"It's Not Some Barbarous Relic" - Trump Adviser Urges Return To Gold Standard [Archive]

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Ares

21st August 2016, 05:48 PM

Q&A with Dr. Judy Shelton, the only female economist advising the Trump campaign.

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/08/19/20160821_gold_0.jpg

Donald Trump is no policy wonk.

He is pitching himself as the best man for the presidency based on his track record as businessman, and his ability to surround himself with the “best” people—not on his knack for writing white papers. This, of course, means that it is important for voters to understand whom he is surrounding himself with, and what sort of ideas they hold.

With this in mind, Fortune reached out to Dr. Judy Shelton, one of two economists recently named to Donald Trump’s economic advisory team, and the only woman to hold that title. Shelton is a senior fellow and co-director of the Atlas Sound Money Project, whose mission is to promote the principles of sound money and raise awareness of what they see as the inherent problems of our current monetary system. Dr. Shelton first rose to prominence when she predicted the economic collapse of the Soviet Union in 1989, two years before it transpired.

Fortune discussed with Dr. Shelton what sort of advice she is passing along to the Republican nominee and what she thinks about the biggest economic questions of the day. The interview has been edited for length and clarity.

How did you become involved with the Trump campaign?

Dr. Shelton: I have over the years advised a number of Republican candidates, going back to Jack Kemp and more recently Marco Rubio, Ted Cruz, and Ben Carson. I’ve worked for a long time with Stephen Moore and Larry Kudlow, and Larry asked me if I had some thoughts for the Trump campaign on the issues I discuss most, namely international monetary relations, currency, and trade issues. I’ve been intermittently sending Larry my thoughts in the form of memos on these issues.

Have you spoken with Mr. Trump directly?

I met him back in the early nineties at some gatherings, both social and business related. But I haven’t spoken directly with him since he’s been a candidate. I have been communicating through [Trump national finance chair] Steve Mnuchin and [economic advisor] Larry Kudlow.

Your first book was on the economic collapse of the Soviet Union: How does that experience inform how you look at the world?

Four years ago I wrote an article for The Wall Street Journal titled, “The Soviet Banking System—and Ours.” What concerns me is that central banks around the world, the ECB, the Bank of Japan are now buying corporate assets. I’m wondering how far away we are from the Fed thinking it needs to branch out and buy corporate assets. Will these corporate assets be those from firms that are politically connected?

My work on the Soviet Union was an analysis focused on the banking system, and how the banking system in the Soviet system became a way to channel credit to state-owned institutions and state-owned enterprises. And I worry that banks are becoming partners with the state in managing the economy. I’m very uncomfortable with how complicit banks are becoming through the their mandatory membership in the Federal Reserve.

If you had been Fed Chair in 2008, how would you have changed monetary policy?

The Fed’s ultimate responsibility is acting as the lender of last resort. They did what they had to do in terms of lending to distressed institutions, but the short answer is that I would have gotten back to normalization of interest rates much more quickly.

More broadly, I think we need a fundamental reassessment of the global monetary order. I’m glad that Chairman Kevin Brady of the House Ways and Means Committee has proposed a monetary commission and really looking at what is the relationship between economic performance and the exchange rate regime, and to whether we need a rules-based monetary policy, and what should be the role of central banks.

You’ve written before about going back to some sort of gold-based monetary system. Is that something the U.S. could do unilaterally, or would we need to convene other nations and get them on board?

I’m not opposed to a new Bretton Woods conference, and if it takes place at Mar-a-Lago, I’m fine with that. But anything the U.S. does because we print the international reserve currency, unilateral action would almost instantly be accommodated by other countries.

In terms of gold being involved, some people may think of that as a throwback, but I see it as a sophisticated, forward-looking approach because gold is neutral and it’s universal. It’s a well-accepted monetary surrogate that transcends borders and time. If you look at the foreign reserves of the most important countries, they keep them mostly in gold. I don’t want to read too much into it, but it proves that gold is not some barbarous relic.

Would the first step in that be issuing gold-convertible bonds?

Don’t attribute this idea to the Trump campaign, but it has been something that I have been proposing for years now. A gold-backed bond was first proposed in 1981 by Alan Greenspan. I think the U.S. should issue them as an experimental pilot program, similar to the TIPS bond, that compensates people who are concerned about the future value of the dollar. For those who are concerned about a big financial meltdown, these bonds would give them some insurance, as gold tends to rise in price during periods of financial stress.

The Chinese would welcome this development, because it would likely be a stabilizing force for the value of the dollar and protect their dollar holdings. I also think they are the most likely country to provide a parallel instrument. If China were to offer a similar instrument where five years from now you can get back x amount in yuan or an ounce of gold, five years from now both the U.S.-issued instrument and the China-issued instrument are worth the same thing, an ounce of gold. So now you start getting projections of a stable exchange rate determined by market forces.

If this practice starts to spread to even more countries, you would start to see the semblance of a future stable exchange rate system with those exchange rates being determined by what market forces believe about the future value of those currencies.

What would you advise the Trump campaign about what it’s been saying about trade?

I like it whenever [Trump] says “I believe in free trade.” And he says it all the time. What he doesn’t like is allowing countries to engage in activities that undermine the principles of free trade. You can’t homogenize the cost of labor or labor standards or environmental standards. But what you can do is address the problems of our international monetary system.

It used to be economic doctrine that stable exchange rates brought about optimum financial flows and investment, and optimum decisions about where to produce goods and where to buy and sell goods and services. And I still think it’s the case that the proper monetary foundation for genuinely free trade has to be stable exchange rates. That way you can’t manipulate currency to get an advantage. Currency manipulation is like saying you’re competing in the 100-meter dash, and at the last minute one runner gets to redefine a meter as a centimeter, and still be declared the winner.

It’s not fair to say that people who are criticizing currency manipulation to be called protectionist. I give Donald Trump a great deal of credit for focusing on that issue.

Donald Trump has also made comments referring to a coming economic crisis. Do you think we should worry?

I commend him for being willing to talk about it, as it’s the elephant in the room. I think it’s perfectly legitimate to question whether the current monetary system we have is working, and whether we’ve solved the imbalances that led to the last crisis.

