News & Analysis
Bernanke Fights Back Against a Gold Standard
Bernanke says gold standard wouldn't solve problems ... Federal Reserve Chairman Ben Bernanke on Tuesday took aim at proponents of the gold standard, saying that such a system handicaps the government's ability to address economic conditions. Bernanke spoke in the first of a series of four public lectures at George Washington University that is the central bank's latest effort to counter a raft of negative public sentiment that has arisen from its handling of the financial crisis. The former Princeton economics professor delivers a second lecture on Thursday and two more next week. – Reuters
Dominant Social Theme: Take your gold standard and shove it.
Free-Market Analysis: Ben Bernanke has come out forcefully against what may be seen as a burgeoning support for a monetary gold standard in the financial community and among the alternative media. This is newsworthy, because it begins to show what the power elite REALLY thinks about a gold standard.
The power elite that wants to create world government certainly does want a universal money. But, what it likely doesn't want is a money that is available to anyone who can dig it up.
We know this is anathema to the power elite because they spend considerable time and energy shutting the door to methodologies of money generation that are NOT controlled by them.
Whether it is Wall Street itself or a myriad of other monetary and financial activities, the elites make it difficult to generate capital in ways that are not supervised by their agents and enforcement officials whenever they can.
The elites do this via mercantilism, by controlling governments and creating laws that support their own enterprises at the expense of others. They then create support for these manipulations via dominant social themes.
These dominant social themes are fear-based promotions that frighten middle classes into giving up power and wealth to facilities that provide global governance. The goal of the elites seems to be a new world order with a new money and a universal government. There are indications that the elites wish to cull the larger human population dramatically as part of this evolution (see Georgia Guidestones).
While some in the alternative media community have claimed with increasing fervor that the elites DO want a universal gold standard, this has never been commensurate with the way the elites operate.
The powers-that-be have been fighting for fiat money (under their control) for centuries. Beginning with European and British central banking perhaps 500 years ago, the elites have been steadily moving away from commodity-based money and toward pure paper that is easy to print and easy to inflate.
The most significant movement to oppose the elites' affection for paper money has been the Austrian, free-market economic movement with its emphasis on "honest money" – a full-fledged, one-to-one gold standard.
In the past decade, however, as the Austrian movement has gained considerable popularity and clout, the preferred position on money seems to have evolved to one of monetary competition, which this modest paper (the Daily Bell) favors.
Money is what people make of it, and while we believe that societies at least in part would settle on some sort of private, fractional gold and silver standard, it is only through the free market itself (monetary competition) that a utile and useful monetary standard can be ascertained.
It is surely not the advantage of central banking generally to face monetary competition, as the only thing that keeps central banks in business is their monopoly control of money production.
Central banks – especially the Federal Reserve – are private in one sense and public in another. This is the way the elites work in fact. They use mercantilism, the conflation of private goals with public mandates, in order to cement control of society.
By ensuring their own goals and desires are enshrined into law, elites make their success mandatory and criminalize its failure. Thus, a private money-making machine like the Federal Reserve has been enshrined into law.
Congress passed an enabling act for the Fed in 1913 and subjects the Fed to considerable scrutiny while also controlling, along with the president, the appointment of its head. Without Congress, there IS no Fed, and this is true around the world. Everywhere you go, central banks have gained the willing or unwilling support of the governments they supposedly support.
Of course, in reality, central banks are apparently controlled by a handful of dynastic families that use the hundreds of trillions within their control to push the world toward global governance.
It is not in their best interest, of course, for these families and their enablers and associates to give up fiat money. At best, these families may wish to subject the world to an ARTIFICIAL gold standard controlled by THEM. But a free-market gold standard is not something that is in their interest.
We know this because the US itself was on a gold and silver standard once upon a time before the Civil War. Certain sophists and wily ones will make the argument that a gold standard especially is sought by the elites, but we know this is not true because the elites destabilized the US gold and silver standard and, in fact, fought a US war in the mid-1800s to implement paper money.
The argument is that the elites control all the gold (they don't) and therefore any gold standard will inevitably be controlled by them. But if this were truly the case, why did the elites evidently and obviously create a war (between the states) to implement paper money?
In fact, within the context of a private marketplace, it is impossible to sustain a monopoly. It is sophistry to maintain that people, freely trading, will support a monopoly not to their liking. The only way an elite can control the market for gold and exercise continued Money Power is via mercantilism and the continued control of government. A free market in gold and silver would deal death to their designs.
