simply cannot keep up). Consistant with supply and demand laws, this will elevate the trade value if there is no dollar-gold fixed peg. You don’t need to meet demand with weight when you can simply enhance the trade value by way of the market and the supply-demand laws. Now you may further see the rationale of the severing of Bretton Woods and the fixed peg. It was all about getting to a real-time paradigm.
Jim, perhaps I’m mistaking your use of the term “cost free” so please correct me if I have this incorrect….
The fact that cost is involved in the creation of a gold coin, wafer or a gold ingot is actually inherent in gold’s intrinsic value because it must abide by the laws of the market and as such its costs are part’n parcel of natural market law resulting in supply discipline. In short, you cannot create too much finished gold in relation to demand because the market will govern your desire to do so. Your business would fail. This is relative to the market driven store of value, as you may know. Gold’s finished weight is a testament to the economic activity of hindsight. Drop a brick on your foot and you’ll know for sure. Classical bank derived arguments would have you believe that the above characteristics of the free market for gold are a detriment. They are not. They have everything to do with store of value properties and the ability to establish fair prices for goods and services when gold is used as a currency. In short, you can call gold a “barter standard” when used as money. You won’t create finished gold from pen & ink any more than you’ll create your car or your house from pen and ink.
Where historical gold monetary systems (gold systems, not gold itself) have fallen short of availing themselves as a good form of money can be found on the liquidity side of gold’s use as a currency. Gold could be cumbersome, heavy and inefficient for buying small items and making proper change. This has been overcome, however, on the basis that independent, competitive, market driven services (much like the wire service for fiat) can take your fully backed gold ownership, digitize it and transfer it to another party in exchange for some other market consideration whether it be a product or a service that you purchase.
Money that has no cost is fiat from thin air. It’s a legal concept, not a market concept, thus its reliance on the “legal tender” label. The label’s a crutch, one that gold doesn’t require because gold is a market currency. Whether that debt based fiat is created by a bank or a government is immaterial to the following point. Its issuance is controlled within a hierarchical structure (or centralized) where the apex of power , controlled by few, has its hand on the supply lever. It is this very issue of “money from nothing” (no cost) that creates the damage. There is always a temptation to inflate. Your opinion may differ but that is only based on your trust in the hierarchical power of the day. I much prefer to trust the fully organic characteristics of a free market commodity, especially now that its weight can be digitized (the actual currency in this case) and transferred to a merchant’s account in full payment and exchange for a jelly bean. There is no debt creation in that transaction. It is instant and completely closed out in the exact same spirit as barter. The efficient implementation and system manifestation simply needed two elements of progression to take place that have occurred over the last 40 years.
1) Gold had to float in its trade value. Current gold processors work in real-time, therefore the peg had to be removed.
2) Once gold’s trade value could float according to market fundamentals, then an efficient method of splitting gold weight had to be devised in order to take advantage of its enhanced value as a form of money. That gold splitting device is the digital currency payment system of the 21st century that digitizes the ownership of weight and transfers that title to the receiver of the payment.Payment are weight based.
Here’s the kicker for you to consider. Please let me know where I can send you an invoice for this critically important information. : – )
The creation of the free floating dollar, as an evolution, was indispensable to the development of the the creation of a real-time gold backed digital currency, by weight. This is fact. It is not anyone’s opinion. If you fully understand how gold payment processors work, you will also know that the use of the dollar is inseparable as a measuring tool to measure the appropriate amount of gold weight to send from A to B. It’s a real-time market function. The dollar’s development , as a currency, was part of the process in arriving at this point where the dollar’s ultimate role is as a mathematical measuring tool that is integrated in the gold processors algorithm because the gold is almost always paying for something that was/is priced in fiat currency. I’m hopeful that the penny may now drop for you as to why the creation and centralization of the dollar, by way of Bretton Woods, was so important. It was about the structural centralization to get all the chess pieces on the same board. The fixed peg between currency and gold had to be removed in order to make way for real-time relationships. Even though BW is not functional at this time, we still have that structural characteristic of dollar centralization and …….. for now. It was part of the process.
I’m not going to argue about a very mute point concerning gold degradation over time. You’re talking about an exceptionally long time here based on its metallurgical properties.
Never forget the gifts of the Magi.
Rooster,
Walk me through how a mortgage contract is priced and paid out under your proposed digital system.
As a metallurgist, my point about gold degradation was to open the discussion on the fact that no one is capable of carrying gold into the future without bearing some additional added costs.
