Paper Money Versus The Gold Standard
Submitted by Tyler Durden on 12/14/2015 18:00 -0500
Submitted by Richard Ebeling via EpicTimes.com,
We are living in a time that can only be considered monetary chaos. The U.S. Federal Reserve has manipulated key interest rates down to practically zero for the last six years, and expanded the money supply in the banking system by $4 trillion dollars over that time. And with the true mentality of the monetary central planner, the Fed Board of Governors are now planning to manipulate key interest rates in an upward direction that they deem desirable.
The European Central Bank (ECB) has instituted a conscious policy of “negative” interest rates and planned an additional monetary expansion of well over a trillion Euros over the next year. Plus, the head of the ECB has assured the public and financial markets that there is “no limit” to the amount of paper money that will be produced to push the European economies in the direct that those monetary central planners consider best.
We also should not forget that it was the Federal Reserve [Ron: which was a PRIVATE corporation owned by Jew banksters at the time] that earlier in the twenty-first century undertook a monetary expansion and policy of interest rate manipulation that set the stage for the severe and prolonged “great recession” that began in 2008-2009, in conjunction with a Federal government distorting subsidization of the American housing market.
The media and the policy pundits may focus on the day-to-day zigs and zags of central bank monetary and interest rate policy, but what really needs to be asked is whether or not we should continue to leave monetary and banking policy in the discretionary hands of central banks and the monetary central planners who manage them. [Ron: currently Central Banks are CONTROLLED by Jew banksters whose deliberations and machinationa are PRIVATE and designed to further their PRIVATE interests.]..
Central Banking as Monetary Central Planning
And make no mistake about it. Central banking is monetary central planning. The United States and, indeed, virtually the entire world operate under a regime of monetary socialism. Historically, socialism has meant an economic system in which the government owned, managed, and planned the use of the factors of production.
Modern central banking is a system in which the government, either directly or through some appointed agency such as the Federal Reserve in the United States, has monopoly ownership and control of the medium of exchange. [Ron: This is a major LIE! Absolute hasbara bullshit! Monopoly ownership of the Federal Reserve System was in the hands of PRIVATE, ESSENTIALLY UNIDENTIFIED, Jew banksters from the "get go". AND those Jew banksters, NOT the US government and people, had control of the medium of exchange which they manipulated to cause the great depression and all subsequent "Boom Bust" cycles.] Through this control the government and its agency has predominant influence over the value, or purchasing power, of the monetary unit, and can significantly influence a variety of market relationships.[Ron: More LIES! The US government, which is a private corporation, has no control over the Federal Reserve System.which is are completely separate corporations.]. These include the rates of interest as which borrowing and lending goes on in the banking and financial sectors of the economy, and therefore the patterns of savings and investment in the market. [Ron: Governments have NO control over interest rates! In fact they almost make a virtue of it! Banksters determine such rates as even this commentator acknowledges in the first paragraph of THIS article.].
If there is one lesson to be learned from the history of the last one hundred years – during which the world and the United States moved off the gold standard and onto a government-managed fiat, or paper, money system – is the fundamental disaster of placing control of the money supply in the hands of governments. [Ron: This article has to be the work of a shill for the Jew banksters! This statement is the REVERSE OF THE TRUTH! And anyone pretending to any expertise in this subject must know that. Is Richard Ebeling seriously contending that the US government (President and Congress) and NOT the owners of the Federal Reserve System, decided to expand the money supply by $4 trillion dollars over the last six years? Everything he says contradicts what he said in the first paragraph of this article.].
Continual Government Abuse of Money
If is worth recalling that money did not originate in the laws or decrees of kings and princes. Money, as the most widely used and generally accepted medium of exchange, emerged out of the market transactions of a growing number of buyers and sellers in an expanding arena of trade. [Ron: Yabba, yabba, SOURCE(S) please, yabba.].
Commodities such as gold and silver were selected over generations of market participants as the monies of free choice, due to their useful characteristics to better facilitate the exchange of goods in the market place.