Money power fears terribly a free market in gold and silver. All their patiently hoarded metals would go for naught. They could spend every bit of it trying to manipulate fee markets and at the end would have nothing to show for it but an empty checkbook and frustrated connivances. For this reason, the "war between the states" was prosecuted. Money Power needed to regain control of money in the colonies.
Some will maintain that the war was about freeing the slaves, but anyone who looks closely at the historical record will likely come to the conclusion that the New York/European banking establishment was behind the Civil War and that its real goal was to minimize US exceptionalism and reduce the power of the republican experiment as regarded both free money and a free society.
The elites have been fighting FOR monopoly fiat money ever since. It is no coincidence that some 150 central banks now occupy most of the world's countries, when there were but a tiny handful 100 years ago. The elites have sought forcefully to emplace private/public central banks throughout the world and have succeeded in doing so.
It makes no sense, then, that the elites would now wish to revert to a free-market gold standard, much less to a gold and silver standard. Such gold and silver standards have been popular throughout history.
Common people can ascertain manipulation by checking the ratio between gold and silver. It's a good way to figure out the manipulations of a given power elite. It is not in the self-interest of central bankers to impose a credible, private market gold standard (or gold and silver) standard, and it is not surprising that Bernanke would come out against such an idea. Here's some more from the article excerpted above:
"Since the gold standard determines the money supply, there is not much scope for the central bank to use monetary policy to stabilize the economy," Bernanke said. "Under a gold standard, typically the money supply goes up and interest rates go down in a period of strong economic activity - so that's the reverse of what a central bank would normally do today."
Embodied by Texas congressman and Republican presidential hopeful Ron Paul, a loud minority advocates the closure of the central bank and a return to a gold standard where every dollar issued must be backed with equivalent reserves of precious metal.
Most economists credit the Fed for acting forcefully by lowering interest rates aggressively once it realized the magnitude of the 2007-2009 crisis. But policymakers, including Bernanke, have been chided for downplaying the housing downturn in its early stages and for turning a blind eye to flaws in the regulatory system that laid the groundwork for the boom and bust.
Some Fed critics argue that the central bank's ultra-easy monetary stance - it has held overnight interest rates near zero since late-2008 and has bought $2.3 trillion in bonds - is paving the way for future inflation.
In the above excerpt we can see the tremendous power that a central bank exercises through its monopoly manipulation of fiat money. Bernanke has "held" short rates near zero since 2007 while injecting trillions into the larger banking economy.
Of course this is nothing but a kind of price fixing. Bernanke is "fixing" the volume and price of money. In doing so, he is presiding over a tremendous wealth transfer from people who earn money to those who haven't earned it and likely won't handle it as well.
Central banking is nothing but price fixing, and price fixing never works. The dollar has depreciated some 95-99 percent since the inception of the Federal Reserve in 1913, and today, given that the Fed has injected literally tens of trillions more into the banking economy, it is very likely that the dollar reserve system is on its way out.
The power elite knows this, of course. The current growing, worldwide depression is of its own design and making as it is a direct result of central banking – the facility, worldwide, that prints too much causing first euphorias and booms and then busts.
The elites evidently and obviously want to supplant national currencies with one international one, perhaps the infamous SDRs supervised by the International Monetary Fund. But in doing so you can be sure the elites don't intend to let the markets themselves control money.
Bernanke would seem to be sending a clear message about that. However, we note that he seems to think he has to do so, and this is probably due to the success that educators like Congressman Ron Paul have had when it comes to money.
Fiat money, Greenbackerism and other inflation-oriented manipulations have been thoroughly vetted in the alternative media and no doubt these discussions have been examined at length by the powers-that-be.
Bernanke's caution about a private-market gold standard is a kind of warning squeak from the power elite that never deigned to address these issues before. That Bernanke, who works directly or indirectly for the top central banking families, has had to issue a statement on the subject is evidence that a great change in taking place in the historical monetary discussion.
Of course, as proponents of what we call the Internet Reformation, we are not surprised. We have long held that the Internet would focus attention on these previously abstruse issues and begin to undermine most if not all of the dominant social themes that the elites use to control people and move the world toward global governance.
