Posted on 04/29/2002 5:14:43 PM PDT by shrinkermd
By monopolizing this commodity the moneyed classes have got Nature by the throat and the community under their heels... Compared with this process, usury is mere child's play. -Alexander Del Mar in The Science of Money.
Advocacy of gold or gold "backed" money rests on dubious foundations. The discussion that follows will reveal some of the semantic deception, half-truths, doublespeak, self-interest pleading, and historical errors employed in gold advocacy polemics.
The Pope admitted in 1992 that Galileo had been right. This has nothing to do with gold money, but it is offered to show that neither antiquity nor authority makes a phony idea anything but phony.
There is a strong belief among gold money advocates that little bits of gold, especially if they are stamped with the image of some authority and numbers make better price counters than numbered pieces of paper or computer bytes. The belief involves a perception of what money is. The person who holds that belief perceives money to be something real and apparently needs to see and hold in his hand a physical manifestation of it. Gold is heavy, and refined gold is bright and shiny. It satisfies an emotional need however meaningless it is to the function of money. Money is a product of human mental fabrication. It always has been; it always will be. It is a tool that facilitates exchange. Modern society could not run without it or some equivalent accounting system.
A rational business decision would require that monetary symbols cost the least possible to manufacture. Presently, (1998), it costs around $280 to mine and refine an ounce of gold. Mining decades of tons of ore per ounce of gold has left holes in the ground measured by cubic miles. The ore is leached by toxic chemicals that have produced environmental pollution. Banks create money in any amount with the touching of computer buttons.
Abstract numbers, meaningless in and of themselves, that count quantities of amperes, wheat, gasoline, volume, distance, area, force, or any measurable, quantifiable thing, suffice in commerce, science, and technics without the clumsy inconvenience of metal counters. Why should it be different with money?
A pseudo-legal argument is sometimes advanced by advocates of gold money that a debt cannot be paid with another debt. This is semantic deception. A debt can be paid with anything that is acceptable to the payee. In addition, as long as debt in the form of deposit entries in bank accounts or Federal Reserve Notes can be exchanged for real goods and services, the payee is just as well off as if he had received little lumps of metal. Further, the multi-trillion dollar world economy runs almost exclusively on exchange of debt-money which only consists of numbers in deposit accounts at banks.
A common argument for gold money that accompanies the pseudo-legal sophistry is that gold has "intrinsic value," another semantic deception. Gold has interesting intrinsic properties such as chemical stability and excellent electrical conductivity, but "intrinsic value" is a semantic error if not outright doublespeak. Value(1) is a subjective judgment and cannot be rationally thought of as intrinsic. Subjectivity is exclusively a product of human minds. "Intrinsic value" is a deceptive euphemism for price.
If people were stranded in some remote location without food, water, and shelter, a mountain of gold would serve no more purpose than so much sand. It would have no price. Gold has no intrinsic value. It merely has a price which is the result of complex factors associated with its subjective price value compared to other commodities. Industrial usefulness of gold as well as human subjectivity that desires gold for personal adornment, etc., does assure that gold will fetch a price in a modern market. But what price?
Gold pricing in the United States, today, 1998, is denominated in Federal Reserve Accounting Unit Dollars.(2) The commodity price of gold has fluctuated wildly in the last half of the 20th Century, mostly remaining in the $300 to $400 per ounce range in the last decade. Price fluctuation was not due to variations of the Federal Reserve Dollar. The U. S. monetary price of gold is $42.22 per ounce. Artifact (jewelry, etc.) and numismatic prices of gold are what the market will pay. The value of gold as denominated by price is highly variable.
Historically, the commodity price of gold has been subject to fluctuation caused by normal supply and demand influences. Supply and demand infuences are in turn affected by the vagaries of mining and shipping, speculation, hoarding, political action, industrial demand, wars, central bank manipulations, and fads.
When governments or private banks have attempted to use gold as money, or for the last yea many centuries the fraud perpetrated as gold "backing" or reserves, it has been necessary to establish a monetary price of gold by fiat in an attempt to isolate money from inevitable price fluctuations of commodity gold.