For almost all of recorded history, governments have attempted to gain control of the production and manipulation of money to serve their seemingly insatiable appetite to extract more and more of the wealth produced by the ordinary members of society. [Ron: Notice the rabbinical sleight of hand here. No mention of Pharisees, Jews, banksters or other private plutocrats. The implication being that governments, ie the community (the public), should not control the monetary creation, supply and distribution process. That should be left in the hands of PRIVATE market forces.]. Ancient rulers would clip and debase the gold and silver coins of their subjects.
More modern rulers – whether despotically self-appointed through force or democratically elected by voting majorities – have taken advantage of the monetary printing press to churn out paper money to fund their expenditures and redistributive largess in excess of the taxes they impose on the citizenry. [Ron: Yabba, yabba, Judaic yabba. US taxes are collected by a provate corporation - the IRS - which sends the money to the US treasury which sends it to the IMF which is another Jew controlled corporation.].
Today the process has become even easier through the mere click of a “mouse” on a computer screen, which in the blink of an eye can create tens of billions of dollars out of thin air.
Thus, monetary debasement and the price inflation that normally accompanies it have served as a method for imposing a “hidden taxation” on the wealth of the citizenry. As John Maynard Keynes insightfully observed in 1919 (before he became a “Keynesian”!):
“By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.”
[Ron: Inflation benefits those who get first use of the newly created money. Everyone else has their money devalued.].
It is the corrosive, distortive, and destructive effects from monetary manipulation by [Ron: the banksters who create money out of thin air, NOT] governments that led virtually all of the leading economists of the nineteenth century to endorse the “anchoring” of the monetary system in a commodity such as gold, to prevent [Ron: banksters and] governments from using their powers over the creation of paper monies to cover their budgetary extravagance. [Ron: yadda, yadda, economic speak,yadda.].John Stuart Mill’s words from the middle of the nineteenth century are worth recalling:
“No doctrine in political economy rests on more obvious grounds than the mischief of a paper currency not maintained at the same value with a metallic, either by convertibility, or by some principle of limitation equivalent to it . . . All variations in the value of the circulating medium are mischievous; they disturb existing contracts and expectations, and the liability to such changes renders every pecuniary engagement of long date entirely precarious . . .
“Great as this evil would be if it [the supply of money] depended on [the] accident [of gold production], it is still greater when placed at the arbitrary disposal of an individual or a body of individuals; who may have any kind or degree of interest to be served by an artificial fluctuation in fortunes; and who have at any rate a strong interest in issuing as much [inconvertible paper money] as possible, each issue being itself a source of profit.
“Not to add, that the issuers have, and in the case of government paper, always have, a direct interest in lowering the value of the currency because it is the medium in which their own debts are computed . . . Such power, in whomsoever vested, is an intolerable evil.”
The Social Benefits of a Gold Standard
Under a gold standard, it is gold that is the actual money. Paper currency and various forms of checking and other deposit accounts that may be used in market transactions in exchange for goods and services are money substitutes, representing a fixed quantity of the gold-money on deposit with a banking or other financial institution that are redeemable on demand.
Any net increases in the quantity of currency and checking and related deposits are dependent upon increases in the quantity of gold that depositors with banking and financial institutions add to their individual accounts. And any withdrawal of gold from their accounts through redemption requires that the quantity of currency notes and checking and related accounts in circulation be reduced by the same amount. Under a gold standard, a central bank is relieved of all authority and power to arbitrarily “manage” the monetary order.
Many critics of the gold standard consider this a rigid and inflexible “rule” about how the monetary system and the quantity of money in the society is to be determined and constrained. Yet, the advocates of the gold standard have long argued that this relative inflexibility is essential to discipline governments within the confines of a “hard budget.” [Ron: yadda, yadda, bankster window dressing yadda.].
A Gold Standard Can Limit Government Monetary Abuse
Without the “escape hatch” of the monetary printing press, governments either must tax the citizenry or borrow a part of the savings of the private sector to cover its expenditures. [Ron: This is a core LIE in the banksters' armory. It presumes that governments must tax or borrow "money" when they seek to procure goods or services whereas it should be a normal function of any community to issue "money" (based on its good faith and creditt) equal to the value of goods and services procured. A problem only arises if money is issued without obtaining the appropriate equivalent value in goods and/or services.].