The Trump Campaign has argued for spending big on new infrastructure at the same time that it wants to build up the military and cut taxes. It hasn’t put forward much in the way of spending cuts, however. Do you think we need to be worried about deficits and the debt?

I’m always worried about deficits and the debt and ideally [want] a balanced budget. But these are really difficult times, and I think following the model of Ronald Reagan, where the focus was on pro-growth policies, is wise right now. On corporate taxes, I think the 15% rate will have a huge impact on small and not-so-small businesses. That’s fiscal stimulus, and I like that a lot better than stimulus that’s just more government spending.

The fact that Trump is a builder and a businessman makes me confident that he can bring his track record of finishing projects on time and under budget to the federal government. It’s the wasteful government spending that ends up being the problem.

http://www.zerohedge.com/news/2016-08-21/its-not-some-barbarous-relic-trump-adviser-urges-return-gold-standard

singular_me

21st August 2016, 06:20 PM

implementing the gold standard must be done gradually otherwise CRASH/CRUNCH/DOOMSDAY. Gold may skyrocket but will TOO cause a devastating blow.

I believe the best in this environment is usury-free paper currency to manage a smoother return to economic sanity. The economic landscape is not the same as which of the founders.

Be careful what you wish for... the NWO is too looking for it, and having a reason to enforce the UN/imf global fiat unit.

as always the answer may lie in the middle: usury-free paper money and the support of local currencies

Hitch

21st August 2016, 06:29 PM

madfranks

21st August 2016, 07:58 PM

The only way a gold standard would work, is if the population increased at the same rate gold was mined out of the ground. In other words, the worlds gold supply would increase and grow as people do, supporting a stable currency. Otherwise, you'd have deflation. Less gold, more people chasing it.

100% incorrect. Deflation is the natural order of things, its just that (((bankers))) at the top have spent 100 years declaring that deflation is a horrible evil to be avoided, and inflation is good. Think about that for one minute. Inflation ruins the value of your money and makes you poorer over time, and this is what they say is good for you. Now think about this: as time goes on, decade after decade, shouldn't technological and economic progress make things less expensive? Well, isn't having your money worth more the exact same thing? Either way you can get more for your money. In a world of advancing productivity, things should get cheaper over time! But, the (((bankers))) tell us that this is awful and must be stopped. Inflation has STOLEN the national productive increase in wealth of the past three generations. Don't listen to them!

Carl

21st August 2016, 08:31 PM

Hitch

21st August 2016, 08:47 PM

100% incorrect. Deflation is the natural order of things, its just that (((bankers))) at the top have spent 100 years declaring that deflation is a horrible evil to be avoided, and inflation is good. Think about that for one minute. Inflation ruins the value of your money and makes you poorer over time, and this is what they say is good for you. Now think about this: as time goes on, decade after decade, shouldn't technological and economic progress make things less expensive? Well, isn't having your money worth more the exact same thing? Either way you can get more for your money. In a world of advancing productivity, things should get cheaper over time! But, the (((bankers))) tell us that this is awful and must be stopped. Inflation has STOLEN the national productive increase in wealth of the past three generations. Don't listen to them!

Wrong. Deflation completely cripples an economy. What you are suggesting, is that wages decrease as well. There is no way wages can increase in a deflationary economy and expect it to continues.

So, people spend less, because they earn less, and it's better anyway to keep cash under the mattress. It is PROVEN this does not work.

Technology and economic progress are less expensive, per item, but they don't last as long. You replace a phone every year most likely. You spend more, replacing shit, than you realize. Drop a phone, get a new one...We probably spend more replacing useless garbage that most our ancestors did on quality items, that last the test of time.

If you get more for your money today, and even more tomorrow, you don't spend, you hoard it. If everyone did that, our economy would completely crash.

Horn

22nd August 2016, 12:04 AM

We probably spend more replacing useless garbage that most our ancestors did on quality items, that last the test of time.

If you get more for your money today, and even more tomorrow, you don't spend, you hoard it. If everyone did that, our economy would completely crash.

Ancestors or 1972?

Gold does not crash an economy, what has happened is price suppression of raw materials has created the disposable economy.

If the gold connections in your cellphone were valued properly they would be quality made and take more work to do so.

More quality work = better/stable economy, less demand for overgrown "paper financials"

https://www.youtube.com/watch?v=IEQc-wtHAlw

madfranks

22nd August 2016, 06:28 AM

Wrong. Deflation completely cripples an economy. What you are suggesting, is that wages decrease as well. There is no way wages can increase in a deflationary economy and expect it to continues.

But remember, the money buys more so a starting wage that decreases over time still buys the same standard of living as the higher wage did in the past. Again, this is a sign of an improving economy.

So, people spend less, because they earn less, and it's better anyway to keep cash under the mattress. It is PROVEN this does not work.

They don't spend less, they really spend about the same. Yes, they spend less monetary units on their life, but they get more for each monetary unit than in the past. Again, it's a wash for new entrants into the economy.

Technology and economic progress are less expensive, per item, but they don't last as long. You replace a phone every year most likely. You spend more, replacing shit, than you realize. Drop a phone, get a new one...We probably spend more replacing useless garbage that most our ancestors did on quality items, that last the test of time.

If you get more for your money today, and even more tomorrow, you don't spend, you hoard it. If everyone did that, our economy would completely crash.

You're ignoring the very real factor of time preference. Cost is not the only factor when people decide to buy something. If I need a computer today, even though I know any computer I can buy today will be less expensive a year from now, I will still buy it today, because I need the use of it for this year. Even though it'll be less expensive next year, my time preference for a computer immediately overrides the fact that it costs slightly more now. If what you say is true, then the computer/electronics industry should be crippled, because people wouldn't be buying any electronics because they all get cheaper over time.

Ares

22nd August 2016, 06:32 AM

But remember, the money buys more so a starting wage that decreases over time still buys the same standard of living as the higher wage did in the past. Again, this is a sign of an improving economy.

They don't spend less, they really spend about the same. Yes, they spend less monetary units on their life, but they get more for each monetary unit than in the past. Again, it's a wash for new entrants into the economy.