The U. S. Constitution writers anticipated the instability of commodity prices and included the phrase, regulate the value, in the coinage clause.(3) In 1792 after the ratification of the Constitution, the Congress, consistent with the Constitutional mandate, defined specific amounts of gold, silver, and copper as representing dollars. They regulated the value and established a monetary price by fiat.(4)
Historically, monetary prices have been set higher than market prices, the ludicrous present U. S. monetary price notwithstanding. It would make no sense to issue money that had an equal or lower monetary value than the price of acquiring the metal. This mark-up is known as seignorage. It is profit that accrued to goldsmiths, kings, banks, and governments that issued gold money. When the monetary price of gold was too low, coins were melted and turned into artifacts that could be sold for more money than the original coins. When the monetary price was too high, artifacts were melted and turned into counterfeit coins. This was another cause of monetary and price instability when gold was used as money.
The relative scarcity of gold and the demand for gold for other uses than money should raise questions about the efficacy of trying to use consumable and losable gold as money or as monetary reserves.
The inherent instability of a scarce commodity subject to all the influences enumerated above have inevitably led to financial instability which instigates human suffering, social unrest, political instability, totalitarianism, fraud, counterfeiting, theft, war, and abandonment of gold monetary policy.
A mantra of gold money advocates is that alternative money systems, particularly "paper money," always fail. Historically, it is true; but it is also a case of selective historical facts, half-truth, and errant semantics. There is archaeological evidence that accounting systems existed before paper was invented. For example, clay tablets written in cuneiform that show evidence of debt accounting. Paper, per se, merely represented another more economical way of accounting. What is never admitted is that all money systems including gold money systems have failed. Today, "paper money" as bank notes is substantially irrelevant. Overwhelmingly, transactions are carried on via computer accounting where money is nothing more than numbers transferred from account to account by computers.
Arguments about the substance of money will never address the problem of why all monetary systems have failed .
In fact, historically, not only has no money system survived indefinitely; but also, no civilization, empire, or political system has survived indefinitely. Systematic monetary manipulation has played a part in their demise. It is not a question of gold or paper; it is a question of human culture. Is it possible to maintain a political system or nation that is founded in myth, intellectual error, and financial fraud?
The Gold "Backing" Fraud
A sacrosanct dogma of modern economic superstition is that money derives its value from scarcity. It is nowhere scientifically proven or successfully argued. It is accepted dogma; and, once again, the semantic trick of substituting value for price is used.
Scarcity does play a role in prices of goods and services, but it is only one factor; there are many other factors in price.
What is provable is that the scarcity of gold provided an opportunity for fraud that has become modern banking custom and practice.
Exactly how the fraud started is not matters of facts, but that it started is not in question.
Legend with perhaps more than a little truth in it has been related many times, including Congressional testimony.(5)
In brief, goldsmiths built vaults to secure their gold which was used in artifact manufacture and lending. The security of the vault attracted others who deposited their gold with the goldsmith for safe keeping. The goldsmith noticed that depositors never claimed all their gold at once. This provided him the opportunity to lend their gold at interest for his profit.
The custom developed that depositors would write notes which could be redeemed by the goldsmith to pay their bills. Eventually, the security of the goldsmith s vault and convenience of the notes induced more and more people to leave gold with the goldsmith and pay their bills with notes.
The common use of notes provided the goldsmith with the opportunity to write notes for making loans. In fact, it enabled him to write notes for more gold than there was gold in his vault. He created money! Eventually, it was found that as much as ten times the value of gold in the vault could be circulated as notes. He only needed enough gold in "reserves" to redeem the few notes that were presented for redemption.
This fraudulent practice has become modern banking custom and practice. Today, it is called fractional reserve banking.(6) Of course, gold is not presently used as reserves; banks just create money out of nothing without any pretense of gold reserves.
Gold advocates lament that money is no longer "redeemable." This is doublespeak that is tantamount to a lie. Since the initiation of the goldsmith s trick in banking, bank notes or "paper money" have never been fully redeemable in gold money. It must also be remembered most money created by banks by checks and deposit entry was never printed as banknotes. While deposit money, Federal Reserve Bank Notes, and U. S. coins cannot be exchanged for any form of gold money at the U. S. Treasury or Federal Reserve Banks, anyone is free to spend as much current money purchasing gold as they please; and the gold can be sold for current money. Furthermore, current money is exchangeable, fully redeemable, for all necessary and desirable goods and services which is the only real purpose gold money could serve. Satisfaction of superstitious beliefs and greed of investors are not considered real purposes.
The growth of national and world economies has rendered even the gold "backing" pretense of using gold as money absurd, but the greedy wishful thinking is that gold will be re-monetized at some astronomical price that will provide a windfall to gold investors. It is more likely that gold will be confiscated, as happened in the United States in 1933, before central banks attempt to re-monetize gold.
