News & Analysis
A Gold Standard Is Good?
Return of the Gold Standard Imminent ... The gold standard will precipitate a massive deflation. The ensuing chaos will help usher in their coveted New World Order and World Currency. What has been in the cards for decades is now fully on the agenda: the return of the Gold Standard. Gold as currency is a weapon. It is a wealth transfer to those holding Gold, which is not the 99%, and will precipitate a massive deflation. The ensuing chaos will help usher in their coveted New World Order and World Currency. – Anthony Migchels / HenryMakow.com
Dominant Social Theme: Gold is a barbaric metal.
Free-Market Analysis: Energetic social-credit entrepreneur Anthony Migchels is back with a spirited criticism of a "gold standard." His article appears – as have others by him – on Henry Makow's website and is focused on a few main points that have in part been made by other critics of a gold standard.
We are grateful to Mr. Migchels – and to neo-Greenbacker Ellen Brown – for continuing to advance a larger monetary debate over fiat versus money metals, even though we think to some degree it aids those who want even bigger government than we already have.
We won't however conflate Migchel's arguments with Brown's as he has disavowed some of them and has in certain instances seemingly agreed with arguments we've made about central banking and government bureaucracy. Nonetheless, we think we disagree with certain points in this article. Some more:
Numerous stories pertaining to Gold as currency have appeared recently. Last week alone, it was reported that India will pay Iran in gold for their oil imports. In another development, China, Japan, Russia, France and a number of Arab states will pay each other with a basket of currencies, including Gold.
Yet another story was about World Bank President Robert Zoellick, who has been promoting a Gold Standard for years, 'admitting' the demise of the dollar reflects 'a changing balance of power' in the world. Even Newt Gingrich has jumped aboard the gold train.
These stories are framed as resistance against the dollar hegemony and of course that is only a part of the story ... But the decline of the dollar is only part of the story. The dollar is only the current vehicle the Money Power uses to rule international finance. It doesn't care for the vehicle itself, as long as it has a suitable successor and that will be Gold.
And in the US itself there also is a strong drive towards Gold as currency. The onslaught by Austrian Economics in the Alternative Media comes to mind. And Ron Paul of course. He openly calls for Gold as currency. In this respect, he clearly is the ultimate internationalist candidate. This contrasts sharply with his patriotic 'constitutionalism'.
Some of this is good! Some of this, we've have pointed out in various articles ourselves. We think, possibly, that Money Power is deliberately breaking down the "old" economic order in order to create some sort of one-world currency. We think gold may be part of it – and we're surely not in favor of this sort of "directed history" when it comes to monetary schemes.
But we also believe that money, historically, has proven out to be gold and silver; though as hard-money economist Murray Rothbard pointed out, money has ALSO been virtually anything that people have decided it is.
However, Rothbard, from what we can tell, was mostly talking about commodity money – shells, salt, copper discs, etc., that are injected into economies via MARKET FORCES. The problem comes when certain monetary theorists want to use monopoly power (often of the state) to produce pure-paper money.
Once the state (or its adjuncts) decides to assume the power to "print" money, the marketplace monitor that works so well for private money is disassembled. Those who work (for the state, especially) do not know how much money is "enough" money – nor can they.
Migchels also states that libertarian-Republican presidential candidate and Congressman Ron Paul "lies" about the Constitution "saying the constitution says we should have Gold as currency ... but other units are allowed."
In fact, the US mints were clearly set up to stamp metals into coins and the intent of the founders regarding money metals seems fairly clear. In an educational article entitled "What Is a Dollar," well-known libertarian writer Edward Vieira, Jr. writes:
History shows that the real "dollar" is a coin containing 371.25 grains (troy) of fine silver.
a. The "dollar" in the Constitution. Both Article I, Section 9, Clause 1 of the Constitution and the Seventh Amendment use the noun "dollar." The Constitution does not define the "dollar," though, because in the late 1700s everyone knew that the word meant the silver Spanish milled dollar.
b. Adoption of the "dollar" as the "Money-Unit" prior to ratification of the Constitution. The Founding Fathers did not need explicitly to adopt the "dollar" as the national unit of money or to define the "dollar" in the Constitution, because the Continental Congress had already done so.