While the degradation of gold is negligible compared to a loaf a fresh bread, a holder of gold has to expend labor/energy to preserve its value to him. If you choose to hold on to your gold, you will have to forfeit some of your stored labor or future labor (opportunity cost) to secure the gold you choose to hold.
This is the beginning to the conversation as to whether governments should be in the business of enforcing usury contracted to by private individuals, or worse, act as vehicles to transfer usury payments to private parties across the generations under interest bearing debt-based financing.
For any of the greenbackers listening in, my challenge to you is to explain why you can’t consider a system where a government “collects and spends” rather than “spends and collects.”
There will always be dreamers (and hustlers) with great ideas backed by the finest of minds with projects they think wealth and capital should be spent on. What is so onerous about adding a brake to the system that simply requires that whoever is in control of the government must first raise revenues BEFORE spending them. Having a government running off the net positive revenues from previous real net gain projects seems more honest to me.
Save-spend-save-spend is a better beat to march to than spend-take-spend-take.
Jim …
First, I have to say that the “proposed digital system” is not mine and is a competitive working model and has been since the mid 90′s. Gold payment systems are not new, simply not well known.
At the present time, gold backed digital currency payment systems are simply distribution conduits that make the age old problem of gold payment and gold liquidity a thing of the past. Any lending of gold is a matter of two parties making an agreement. This includes the prospect of lending for a mortgage. Gold on account is actually owned by the account holder, not the institution providing the distribution service. The individual is granted this sovereignty. Jefferson would be proud.
It should also be pointed out that these same gold processors are part of a completion process of a reintegration of the measure and the weight, where the FED creates the measure and the market creates the weight. The difference in the gold money paradigm is that the fiat dollar does not act as the currency, simply as a tool in the real-time algorithm on the basis that the weight is the payment and the dollar simply bridges the fiat paradigm pricing of economic goods and the gold paradigm of weighted payment. In this way store of value is married with instant liquidity so that gold’s historical issues of poor liquidity are overcome. You can buy a stick of gum in an instant and make exact payment for that $0.01 stick of gum with gold title.
There is no need to abolish or destroy anything, including the FED. The right pieces are in place. I find it odd that people sometimes assume that a country’s currency system has to be one dimensional , especially considering that the same country was created and grew under the banner of free markets. How is it that competitive currencies would not be part’n parcel of such a setting ? It’s absurd and I suppose this is all part of the paradigm shift. We can speculate that “legal tender” was part of the process to protect the development of the fiat dollar (and its gold role as the real-time measure).
I fully agree with raising gov’t revenues before spending. This is what gold was intended to do, but the peg got in the way and actually became restrictive. Monetary gold got the reputation of being deflationary but gold was not really the problem. The problem was the lack of a floating , real-time valuation, one that has now been overcome. This does not mean that gold should be centralized under a government or private banking system , however. Keeping gold ownership decentralized within the whole market is the safest structure, IMO. That’s what the gold payment systems support. Moses would agree, thus the great displeasure of centralizing the gold n the golden calf. The vil was not in the gold. It was in the structure. The account holders own their own gold on account within these 21st century models..
You cannot pour new wine into old wineskins.
My two pen’orth.
It may be that spend-save would fall for more dreamers and hustlers than save-spend, but what if this is offset by a greater level of growth?
Although i object to the current system of private money creation, the world has experienced incredible growth over the last 100 years. Would save-spend have been as productive?
There are ways other than purely economic to add a brake to a spend-save government controlling the money supply, e.g. professionalism, targets, public accountability, dismissal etc.
As an aside – why can’t the productive potential/capacity of a nation be considered a commodity, backing that nation’s credit?
Rooster unmask!
You’ve propounded some interesting ideas, many of which merit more development. Are you published or do you maintain your own website?
The US Gold Reserve Act of 1934 required that all gold and gold certificates held by the Federal Reserve be surrendered and vested in the sole title of the United States Department Of The Treasury. The gold the IMF now possess are controlled by its board of governors in which the US Treasury’s claim of 16.74% (the largest), is represented by Tim Geithner.
Where will the government get the gold?