Attempts to re-monetize gold in the early 20th Century were accompanied by disaster in national economies and were quickly abandoned.
The Gold (un)Standard
"... the disastrous inefficiency which the international gold standard has worked since its restoration five years ago (fulfilling the worst fears and gloomiest prognostications of its opponents) and the economic losses, second only to those of a great war, which it has brought upon the world..."--J. M. Keynes(7)
What is generally referred to as "the gold standard" is a set of variable monetary and economic goals that involve manipulation of currency, balance of trade, internal commerce, and prices by use of variable gold policies. Different countries have tried different gold policies depending upon the desired goal. Whether it was to achieve balance of international trade, stable currency, stable internal commerce, or stable prices determined the policy. Balancing international trade may, and usually does, interfere with internal commerce. Stable prices may require juggling currency. Different countries with different goals pursuing different policies may conflict. What is called "the" gold standard is not a unique and well defined system.
There is a common conception of "the" gold standard that ties the value of the currency unit to a legally determined amount of gold. It is believed that such a policy would stabilize currency. It may be possible to stabilize currency using gold in monetary policy decisions but with disastrous other results.
For example, five methods used to manage a gold standard by the Bank of England from 1925 to 1931 follow:(8)
i. The bank rate.
ii. Open market operations (that is purchase and sale of securities) undertaken to influence the amount of reserves of the commercial banks, and their power of creating bankers money.
iii. Open market operations, undertaken to influence the London Money Market.
iv. Gold exchange methods dealings in foreign exchanges and in forward exchange, and variations in the price of gold within the narrow limits permitted.
v. Personal influence or advice such as the so-called embargo on foreign loans.
Anyone familiar with Federal Reserve operations will note amazing similarity. Just as the present Federal Reserve Open Market Committee engages in a variety of open market transactions to control the dollar, the Bank of England tried to manage the pound ostensibly based on gold. The results also have an amazing similarity to the Federal Reserve s policies, particularly the "soft landing" announced by Alan Greenspan that was the 1990 recession.
... the operations of currency management conferred upon the Bank of England the power to restrict credit, to postpone new enterprises, to lessen the demand for constructional materials, and other capital goods, to create unemployment, to diminish the demand for consumable goods, to cause difficulty in renewing loans, to confront manufacturers with the prospect of falling prices, to force dealers to press their goods on a weak market, and to cause a decline in general prices on the home market. In brief, the stability of the international exchanges was accomplished by a process which deliberately caused universal depression in industry, created unemployment, and forced manufacturers to produce, and merchants to sell, at a loss.(9)
The operations of the Bank of England under the administration of Montagu Norman critiqued above is a classical example of what happens when monetary policy is carried out in the abstract. Human needs and human suffering be damned, trade will be balanced to control the outflow of gold or silver or inflation will be controlled to maintain prices regardless of how it affects employment, hunger, or any other form of human stress.
The errant buzz-word of monetary policy administered by Federal Reserve gurus personified by Alan Greenspan is inflation. Low unemployment motivates the gurus to "slow down an overheating economy." In other words, needful humans must be made to suffer to accomplish abstract monetary goals.
The above critique of Bank of England policies exposes, more than anything else, the fallacious thinking that gold will automatically regulate currency and prices. Not only the above critiqued policies, but also, other history confirms the fallacies.
One extreme anecdote from Roman history is the case of a man who had his own image placed on a gold nugget which he presented to a lover. So extreme were Roman concerns with controlling money that it was a death penalty offense under Roman law at that time to affix any image on gold except for official purposes. The law-breaker was executed.
This Roman anecdote is an example of two things: 1. An absurd, extreme policy used in an attempt to make an inherently unstable commodity suitable for monetary use by legal means. 2. The arrogant stupidity of legal absolutism.
Some factions of gold advocates argue that attempted regulation is the problem and that "market forces" should be allowed to follow their course with gold. Aside from the obvious superstitious belief in a fiction in support of a belief, histories of fraud, manipulation, monopolization, gambling, and speculation of commodities(10) left to market forces should overcome the tunnel-vision and doublethink of such an argument as market forces should determine the value of common currency while believing the implausible, self-defeating belief that gold left to speculation and monopolization will, by magic, lend stability to currency in the same market.