Migchels doesn't seem to fully define the difference between a state and a private gold or gold-and-silver standard. One standard is imposed by force and the other is not. What is the harm in having a standard that is voluntarily imposed and utilized?
The idea apparently is that even with a voluntary gold or gold and silver standard, the elites would continue to control the world's money system because they own most of the metal extant.
We're not sure this accurate to begin with, but even it is we're not sure it makes much difference. In a free money system, it would be difficult to control a money marketplace. If one wanted to try to manipulate markets, one would have to issue out money metals – or hoard them – at which point the price would go up ... or down.
The Anglosphere power elite, from what we can tell, is almost entirely allergic to using its own funds for purposes of realizing a New World Order. We find it highly doubtful that such a group would pour money into the marketplace to devalue gold or silver – especially since those holding most of the money metals would be the most affected.
If the elite tried to hoard metals, people likely would simply dig up more of it, devaluing what was already above-ground. In a free market, money manipulations are very difficult, if not impossible, especially over a long period of time.
Migchels makes the point that a Gold Standard would be "an unmitigated disaster" that would lead to excruciating deflation. But what is wrong with deflation? Murray Rothbard was fond of pointing out that in a full-gold-standard environment, goods and services would become more affordable as technology brought down their provision.
The point, apparently, according to Mr. Migchels, is that "Deflation is a horror for debtors, who see their debts and the interest they pay over them grow worse in real terms." But in a deflationary environment, those who held commodity money would see their assets appreciate, even if their debt did as well.
Mr. Migchels quotes the "Protocols" as saying: 'You are aware that the gold standard has been the ruin of the States which adopted it, for it has not been able to satisfy the demands for money, the more so that we have removed gold from circulation as far as possible."
The trouble with this quote is that it is difficult to establish definitively where the Protocols came from or whose views they represented. (We've actually written about this in the past.) But even assuming that the Protocols speak for "all Jews" – or even a Jewish "ruling class," the statement is seemingly vague. It makes no distinction between a free-market standard and a state-mandated one.
Mr. Migchels writes that, "Far from a 'solution', the coming Gold Standard is the logical next step in the Money Power plan of destabilization and order out of chaos. We will have a long and painful depression. Although it is not certain that Gold will completely replace paper, it is obvious that we will know scarce money and contraction for years to come."
This is only certain if the powers-that-be are able to mandate a state-run gold standard. State power is always to be feared, especially in the context of a new monetary system. But we would argue, on the other hand, that no one has to fear money that is created within the context of the market itself.
For some reason, part of the alternative media is consumed with fear when it comes to money metals. We think the real agenda may be that even critics of the current system that reside on the alternative media cannot entirely give up their yen to control society via the levers of state authoritarianism.
They want to have it both ways, in other words – criticizing the current system but making state power available for their various nostrums. Within this context, it is important to remember that every law and regulation is a price fix transferring wealth from those who earned it to those who did not and have little idea what to do with it.
Let the market itself decide on money. Don't fear money metals! Gold and silver have been the historical money of choice for thousands of years. A free-market gold and silver standard has apparently proven especially utile in the past.
Conclusion: If money competes – as we hope it will – we would be surprised if gold and silver don't eventually win out. Hopefully, one day, we'll be in a position to see if this is true ...
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Posted by Bischoff on 02/03/12 05:20 PM
"It is credit. It is money too. It has nothing to do with barter. Most of these systems call themselves 'barter' systems, but they use their own means of exchange agreed upon by the participants. Thus they use money.
This money is created as debt, just as is the Dollar."
Of course, what you describe depends on your definition of money, with which I disagree. Therefore, we are talking about two different things. Debt can never be "Money" by my definition. Your definition allows "a debt obligation" to function as a a means of exchange, and therefore by your definition it is "Money".
Without a commodity being the universally agreed upon standard as INTERMEDIATE in exchange transactions, you have no "money economy". If you really think out your argument for the validity of the transactions you describe, you will come to the conclusion that it is barter, or you otherwise are engaging in a circular argument that amounts to a dog chasing its tail.
"Don't fall for semantics Ingo: this trade is real. WIR is real. Interest free credit is real."