People keep reverting to “what they know” and “what they know” has been cemented by the experience of a top-down paradigm. There is no need for a gold standard to be built in top-down fashion. Each and every person can own gold and circulate gold. Now that we are in the age of information, individual gold ownership can be distibuted by way of gold based payment processors where the ownership title is the thing that gets transferred. The title is the currency. In this way, the title is denominated in weight. Transferring gold ownership allows that currency to support transactions anywhere and everywhere, in real-time, regardless of how a purchased item is priced. The system will ship the real-time equivalent of gold (or other PM) by the weighted equivalent.
This allows for debt-free store of value to be instantly distributed on a global basis. There is no top-down standard required. The market can govern all trade values.
Governments need no gold. They probably want it to maintain some for the sake of not totally losing their dwindling power, but that would be their problem.
The above is based on the ability to decentralize gold, right down to the individual and the ability to decentralized is based on gold’s debt-free and sovereign status. (The debt is already paid by labour/production)
Rooster,
I like your idea of free market money. Two things come to mind—-
Since digitized gold represent the real thing, convertibility on demand would have to be honored and as such, storage and a brick and mortar presence is required. Banks?
The US Treasury does have title to the confiscated gold from long ago. What might be done with this?
Rooster’s Law :
Because gold bullion ownership can be digitized and transfered using real-time valuations (floating) , Gresham’s Law will become obsolete as gold approaches “it’s price” in terms of real trade value.
Gresham’s law was relevent to fixed pricing and the incentive to hoard undervalued gold.
I claim published rights.
This feller helped create the latest world currency, had a spat with the bankers, and left them employ.
Some times, apostates are reliable sources of information:
Before 1913 when the Federal Reserve was formed there was a more free banking system to an extent. These banks worked on a fractional reserve basis issuing bank notes for loans. Banks could pay to be insured by a private insurance company in case of a run on the bank. In return the banks had to agree to keep a high reserve requirement on hand. Additionally, every state had State Charter banks as a with a reserve requirement. If an irresponsible bank went broke it had only a minimal damaging effect on society. Were there recessions/depressions? Yes. However they rarely lasted longer that a year.
We were on a gold standard at that time if i’m not mistaken and we had high growth and innovation that made life better for nearly all in society. There was also little fluctuation in gold. I am not endorsing a gold standard, on the contrary I believe the market should decide. A bank could offer any sort of commodity to back the currency in which it wants. Options for the consumer would only help them store wealth. Additionally, the Treasury would provide a service to its citizens by allowing the citizen to bring their old coins or metals to the Treasury in order to have the coins reminted for a small fee. This would prevent Gresham’s Law from setting in.
In an earlier post someone commented that Rome offered copper and other coins. They still had intrinsic value. We should be able to trade in any coin we like but in order for it to work they would have to be minted to weight , not value. Use the government decreed FIAT currency for taxes and if people wish, they can accept it as a medium of exchange as well. My guess would be the FIAT currency would become obsolete except for payment of taxes as soon as government attempted to print their way out of trouble.
Sure goverment interest free money is a great idea withen a poltical and economic unit that has access to all the resources it needs withen its borders.
However there are numerous areas that have little oil and some areas with a surplus of oil.
It is surely not a sustainable trade when one goverment that has oil accepts money from another if the other goverment can create money on demand.
I believe the major flaw of both the greenback and bank fiat money creation system is that it divorces money from its fundamental value which is a token of energy yet to be used.
Intelligent use of this money may increase value by deferring private consumption of oil to build non oil based energy systems such as capital intensive nuclear industries but without a limit set on money creation nearly all energy tokens will be used to consume energy now and not invest for future energy use.
The creation of classical gold standard systems and their gradual transition towards a pure fiat system is a mirror of coal based power which is local and centric towards a more mobile energy source that rewarded conquest and extraction to a greater extent then previous capital intensive / semi static coal based societies.
When the US reached peak oil withen its borders it could no longer sustain its semi- gold standard and created the petrodollar to dominate the middle east – this now seems to be coming to a end as these areas reach peak capacity.
Just remember when Ben B. produces dollars for his host country it robs the rest of the planet of energy tokens to spend on goods and services.
There is very little capital creation on this planet now because the symbolic money used for its designation is grossly undervalued.
I think the optimum monetory system for the future is home based interest free money creation but international trade with Gold as a unit of account so not one nation can gain a monopoly of resources and will have to trade and create capital to the best of its ability.
However this may be unlikely as no nation especially the US which has lived under such a exorbitant privilege will accept this austerity lightly.
Dork of Cork ….
Could you please define austerity as per the notion of using gold as money, please ? There is a way of using gold in such a way that liquidity is not hampered at all. It may not have come to mind as yet.