One of the sophistries used by gold money advocates is the non sequitur. Byzantium has been offered as an example of how a culture or empire was stabilized by a stable gold currency.(11) In the first place, stable Byzantium can be dismissed with the question: Where is Byzantium now? In the second place, the longevity of Byzantium was not extraordinary for its day. Nor did Byzantium ever achieve extraordinary wealth. The Italian city states built on bankers credit lasted longer and achieved more wealth.(12) Byzantium existed during the "dark ages" of Europe as a near singularity in the Euro-Asian area. It was founded in autocratic theocracy. The annual trade of Byzantium was less than a week of world trade today, perhaps less than a day s trade. Byzantium s relatively stable coinage was a function of its relatively stable society maintained by a severe autocracy. Its relatively stable society was not a function of its coinage; its relatively stable coinage was a function of its relatively stable society.
After the ascendancy of the Italian city states, it could just as well be argued that Byzantium failed to achieve great wealth and eventually succumbed because of the superiority of credit money or Byzantium s stupid, limiting, and inflexible reliance on gold coinage, but that is not the argument presented here. The argument here is that money is a function of culture, not culture is a function of money although selective facts may make it appear so. Certainly, the pathological kleptomania and greed of Capitalism make it seem U. S. culture is a function of money.
The coup de grace of gold standard is that a gold standard applied in recent centuries has not altered the custom and practice of bank issued debt-money. Bankers, such as Alan Greenspan who has advocated a return to a gold standard, are well aware that gold standard is not only no threat to their power and ability to create money out of nothing; but also, it enhances their confiscatory power and control over both the public and private economy. It helps banks realize their superstitious mantra that money derives its value from scarcity. The more scarce the more value, i.e., the more interest banks can charge for the money they create out of nothing.
Ordinary gold standard advocates are either ignorant or disingenuous about bank created money. They usually blame government for the abuses of credit money, but it is banks that create money nearly exclusively. Paranoid, near hysterical arguments such as inflation is caused by "governments printing too much money" are absurd when it is banks that create money. What a silly argument it is to say governments print too much money when, for example, the U. S. government has borrowed more than $5 trillion from banks and other investors in government securities! Every cent of it originally issued by banks! But just as any paranoiac can have real enemies, there is plenty of blame to lay on government. It is government that has given the power to create money to banks(13) then relies on borrowing money from banks and private investors at the additional expense of interest when taxes are inadequate to meet expenses.
A Federal Reserve bankers dogma is that monetary policy must be separated from politics because politicians can t be trusted with it. This dogma has some truth in it; but like any half truth, it obscures a lie. Monetary policy can never be separated from politics, and bankers would loose their golden goose if the government excercised its Constitutional power to issue its own money.
Ostensibly, the people have the power to control politicians with the political process. People have no power to control bankers for whom they cannot vote and do not know.
Criticism of bank created money and how(14) it is done is left to other vehicles. This discussion is about the fallacies of gold money arguments.
Conclusion
What is usually referred to as "the" gold standard or gold backed money is an intellectual and financial fraud. Under gold standard policies, Central banks wrote checks creating money to buy gold to use as reserves, just as Federal Reserve Banks create deposits to buy U. S. Treasury securities, now. A gold standard does not prevent commercial banks from creating money on the basis of fictional reserves and lending it at interest. What has passed as a gold standard in the last few centuries is not theoretically or functionally different than the present bank created credit/debt money system. In both cases, banks create and issue money as debt. Both systems are often properly labeled debt-money systems. Money is nearly exclusively issued by banks as debt at interest in both systems.
A plausible argument can be made that if banks were required to maintain an invariable level of gold reserves, it would limit how much money they could create. It would, but it would also limit how an economy functions as in the disastrous British case cited above.
The Federal Reserve Act was passed in 1913 establishing the Federal Reserve System as the U. S. Central bank. It required 40% gold reserves behind issuance of Federal Reserve Notes. World War I soon followed. It would have been impossible for the United States to finance it s participation in that war with Federal Reserve Banks and commercial banks required to maintain 40% gold reserves. (The argument that it may have forced the U. S. to stay out of the war had the reserve requirement been maintained is irrelevant; the U. S. participated in the war.) Reserve requirements were lowered, and the war was financed with debt-money created by banks.
The first central bank of the U. S. was charted in 1791, and the Coinage Act of 1792 which limited coinage to the haphazard appearance of gold and silver owners at the mint forced seekers of money to use bank credit or debt financing. It is a speculation whether the two cited acts were intended to force money seekers into banks. The central bank has been attributed to the efforts of Alexander Hamilton. There is no doubt of Hamilton s banking connections.