Those proposing government spending must either justify it by explaining where the tax dollars will come from and upon whom the taxes will fall; or make the case for borrowing a part of the savings of the society to cover those expenditures – but at market rates of interest that tell the truth about what it will cost to attract lenders to lend that sum to the government rather than to private sector borrowers, and therefore, at the social cost of private sector investment and future growth that will have to be foregone.
[Ron: This is all bankster rhetoric justifying the usurious status quo. In addition, it pretends that usury (charging interest on money created out of thin air) isn't theft and that governments cannot issue their own "money".The moment that a government rather than a private bankster issues "money" honestly and for value when acquiring goods and services, the whole argument about taxation and borrowing from the private sector becomes redundant. Growth is only forgone when banksters curtail the amount of money in circulation which they do periodically in order to obtain land, houses and property for pennies on the dollar. IF governments (however described) issue interest free "money" to pay for goods and services they can issue sufficient "money" to ensure FULL EMPLOYMENT, thus avoiding the need for the Welfare State etc. Assuming that private usurious banksters are necessary is cant.].
In other words, it prevents the government from “monetizing the debt” to cover all or part of its budget deficits. The borrowed sums cannot be created out of thin air through central bank monetary expansion. The government, under a gold standard, can no longer create the illusion that something can be had for nothing.
[Ron: More bullshit! Whatever is used for "money" is essentially a lubricant; a means to facilitate the production and exchange Of goods and services. IF a government issues interest free "money" to buy goods and services to build a road or a hospital etc, something tangible and usable is produced. Those being paid "money" for producing those tangible goods and services can then exchange their "money" tokens for goods and services produced by others. In a healthy economy where the government issues enough interest free "money" to ensure full employment, everyone acquires and uses that "money" to acquire other goods and services. The net result is a rapid transfer of "money" as people use it. That increased VELOCITY begets further activity and so on. Our current dysfunctional economy is due to the fact that private banksters have a monopily on money creation, supply and distribution which they routinely abuse for personal profit. Thay also charge interest on money they create out of thin air while at the same time they do not create any "money" to pay that interest. Accordingly, there is always a shortage of money in the system which can only be remedied by creating more loans which, in turn, require interest payments but the money for those interest payments is NOT issued. GET THE PICTURE! Anyone arguing for the continuation of such a system is a SHILL!].
As Austrian economist, Ludwig von Mises, expressed it:
“Why have a monetary system based on gold? Because, as conditions are today and for the time that can be foreseen today, the gold standard alone makes the determination of money’s purchasing power independent of the ambitions and machinations of governments, of dictators, and political parties, and pressure groups.[Ron: WHY no mention of Jews and Jew banksters?!] The gold standard alone is what the nineteenth-century freedom-loving leaders (who championed representative government, civil liberties, and prosperity for all) called ‘sound money’.”
Milton Friedman’s “Second Thoughts” About the Benefits of Paper Money
It must be admitted that even some advocates of economic freedom and limited government have been advocates of paper money. The most notable one in the second half of the twentieth century was the Nobel Prize economist, Milton Friedman. Over most of his professional career he argued that maintaining a gold standard was a waste of society’s resources. [Ron: I'm getting tired of this cant.
How the Jews must laugh at us!? Talk about hiding the truth in plain sight! Jews have always sought to covertly monopolise and destroy competion. The Rothschilds have dominated the so-called free-enterprise British and global economy since Waterloo and John D. Rockerfellers said competition was a SIN and destroyed all competition by every means available. Jews OWE a great debt to the lipservice their propaganda organs have paid to 'free enterprise and competitive capitalism' BUT have always secretly used those doctrines to destroy competition by gentiles (goyim) everywhere. Jews secretly work together to undermine ALL goyim in every aspect of society whether it be business, politics, academia or anything else. To suggest that they have EVER sought, as a group, to foster genuine free enterprise and competitive capitalism is totally laughable.