You're ignoring the very real factor of time preference. Cost is not the only factor when people decide to buy something. If I need a computer today, even though I know any computer I can buy today will be less expensive a year from now, I will still buy it today, because I need the use of it for this year. Even though it'll be less expensive next year, my time preference for a computer immediately overrides the fact that it costs slightly more now. If what you say is true, then the computer/electronics industry should be crippled, because people wouldn't be buying any electronics because they all get cheaper over time.

Summarized:

Inflation benefits (((bankers))) and (((Governments))) Deflation benefits people.

Bigjon

22nd August 2016, 06:36 AM

Bigjon

22nd August 2016, 06:57 AM

Dr. Judy Shelton isn't really talking about a return to gold money standard, she's talking about gold as a bonded tier 1 asset. Same thing as FOFOA has been pushing over the past several years.

The real problem isn't the fiat or usury, it's the bank generated debt based credit being passed off and used as if it were money, that is the problem. Debt based credit, along with (((capitalism))) requires ever expanding debt/credit to service previous debt/credit expansion and (((capitalism))) needs it to service its debts and to pay dividends.

I agree that credit money in the form of fractional reserve banking is bad.
Because it puts the bankers in the drivers seat of creating new money. Allowing them to buy up all the productive enterprises and control any economy they are in.

Producers should own the means to create the money they need to produce their products. Allowing producers to buy bullion and take it to the mint to create coin to facilitate an increase in the monetary supply and conversely allow the melting of coins to sell into the bullion market to keep the supply in balance with the economy.
Plus allow the sale of REAL BILLS which is under control of the producers not the banksters and allows the expansion of the monetary system.

Enter Nelson Hultberg: http://www.321gold.com/editorials/hultberg/hultberg072605.html

The central message of Dr. Antal Fekete is that such a monetary system did come close to existing in the past and could be perfected for the future. It was the gold / silver systems of the 18th and 19th centuries accompanied by the use of real bills among producers, distributors and retailers. The price inflations that existed during this era of history were not due to the circulation and discounting of real bills, but to the interventions of government into the monetary affairs of the market to corrupt all credit and clearing instruments by shielding banks from full disclosure and exempting them from the rules of contractual law. The other two sources of price inflation during this era were the funding of government wars with paper money and new strikes of gold large enough to bid up prices.
Thus the perceptive man asks: Is there a mean between the cheap, low productivity of the pure 100% gold system of the Middle Ages and the expensive, high productivity of the Keynesian fiat paper systems of the 20th century? Is there a system that finds a balance and does not sacrifice abundance of productivity in favor of cheapness of price? This is the question that a perceptive man asks. He concentrates on the big picture of history and how money actually operated over the centuries. He asks: Which monetary system will bring about the most amount of productivity and wealth while maintaining the most stable prices? It's not enough to show that one's system will bring about the cheapest prices. That, a 100% gold system will undoubtedly do. But we must also ask how much productivity will our monetary system bring about?
Listed below is an example of what I mean by the fact that the 18th and 19th century monetary system of gold and silver accompanied by real bills (but purged of the fraudulent, inflationary aspects of fractional reserve banking) would be the mean, i.e., the proper balance which we should strive for. It would avoid the "defects" of a 100% gold and silver system, and it would also avoid the "excesses" of a Keynesian fiat paper money system. In this way, it would approach the Aristotelian ideal which states that the good is the rational course that lies between the two opposite extremes of defect and excess.
All students of the market know that there is a mean to which prices always return. Well, philosophical Aristotelians realize that not just the stock market, but also much of life itself is constructed around the three positions of defect-mean-excess, and that humans and their societies constantly swing back and forth between the three positions striving for the mean.
EXCESS -- Keynes System
1. Fiat paper as money
2. Used during the 20th century and in present day
3. Price inflation is the norm
4. Boom / bust economy that grows in wild cycles
5. Super productivity
MEAN -- Fekete System
1. Gold and silver as money accompanied by real bills
2. Used imperfectly during the 18th and 19th century
3. Price stability would be the norm
4. Productive economy that grows vigorously
5. Excellent productivity
DEFECT -- Rothbard System
1. Pure 100% gold and silver as money
2. Used during ancient times up through the Middle Ages
3. Price deflation would be the norm (if circulating coins are not tampered with)
4. Stagnant economy that grows very slowly
5. Poor productivity
Why a 100% Gold System Will Fail
Here is why a 100% gold monetary system fails. Without a clearing system of real bills, any gold monetary system will be exactly what Keynesians say it will be --contractionist. Our economy would crash into a very low level of productivity. If we were to attempt such a system, we would have to accept a much lower standard of living. As Fekete shows, the reason why Keynes got away with claiming that a gold monetary system is contractionist and a barbarous relic is that the central banks of Europe and the U.S. in the 1909-1920 era succeeded in sabotaging the clearing system that real bills gave to gold throughout the 19th century. So of course gold became contractionist without its clearing system of real bills. But as Fekete demonstrates repeatedly throughout his works, there is no limit to the amount of productivity that can be cleared in a non-inflationary way if gold is accompanied by the use of real bills among producers, distributors and retailers.
Dr. Fekete is presently beginning a new series of articles entitled, A Revisionist Theory and History of Money, in which he intends to explain HOW and WHY this sabotaging was done by the creators of our modern day fiat money systems. The resplendent age of freedom that existed in the 18th and 19th centuries throughout Europe and America came crashing down with the guns of August in 1914. Socialism was sweeping the world, and the concept of government banking fit right into its paradigm of monstrously regimented lives for humans. Gold became the favorite whipping boy of the collectivists during the thirties when, in fact, it was not the problem at all. Gold is capable of funding a modern economy, but not by itself. It needs a clearing system.
Rothbard is very mistaken when he claims that a pure gold monetary system would be quite adequate to finance a growing economy in a stable manner. In The Case for a 100 Percent Gold Dollar (http://www.mises.org/store/product1.aspx?Product_ID=64), he writes, "that the supply of money essentially does not matter. Money performs its function by using a medium of exchange; any change in its supply, therefore, will simply adjust itself in the purchasing power of the money unit, that is, in the amount of other goods that money will be able to buy...There is therefore never any need for a larger supply of money." [Meriden, CT: Cobden Press, 1984, p. 28.]
As I wrote in The Future of Gold As Money (http://www.321gold.com/editorials/hultberg/hultberg020105.html), if there is "never any need for a larger supply of money," why does the marketplace (when left free) naturally expand the purchasing power via bills of exchange and extend temporary monetary privileges to them? The marketplace itself is telling us that there is always a definite need for a larger supply of money. Our only necessity is to make sure that the implementation of this increasing money supply is carried out in a way that cannot be corrupted into the inflated travesty we now endure.
According to Rothbard, a 100 percent gold dollar would "simply adjust itself in the purchasing power of the money unit." Gold (and silver) would become elastic and would suffice to clear the market of goods being produced. But if this is true, why didn't they? History shows us no proof of gold and silver on their own making such an adjustment easily and prosperously. In fact history shows us proof of just the opposite.
A pure 100% gold and silver system is one of the reasons why the Middle Ages remained stagnant productivity-wise in relation to what followed in the Renaissance, the Enlightenment, and the modern age. Though there were numerous other reasons why commerce and productivity began to increase greatly with the onset of the Renaissance, one important reason was surely that trade during this era was no longer tied to a pure metallic money. With the emergence of real bills and their sophisticated, non-inflationary clearing system, manufacturers and merchants were now able to expand their productivity to a much higher level.
Rothbardians will, of course, dispute this by repeating their mantra that Blumen uses: "Paper by itself cannot fund production." As they see it, real bills, being a paper instrument, cannot increase the productive and distributive capacity of an economy. This, as I have pointed out above, is a fallacy. Both gold and paper are capable of increasing production. But they will not do so with equal safety, nor with equally benign results. The latter (when it is employed fraudulently and indiscriminately) will result in inflationary prices, malinvestment, and a highly unstable boom / bust economy. But if paper instruments are of a certain kind (i.e., self-liquidating real bills) they will readily increase production safely and benignly. Too many libertarians miss this crucial distinction between conventional, corruptible credit instruments and real bills. As a result, they denounce all credit instruments that exceed gold and silver reserves. They crudely lump them all together and thus dismiss the immense benefit of real bills.
It is important to point out that the central flaw of fractional reserve banking does not lie in its use of paper to fund production. It lies in the kind of paper that it uses to fund production. It lies in the laxity of banking laws upon which it is sustained. It lies in the monopolistic fascism that it engenders between bankers and bureaucrats. Paper (or credit) can certainly fund production. Witness the explosion of productivity that paper and credit gave us to fight World War II. Witness the recent explosion of productivity during the nineties.
Whether our money is metal or paper, humans will use increased quantities of it to create new businesses, more goods, and higher standards of living. But (and it's a big but) paper is fraught with danger because it is so easy to roll off the printing press. It is so easy to loan out, to roll over and extend. It is so readily corruptible in the hands of short-sighted, greedy bankers. As a result, it invariably brings about relentless price inflation. If it is fiat paper, it will always end in worthlessness because of the nature of man. This is why there are necessary procedures that must be followed in the banking world so as to inhibit this tendency to corrupt the money and credit of an economy. These procedures were abandoned in successive waves throughout the 20th century starting in 1913, which has led us to the runaway malignancy we term a "money system" today.
These procedures are: the decentralization of banks and the prohibition of monopolized government banking, the application of objective law to all banks (i.e., no special privileges conveyed to them), the legal curtailment of surreptitiously loaning out demand deposits, the requirement of full disclosure of bank portfolios to the public on a quarterly basis, etc.
If these procedures are followed, then credit in excess of gold reserves is not bad. It simply must be structured according to proper principles and objective laws so as to prohibit its abuse. Real bills fit very nicely within such a structuring.

