What Kind of Gold Standard?
By Staff News & Analysis - November 18, 2010

BY disclosing a plan to conjure $600 billion to support the sagging economy, the Federal Reserve affirmed the interesting fact that dollars can be conjured. In the digital age, you don't even need a printing press. This was on Nov. 3. A general uproar ensued, with the dollar exchange rate weakening and the price of gold surging. And when, last Monday, the president of the World Bank suggested, almost diffidently, that there might be a place for gold in today's international monetary arrangements, you could hear a pin drop. Let the economists gasp: The classical gold standard, the one that was in place from 1880 to 1914, is what the world needs now. In its utility, economy and elegance, there has never been a monetary system like it. It was simplicity itself. National currencies were backed by gold. If you didn't like the currency you could exchange it for shiny coins (money was "sound" if it rang when dropped on a counter). Borders were open and money was footloose. It went where it was treated well. In gold-standard countries, government budgets were mainly balanced. Central banks had the single public function of exchanging gold for paper or paper for gold. The public decided which it wanted. – James Grant, New York Times

Dominant Social Theme: Gold provides hope for the world. Let the government get out of the way. The proper function for the authorities is merely to set the standard and then leave it alone.

Free-Market Analysis: Money is being argued about again, which is a good thing. But as usual (or so it seems to us) the argument is being framed in terms of what "ought" to be done. This is a kind of promotion, a dominant social theme, whether or not one wishes to admit it. Even the argument over re-imposing a gold standard, as the excellent James Grant argues in the article excerpt above (and he is surely a fine financial journalist) is tendentious because it involves GOVERNMENT solutions, or at least government involvement, however marginal. It certainly gives us permission to think in terms of government solutions.

Of course in the current day, government is a given – a necessary reality that until recently has been accepted with the same stuporous acquiescence as one tolerates bodily functions. But we will predict, as we have throughout the lifecycle of the Bell, that acceptance of this most fundamental of all memes is beginning to shift. As the truth-telling of the Internet continues to have an impact, government mendacity is increasingly exposed and its logical fallacies are revealed, along with its false promotions.

For this reason, the "what should be done" argument could eventually retard social and cultural progress in our humble view – at least if one believes the truth-telling of the Internet is beginning to generate a kind of modest "New Enlightenment." Such suppositions (re-involving government) lend themselves, unfortunately, to Hegelian analysis. American cable news shows especially (mewling like mongrels at the thought of a real free-market) begin to hold debates between more or less authoritarian types and quasi-free-market proponents. The discussion is then over HOW MUCH should be done, not whether nothing should be done.

No, nothing SHOULD be done. That's the whole point. The more people argue about what SHOULD be done, the more of an environment is created where people (even very smart people) begin to believe more firmly that getting "something done" – presumably via government – is evidently and obviously the thing to do (even in an atmosphere of increasing freedom).

Money is private! It evolved privately thousands of years ago. This is evident and obvious. All that needs to be done is to help return it to that status and then leave it alone to interact with the market itself. This, too, is evident and obvious. This is why James Grant for all his tremendous sophistication and wit is somehow wrong in our humble view. He may not be wrong directly on the merits of his arguments, but he is wrong in the way he is FRAMING the argument.

Why slam the door on government money manipulation and then open it back up again at a different location? Let the market work. Get the government out of the money business. If a mint is needed, let it be a private mint. There is no reason that government needs to mint money or to establish a legal tender. Government is not a necessary part of the money equation. It never has been. There is nothing that EVER has been done by government that has not been done by the private sector first. We know this from observations of the way government operates.

That is why Ellen Brown's arguments (see her book Web of Debt) for national money are ultimately wrong-headed as well. She bases her arguments on the idea that money (specie) was first-produced by religious institutions (temples). The clear implication is that the value of money metals was discovered through this process as well. In fact, as we have argued many times, coined or not, money metals (gold and silver) were doubtless recognized as valuable long before anyone struck a coin. (Else why bother in the first place.)

Ms. Brown's arguments have merit in the sense that if the "people" (an elected and representative group) run the money presses and make the loans, it will be fairer and less exploitative process. But we have seen from history that government rarely if ever remains quiescent. It is like mercury – attracted to power – and flows to influence. So what happens? Wealthy people take over government processes over time via what we call mercantilism. They begin to pull the levers of government power for their own enrichment. Already there is a movement (presumably one with elements of disinformation, as we have pointed out in several articles), to replace the Federal Reserve and its functions with the US Treasury. This is like replacing Cyclops with a Titan – the manifestation remains.

Of course, to be perfectly fair to "Brownianism" it took a war in the US (the Civil War, or "War Between the States") to deconstruct the US Constitution and bring government to the fore. But even leaving aside the practicality of Brownianism and like philosophies, the constant harping on doing something ends up as a kind mind control. Again, nothing needs to be done. If the current system, worldwide, crashes through entropy (and it seems well on its way) then something will emerge from the market itself to take its place.