I would agree with that. We need to do a bit more alternative energy development; then all nations could be independent.
The Rooster
Try to imagine oil and gas as being lightly capital intensive on a relative basis to lets say Nuclear.
Basically this means that the cost of oil extraction is the most important input and not the capital build needed to utilise this resourse.
The opposite of this is nuclear – most of the capital goes into making the plant and refineries and not the fuel – even if Uranium doubled in price it would not dramatically effect the overall cost but if oil doubles in price it dramatically effects the end cost.
Now try to imagine Gold as the best symbolic representation for capital as it is hard to dilute – credit on the other hand can be produced easily.
So a country experiences a oil shock which depending on your point of view has been caused by too much credit creation or depletion even if temporary.
If it cannot get oil which is itself a form of nearly pure capital then it needs to recapitalise by reducing personal consumption AND redirecting this surplus towards more difficult capital creation (if oil was difficult it would not be such a bounty)
Now lets go back – oil is pure capital and if Gold is the best symbolic representation of capital then they have a relationship.
Imagine if Nixon did not take America off the partial gold Standard – what would he have done to maintain Gold reserves.
If he merely pursued consumption austerity and transfered the surplus to the financial sector then Gold would continue to deplete as it has done by stealth but possibly at a slower pace – if on the other hand he used the surplus to create the capital intensive infrastructure needed for semi – oil independence then the bankers consumption would make this endeavour impossible.
A example of non-oil based capital construction would be using the remaining capital to build railways and not following Carters liberlisation of the trucking industry which was dependent on the cheap oil fiction of the fiat dollar – this led indirectly to the walmartization of America as formally central nodes of development were stretched into linear nightmares.
If we jump to 1980 and Volcker’s so called saving of the dollar – he did save the dollar temporally – but what was the effect of 10 – 20% interest rates – it gave dollar holders which were still to a large extent American huge buying power but made capital formation impossible withen America – however it was a huge Industrial kick to Asia and to a lesser extent Europe as America became a destination for their exports and deindustrialised into its present sorry state.
What is money in my opinion – it is energy yet to be used – we have engaged in depletion economics for at least 40 years – I am surprised the bankers kept this going for so long – the fall will be hard but if no energy is redirected towards capital consumption people will not get up.
I hope you can now visulaise Gold for all its flaws due to manipulation is a beter and more sustainable unit of account then credit when dealing with trade between nations
@Rooster
The FOFOA site is in favour of bank credit to keep the system lubricated. – using Gold on the asset side of the balance sheet to counter liabilities such as cash and other instruments.
Unfortunetly there is not even enough Gold on the ECB balance sheet to cover cash – the price of Euro Gold would have to be multiplied something like 2.5 times just to cover euro cash and as for the M1………..
Also assets bought in exchange for cash to keep dead banks alive are shown on the asset side of the ECB balance sheet – I believe they bought 135 Billion of Irish crap – although the ECB has first call on the collateral, if they take a loss then they may have to raise the euro gold again.
They essentially now have liabilities on both sides of the balance sheets and need to raise the euro gold price to keep the system going.
However if the Gold price goes to the moon and the world accepts gold as the reserve currency then I Believe Europe will be a big winner if they really hold the Gold most of which may be in private hands that do not show up on the central banks balance sheet – (this distorts the euro gold price upwards to private holders benefit as the ECB will use the partial reality of their balance sheet to revalue gold)
If we assume the Americans have less private gold then Europeans then they could lose first call on the earths resourses.
However the US could game the system if they create a silver standard and not accept free gold.
Let me explain.
Max Keiser’s campaign to break JPM could provide a opportunity for America if a adminstration comes into power that is both nationalistic , Independent of the FEDs power and yet pragmatic.
If a nationalist adminstration came into power and implemented a greenback philosophy and yet the dollar remained as the reserve currency it would export inflation and yet prevent the mercantile states from gaining any interest income – this would create huge tensions on the planet as Bens new QE2 policey of buying treasuries is indeed doing now (he needs to keep his host alive )
So to maintain the peace I do not beleive this is a option
So getting back to silver – the argument against using a silver standard comes down to the fact that silver is declining and cannot be inflationary – this is foolish if you believe the price of silver has been manipulated downwards as there is a shortage due to a lack of recycling and limited mining.