Glossing Over History
In conclusion, Rothbard's followers are barking up the wrong tree with their animosity toward these marvelous clearing instruments. Their theoretical grasp of the nature of real bills is flawed because both Mises and Rothbard failed to research them thoroughly, and dismissed them as just another form of corruptible credit. By glossing over the history of real bills, they failed to see their crucial link to the transformation of economic society from low productivity in the Middle Ages to the higher productivity of the Renaissance and its evolution into the modern day. Antal Fekete, however, perceived the link, did the research, and has written a powerful array of works on the subject matter, Monetary Economics 101 and 102 (http://www.shoemakerconsulting.com/GoldisFreedom/default.htm). It behooves us all to delve into this man's dynamic and independent thought. A whole new way of viewing money will be opened up to the reader.
The majority of today's real bill detractors will, no doubt, refuse to change their minds. The nature of many humans is that they prefer to twist the facts of reality semantically and let sophistry shield them from facing up to a flawed viewpoint. But in every generation, there is always a core of genuine truth seekers who do not let past prejudices and errors on the part of their intellectual leaders prohibit them from correcting those errors and thus strengthening the cause they espouse. It is with these stalwart souls that the future of freedom now lies.
I would say this to Rothbardians: You need to step back from all the minutiae and appraise the Big Picture. It would be very helpful if you would concentrate on what is essential in this debate:
1. Real bills worked splendidly for 500 years. Should you not consider why?
2. Real bills are open, non-fraudulent agreements among market participants that help to move goods on a grand scale. Is it possible that Mises and Rothbard were mistaken in their interpretation of real bills? No sin here. Humans are not gods; they make errors.
3. Real bills spring from the market, not from bank chicanery and not from government coercion. How then does one prohibit their free and spontaneous use and still claim to stand for freedom?
4. For over 100 years from 1800 to 1914, real bills flourished throughout the world, yet prices in Europe and America came down. Why did this happen if they are so inflationary?
5. The central banks sabotaged real bills in the early 20th century. Why would central bankers, who are arch-inflationists, have such an aversion to real bills if they are tools of inflation as Rothbardians claim? Would not central bankers have fought to retain them if they are so inflationary?
In his book, What Has Government Done to Our Money? (http://www.mises.org/store/What-Has-Government-Done-to-Our-Money-P68C0.aspx), Murray Rothbard writes that, "There is no need to tamper with the market in order to alter the money-supply that it determines." [op.cit., p.13.]
Why then are all his followers trying so hard to tamper with the market in order to suppress the natural emergence of real bills? Real bills are simply an example of self-liquidating credit that springs up FREELY in response to a genuine need. They are an example of the market determining the money supply in a non-fraudulent, non-inflationary manner. Those who denounce real bills and work for their suppression are not advancing the cause of gold and freedom. On the contrary, they are stifling the restoration of them to our lives.
July 25, 2005
Nelson Hultberg
Americans for a Free Republic
website: www.afr.org (http://www.afr.org/)
email: nhultberg@afr.org
Hultberg Archives (http://www.321gold.com/archives/archives_authors.php?author=Nelson+Hultberg)