I have extensive personal experience with barter. The printing business which I headed for many years was ideally suited to engage in barter transactions. We did extensive barter business during all of the 1980s and some of the 1990s. While we dealt in "barter credits", they did not amount to an extension of credit in the classical sense, nor are such "barter credits" considered "Money" by the definition I gave.
The "barter credits" or "barter sales" had to be accounted for on our books as equivalent to the USD/FRN. Our receivables under "barter due us" was an asset on our books on which we had to pay tax as if the "barter credits" were USD/FRN cash income. The advantage of engaging in barter transactions was the fact that it did improve cashflow. However, by no means were the "barter credits" (barter points) the "most liquid" means of exchange, though sometimes they were preferred to payment in USD/FRN.
There was no doubt however, that Gold would have been preferred by us to any other means of exchange. However, due to the 1982 Coinage Act, we could find no one who would pay our invoices in Gold, when when our customers knew that we had to accept the irredeemable, legal tender USD/FRN currency in payment for our service.
The only believable alternative to real "Money", which crept up in the early 1990s, was the "Liberty Dollar" created by an Idaho company. Their paper currency was redeemable in silver. As you probably know, the Secret Service, FBI Agents, Treasury Agents and IRS Agents swooped down on that poor company so fast, they did not know what hit them. All their assets were consficated under the bogus charge to have violated counterfeit laws. They are now in court for the next twenty years to have their property returned to them.
"It's all just bookkeeping, just like our current money system. It's just not used as a wealth transfer to the ones owning the system. All the added value of the trade associated with WIR currency remains with the participants."
The transaction with WIR are barter and they are inferior to a redeemable currency. You can make a statement that WIR is "Money" only by using your definition.
"Gold is Money, and nothing else." J. P. Morgan. A redeemable currency created under the RBD is far superior to any concocted WIR or other barter transaction. Barter transactions are a throwback in comparison to Money transactions. Why not fight the Fed central bank, run by the U.S. Congress and influenced by the "dependent" U.S. banking system to at least return to the original Federal Reserve Act of 1913, and to throw out the 1935 Banking Act legislation which created the Fed central bank and stood the intent of the original FRA on its head. International Bills of Exchange and Gold made possible a volume of world trade in real terms in 1890 which was not surpassed for a hundred years. That is how powerful the redeemable currency created under the RBD is for promoting production, trade and full employment.
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Posted by Summer on 02/03/12 04:08 PM
Who's really living off of who?
What if your country is the next with having to hold out begging bowl? Perhaps someone will do worse than kick it - give you an interest loan, feed off you and impoverish you for generations. Don't forget to say please.
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Posted by memehunter on 02/03/12 02:45 PM
I found a gem today on FOFOA, by regular feedbacker "JR":
"I'll even take it a step further and say that a monetary and financial system that uses compounded interest cannot afford to compel all savings into the hands of debtors. It must have a means of hoarding wealth outside of the system in order to constrain the exponential growth function, or else the entire system will become retarded and then collapse. In return, this constraining function of "gold the wealth reserve" will restore intelligence to the human superorganism. Intelligence that has been sucked dry by Wall Street's systemic aggression against a free-floating physical gold price."
Click to view link
See how this comment links ideas about compound interest, gold as a wealth reserve "outside the system", and a subtle but important emphasis on "physical gold" (to be contrasted with "gold-backed currency" or "gold standard") It seems that independent minds are coming to similar conclusions (no, I am not "JR"). DB elves, it may be time for you to think about it...
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Posted by Bischoff on 02/03/12 02:03 PM
CORRECTION: "... we would still enjoy the benefits of a currency in control of productive businesses and their customers... "
SHOULD READ: "... we would still enjoy the benefits of a currency in control BY productive businesses and their customers... "
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Posted by Bischoff on 02/03/12 02:01 PM
First, I thank you for your reply, as well as for the tone of your reply.
You have given a response which I consider the dominant, yet in my opinion incorrect view of the function of Gold as Money. This dominant view of money has to do with the "Quantity Theory of Money" and the idea of the value of money being determined by "Supply and Demand". It has to do with "credit" as part of the monetary system.
Neither of these ideas has anything to do with how a redeemable currency created under the Real Bills Doctrine functions, nor how "prices" for goods and services are determined in a "free market".