So in the future JPM and HSBC shorting mechanism is broken – silver goes to $500 and this new nationalist but pragmatic goverment issues a new silver standard to prevent the Europeans and inside men in America from gaining a monopoly on the US resourses.
What happens to silver production ? it rises – silver unlike Gold can increase the overall quanity much more quickly then Gold.
Now the execution of this will require the creation of a monetory union between both the US and Mexico and possibly Canada not unlike the latin monetory union (Mexico has the silver)
Using Hugo Salinas silver idea using a legal tender coin with a designeted weight and no face value to be revalued upwards every few years to keep ahead of monetory printing.
This silver standard in North America will cool the freegold price in Europe yet both will be inflationary for fiat which is neccessary to get out of this mess which has completly distorted the global supply chain.
The silver standard will be inflationary for fiat as silver production will rise to meet the money supply somewhere and freegold will be also be inflationary as fiat meets the gold.
People in America can now save in silver as the bank fiat is inflated away transfering purchasing power to the workers while Europe can inflate realative to Gold without gaining full control of the earths resourses.
Just a thought – bimetalism across the Atlantic ?
Based on point two, would it make sense to you that gold is in an “investment leg” right now, in its journey toward market monetization” Not top-down proclamation is required for gold to trade as money.
It is sovereign and debt free.
Actually, the monetization of gold is growing at the individual level on a daily basis. When you track the whole history, you can find that the ultimate purpose of the free floating dollar development (1971) is so that it can act as a support mechanism for gold, not as a currency, but as a real-time measure for gold , in consideration of the reality that we price the things we buy in the real economy in fiat, almost exclusively. There must be a real-time bridge between the 2 paradigms so bullion can be used for debt-free payment.
Gold payment processors support this ability to instantly make payment with gold. The answers are already working. The challnge is not design but simply marketing and scale-up, all predicated on grass roots demand.
If you’re looking for a top-down answer, forget it. It wouldn’t be conducive to free-market capitalism. It’s imperative to understand how monumental the shift is, which also includes the very structure that governs power.
PS – the silver price would track the base money of the economy and as the cental banks created high powered money to replace the outstanding dead credit money in the economy the siver price would rise in tandem with base money inflation.
Because most of the worlds silver is in the ground rather then on top, workers of the future will be rewarded by saving in silver rather then rewarding large players which sit on even larger gold postions.
One can always dream but as Jesse has commentated recently the situation will get a lot worse before it gets better.
Web of Debt is the most intelligent book about money and banking I’ve ever come across and the clear understanding of the problematic nature of gold is a big part of it. The value of gold is entirely based on psychology and psychiatry and not on economics or physics. The only two real uses for the stuff traditionally have been electrical connectors and jewelry and the quantity of the stuff stashed at Ft. Knox alone has to be billions of times what the human race will ever need for jewelry or connectors, and there are much less expensive materials which work for jewelry and connectors.
There is a third possible use for the stuff for which nothing else in fact would work as well: half again denser than lead, soft, and totally inert, gold would be the absolute ideal metal for waterfowl shot. You could kill geese all day long with 2.75″ shells, and #7 shot, or at most #6. You’d have to alloy it with something harder to make it withstand the acceleration without deforming of course or you’d never hit anything past 20 yards.
A couple points:
1) There’s a high probability that Ft. Knox no longer contains any gold.
2) Gold has additional uses.
- Electrical properties make it good not only for wires and connectors, but also as shielding against radio frequency energy.
- Density on par with lead means it is as useful as lead for radiation shielding.
- Besides jewelry, gold is quite fashional for other artwork.
However, I must agree that the industrial and artist value of gold as a commodity are far less than the current price of gold would indicate. Which means that its current value is nothing more than a “bubble” which will someday bust. For the past few hundred years, gold’s value as money had more to do with legal fiat or societal pressure than anything to do with its underlying value as a commodity.
I agree! Great Book!
There is another possible use of gold, other than it’s use as weights for a trot line, if you’re a scheming maniacal megalomaniac intending to enslave the working class and enrich the aristocratic banksters for ages to come — gold could be used to back up a one world global currency that would surge the greed minded merciless, assassins of THE notorious One World Order – members only secret meetings held irregularly @ Jekyll Island.
If you are a seperate independent country – you want to be paid in Gold , this cannot be inflated to infinity.
Debt free credit inside a country yes , but forget about it for foregin trade.
Use either or both. That’s actually what we have in place now but not many people know about real-time gold where gold is the medium of exchange and fiat currency is the real-time measure to bridge gold payment for items and services priced in currency.