Copyright ©2005-2008 Americans for a Free Republicwww.afr.org (http://www.afr.org/).

mamboni

22nd August 2016, 07:08 AM

Summarized:

Inflation benefits (((bankers))) and (((Governments))) Deflation benefits people.Exactly. Inflation is the friend of the debtor. A government that adopts a fiat debt-based money must always inflate. Inflation is a tax on the labors of the people. If a government adopts a gold-backed money, then average inflation is determined by increases in the gold basis, which will average 1.5 - 2%. Because of the business cycle, the money will oscillate between deflation and inflation. The two tend to balance, to gravitate towards gold. This benefits the people because increasing productivity and technological advances deflate the prices of goods and services and allow workers to purchase more with their dollars. Inflations occur when the money supply is increased in a particular region of the economy (i.e. large gold discovery, oil find, private banks decrease interest rates and facilitate expansion). The key here is that all inflations are eventually corrected via the governing discipline of the gold standard. So the savings and capital investments of the people are always safe. Under our present fiat debt-based money, savings and capital are slowly destroyed, with wealth moving from the people and to the government. This continues until the government defaults, either through hyperinflation or debt cancellation, wiping out all wealth denominated in the coin of the realm, now defunct. The people and the government are left impoverished.

Gold is indifferent to man's monetary macinations. Gold is always accepted as money, as payment, anywhere in the world, especially when confidence in government script is on the wane. This is why the sovereign citizen should always own gold.

Horn

22nd August 2016, 07:50 AM

Right, I think a large part of society has been sold and probably correctly that a large part of. gov benefits would stop if it were a gold standard.

Thus the assumption that it is an economic destroyer.

They are refering to those captains of police forces and admirals of aircraft carriers.

mamboni

22nd August 2016, 08:13 AM

I agree that credit money in the form of fractional reserve banking is bad.
Because it puts the bankers in the drivers seat of creating new money. Allowing them to buy up all the productive enterprises and control any economy they are in.

Producers should own the means to create the money they need to produce their products. Allowing producers to buy bullion and take it to the mint to create coin to facilitate an increase in the monetary supply and conversely allow the melting of coins to sell into the bullion market to keep the supply in balance with the economy.
Plus allow the sale of REAL BILLS which is under control of the producers not the banksters and allows the expansion of the monetary system.

Enter Nelson Hultberg: http://www.321gold.com/editorials/hultberg/hultberg072605.html