The United States has become the most powerful nation ever in history. It did so mostly on bank credit; nearly exclusively so in the 20th Century.
Winning two world wars, once having the highest now reputed third or fourth average standard of living in the world, and development of spectacular technology including space exploration were all accomplished under bankers debt-money schemes, but this is not a defense of bankers debt-money. It must be repeated that criticism of bankers debt-money is found elsewhere. This is to suggest that the U. S. could not have developed as it did under the restrictions that a gold money system would have imposed.
A credit money system operated for the purpose of serving human needs instead of serving the profit interests of bankers could educate everyone to any desired level, provide medical care for all, end poverty, and finance any socially acceptable and physically possible activity.
The substance of money used for counters whether lumps of yellow metal or computer bytes is unimportant, per se. What is important is monetary policy. Good or bad policy can be made with credit money that makes good or bad results. It is hardly possible to have a good policy under the restrictions and inflexibility that a one hundred percent gold money system would impose. Gold "backing" known as fractional reserves has already been revealed as a banking fraud that differs from the present bankers debt-money system in cosmetics only.
If there is anything that can be classified as a public utility, it is money. Yet, the supposedly democratic U. S. Government has seen fit to endow a select group of greedy bankers with all the power of issuing and regulating the money supply for their own profit. The banking system that issues money as debt holds the government and people hostage to the system. Until the power to issue money is taken from the hands of greedy corporate profiteers, megalomaniac kings, and plundering politicians, there is little hope for a socially kind and peaceful society or a safe and sustainable environment.
The science of how to do it is well known.
They [bankers] viewed national interests from the windows of the bank parlour. From their point of view, industry, commerce, agriculture, wages, employment, were but counters in the skilled game of international finance. They must be regulated to fit in with the monetary scheme. The monetary scheme must not be regulated to fit in with the needs and necessities of the world.(15)
Whose interests are served by "the monetary scheme"?
Until the "cart before the horse" philosophy of financiers revealed in the above quote is righted, no monetary system will serve public interests. A gold monetary system will be just
FOOLS' GOLD!
Notes:
1. See Theoretical Essay on the Nature of Money for a fuller explication of value.return
2. Contrary to popular opinion, the "U.S." dollar in the form of bank notes and commercial bank credit is not issued by the United States Government. It is issued by Federal Reserve Banks and commercial banks mostly in the form of deposits or numbers in deposit accounts. return
3. Article I, Section 8, clause 5. return
4. An Act establishing a Mint and regulating the Coins of the United States, April 2, 1792, specified 24.75 grains of pure gold and 27 grains of standard alloy per dollar. return
5. Robert Hemphill, credit manager in the Federal Reserve Bank of Atlanta, before the Committee on Banking and Currency, House of Representatives, March 22, 1935, re Banking Act of 1935. return
6. See Modern Money Mechanics, published by the Federal Reserve Bank of Chicago for a detailed explanation of how the central bank creates reserves and regulates the money supply and commercial banks create money by fractional reserve lending. return
7. Quoted by Sir Charles Morgan-Webb in The Money Revolution. return
8. Ibid. return
9. Ibid. return
10. See "The Tulipomania" chapter of Extraordinary Popular Delusions and the Madness of Crowds for a charming example of kleptomania, gambling, and greed in an unregulated market. Of course, a free market in tulips is one thing; a free market in common currency is another. The whole book is an entertaining read of collective "delusions" and "madnesses." return
11. See The War on Gold by Antony C. Sutton. return
12. See An Inquiry into the Permanent Causes of the Decline and Fall of Powerful and Wealthy Nations by William Playfair. return
13. See The Federal Reserve Act in the United States Statutes at Large and Title 12 USC for complete texts of current banking law. return
14. For how, see Modern Money Mechanics published by Federal Reserve Bank of Chicago. return
15. The Money Revolution by Sir Charles Morgan-Webb.
Ooops... Yeah, that's what I meant!
What you are probably concerned about are all those dollars being exported. If and when they come home to roost the scenario you fear will come to pass and we will all have to run for cover.
Well, if they don't come home to roost, that means that these countries have basically been sending us all their exports for free, right? Somewhere along the line, they're going to want to get paid for it with something they can actually use. Looking over this thread, it seems you're more or less on my side - pro-gold, anti-fiat. So what I don't understand is, how can the pro-fiat people not see this? How can anyone just pretend it's not an issue?
It's easy...just accept the fact that foreigners, for some unaccountable reason, are perfectly willing to trade bananas, computers, etc. for tastefully green pieces of paper.