The contrary proposition namely that Jews 'have done so much to undermine the intellectual foundation of capitalism' is of course true. But it is not only true as regards the undermining of the "intellectual" foundation of capitalism so typical of Karl Marx and those who followed his work; but also Jews, in the guise of the Khazar Jew Bolsheviks who fomented and created the October Revolution in Russia and established the Soviet Union (USSR), absolutely and literally annihilated free enterprise and capitalism in the USSR and other places between 1917 and the early 1970s. To do that they murdered some 100 million Christians in and around the USSR, Germany and eastern Europe.
But the real joke for Milton Friedman has to be that his own extensive work would also have guaranteed the death of free enterprise and capitalism if the Rockefeller Cartel and the Rothschild Cabal hadn't already arranged it. In truth, Friedman was merely a propaganda tool of the Jew banksters and corporatists who needed a propaganda Pied Piper to mislead public opinion. Friedman's role was to spawn propaganda that fooled USans and the global population generally, into believing that the formal finishing touches to the annihilation of the very idea of free enterprise and capitalism, was its opposite. Freidman thus successfully led public opinion to acquiesce in the rampant fraud carried out by the global bankster and corporatist cabals operating through the US Federal Reserve System and the global Central Bank system it controlled. The result is now obvious. The global financial and economic system has collapsed and only appears to be still standing because 'bought and paid' for politicians, media and other opinion leaders are part of the charade and the Fed has created 4 trillion USD in imaginary "money" to inflate our world into oblivian.].
Why squander the men, material and machinery digging gold out of the ground to then simply store it away in the vaults of banks? It is better to use those scarce resources to produce more of the ordinary goods and services that can enhance the standard and quality of people’s lives. Control the potential arbitrary recklessness of central banks, Friedman proposed, by setting up a monetary “rule” that says: Increase the paper money supply by some small annual percent, with no discretion left in the hands of the monetary managers.
But it less well known is that in the years after Friedman won the Nobel Prize in Economics in 1976, he had second thoughts about this monetary prescription. In a 1986 article on, “The Resource Costs of Irredeemable Paper Money,” he argued that when looking over the monetary mismanagement and mischief caused by governments and central banks during the twentieth century, it was “crystal clear” that the costs of mining, minting and storing gold as the basis of a monetary system would have been far less than the disruptive and destabilizing costs imposed on society due to paper money inflations and the booms and busts of the business cycle brought about by central bank manipulations of money and interest rates.
In his 1985 presidential address before the Western Economic Association on “Economists and Public Policy,” Friedman said that Public Choice theory – the use of economics to analyze the workings of the political process – had persuaded him that it would never be in the long-run self-interest of governments or central bankers to manage the monetary system according to some hypothetical “public interest.”
Those in government or holding the levers of the monetary printing press will always be susceptible to the temptations and pressures of short-run political gains that monetary expansion can fund. He admitted that it had been a “waste of time” on his part to try to get governments and central banks to follow his idea for a monetary rule.
And in another article in 1986 (co-authored with Anna Schwartz) on, “Has Government Any Role in Money?” Friedman said that while he was not ready at that time to advocate a return to the gold standard, he did conclude that “that leaving monetary and banking arrangements to the market would have produced a more satisfactory outcome than was actually achieved through government involvement.” [Ron: Utter bullshit! The community MUST control the money creation, supplyand distribution situation.].
Monetary Mismanagement versus Markets and Gold
But it is not only the political dangers arising from government mismanagement of paper money that justifies the establishment of a gold standard. It is also and equally the fact that monetary central planning is unworkable as a means to maintain economy-wide stability, full employment, and growth.
Especially since the 1930s, many economists and policy makers influenced by Keynes and the Keynesian Revolution have believed markets are potentially unstable and susceptible to wide and prolonged fluctuations in employment and output that only can be prevented or reduced in severity through “activist” monetary and fiscal policy.[Ron: the instability is due to intentional Judaic manipulation, that should be obvious even to the intellectaullay impaired.].