Within this context, Bernanke's statements can be seen as further evidence that even the basic memes of the elite are under attack. They must be most uncomfortable now for Bernanke to make this statement.
They must, metaphorically, be making such statements between gritted teeth. It is NOT something they wish to do. They wish to treat monopoly fiat central banking as a GIVEN, something that is never to be commented because it is natural as breathing.
Only it is not. And the billions of words now expended on the subject of this illegitimate and destructive monetary system are likely, finally, having an effect on the powers-that-be. Not even the top powers of the world can keep an entirely illegitimate system in place.
There is, in fact, no place in the world for a system that allows a handful of people to print up to US$50 trillion on a whim to support their cronies while the rest of the world is struggling to get by on a dollar or two a day.
Since entering office in 2006, Bernanke has taken several steps to make the central bank more transparent, including holding quarterly news conferences and publishing policymakers' own projections for the path of interest rates.
This statement toward the end of the article profoundly misses the point, of course. The elites' staggering monetary manipulation has played out over the Internet in the past decade, and its profound IMMORALITY is public knowledge. More transparency is the LAST thing the system needs.
We have been arguing for a long time that many of elite memes are dying or dead thanks to the Internet and central banking may be chief among them. This squeak of agony from Bernanke is further proof that the top powers feel a need to protect central banking and to challenge its detractors.
The trouble is that central banking came in with assurances that it would modify monetary manias and ensure the system stayed solvent and steady for the benefit of the average person. As it has done none of that and has been exposed as horribly unjust and even genocidal system anyway, it is difficult to see how the elites intend to defend it going forward.
The alternative, in fact, is some sort of PUBLIC gold standard or global monetary standard controlled by the elites who have set up the current system. Bernanke's comments can also be seen as paving the way for a further evolution within the context of these parameters. But the LAST thing the elites want is a private gold standard or private money generally.
Ironically, unless they can gain significant control over the Internet, private monetary standards may indeed be in their future, which would jeopardize the entire program of global governance as their funding sources would dry up.
Conclusion: This will likely be the final battle of the Internet Reformation in our view – the struggle by the elites to move away from the failing and exposed central banking system toward another system ALSO controlled by them. Whether they can pull it off remains to be seen. The world's economy would seem to hang in the balance.
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Posted by memehunter on 03/22/12 12:03 PM
Justin: I read that as "its quantity cannot be greatly increased in a short period of time".
I agree that the actual quantity of gold in existence (or above ground) does not really matter. However, the rate and, more importantly, the *predictability* of the rate at which the quantity of gold increases is of great consequence with respect to the "store of value" function of gold. If people thought that the quantity of gold in existence could be greatly increased in a short period of time, then surely they would think twice about using gold as a long-term store of value. If, on the other hand, a slow but steady increase in the quantity of gold above ground can be assumed, then people will be more likely to use gold as a store of value.
Note that these arguments would also apply to other commodities when used as "stores of value", but they are especially relevant to gold given the fact that it "does not spoil or deteriorate", as you mentioned.
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Posted by obsvr_1 on 03/22/12 11:37 AM
... Borrowing money to get out of the fix is no longer possible, since the exponential curve of compound interest has intersected the linear growth of debt. That means, if you borrow money now, you only add to the debt problem without having a chance to get out of debt. The conclusion... ??? Default is inevitable. As a matter of fact, QEs constitute default already... ...
If you can figure all that out, and how the Fed sells bonds and how to front run the Fed and what happens when that no longer work, you can make yourself a hell of a killing in the market... .
****
This is the point, and why I suggested a move to a debt-free money (Restore Seiniorage) as a baby step in the right direction.
By moving to Restore Seiniorage, the exponential rise in debt from interest would be eliminated. This "money"/value would be retained as a National Asset by the gov't reducing the tax burden of the exponential interest expanse. It would also put an economic stabilizer in place such by eliminating Fractional Reserve Lending (reduce leverage) and ensure risk is retained by the institutional owners (execs, stock/bond holders) and not be shifted to the tax payer (eliminate the Moral Hazard).
Instead of dismissing an idea and as others on the blog have done by summarily rejecting ideas because it is not a gold standard or ultimate libertarian world, I wanted to engage in a discussion of the "baby step" in comparing the existing world of debt-based money vs. Restore Seinoriage. The white paper that I reference shows how structurally easy it would be to convert over to a debt-free "money", not that it would be easy from a political or banker perspective.