Ain't it grand?!? Heck of a deal for Americans!
La la la la la... la la la la la...
The private banking cartel -- Federal Reserve System has been sucking the wealth from productive Americans for 90 years using their literal and figurative "monopoly money."
The Constitution's Article I, Section 8 reads, "...The Congress shall have the Power to...Coin Money, regulate the Value thereof and of foreign Coin, and fix the Standard of Weights and Measures..." It does not authorize Congress to transfer this function to private bankers (Federal Reserve).
Accordingly, our Congress committed treason and violated the Supreme Law of the Land by allowing private/foreign interests to regulate our currency by fiat. And all politicians who take an oath to defend and protect the Constitution are committing perjury by allowing this funny-money system to continue to operate.
Now, we use "colorable" money that moved us into a colorable jurisdiction (Uniform Commercial Code), and right out of our Common Law Jurisdiction (Constitution), where real money (gold/silver) is the substance of Law.
It's certainly easy to start. Every fiat currency ever created has ended up worthless!
So, along with your Confederate notes, Reichsmarks, rubles, etc., etc., etc., stuff away a few Washingtons and Lincolns, even a Ben Franklin if you're particularly masochistic, and DON'T spend them.
There is nearly a 100% probability that they, too, will become worthless. Hey, don't shoot me; I'm just the messenger!
Charles de Gaulle called our position as a reserve currency an "exorbitant privilege" because we promised (but discouraged) gold redemption at 1/35 ounce per George. France held our feet to the fire throughout the sixties: they were impertinent enough to prefer gold to green. Charlie would be turning over in his grave if he saw the situation today: we have been able to get people to hold dollar as a reserve even without the redemption promise. As Mel Brooks says in "History of the World":
It's good to be the King!
It is impossible to debate someone who is too ignorant to even make a point.
Those are some great examples. Let's see, the South lost the Civil War, the Third Reich fell in World War II, and Russia went Communist. Being fiat money had zero to do with it. I am 100% confident the US dollar will be solid through my lifetime.
----------
About FDR:
I agree that FDR was socialist scum, but when it came to taking us off the 'gold standard', he had no choice. The Great Depression was deepening and the US gold reserves were disappearing at an alarming rate as people redeemed their currency for precious metals. There was no where near enough bullion of any kind in America's reserves to cover the amount of currency issued; there never has been in the entire history of our nation, not even close to that amount.
If FDR has not acted, the bullion reserves would have been exausted in a very short time. Once everyone discovered that there was nothing left to back the supposedly gold-backed currency, there would be a panic and hyperinflation, with the currency becoming literally worthless overnight. I'd like to hear the gold cultists explain what FDR could have done instead.
----------
About the 'real value' of gold:
People pooh-pooh the market value of gold and talk about the 'real value'. They are right in that the market value is heavily manipulated, but they are wrong in that the 'real value' is not what they think. The goal in using the term 'real value' is to project the false impression that gold's value is immutable. They point to the history of our country, and say that supply changes (like the California gold rush) didn't drastically change the value of gold, which is true. But that doesn't take into account new events that have never happened before, like a technological breakthrough in gold extraction, or a really massive new source, like asteroid mining.
The basic point is this. The true value of gold is what other people are will to trade you for it. It's just that simple. The only reason that gold has remained so valuable over the history of our country is that the general population believed it was scarce, thus believed it was valuable. If news gets out that new technology can extract/mine/transmute gold cheaply in very large quantities, that general perception of value, which is totally predicated on gold's scarcity, will disappear in a flash, and gold's true value will evaporate on the spot. No one can change that fact.
----------
About the changeover from floating currency to specie-backed currency:
No one has yet explained how this can be accomplished without crashing the economy. The argument seems to be, "gold will solve all our problems, and since the fiat currency will crash anyways, we have nothing to lose, so let's go for it!" First, our fiat currency has survived for 70 years now without becoming worthless, in spite of constant predictions of imminenet currency collapse since day one. Second, the benifits of a specie-backed currency have been largely debunked here. Third, the dangers of a specie-backed currency remain unanswered by the gold cultists. I can't see the justification for destroying our economy with such a changeover for no real gain.
----------
I would love for someone to show me a realistic option to our fiat currency with a realistic plan to get there, but I have yet to hear either after dozens of gold-standard debates. The privatization of currency has some interesting possibilities, although I think those that actually believe that such a currency couldn't be manipulated by banksters or the government are being quite naive. Such sleazebags always find a way to manipulate currencies, and our gold-standard currency was certainly heavily manipulated by currency speculators throught it's history.