To imagine a free market society without a competitive currency system is absurd and borders on insanity.
Each individual country motivates labor in different ways which in my opinion should be the basis for the value of money. By using gold world wide between governments, where it is horded and used as a power base, you ignore the way products are produced inside individual countries. In other words a dictator of one country could give your country a sweet deal which perverts the true value of a product. If the exchange rate was fair, you would have an equal value everywhere so you wouldn’t need gold but a tally system instead.
Albert Einstein wrote an article that nails it, in 1949, called “Why Socialism”. I noticed someone posted it on Global Research website > http://globalresearch.ca/index.php?context=va&aid=22703<
To assume that true capitalism exists here in the US or anywhere on the globe is being naive. When the PPT(plunge protection team) gets deployed here to correct the stock market and keep it running smoothly you have to realize that favored people and companies are given unfair advantages. That isn’t a free market system. That is plutocracy or just plain dictatorship by the most powerful who manipulate, behind the curtain, the stock market and money supply. Gold is one of their tools among many. Read Web of Debt and you will see more of their game plans.
We have very complicated issues at stake now. To leave those issues in the hands of profiteers seems irresponsible to me. All the citizens of this world have an equal stake so all the citizens should have access to the truth whether they are capable or not.
No matter how well intentioned those wizards behind the curtain are it isn’t fair that they control the world especially if it is primarily for their bottom line. We could all be so happy if we could motivate production for the benefit of Earth and all its inhabitants rather than the bottom line for JP Morgan and the Rothschild’s or the likes in competition for the last profit making gene in our DNA. A new way forward is possible and hopefully we will survive this greed and learn to live as equals, prosper and fix our planet.
terry
The PPT’s mandate is to regulate the rate of change from a fiat paradigm to a gold money paradigm. I know this from an insider. Rate of change is critical.
Gold is a free market currency. There is nothing wrong with national fiat in spite of all its flaws as long as people have a competitive choice and a “port in the storm” to take shelter in. Let the idiots inflate. It’s a self destruction if they do so. Competition will force responsibility.
The ultimate purpose of the USD development was not even for the sake of using it as a currency, although this is “what we know”. The ultimate purpose was to develop a real-time measure for the sake of making real-time gold payments. No fiat development would have meant no real-time gold payment possibilities. The proof is undeniable. The USD (intellectual property) is embedded in the algorithm of all gold backed payment processors. It’s the gateway between fiat pricing of goods/services and weighted bullion payment.
What is a country but a large power base ?
The world is not fair , it never was nor will be – why should one government put its fate in the credit of another ?
Such a naive country will be gamed out of existence – witness Ireland , doing what its told.
Socialists are such strange creatures
There is an old saying that disagrees with my constitution. It is called the “Golden Rule”. It goes like this: Who ever has the gold makes all the rules.
Now, using your common sense, if yours is in fact common and assuming you have any, you are suggesting that socialist are strange creatures because they desire to be equal in a world that, as you put it, is not fair.
Well, I think the opposite. That is a slave to the present system who supports the same is strange instead. This, here in the USA, is a system that is governed by an unknown banking cartel the owners of which could be any tyrant of the entire international community. They don’t care about a gold debate. They actually make all the rules because they are the Feds given they power over our economy through the Federal Reserve Act almost a century ago.
So, define creature Mr Cork. Strange, Mr Cork?
Terry Thomas
There’s a severe blind spot in here. A monetary system does not have to be one dimensional. We actually have a dual system across the globe.
1) Money from nothing by fiat (top-down)
2) Gold measured in real-time (bottom-up)
The second is largely invisible to people.
Let governments inflate if they like. The gold system is a competitive alternative to fiat and available to the whole market. As critical mass grows, governments will be forced to become more fiscally responsible.
Gold is a market currency that needs no “crutch” or label of legal tender. Legal tender is a legal concept that is supposed to bring value for a market reality. It doesn’t. It either brings confidence or non-confidence based on supply dicipline and the ability for national governments to redistribute debt.
Gold as money is economic value as an affair of market hindsight. There is no promise to fulfill. It’s already been done. You can hold the proof in your hand, sovereign and debt-free.
Choosing is simply a matter of asking which paradigm you wish to live in, one with debt or without.