The central message of Dr. Antal Fekete is that such a monetary system did come close to existing in the past and could be perfected for the future. It was the gold / silver systems of the 18th and 19th centuries accompanied by the use of real bills among producers, distributors and retailers. The price inflations that existed during this era of history were not due to the circulation and discounting of real bills, but to the interventions of government into the monetary affairs of the market to corrupt all credit and clearing instruments by shielding banks from full disclosure and exempting them from the rules of contractual law. The other two sources of price inflation during this era were the funding of government wars with paper money and new strikes of gold large enough to bid up prices.
Thus the perceptive man asks: Is there a mean between the cheap, low productivity of the pure 100% gold system of the Middle Ages and the expensive, high productivity of the Keynesian fiat paper systems of the 20th century? Is there a system that finds a balance and does not sacrifice abundance of productivity in favor of cheapness of price? This is the question that a perceptive man asks. He concentrates on the big picture of history and how money actually operated over the centuries. He asks: Which monetary system will bring about the most amount of productivity and wealth while maintaining the most stable prices? It's not enough to show that one's system will bring about the cheapest prices. That, a 100% gold system will undoubtedly do. But we must also ask how much productivity will our monetary system bring about?
Listed below is an example of what I mean by the fact that the 18th and 19th century monetary system of gold and silver accompanied by real bills (but purged of the fraudulent, inflationary aspects of fractional reserve banking) would be the mean, i.e., the proper balance which we should strive for. It would avoid the "defects" of a 100% gold and silver system, and it would also avoid the "excesses" of a Keynesian fiat paper money system. In this way, it would approach the Aristotelian ideal which states that the good is the rational course that lies between the two opposite extremes of defect and excess.
All students of the market know that there is a mean to which prices always return. Well, philosophical Aristotelians realize that not just the stock market, but also much of life itself is constructed around the three positions of defect-mean-excess, and that humans and their societies constantly swing back and forth between the three positions striving for the mean.
EXCESS -- Keynes System
1. Fiat paper as money
2. Used during the 20th century and in present day
3. Price inflation is the norm
4. Boom / bust economy that grows in wild cycles
5. Super productivity
MEAN -- Fekete System
1. Gold and silver as money accompanied by real bills
2. Used imperfectly during the 18th and 19th century
3. Price stability would be the norm
4. Productive economy that grows vigorously
5. Excellent productivity
DEFECT -- Rothbard System
1. Pure 100% gold and silver as money
2. Used during ancient times up through the Middle Ages
3. Price deflation would be the norm (if circulating coins are not tampered with)
4. Stagnant economy that grows very slowly
5. Poor productivity
Why a 100% Gold System Will Fail
Here is why a 100% gold monetary system fails. Without a clearing system of real bills, any gold monetary system will be exactly what Keynesians say it will be --contractionist. Our economy would crash into a very low level of productivity. If we were to attempt such a system, we would have to accept a much lower standard of living. As Fekete shows, the reason why Keynes got away with claiming that a gold monetary system is contractionist and a barbarous relic is that the central banks of Europe and the U.S. in the 1909-1920 era succeeded in sabotaging the clearing system that real bills gave to gold throughout the 19th century. So of course gold became contractionist without its clearing system of real bills. But as Fekete demonstrates repeatedly throughout his works, there is no limit to the amount of productivity that can be cleared in a non-inflationary way if gold is accompanied by the use of real bills among producers, distributors and retailers.
Dr. Fekete is presently beginning a new series of articles entitled, A Revisionist Theory and History of Money, in which he intends to explain HOW and WHY this sabotaging was done by the creators of our modern day fiat money systems. The resplendent age of freedom that existed in the 18th and 19th centuries throughout Europe and America came crashing down with the guns of August in 1914. Socialism was sweeping the world, and the concept of government banking fit right into its paradigm of monstrously regimented lives for humans. Gold became the favorite whipping boy of the collectivists during the thirties when, in fact, it was not the problem at all. Gold is capable of funding a modern economy, but not by itself. It needs a clearing system.
Rothbard is very mistaken when he claims that a pure gold monetary system would be quite adequate to finance a growing economy in a stable manner. In The Case for a 100 Percent Gold Dollar (http://www.mises.org/store/product1.aspx?Product_ID=64), he writes, "that the supply of money essentially does not matter. Money performs its function by using a medium of exchange; any change in its supply, therefore, will simply adjust itself in the purchasing power of the money unit, that is, in the amount of other goods that money will be able to buy...There is therefore never any need for a larger supply of money." [Meriden, CT: Cobden Press, 1984, p. 28.]
As I wrote in The Future of Gold As Money (http://www.321gold.com/editorials/hultberg/hultberg020105.html), if there is "never any need for a larger supply of money," why does the marketplace (when left free) naturally expand the purchasing power via bills of exchange and extend temporary monetary privileges to them? The marketplace itself is telling us that there is always a definite need for a larger supply of money. Our only necessity is to make sure that the implementation of this increasing money supply is carried out in a way that cannot be corrupted into the inflated travesty we now endure.
According to Rothbard, a 100 percent gold dollar would "simply adjust itself in the purchasing power of the money unit." Gold (and silver) would become elastic and would suffice to clear the market of goods being produced. But if this is true, why didn't they? History shows us no proof of gold and silver on their own making such an adjustment easily and prosperously. In fact history shows us proof of just the opposite.
A pure 100% gold and silver system is one of the reasons why the Middle Ages remained stagnant productivity-wise in relation to what followed in the Renaissance, the Enlightenment, and the modern age. Though there were numerous other reasons why commerce and productivity began to increase greatly with the onset of the Renaissance, one important reason was surely that trade during this era was no longer tied to a pure metallic money. With the emergence of real bills and their sophisticated, non-inflationary clearing system, manufacturers and merchants were now able to expand their productivity to a much higher level.
Rothbardians will, of course, dispute this by repeating their mantra that Blumen uses: "Paper by itself cannot fund production." As they see it, real bills, being a paper instrument, cannot increase the productive and distributive capacity of an economy. This, as I have pointed out above, is a fallacy. Both gold and paper are capable of increasing production. But they will not do so with equal safety, nor with equally benign results. The latter (when it is employed fraudulently and indiscriminately) will result in inflationary prices, malinvestment, and a highly unstable boom / bust economy. But if paper instruments are of a certain kind (i.e., self-liquidating real bills) they will readily increase production safely and benignly. Too many libertarians miss this crucial distinction between conventional, corruptible credit instruments and real bills. As a result, they denounce all credit instruments that exceed gold and silver reserves. They crudely lump them all together and thus dismiss the immense benefit of real bills.
It is important to point out that the central flaw of fractional reserve banking does not lie in its use of paper to fund production. It lies in the kind of paper that it uses to fund production. It lies in the laxity of banking laws upon which it is sustained. It lies in the monopolistic fascism that it engenders between bankers and bureaucrats. Paper (or credit) can certainly fund production. Witness the explosion of productivity that paper and credit gave us to fight World War II. Witness the recent explosion of productivity during the nineties.
Whether our money is metal or paper, humans will use increased quantities of it to create new businesses, more goods, and higher standards of living. But (and it's a big but) paper is fraught with danger because it is so easy to roll off the printing press. It is so easy to loan out, to roll over and extend. It is so readily corruptible in the hands of short-sighted, greedy bankers. As a result, it invariably brings about relentless price inflation. If it is fiat paper, it will always end in worthlessness because of the nature of man. This is why there are necessary procedures that must be followed in the banking world so as to inhibit this tendency to corrupt the money and credit of an economy. These procedures were abandoned in successive waves throughout the 20th century starting in 1913, which has led us to the runaway malignancy we term a "money system" today.
These procedures are: the decentralization of banks and the prohibition of monopolized government banking, the application of objective law to all banks (i.e., no special privileges conveyed to them), the legal curtailment of surreptitiously loaning out demand deposits, the requirement of full disclosure of bank portfolios to the public on a quarterly basis, etc.
If these procedures are followed, then credit in excess of gold reserves is not bad. It simply must be structured according to proper principles and objective laws so as to prohibit its abuse. Real bills fit very nicely within such a structuring.