We live in a fiat world, debt-based money (currencies and credit), we live in a world of non-money (bits and accounting transfers) used as money (measure of value, store of value and exchange of value). So how to we get from here to there (ultimate place of a gold standard).
Also, even if the system was based on a Gold Standard, very few if any of the political problems, waste, fraud and abuse in the system would be solved as there would still be a credit world to deal with and it is the credit bubbles that are causing our economic problems and financial crisis; these also existed for 100's or 1000's of years as they are all man made events.
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Posted by EdwardUlyssesCate on 03/22/12 11:12 AM
"Most universities are no longer temples of knowledge,
but of power, and true moderns worship there."
DEAN KOONTZ, Brother Odd (2006)
Seemed an appropriate quote for Bernanke's George Washington University lecture. I feel bad for the 30 university students, who assumed they were receiving "knowledge."
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Posted by memehunter on 03/22/12 09:55 AM
Bischoff, I am certainly aware of the difference between store of value and means of exchange, and I am aware that gold is particularly suited for the store of value function. In fact, I wrote about this earlier on this thread.
Yes, gold has been used for millennia as a store of value, and there are good reasons for that (I also wrote about this).
The only point I was trying to make (which was not actually about gold, this was only an example) is that when Hoss speaks about a store of value, I believe that one can be more specific and add that this "store of value" function is relying on an implicit expectation that others will still accept this particular form of money (or currency) in the future in exchange for their productive output.
I'm not sure why you would want to disagree with that, but perhaps you can explain that to me.
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Posted by Justin on 03/22/12 09:03 AM
Ingo... Ingo...
Perhaps your arguments with other commenters is making a red mist descend over your vision. I'm saying your point in #2 is in fact the key point, the exact OPPOSITE of maintaining that your point in #2 is not valid. In other words I'm agreeing with your point #2.
I'm sorry though, your point #1 DOES imply a quantity argument, you are saying gold cannot be mass produced. I read that as "its quantity cannot be greatly increased in a short period of time". I contend that it does not matter whether it can be mass produced or not, the quantity of gold is of no consequence, for quantity is not what determines value.
As for constant marginal utility, it is a quote much bandied about but no real reason given for its importance. I'm stating that constant marginal utility is given by an infinite bid. Gold is the only thing whose "chemical & physical properties" mean it "does not spoil or deteriorate", thus it is the only thing that you can never have too much of, the bid for Gold is, more or less, infinite.
Money is what extinguishes ALL debt, you can never have enough of it, since there is no limit to human desire, thus debt incurred - Gold is the only thing you can never have enough of - only Gold is money.
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Posted by rossbcan on 03/22/12 08:38 AM
gees, I hope DB and others understand your REAL meaning.
You are absolutely correct, so long as decreed standards (as opposed to something relating the "value" of currency to something REAL and uncounterfeitable, redeemable, much as without standards of measurements such as inch, we lose all precise economic signals, confusing choice), there will be absolutely no controlling those who make and play the "rules" to decree their own wealth, at the expense of the productive and cyclical economic boom (nurture the prey, allow them to produce real stuff) and bust (harvest the prey, steal their real stuff).
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Posted by Abu Aardvark on 03/22/12 08:26 AM
'What we need is for the exchange system (money) to be debt-free instead of the current debt-based money. The FED would be in a much better position to use monetary policy to keep inflation moderated.'
------------
Another day, another Greenbacker ...
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Posted by rossbcan on 03/22/12 08:22 AM
... and, of course, this Bernanke video has stood the test of time (truth):
Click to view link
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Posted by rossbcan on 03/22/12 06:54 AM
BB: "took aim at proponents of the gold standard, saying that such a system handicaps the government's ability to address economic conditions."
Translation to REALSPEAK: Government knows best. The "unseen hand" of collective choice of free market participants, making their own value judgments in pursuit of individual self-interest, summing to collective self-interest is too (insert misdefined term case: greedy, stupid, antisocial, on to infinity) to see to the "greater good", requiring that money be counterfeited and printed from nothing, to steal the resources of the productive and impoverish civilization in pursuit of "higher goals" (codephrase: private profit for choosers, socialized loss).