@Terry thomas
Yes we are strange to each other – I just do not get simple morality tales , I did not deny the existence of the cartel – the debate is about the utility of gold and /or greenbacks – different power bases will obviously use these mechanisms like all power centres –
– we inhabit different dimensions and I am afraid we will never agree , good luck using morality against raw power.
Raw power works its way to morality. If you check my last post, you’ll see the dual role of the USD. The fiat process is about arriving in a real-time environment where gold can be used efficiently according to real market fundamentals, which it could not do outside of the information age , on any appreciable scale.
Some evils are necessary as we all “follow the script”.
Gee I figured this Gold-Greenback debate would be winding down by now. Didn’t Ellen’s idea win that debate hands down?
Our money has been only as good as the confidence shown for it. Now days that confidence is waning.
If each dollar were really backed by gold then all money would have left our country ages ago because we don’t produce nearly as much as we import. Almost everything is imported and payments for the imports would not be possible now if each dollar was backed by gold. It is my understanding that the gold is long gone anyway. Most of it is probably in China and India as they produce most of our stuff. We would have starved by now if we didn’t have a charge account. The same people who create our money via fractional reserve lending policies preach gold backed currency. They speak with fork tongues. They’re lending to us this privately created money so we can continue buying foreign products at huge percentage rates. If only our government had created the money instead of the bankers we, as a whole, wouldn’t be in debt up to our rear ends to these private banks and our government would be healthy instead. It would be providing infrastructure and employment. It’s the “quantity theory” that we are talking about and it is explained very well in Chapter 10 of “The Web of Debt”.
But providing humanity for all, or at least in our country, might not be the goal here. Raw Power has been suggested as the primary aims of our country. It seems we have more than enough of that. Who is that wizard behind the curtain? I cringe at the thought.
I think we should work together, here, on a solution but one has to be agreed upon. There is no referee here or voting mechanism. Will we ever come to an end of this debate and actually work together on an idea in a force to be reckoned with? I say public bank!
Maybe before we express our opinions, in this debate, we should express our goals. What kind of a society do we want once we ditch these banksters? Or, what kind of dictation are you willing to take from these self appointed corporate presidents of these banks? – in which case how much freedom are we willing to give up for false security offered by the bankster lobbied and funded politicians? Anyway, stating your political positions would give those undecided a since of direction from which to choose. I know that politics are avoided here but come on. How much more political can you get than solving everybody’s money problems? Money is the foundation of almost every political argument from Austerity measures on the poor to tax cuts for the rich.
My goal would be a moral one. It has been stated, in the distant past, “that mankind must first of all eat, drink, have shelter and clothing, before it can pursue politics, science, art, religion, etc.”. Raw Power is an important factor in governments. But, if governments are not serving their constituents, that Raw Power could be a very evil force.
In my opinion the Greenback would be much more beneficial to humanity than Gold backed currency as has been made perfectly clear in Ellen Brown’s Book. It could solve the unemployment problem and kick start the economy.
I’m not a fan of raw power but I can see that it is necessary to defend against true tyrants. The problem is figuring out who those tyrants really are as I suspect the private unregulated Federal banksters with the resources for propaganda to sell their agenda to the unsuspecting patriots. That is another good reason to have public owned banks who are the only ones with the power to create money, or debt if you prefer. Government has no agenda other than to serve the people who educate themselves, vote and remain active as a promoter for Nationalizing the Feds or at least getting state banks going. Power back to the people!
Terry Thomas
I want an end to wage slavery. A maximum of individual freedom while minimizing violence. I believe we live in a world that can (and does) provide an aboundance of all resources needed to support everyone.
Our current monetary system creates an artificial scarcity, which unnecessarily limits the availability of things people need to live. As an example: for the past 200 years (or longer), mankind has produced enough food to properly feed every human being on the planet. The means of distributing this food may have been inadequate to prevent occasional famines in one region or another over a century ago; but since then mankind has not only produced enough food, but also had the resources to distribute it to everyone who needed it. The only reason anyone on earth is starving today is because a few people here and there demand a profit before they will allow 25% of our world’s population to be fed.
So we have to get away from any monetary system that creates unnecessary scarcity. That means debt-based money, scarce commodity money (like gold), and anything similar that is controlled by private parties for private interests has to go.
The Greenback solution may not be the best solution, but I know it is far better than either debt or gold. In the end, we just need an accounting system to track people’s contributions to society and their draws upon society. Changing the total number of “points” in the system should not devalue people’s contributions or allow some people to draw more for less than others.