Without going into long explanations here, let me say that the redeemable currency created under the RBD has a positive value and involves no credit at all. It uses Gold only as the standard of value, which is not the same as the unit of account. Furthermore, the "free market" price of any good or service is not determined by supply and demand, but by an arbitrage between the "bid" of the buyer and the "ask" of the seller/producer. The motivation of the buyer and the seller/producer, coming together in a market transaction, are different.
The buyer wants to maximize the utility of the good and service. He will switch to an alternative at the margin. Carl Menger, the founder of the Vienna School, aka the "Austrians", did valuable work in that area with his Theory of Marginal Utility. The problem with holding out this theory as the sole determinant of the market price is that it ignores the motivation of the seller/producer in "free market" transactions.
The seller's/producer's motive is to earn a maximum "profit". At the point where the seller/producer can no longer turn a profit, he will switch to investing his "Money" in producing/selling a different product or service. On this subject, the notable German economist Heinrich Rittershausen, is quite informative. The buyer's decision to engage in a "free market" transaction is unique and subjective. The decision of the seller/producer to participate in a "free market" transaction is objective and determined by the value standard represented by Gold.
To your specifics:
1. "I just don't understand Ingo: while it is true that Gold has seen no structural depreciation and while it is indeed true that Gold maintains purchasing power throughout the ages, it is also clear that one ounce Gold bought different quantities at different times."
Answer: Yes, gold (as currency) would buy different quantities at different time, as it should. As regards my example, it is important to point out that the Roman toga and the sandals were produced by hand. It is also important to point out that the wool suit was customed tailored and the pair of shoes were customed crafted. The value of the Roman toga and the sandals, as well as the value of the tailored wool suit and the custom shoes were measured by the value standard of Gold. The value of both was was found to be equivalent, including the raw materials, though their production was 2,500 years apart.
On the other hand, the "price" of a mass produced suit and pair of mass produced shoes in comparison to the Roman toga and the sandals would be available for much less Gold (gold used as currency). Does that mean the value of gold changed... ??? In other words, gold became cheaper to mine and refine. No, it means that it becamer cheaper to produce suits and shoes with less labor (less labor, meaning work/joules required) in comparison to the work required to mine and refine gold. As I pointed out, the work required to mine and refine specific amounts of gold has stayed remarkably constant over centuries. It is for that reason that Gold lends itself as a commodity to function superbly as a standard of value.
2. "It is thus simply untrue Gold has stable value."
Answer: Based on my above explanation, will you retract your statement... ???
3. "It is true that at times Governments have tried to pin Gold value by decree. They all failed, as you are undoubtedly aware."
Answer: I am not entirely clear as to what you mean by this comment. However, let me say this that governments are in no position whatsoever to determine what "Money" is. That decision is a universal decision, i.e. a decision by a "market" which encompasses the entire world population and one which cannot be "topped". That universal decision can be undermined, it can be subverted, it can be "out lawed", but it can never be negated. The proof is 80 years worth of annual gold production in above ground inventory.
As to establishing a unit of account, i.e. Dollar, Euro, Pound, Mark, Yen, Ruble, etc. in terms of quantities of gold, I don't have a problem with the government getting involved, except once established, it remains constant. (I had a heated argument with a AJ, a DB reader, about this subject, and he won the argument. I am grateful to him for engaging me.)
4. "But this is no market decree. The market has had very different appreciations of Gold value at different times. I just don't see how this can be denied. I just don't see how one can speak of 'gold as the universally accepted fixed standard of value'".
Answer: I hope I have made clear that the decision made by the "market", which is comprised of the world's population, is the universal decicion which declared Gold the most preferred INTERMEDIATE, meaning Money. Since Gold is the standard of value, it therefore has no price. The value of Gold as a standard lies in the constancy of the amount of work required to mine and refine a specific amount of it, which can be compared to the work required to produce any other commodity or service. People recognized this fact as long as 3,000 years ago. They are still doing so today, if only instinctively, starting with the most sophisticated trader on Wall Street to the lowliest shoeshine boy in Zimbabwe.
5. "In an earlier comment in this thread the example was given of a guy offering a Gold coin with an ounce of specie in it, and people would not even give ten bucks for it. So where is the 'universally accepted fixed standard of value'?