Well, BB and his entire "industry" of unproductive rationalizing syncophants, including corrupt government and law are WRONG. Only those with "boots on the ground" and facts in hand are even remotely capable of making correct choices, on any issue:
Click to view link
So long as resources are stolen from the productive, by any means, including fiat printing of "money", to the sole benefit of the "printers", the grim reapear of "Mathematics of Rule" (reality) will continue to collapse prosperity, peace and civilization:
Click to view link
This is the SOLE reason THEY don't like free market competing and/or commodity backed currencies: THEY are too stupid to add value to civilization by doing ANYTHING that people value enough to voluntarily trade for. THEY are predators, nothing more, nothing less. When the pretexts and rhetoric is stripped away, we are left with: what THEY DO and, the consequences to all of us.
Hopefully this and many similar civilization collapsing issues will be once again solved by us personally and collectivly insisting on the "rule of law", holding these glib criminals to account and again removing the yoke of servitude from the innovative and productive so we can all, once again, get on with the business of peaceful coexistance and collective survival:
Click to view link
Bush the lessor was correct: It is either US, or THEM, but, he had the identities misrepresented. US is the civilized, THEM are barbarians and predators, enemies and destroyers of civilizations.
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Posted by Abu Aardvark on 03/22/12 05:58 AM
Not entirely off-topic:
"End Of The Road" - A Teaser
Click to view link
Catching The "Silver Crusher" Algorithm In The Act
Click to view link
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Posted by Bischoff on 03/22/12 03:44 AM
"However, it should be kept in mind that even the "store of value" function rests on an implicit expectation that this store of value will be accepted in the future in exchange for productive output. Therefore, it can be said to rely on an unspoken agreement to keep using this particular form of money as a "means of exchange" (whether that is its primary or secondary function)."
It seems that confusion abides.
Gold became an intermediate commodity (means of exchange)in the exchange of goods about 3,000 years ago. The reason why it was selected as such had to do with its chemical and physical characteristics.
Those characteristics made gold a "store of value", as well as a "measure of value", besides being used as a means of exchange (currency).
Some 700 years ago, gold as a means of exchange started to recede. There wasn't enough Gold available to finance manufacturing/production and also carry on commercial exchanges. More efficient currencies had to be found, i.e. silver, copper, redeemable paper, etc. However, in every case, the new currency had some fixed relationship to gold.
It was for the very first time in history that all currencies in the world were officially divorced from any connection to gold 40 years ago.
Still only gold is money. However, the standard of measure that gold provided to the accounting unit of currencies, and the store of value that gold was when paper currencies could be exchanged for a fixed amount of gold, ceased to exist in 1971.
Today, the value of the USD/FRN is fixed by Saudis due to the fact that they quote oil only in USD/FRN currency. It varies, as you have noticed over the years. However, the value curve of Saudi crude and the value curve of Gold are synchronous. Go, check it out.
What's ot mean... ??? It means that Gold is Money.
Lucky for us though, the Saudis quote oil only in USD/FRN. That makes the USD/FRN the world's reserve currency, because countries need USD/FRNs to pay their oil bills. Being the world's reserve currency is like writing checks that are never cashed.
"Therefore, it can be said to rely on an unspoken agreement to keep using this particular form of money as a "means of exchange" (whether that is its primary or secondary function)."
What does this mean... ??? Is it a conclusion, a premise, what... ???
Gold is universally recognized by people, past and present, as the one commodity on earth which best preserves value. This recognition has been such for 3,000 years. My prediction is that it will not change in the foreseeable future. So what's with this "... unspoken agreement to keep using this particular form of money"... ??? Just because governments de-monetized currencies, it doesn't mean Gold is NOT still money.
Evenso, there exist only "legal tender" currencies in the world, Gold is money, and will be such for the foreseeable future.
Don't confuse currency with money, and don't confuse store of value and measure of value with means of exchange.
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Posted by Bischoff on 03/22/12 02:25 AM
Yes, the banks are connected to the Federal Reserve "Fed" as stated, but that still leaves them an appendage of the "Fed".
To understand my point, you have to understand the difference between the "Federal Reserve System" created in 1913 and the "Federal Reserve" created by gutting the 1913 FRA and wholly modifying it with the National Banking Act of 1935. It's too long to get into... .
As to the National debt never being payed off, you are correct. As it stands, the revenue of all economic actvivity would have to go straight to the government and then some. That means nobody eats, drinks... etc., So, that solution is out of the question.