Just to stir up the debate, I will propose an idea I came up with myself. Suppose we used land titles to back currency. The fedgov could start selling the huge amount of public lands to private currency issuers (PCIs). The PCIs would hold the land, and have the right to lease use of it. They would be responsible for maintaining the land. The PCIs would then issue currency based on the value of the basic land title (not on the structures on the land). They would pay these 'land notes' to the fedgov, who would use them to pay the national debt and for government services, thus putting this new currency into circulation painlessly. The trick would be the appraisal of the land, to get an impartial board to decide the value of each title, and how much currency could be issued against it. This is an idea I haven't heard elsewhere before.
The obvious advantage is that, with increasing populations, land is highly unlikely to lose any long-term value - ever. The two currencies, FRNs and land notes could coexist in the economy, making the currency transition gradual. The currency would become privatized, although the fedgov would likely grab an oversight role to stop the inevitable fraud. The drawback is potential inflation, as over the long term, land always increases in value due to the fixed supply.
Anyways, there's an alternative for all of you to think about. Perhaps you could come up with other better ways to ditch FRNs. The idea that fiat currency or specie-backed currency are the only possible options is false.
More accurately, he CONFISCATED gold at 1/20 ounce/$ and then redefined the $ as being only worth 1/35 ounce as soon as the confiscation was complete. "Taking us off the gold standard" is a euphemistic phraseology.
I'd like to hear the gold cultists explain what FDR could have done instead.
A primary tenet of free enterprise is that you have the right to compete, but not to suceed. Those who made bad decisions were supposed to suffer the consequences not get the government to act in a totalitarian manner to rescue them.
The basic point is this. The true value of gold is what other people are will to trade you for it.
Who's disagreeing with this?
Gold's true value will evaporate on the spot [if it no longer is scarce]. No one can change that fact.
Who disagrees with that? If it is not the most ideal long term store of liquidity, why is there a 25+ year inventory sitting in inert bars in vaults. What other commodidity even comes close? Name one other commodity (diamonds don't count because they lose their value when divided) that has even 2 years of production in inventory.
No one has yet explained how this can be accomplished without crashing the economy.
Will you favor it if someone can?
I would love for someone to show me a realistic option to our fiat currency with a realistic plan to get there, but I have yet to hear either after dozens of gold-standard debates.
You are not ready to hear how it can be done. You are not at all convinced it is a desireable goal.
our gold-standard currency was certainly heavily manipulated by currency speculators throught it's history.
Where can I learn more about such manipulation.
d:
"More accurately, he CONFISCATED gold at 1/20 ounce/$ and then redefined the $ as being only worth 1/35 ounce as soon as the confiscation was complete. "Taking us off the gold standard" is a euphemistic phraseology."
While the way FDR executed the changeover was criminal, that is not an answer to my question. What was the alternative to floating the currency, with the total depletion of the bullion reserves being imminent ???
----------
V1:
"I'd like to hear the gold cultists explain what FDR could have done instead."
d:
"A primary tenet of free enterprise is that you have the right to compete, but not to suceed. Those who made bad decisions were supposed to suffer the consequences not get the government to act in a totalitarian manner to rescue them."
If FDR had allow the run on the bullion reserves to continue until they were gone, and the currency had collapsed completely, everyone would have suffered immensely. In such an emergency, who should be punished is not the priority. Only slowing the crash and minimizing the damage are important to a new President taking office during such a disaster. Again, considering that the subject is what FDR needed to do as the leader of the nation, and given the economic circumstances when FDR took office, your point is irrelevant.
----------
V1:
"The basic point is this. The true value of gold is what other people are will to trade you for it."
d:
"Who's disagreeing with this?"
Those gold advocates who wrongly imply that gold's value is basically immutable.
----------
V1:
"Gold's true value will evaporate on the spot [if it no longer is scarce]. No one can change that fact."
d:
"Who disagrees with that?"
Same answer as above.
----------
d:
"If it is not the most ideal long term store of liquidity, why is there a 25+ year inventory sitting in inert bars in vaults. What other commodidity even comes close? Name one other commodity (diamonds don't count because they lose their value when divided) that has even 2 years of production in inventory."