Answer: First, the example in the thread is anecdotal. Second, if in fact it happend, it certainly is not reflective of the combined decision by billions of people the world over. There is room for "standard deviation". As to giving a "buck" or USD for an ounce of gold, you will agree with me that it reflects the value of the USD vis-a-vis Gold, and not the value of Gold vis-a-vis the USD. Gold is the standard not the USD. I hope you can see that.
6. "Of course one can axiomatically say that 1 ounce of Gold = 100 and index all other values against that. But what would be the use of that? We would see massive price swings in all other commodities. It would give us nothing and the truth is: nobody is doing what you are suggesting. Simply because it is a bad idea. It gives no information about 'value'. Only price as a result of demand and supply gives information about value, not it's relative position to Gold."
Answer: This comment goes to the heart of my disagreement with you. You are steeped in the idea of "quantity of money", "supply and demand" and "debt based" ("credit") currency, which is typically Keynesian and Friedmanite bunk. To understand where I come from regarding redeemable currency, you'd have to understand the "Real Bills Doctrine", the "value standard represented by gold" and the "arbitrage" to discover prices in a "free market".
It may interest you to know that redeemable currency was created under the RBD by private banks in North America and in the United States for over 200 years. It has performed its function remarkable well. Had it not been for the "lower" aspects of human nature winning out, we would still enjoy the benefits of a currency in control of productive businesses and their customers, as well as the average American saver.
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Posted by Anthony Migchels on 02/03/12 01:19 PM
Our motto to our customers is: pay with Gelre, save with Euro. Because Euro is clearly the better deal when it comes to hoarding. Gold is much better than euro, of course, but I reckon you get the message.
The Gelre is designed to be a means of exchange. It is offered as such to our customers. They are actively encouraged to spend their units asap and keep their balance as low as possible. In this way everybody minimizes the damage in case anything goes wrong. Meanwhile, it greatly facilitates circulation and turnover.
Everybody wins.
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Posted by Anthony Migchels on 02/03/12 01:13 PM
DB said: "Interesting. Is there a formal penalty for hoarding in your system, Mr. Migchels? And if so, who administers it? The private sector? The government? "
Demurrage is a penalty for hoarding.
In my system the Demurrage is a variable, which at the moment stands at zero. It can be turned up.
In that case my organization (a foundation) would get an income through that, albeit very small. This income is used for the 'stabilization fund', which we use to buy back Gelre if the conversion rate is under pressure.
All this is totally a market operation, there is absolutely no government involvement, although I do have had problems with the Dutch Central Bank. Clearly they are inimical to the scheme
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Posted by memehunter on 02/03/12 11:58 AM
Why is it madness? See my earlier comment:
"This is exactly why the means of exchange should ideally be an interest-free currency that has no or little intrinsic value. Since it makes no sense to hoard it (and a means of exchange should not be hoarded), it will circulate faster and be reinjected in the real economy. Again, this is what happened in Wörgl (in this case, a demurrage charge was applied)."
There is no need for a formal penalty for hoarding in the case of an interest-free currency "printed from nothing", as there is no incentive for users of such a currency to hoard it for long periods. The means of exchange should ideally be designed to encourage its circulation, not its hoarding. People can always hoard gold if they desire to preserve their wealth for the long run. Isn't that what the DB (and you too, Abu, I presume) is advocating anyway?
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Posted by Abu Aardvark on 02/03/12 11:32 AM
"Well, you're the one complaining about its depreciation! So just don't hoard it! Caveat Emptor, right?"
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Nope, the word is CONFISCATION.
"So just don't hoard it!" ???
This is madness!
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Posted by Anthony Migchels on 02/03/12 11:25 AM
Why would you think it is your (or anyone's) business whether or not one "hoards" his means of exchange?
Well, you're the one complaining about its depreciation! So just don't hoard it! Caveat Emptor, right?
Reply from The Daily Bell
Interesting. Is there a formal penalty for hoarding in your system, Mr. Migchels? And if so, who administers it? The private sector? The government?
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Posted by Abu Aardvark on 02/03/12 09:25 AM
"Money is a means of exchange. It is not a store of value. It's value is a result of the agreement to use it as a means of exchange. Don't hoard the means of exchange!