Borrowing money to get out of the fix is no longer possible, since the exponential curve of compound interest has intersected the linear growth of debt. That means, if you borrow money now, you only add to the debt problem without having a chance to get out of debt. The conclusion... ??? Default is inevitable. As a matter of fact, QEs constitute default already... ...
If you can figure all that out, and how the Fed sells bonds and how to front run the Fed and what happens when that no longer work, you can make yourself a hell of a killing in the market... .
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Posted by Bischoff on 03/22/12 02:01 AM
"Ingo, I contend that 1. is irrelevant, as it implies a quantity argument."
It does no such thing. It merely states that the physical and chemical characteristics of gold are such that there is no other process by which it can be created except by nature. IOW, there is no labor (work) saving devise nor process by which refined gold can be obtained other than mining and refining. That is the reason gold is the standard of value. It measures work and it has been consistent over thousands of years.
"2. is the key criteria as the determinate of value is QUALITY. A practical example; which do you value more, the quality set of spanners you inherited, ie. paid nothing for, from your father or grandfather or the set of shitty Chinese spanners you paid $20 for at the hardware?"
That statement is in no way responsive to my point #2. What I tried to point out with point #2 is that Gold is the most stable element in the periodic table, therefore it doesn't spoil or deteriorate. Gold therefore also makes a perfect store of value.
"... gold is not of value because of its quantity... "
Do you think you are telling me something new... ???
"... the unaltering quality of gold, its ability to extinguish ALL debt ALWAYS, gives it its constant marginal utility - given by its infinite bid, you cannot have to much gold. Only gold can have this property, as only gold is forever; except diamonds but they are not all alike, unlike refined metal."
Here, you are stumbling around, but you've found some kernel of truth.
First, you maintain that my point in #2 is not valid, then you tell me that "the unaltering quality of gold" plays a factor in gold having constant marginal utility... What's with that... .???
Gold has constant, or nearly constant marginal utility, because gold is universally recognized as the best commodity on earth to retain its value. It does that because of the things I pointed out.
Gold is what the world population, past and present, has decided was the ultimate store of value. This universal acknowledgement of gold as a store of value recognizes the unique qualities of gold which also makes it the "objective" standard for measuring value (work). Because Gold is the standard of measure, gold has no price. (It has to do with Austrian marginal utility analysis)
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Posted by memehunter on 03/22/12 01:57 AM
Hoss, I wanted to comment on this specific point:
"Money should be a store of previously-produced and as-yet unconsumed value. Not a claim on my productive output. Not without my permission."
I agree with the concept of the "store of value" as being one of the important functions of money, and I find this formulation preferable to the one seeing money as a claim on productive output.
However, it should be kept in mind that even the "store of value" function rests on an implicit expectation that this store of value will be accepted in the future in exchange for productive output. Therefore, it can be said to rely on an unspoken agreement to keep using this particular form of money as a "means of exchange" (whether that is its primary or secondary function).
As someone said here on the DB, the store of value can thus be seen as a "store of the means of exchange function", with the expectation that the form of money in question will still be in demand in the future in exchange for productive output. So, although it is a shortcut to view money as a claim on productive output, it is still this implicit expectation that is the most compelling reason to use money as a store of value.
In the case of gold, it seems unlikely that gold would suddenly lose its appeal after several millennia, especially given that it is particularly suited for this function. But it is important to keep in mind that this is still based on implicit expectations (even if it is a historically informed set of expectations). If people did not trust that they could eventually use gold coins to pay for someone else's productive output, there would be little reason for them to accept gold coins in exchange for their own productive output.
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Posted by obsvr_1 on 03/21/12 11:10 PM
I get this from the Federal Reserve website
Click to view link
See Page 12 -- National Banking is not an appendage, they are member banks with members within the governing structure.
... today the politician spend into deficit and increase the national debt - which everyone should understand by now will never be paid back, just roll over ad infinitum; so the pain that the contemporaneous taxpayers feel is the interest payments on the debt (in addition to all the other waste, fraud, abuse in the political process of budgets & appropriations) -- The interest payment pain could be eliminated if the system was changed to debt-free money.