James Grant, too, need not argue about the merits of a formal gold standard. It is as constricting in its own way as the Brownian argument. It not only drags government back into the money business, it excludes the other historical money metal, which is silver. It was this exclusion, in fact, which crashed the gold standard that Grant recommends. Keep the government (and government force) out of it. if this takes place, we would suggest that what will emerge is a gold-and-silver based private metals standard alongside free-banking and, likely, Real Bills.

The truth-telling of the Internet is leading a revolution in thought. We would argue that even the specter of its presence more than a decade ago led the current Anglo-American power elite to speed up its push for world government – to put the necessary elements in place more quickly. But all this has done, in fact, is speeded up a fuller destruction of the system, which has then played out over the Internet.

Yesterday, we argued that the powers-that-be were consciously trying to introduce ruin into the world as they have done, apparently, in the past, in order (this time) to generate the implacable necessity of a single currency, worldwide, under the benevolent auspices of the International Monetary Fund. But as we also indicated we had some trouble with this analysis even as we were making it. We are still apt to conclude that if events continue to unfold as they have, and with such rapidity, the elite itself may have no choice but to take a step backward. In such a scenario, a New World Order would become far less likely; the global sociopolitical profile would reassume a more recognizeable shape, one driven by market forces rather than a 100-year-old conspiracy to centralize world power.

Is this over-optimistic? Possibly so. Logically, the power elite may well continue to scheme and conjure up more sociopolitical, economic and monetary manipulations, as it has throughout this past century. Power is hard to surrender, let alone possibilities for even greater wealth. But more and more we tend to believe that credibility is slipping away; soon in fact it may be too late for self-identified leaders to propose further "world saving" solutions. This time, as we have suggested, the solutions may come from the ground-up, from the marketplace itself, courtesy of the Internet and the education that has been continually provided for this past decade and longer.

The trouble the elite has in doing anything right now is that its actions and motivations are being viewed through an increasingly sophisticated frame of reference (thanks to a new communication technology) that includes its historical machinations and future actions. Increasingly, the actions of the elite seem circumscribed; their activities anticipated, their rhetoric pre-empted. This trend may not be brooked, necessarily, by Internet "off-switches" or much delayed by even the most Draconian governmental regulation.

Think back to the Renaissance or the Reformation or even the Enlightenment. These are large social movements that may have been manipulated by the elite of the day, but were indisputably driven, as well, by instinctual desires developed deep in human pre-history. This is what the elite unknowingly unleashed on the world when DARPA's Internet invention combined with the personal computer and floppy-disc insights of two raggedy adolescents named "Steve" in a garage one summer. "Naked apes" tend to exploit new technologies to the utmost, and new communication facilities are yet evolving at rapid rates.

One might as well fight the tide in our view. The power elite can attempt to influence and manipulate what is currently taking place, but the new thinking being created by the truth-telling of the Internet should have its way sooner or later. In fact, we would argue it already has. We have been astonished by the recent crumbling of numerous fear-based elite memes. What has occurred in the past two years we expected might take ten.

There are of course those who don't see it this way. For these individuals, it is necessary that the majority of people understand the confrontation between the elites and the age-old verities of larger truths before any real change occurs. But we would argue it only takes a few percent, an enlightened few, so to speak – especially when one is dealing with a mass of six billions. And this is why we would like to see the argument turn toward the reasonable arguments of a Rothbard or Hoppe. Anarcho-capitalism can be, perhaps, a principled position.

Contrary to Grant's perspective, government need not be involved, even tangentially, in money. Nor in much else for that matter. We would like to see culture, society and private spirituality provide the morality for communal living. Certainly we would be in favor of market forces winning out over the elite's ruinous money fixing; and money-stuff reverting to private valuations.

Some more changes we'd like to see … Let private justice and pre-British (and Roman) common law prevail once more. Let business function in an unregulated manner with competition as the discipline rather than state authoritarianism. Let people cure themselves of cancer with herbs and vitamins. Let the obscene fraud of regulatory democracy die a quick death in both America and Europe. Let peace prevail instead of the horrors of multiple wars and irradiating poisons. Let devolution overtake the European Union. Let history be told as it is, not the lies that have infected every part of civil society. Let the thuggish, terrorizing behavior of domestic and international intel agencies subside. Let the fear-based promotions of the elite disintegrate even more rapidly than the already are. Let human decency return to Western society even at the very top where it is obviously lacking.

Edited on date of publication

After Thoughts

Is this all so very radical? So were the results of the Gutenberg press, long ago. It begins, perhaps, with a new rhetoric.