Glossing Over History
In conclusion, Rothbard's followers are barking up the wrong tree with their animosity toward these marvelous clearing instruments. Their theoretical grasp of the nature of real bills is flawed because both Mises and Rothbard failed to research them thoroughly, and dismissed them as just another form of corruptible credit. By glossing over the history of real bills, they failed to see their crucial link to the transformation of economic society from low productivity in the Middle Ages to the higher productivity of the Renaissance and its evolution into the modern day. Antal Fekete, however, perceived the link, did the research, and has written a powerful array of works on the subject matter, Monetary Economics 101 and 102 (http://www.shoemakerconsulting.com/GoldisFreedom/default.htm). It behooves us all to delve into this man's dynamic and independent thought. A whole new way of viewing money will be opened up to the reader.
The majority of today's real bill detractors will, no doubt, refuse to change their minds. The nature of many humans is that they prefer to twist the facts of reality semantically and let sophistry shield them from facing up to a flawed viewpoint. But in every generation, there is always a core of genuine truth seekers who do not let past prejudices and errors on the part of their intellectual leaders prohibit them from correcting those errors and thus strengthening the cause they espouse. It is with these stalwart souls that the future of freedom now lies.
I would say this to Rothbardians: You need to step back from all the minutiae and appraise the Big Picture. It would be very helpful if you would concentrate on what is essential in this debate:
1. Real bills worked splendidly for 500 years. Should you not consider why?
2. Real bills are open, non-fraudulent agreements among market participants that help to move goods on a grand scale. Is it possible that Mises and Rothbard were mistaken in their interpretation of real bills? No sin here. Humans are not gods; they make errors.
3. Real bills spring from the market, not from bank chicanery and not from government coercion. How then does one prohibit their free and spontaneous use and still claim to stand for freedom?
4. For over 100 years from 1800 to 1914, real bills flourished throughout the world, yet prices in Europe and America came down. Why did this happen if they are so inflationary?
5. The central banks sabotaged real bills in the early 20th century. Why would central bankers, who are arch-inflationists, have such an aversion to real bills if they are tools of inflation as Rothbardians claim? Would not central bankers have fought to retain them if they are so inflationary?
In his book, What Has Government Done to Our Money? (http://www.mises.org/store/What-Has-Government-Done-to-Our-Money-P68C0.aspx), Murray Rothbard writes that, "There is no need to tamper with the market in order to alter the money-supply that it determines." [op.cit., p.13.]
Why then are all his followers trying so hard to tamper with the market in order to suppress the natural emergence of real bills? Real bills are simply an example of self-liquidating credit that springs up FREELY in response to a genuine need. They are an example of the market determining the money supply in a non-fraudulent, non-inflationary manner. Those who denounce real bills and work for their suppression are not advancing the cause of gold and freedom. On the contrary, they are stifling the restoration of them to our lives.
July 25, 2005
Nelson Hultberg
Americans for a Free Republic
website: www.afr.org (http://www.afr.org/)
email: nhultberg@afr.org
Hultberg Archives (http://www.321gold.com/archives/archives_authors.php?author=Nelson+Hultberg)

Copyright ©2005-2008 Americans for a Free Republicwww.afr.org (http://www.afr.org/).
Gold-backed money and real bills keep the power and influence with the producers, the commercial traders in real goods and services, as opposed to the financial sector, which today is the tail wagging the real economy dog. This is the root of all of our economic problems. The banks must serve the real producers, not the other way around. Most banks would operate as state-sanctioned utilities under a gold standard. As gold is their bedrock capital asset, in a sense the banks are owned by the people because the people hold some gold (shares in the bank).

madfranks

22nd August 2016, 08:52 AM

Gold-backed money and real bills keep the power and influence with the producers, the commercial traders in real goods and services, as opposed to the financial sector, which today is the tail wagging the real economy dog. This is the root of all of our economic problems. The banks must serve the real producers, not the other way around. Most banks would operate as state-sanctioned utilities under a gold standard. As gold is their bedrock capital asset, in a sense the banks are owned by the people because the people hold some gold (shares in the bank).Have you ever read "The Revolution Was," by Garet Garrett? (https://mises.org/library/revolution-was) In it, he says the following, which is similar to your analysis:

Now regard the credit reservoir as a lake fed by thousands of little community springs, and at the same time assume the point of view of a government hostile to the capitalistic system of free private enterprise. You see at once that the lake is your frustration. Why? Because so long as the people have the lake and control their own capital and can do with it as they please, the government's power of enterprise will be limited, and limited either for want of capital or by the fact that private enterprise can compete with it.

So you will want to get rid of the lake. But will you attack the lake itself? No; because even if you should pump it dry, even if you should break down the retaining hills and spill it empty, still it would appear again, either there or in another place, provided the springs continued to flow. But if you can divert the water of the springs — if you can divert it from the lake controlled by the people to one controlled by the government, then the people's lake will dry up and the power of enterprise will pass to government.

mamboni

22nd August 2016, 09:15 AM

Have you ever read "The Revolution Was," by Garet Garrett? (https://mises.org/library/revolution-was) In it, he says the following, which is similar to your analysis:

Haven't read that. But I agree with his analysis.

madfranks

22nd August 2016, 10:34 AM

Haven't read that. But I agree with his analysis.

Well, read it. :)

mamboni

22nd August 2016, 11:15 AM

Well, read it. :)A true economist must be double-jointed. And he must be Hungarian.

https://www.youtube.com/watch?v=95dA3JZ7TZA

Carl

22nd August 2016, 01:04 PM

~ Allowing producers to buy bullion and take it to the mint to create coin to facilitate an increase in the monetary supply and conversely allow the melting of coins to sell into the bullion market to keep the supply in balance with the economy. ~

What do you mean by "buy bullion" and "melting coin" to make bullion?

This represents a fundamental misunderstanding of money.

The ONLY value money has is its use and acceptance as a medium of exchange, and it's only worth what it can buy.

This holds true regardless the material construct of the monetary medium. A gram of gold as money is worth whatever a gram of gold can buy, period. There is no other external value to it. Coin or bullion form, it's the same thing, there is no 'price' or 'status' differentiation between the two.

crimethink

22nd August 2016, 01:28 PM

Deflation is only good for people who are holding lots of cash; cash which cannot be re-valued.

If you have debt or the cash you hold can be re-valued by (((them))), fear deflation.

Holding PMs does not protect you from deflation, as their real value holds fairly steady.

palani

22nd August 2016, 01:29 PM

There is no need to be 100% funded in precious metals. All you need now and all you ever needed to engage in a contract by common law is one dollar. That is the substance. It might be in gold/silver/or any other metal as agreed upon. There never has been enough gold or silver to entirely fund any country. The use is symbolic only .. .somewhat akin to livery of seisin ... where you perambulate land and takle a small portion every place you leave your marker.

People who talk about returning to the gold standard don't really know that this standard never left. It is an individual choice not a mob action.

crimethink

22nd August 2016, 01:37 PM

mamboni

22nd August 2016, 02:30 PM

Before you promote a 100% Gold Standard economy, remember (((who))) owns most of the gold.