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Posted by Jason on 03/21/12 11:07 PM
This article in an aside seems to advocate for a fractional reserve gold standard. I have seen this concept repeated in various other articles, and am confused by this. According to Austrian theory, loaning out demand deposits is akin to issuing unbacked currency, as both are forms of artificial credit expansion and have the same effects on the economy. A fractional reserve requirement actually necessitates a central bank since the fractional reserve banks, which are insolvent by definition, require a lender of last resort.
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Posted by Justin on 03/21/12 10:55 PM
1. Gold cannot be mass produced by chemical of physical processes.
2. Gold does not spoil or deteriorate.
Ingo, I contend that 1. is irrelevant, as it implies a quantity argument. 2. is the key criteria as the determinate of value is QUALITY. A practical example; which do you value more, the quality set of spanners you inherited, ie. paid nothing for, from your father or grandfather or the set of shitty Chinese spanners you paid $20 for at the hardware?
There are hundreds of thousands of tonnes of gold, gold is not of value because of its quantity. It wouldn't matter if there were a billion tonnes of gold or 100 tonnes, the unaltering quality of gold, its ability to extinguish ALL debt ALWAYS, gives it its constant marginal utility - given by its infinite bid, you cannot have to much gold. Only gold can have this property, as only gold is forever; except diamonds but they are not all alike, unlike refined metal.
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Posted by johnblenkins on 03/21/12 09:47 PM
The price of silver is so volitile, because it is by far the
most manipulated of commodities. JP Morgan et al.
The two near 30% takedowns of May and September 2011 could not be plainer.
Intresting fact not only did silver coin for the first time ever sell
in dollar terms as much as gold coin from the US Mint.
2011 also saw the Mint sell 40 million 1oz silver eagles alone.
The US only dug 38 million oz out of the ground last year.
Silvers industrial use grows as you say but lets not forget
it has been MONEY as long as gold at least.
In a true free market silver would find its own leavel with gold.
History pegs the average at 15/1.
With all those light switches and solar panels that gap
will close.
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Posted by Bischoff on 03/21/12 09:36 PM
"Today the FED is a consortium (cartel) of private banks, as all Nationally charterred banks are members of the Federal Reserve System."
Are you serious... ??? Where do you get such idiocy... ??? Have you ever looked up the Federal Reserve Act as modified by the Banking Act of 1935... ???
Section 10 clearly states that the "Federal Reserve" is the Board of Governors of the Federal Reserve with headquarters in Washington, DC along with twelve Federal Reserve District Banks located in major cities throughout the country. Period.
Clearly, the Federal Reserve ("Fed") is an agency of the U.S. Government, albeit with "independent" status in which bankers have much influence due to the appointment process relating to the members of the Board of Governors and of the Federal Open Market Committee.
The big National Banking system is an appendage. Their business is entirely dependent on the "Fed" and its policies.
So, what's all this crap about a cartel of private banks running our monetary system... ??? Are you chilling for power hungry Congress critters who push this central bank set up... ???
Of course they get reelection money from the banks, and they are eager to take it. It's no skin of anybody's nose, except the taxpayer's. The politicians are in charge of putting the taxpayer into debt so the debt can be used to monetize FRNs which then pay for the reelections of the politicians who just stuck it to the taxpayers.
Wake up, and smell the coffee... .this cartel business is old schtick. Who still believes in this crap... ???
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Posted by obsvr_1 on 03/21/12 09:23 PM
I did -- see Posted by obsvr_1 on 03/21/12 02:52 PM
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What we need is for the exchange system (money) to be debt-free instead of the current debt-based money. The FED would be in a much better position to use monetary policy to keep inflation moderated. The business cycle (Boom/Bust) is driven by the Fractional Reserve Lending of the banking system (Mainly TBTF and unethical shadow banks). Under a debt-free money system, there would be no need for a US Treasury market where the FED uses FOMC to manipulate the interest rates. People who want to save would use the Free Market to invest in stocks, corp bonds, muni bonds, money markets, CDs etc... . and get Free Market rates of return. The banking system would use their own capital to loan to the business/consumers. Banks would loan money from the CB (FED) for any credit expansion beyond their own capital. This would eliminate the interest cost on the monetary base that is needed to facilitate economic activity and increase revenue to the gov't from the bank leanding, thereby reducing the tax burden for all.
Take time to read the white paper for more detail on debt-free money system @
Joseph Huber & James Robertson at New Economics Foundation published a white paper
Click to view link
that describes the theory and operational aspects of a debt-free system
(Restoring Seigniorag).
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