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Why would you think it is your (or anyone's) business whether or not one "hoards" his means of exchange?
And why don't you just work at the FED directly? They'll love your attitude ...
From the Swiss "Tages Anzeiger" of today:
"When money rusts - Many central banks are sitting in a liquidity trap. In order to escape, the US FED falls back on an old idea: Demurrage money ... Bernanke wants to convince businesses that, for the foreseeable future, inflation will be higher than interest. He who hoards money will be left holding the bag, because real interest isn't close to zero but below.
The hoarded money will be worth less in two years than it is today. US businesses sitting on a mountain of cash of around 1,700 Billion USD. Now the FED gives them a strong incentive to spend at least a part of it in order to create jobs.
With this monetary policy Bernanke seizes on an old idea. It originates from Silvio Gesell, a very successful merchant of German-Argentine nativity"
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Posted by Anthony Migchels on 02/03/12 05:25 AM
Thank you Ingo.
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Posted by Anthony Migchels on 02/03/12 05:01 AM
Outstanding credit: 900,000 WIR should be 900,000,000 WIR
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Posted by Anthony Migchels on 02/03/12 04:54 AM
Here's the link to a short TV documentary on WIR:
Click to view link
Here's the story of the Chiemgauer, a rapidly growing German local currency:
Click to view link
The morale:
Money is a means of exchange. It is not a store of value. It's value is a result of the agreement to use it as a means of exchange.
Don't hoard the means of exchange! But use it to buy durable assets that will maintain value or provide future income, or cut costs.
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Posted by Anthony Migchels on 02/03/12 04:51 AM
"This statement proves total and complete ignorance about the nature of the Gold Standard. Unlike your contention of centralizing "Money Power", the Gold Standard hands the control over the interest rate to the average saver. The average saver is the worker who earns redeemable currency, and who can turn a small part of his income into gold, which he then can use to invest in "Gold Bonds" for interest earnings. Unlike your contention, the Gold Standard takes power away from special interests represented by banks and federal politicians. :"
This is suggesting that Gold will be with the 'average saver'.
And that is just total nonsense.
Nobody knows how much Gold there is, as the Rothschilds own all the mines and we are depending on their reports of production. They have owned all the mines for centuries.
But we can be quite sure they have decisive stake in the Gold Market.
So it is not the average saver that will set interest rates. It's the Gold Monopolist of ages that will have privilege.
In fact, it is well known that a Rothschild sets the daily price for Gold at the LBMA. Every day.
The idea that we need gold to save is wrong. Saving is not needed in a modern economy. Because Mutual Credit facilities require zero capitalization.
All the cash necessary will always be available, because with real assets as collateral all the credit will be there when needed at close to zero cost.
So for 'saving', the use of wealth for consumption at a later stage, we need not hoard cash, we should collect assets: pay off our house (which can be remortgaged when we need cash for new investments), invest in our own business, education etc. Even buy some Gold for all I care!
Just don't hoard the means of exchange!
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Posted by Anthony Migchels on 02/03/12 04:45 AM
"What silly comment is this... ??? What does this have to do with the Gold Standard... ??? This may have to do with monitized debt currency and compound interest, but is has absolutely nothing to do with the Gold Standard."
Obviously, if you see the Gold Standard purely as a Unit of Account, there would no problem.
But the practical notion of a Gold Standard is that it is the dominant means of exchange. And to use it as a means of exchange, it will have to borrowed from Gold Banks, which will be owned by the same people who own the current banks.
They will slap interest on that credit and that interest on Gold used as the means of exchange will facilitate this continuing wealth transfer.
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Posted by Anthony Migchels on 02/03/12 04:43 AM
"Barter is barter. It is a two-way exchange. It has nothing to do with credit. "Mutual Credit" is a term invented to describe an agreed upon barter exchange to be completed in the future. To call this credit is stretching credulity. In fact, "Mutual Credit" is no "Credit" at all. It's a bogus term. "
Please ignore the last sentence in the previous comment.
This is just wrong, you're missing out on something. I'll refer you to Lietaer and Thomas Greco.
It is credit. It is money too. It has nothing to do with barter. Most of these systems call themselves 'barter' systems, but they use their own means of exchange agreed upon by the participants. Thus they use money.