Gold is the best commodity only as long as the percerption of its scarcity remains strong in the minds of the people. Technology advances by leaps and bounds daily. To assume the scarcity of gold will never change is foolish. To say using gold as the basis of anything is a good idea just because the fedgov does so is even more foolish. Your question also presupposes that a currency must be backed by a single valuable commodity. Hasn't the performance of the American dollar over the last seven decades put the lie to that idea? And anyways, I believe I proposed at least one interesting alternative commodity.
----------
V1:
"No one has yet explained how this can be accomplished without crashing the economy."
d:
"Will you favor it if someone can?"
That is hardly an answer to my question. However, to address yours, I am open-minded on the subject and willing to be convinced. However, after many debates, all I get is the same old line and I still have pretty much the same set of unanswered questions. I'm not impressed.
----------
V1:
"I would love for someone to show me a realistic option to our fiat currency with a realistic plan to get there, but I have yet to hear either after dozens of gold-standard debates."
d: "You are not ready to hear how it can be done. You are not at all convinced it is a desireable goal."
The first statement you've made here is a ridiculous and baseless assumption, which happens to be false. Jumping to conclusions about me and then stating them as factual only discredits you. The second statement is true, but isn't that what we9;re debating here, the desirability of the gold standard (or bullion itself as currency)? I'm not yet convinced only because you and others here have failed to make your case. The blame for that may not be laid upon my doorstep.
----------
V1:
".... our gold-standard currency was certainly heavily manipulated by currency speculators throught it's history."
d:
"Where can I learn more about such manipulation."
When you manipulate the gold market, you manipulate any gold-backed currency as well. Even with government price-fixing, the law of supply and demand still rules with any commodity, still determines the value and desirability of a commodity. Surely you don't believe that the gold market has ever gone unmanipulated at any time in human history? Anyways, if you want more detailed info, I recomend Currency and Coercion: The Political Economy of International Monetary Power, by Jonathan Kirshner. Great book. (ISBN: 0-691-01626-7)
In the mean time while y'all fuss over this I'll just keep buying NEM,GLG,DROOY and Harmony on the pullbacks.
1. Did we have to get off the gold standard because “everyone was in big trouble if we didn’t” or was that just an incredibly Big Lie?
2. What kind of a monetary system is the ideal one for a free society today and how do we get there?
Chose either one of these topics (again, I prefer 2) and lets proceed (in bite-sized chunks) to discuss them interactively. Once you let me know your choice I will give you my overall answer in a paragraph or two as the basis for an interactive and respectful dialogue
I don't think you're being completely honest with us here. FDR's pattern, not just when it came to monetary policy, but to all aspects of public affairs, was not to simply "minimize the damage", but to completely overhaul the pre-existing social order, using an emergency as his vehicle. There may have been plenty of temporary measures government could have instituted to alleviate the damage that government caused, but that's no reason for society to be run like a permanent emergency.
And again, you have yet to answer the point I (#43) and at least one other poster raised, that every charge of "instability" you can level against a gold-based system can be applied with even greater force against a fiat currency - unless of course you simply trust the government to do what's right.
And buy gold and gold stocks. ;^)
On the contrary, I think they are very easily disposed of. The article is full of ex cathedra pronouncements--such as the suggestion that America owes her present greatness to paper money. The Founding Fathers would certainly not agree with that. The man does not a case make.
There is sound reason that the Founding Fathers in the Constitution forbad the States from making anything but Gold or Silver a medium of exchange. Getting rid of the reckless inflation that followed the War, was one of the motives for the Constitution. Because it was the hard money group who were backing the Constitution, they overlooked the fact that a similar prohibition against the Federal Government would have been in order. But regardless of that, we had a Gold Standard until FDR, and a Gold Exchange Standard until Nixon. The Foundations of modern America were very closely related to that Gold Standard.
Of course, the reason for Gold is that it has value to most people. It does not depend upon the arbitrary fiat of the State of Bankers. While gold coins may be clipped, or adulterated, that does not make a point either. Man can corrupt almost anything. But fiat--paper money that is not convertible--is made to be corrupted. On the other hand, paper money convertible into a precise quantity of gold, offers far greater safety--unless a demagogue like FDR repudiates its convertibility, which is what happened. (Gold didn't fail us; our leaders stole our assets.)
Traditionally the opposition to the Gold standard is that it prevents the manipulations of the currency for the temporary advantage of the politically favored groups. It means that your savings--what you put aside in one era--should retain their value in the next. It adds predictability to accounting; makes long term planning easier.
William Flax Return Of The Gods Web Site
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.