Unless you are advocating expropriation of the banksters, you are working against the Goyim by promoting a 100% Gold Standard without a settling of accounts.Agreed. In fact, unless the banks accept massive writedowns on their nominal paper assets, the gold price would have to be priced in excess of $10,000 per troy ounce in order to recapitalize the system.

Bigjon

22nd August 2016, 04:07 PM

What do you mean by "buy bullion" and "melting coin" to make bullion?

This represents a fundamental misunderstanding of money.

The ONLY value money has is its use and acceptance as a medium of exchange, and it's only worth what it can buy.

This holds true regardless the material construct of the monetary medium. A gram of gold as money is worth whatever a gram of gold can buy, period. There is no other external value to it. Coin or bullion form, it's the same thing, there is no 'price' or 'status' differentiation between the two.

That's a great concept except we don't all have an assay kit on hand to judge the color of your gram.

The reason to put it in coin form is that the mint has standards to adhere to concerning weight and purity. Because of the work and the reputation of the coin it usually represents a higher value than just plain bullion.

Carl

22nd August 2016, 08:27 PM

That's a great concept except we don't all have an assay kit on hand to judge the color of your gram.

The reason to put it in coin form is that the mint has standards to adhere to concerning weight and purity. Because of the work and the reputation of the coin it usually represents a higher value than just plain bullion.

A gram of ''gold as money'', infers the purity of the weight.

OK, so we have gold the commodity worth less than gold the bullion wroth less than gold the coin. And when there is too much gold the coin in the economy, you pay to have it melted down to gold the bullion at a loss. Who decides when there's too much gold the coin in the economy? And what determines the values of all these stages of gold?

And, how does any of that alter the fundamental fact that gold as money is still only worth what it can buy, which is the exact same worth of a paper money?

Bigjon

23rd August 2016, 04:34 AM

A gram of ''gold as money'', infers the purity of the weight.

OK, so we have gold the commodity worth less than gold the bullion wroth less than gold the coin. And when there is too much gold the coin in the economy, you pay to have it melted down to gold the bullion at a loss. Who decides when there's too much gold the coin in the economy? And what determines the values of all these stages of gold?

And, how does any of that alter the fundamental fact that gold as money is still only worth what it can buy, which is the exact same worth of a paper money?

Well anyone can melt down a coin and sell it as bullion, so you get to decide Carl.
The people regulate the amount of money in coin form.
They would only melt it down if there was a profit to be made in doing so. Too many coins and a shortage of pure bullion.

When I buy bullion from Johnson Mathey I expect it to be 99.999% pure, but when Carl approaches me on the street and claims his bullion is pure... well I have his word.

Paper or gold you decide.

Neuro

23rd August 2016, 07:19 AM

Wrong. Deflation completely cripples an economy. What you are suggesting, is that wages decrease as well. There is no way wages can increase in a deflationary economy and expect it to continues.

So, people spend less, because they earn less, and it's better anyway to keep cash under the mattress. It is PROVEN this does not work.

Technology and economic progress are less expensive, per item, but they don't last as long. You replace a phone every year most likely. You spend more, replacing shit, than you realize. Drop a phone, get a new one...We probably spend more replacing useless garbage that most our ancestors did on quality items, that last the test of time.

If you get more for your money today, and even more tomorrow, you don't spend, you hoard it. If everyone did that, our economy would completely crash.

Deflation in a fiat based economy yes... In a gold based or at least gold backed economy it is the natural state of affairs to have a slight deflationary pressure, like was standard most of the time in 19th Century Europe and America, and economy was very healthy...

With Jew bankers sponsoring their cronies through the control of issuance of money and credit, inflation is an inevitability.

In a gold based economy, very few had loans to finance consumption and even investments, people saved for what they wanted

Carl

23rd August 2016, 08:36 AM

Well anyone can melt down a coin and sell it as bullion, so you get to decide Carl.
The people regulate the amount of money in coin form.
They would only melt it down if there was a profit to be made in doing so. Too many coins and a shortage of pure bullion.

When I buy bullion from Johnson Mathey I expect it to be 99.999% pure, but when Carl approaches me on the street and claims his bullion is pure... well I have his word.

Paper or gold you decide.

Why in the hell would anyone destroy the value of their money by melting it down to bullion???

And how can there be "profit" in destroying your monetary medium of exchange???

Who is going to pay more gold money for less gold in bullion form?

Sorry Bigjon but, that's just silly rationalizations used to make your beliefs appear plausible.

Carl

23rd August 2016, 08:53 AM

Deflation in a fiat based economy yes... In a gold based or at least gold backed economy it is the natural state of affairs to have a slight deflationary pressure, like was standard most of the time in 19th Century Europe and America, and economy was very healthy...

With Jew bankers sponsoring their cronies through the control of issuance of money and credit, inflation is an inevitability.

In a gold based economy, very few had loans to finance consumption and even investments, people saved for what they wanted

The vast majority of the 19th century U.S. economy was rural farmers who traded in barter and community credit systems, not gold and very little silver.

The (((capitalist))) industries that arose during that time did so on fractional reserve banking and bankster credit being used as if it were money.

And yes, there were also localized free/private enterprise industries and businesses as well, financed by real savings, relatives and friends.

*Oh and, the majority of the 'deflation' during that time was driven by an influx of immigrants.

Neuro

23rd August 2016, 09:07 AM

The vast majority of the 19th century U.S. economy was rural farmers who traded in barter and community credit systems, not gold and very little silver.

The (((capitalist))) industries that arose during that time did so on fractional reserve banking and bankster credit being used as if it were money.

And yes, there were also localized free/private enterprise industries and businesses as well, financed by real savings, relatives and friends.

Yes, but the basis of the monetary system was gold, even though most people never saw gold, and most gold never moved out of the vaults it was stored in. Gold based with free market currencies/credits complementing it. There was many boom bust cycles, when the banks overextended credit from time to time. But it has gone from boom-bust-boom-bust..., to boom-boom-WWI-boom-boom-DEPRESSION-WWII-boom-boom-boom-End of TIME.

We live in interesting times!