This money is created as debt, just as is the Dollar.
This debt is interest free. These debts can be very substantial.
Here is a link to a short film about WIR, a system with 70.000 swiss firms participating. They turn over 2 billion per year. Outstanding credit: 900,000 WIR (1 WIR = 1CHF).
Don't fall for semantics Ingo: this trade is real. WIR is real. Interest free credit is real.
It's all just bookkeeping, just like our current money system. It's just not used as a wealth transfer to the ones owning the system. All the added value of the trade associated with WIR currency remains with the participants.
That's what it's all about.
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Posted by Anthony Migchels on 02/03/12 04:37 AM
"I have purposely furnished you with the example where the an ounce of gold today, as in Roman times, bought the same or equivalent attire. No loss of value over 2,500 years with gold. You completely ignored this fact. I leave it to you to check other commodity values in terms of gold over time. They all turn out to be in line with the example (work for work, i.e. joules for joules comparisons)
I have described gold as the universally accepted fixed standard of value. I have explained that a "price" measures the value of any good or service as a ratio of the fixed value of gold. I have explained why gold is the fixed value standard. Why therefore, Gold has no price, because gold and only gold is money, and money has no price.
You come along and argue that there is a "price" for gold and that it swings up and down. This is like arguing that a bobbing ship in a taifoon can fix its position by observing other bobbing ships. It's nonsense. Gold in comparison, is the lighthouse, a fixed postion on shore against which the bobbing ships can fix their position. Gold is the INTERMEDIATE commodity (Money). It is a fixed measuring devise, not a rubber band. "
I just don't understand Ingo: while it is true that Gold has seen no structural depreciation and while it is indeed true that Gold maintains purchasing power throughout the ages, it is also clear that one ounce Gold bought different quantities at different times.
It is thus simply untrue Gold has stable value.
It is true that at times Governments have tried to pin Gold value by decree. They all failed, as you are undoubtedly aware.
But this is no market decree. The market has had very different appreciations of Gold value at different times. I just don't see how this can be denied. I just don't see how one can speak of 'gold as the universally accepted fixed standard of value'
In an earlier comment in this thread the example was given of a guy offering a Gold coin with an ounce of specie in it, and people would not even give ten bucks for it. So where is the 'universally accepted fixed standard of value'?
Of course one can axiomatically say that 1 ounce of Gold = 100 and index all other values against that. But what would be the use of that? We would see massive price swings in all other commodities. It would give us nothing and the truth is: nobody is doing what you are suggesting. Simply because it is a bad idea. It gives no information about 'value'. Only price as a result of demand and supply gives information about value, not it's relative position to Gold.
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To my mind you are mixing apples and oranges: the means of exchange and the unit of account.
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Posted by memehunter on 02/03/12 01:14 AM
"How do you maintain a private cartel when you have a redeemable gold standard? Just asking. Won't the gold be drained away from the cartel? Or do you expect each and every person who uses that currency to be a member of the cartel, so at to somehow come to an agreement not to redeem their currency for gold?"
Well, this seems to have worked for a few centuries, no? As long as most people are happy to leave their gold in the banks (and the bankers know this), this is not a big issue. Moreover, if compound interest is part of this system, the cartel will, on the contrary, be eventually able to control an increasingly larger portion of the available gold reserves.
I agree that, in theory, gold could be drained away, but it is an unlikely scenario and one that (I assume) bankers are willing to live with. Note that I wrote "quasi-limitless", not "limitless" - the bankers will go as far as they can as long as they can get away with it.
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Posted by memehunter on 02/03/12 01:06 AM
"If the rich do not loan out their capital, you will malign them for hoarding. If they do loan out their capital, you will call them evil people for living off interest.
What are the rich to do? It makes no sense to loan capital out interest-free."
This is exactly why the means of exchange should ideally be an interest-free currency that has no or little intrinsic value. Since it makes no sense to hoard it (and a means of exchange should not be hoarded), it will circulate faster and be reinjected in the real economy. Again, this is what happened in Wörgl (in this case, a demurrage charge was applied).
Wealthy people would always have the possibility to hoard gold. They can always try to loan at interest (no "coercion" against interest), but they will find few takers in a situation where interest-free credit is easily available.
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