But in reality, the causation runs the in the opposite direction. It is central bank manipulations of money, credit and interest rates that have generated the instability and periodic swings in economy-wide production and employment. [Ron: YES!].
The fact is financial institutions and interest rates have important work to do in the market economy. [Ron: Bullshit!They are the crux of the problem] Banks and other financial intermediaries are supposed to serve as the “middlemen” who bring together those who wish to save portions of their earned income with others who desire to borrow and invest that savings in profit-oriented productive ways that generate capital formation, technological improvements, and cost-efficient production of new, better and more goods and services to satisfy consumer demands in the future.
Market-determined interest rates are meant to bring those savings and investment plans into coordination with each other, so the amount of invested capital and the time-shape of the investment horizons undertaken are consistent with the available real savings to support them to maintainable completion. [Ron: Barf! barf!].
Monetary expansion by central banks creates the illusion that there is more actual investable savings in the economy than really exists. And the false interest rate signals generated in the banking system by the monetary expansion not only misinforms potential investment borrowers about the amount of real savings available for capital projects, but creates an incorrect basis for determining the present value calculations that influence the time horizons for the investments undertaken.
It is these false monetary and interest rate signals that induces the misdirection of resources, the mal-investment of capital, and the incorrect allocation of labor among employments in the economy that sets the stage for an inevitable and inescapable “correction” and readjustment that represents the recession stage of the business cycle that follows the collapse of the artificial boom. [Ron: Yabba, yabba, economic bullshit yabba.].
The monetary central planners can never be more successful in determining a “optimal” quantity of money or the “right” interest rates to assure savings-investment coordination than all other socialist planners were when they tried to centrally plan agricultural production or investment output for an entire society.
All such attempts at monetary planning and management by central bankers are instances of what Friedrich A. Hayek called in his Nobel Lecture a, “pretense of knowledge,” that they can know better and do better than the outcomes generated by competitive interactions of the market participants, themselves. And as Adam Smith warned, nowhere is such regulatory power “so dangerous as in the hands of a man who had the folly and presumption enough to fancy himself fit to exercise it.”
There is no way of knowing the optimal amount of money in the economy other than allowing market participants in the competitive exchange process to decide what they want to use as money – which has historically been a commodity such as gold or silver. And there is no way of knowing what interest rates should be other than allowing the market forces of supply and demand for lending and borrowing to determine those interest rates through the process of private sector financial intermediation, without government or central bank interference or manipulation. [Ron: This writer is a SHILL for the jews.].
The Return to the Gold Standard as a Monetary Constitution
Finally, how do we return to a functioning and workable gold standard? Under the current government and central bank-controlled monetary system the simplest method might be for the monetary authority to stop creating and printing money and credit. Over a short period of time a fairly reasonable estimate could be made about the actual quantity of a nation’s currency and checking and related deposits that are in existence and in circulation. A new legal redemption ratio could be established by dividing the estimated total quantity of all forms of these money-substitutes into the quantity of gold possessed by the government and the central bank. [Ron: Bullshit! What is needed is a realistic assessment by each community, of what its needs are and what its physical and labour capacity to satisfy them is.].
A country following this procedure would then, once again, be on the gold standard. Its long-run maintainability, of course, would require the government and the central bank to follow those “rules of the game” that no increase in the quantity of money-substitutes may be created and brought into circulation unless there have been net deposits of gold in people’s accounts with banking and other financial institutions.
Can we [Ron: Who is 'we"?] trust governments and central banks to abide by these rules of the game? The temptations to violate them will still remain strong in a political environment dominated by ideologies of wealth redistribution, special interest favoritism, and numerous “entitlement” demands.[Ron: WHY would any community want those things?].
It is why the real long-run goal of monetary reform should be the denationalization of money. That is, the separation of money from the state by ending of central banking, altogether. In its place would emerge private, competitive free banking – a truly market-based money and banking system. [Ron: Bullshit! This is total Judaic propaganda! PRIVATE Jew bankster corporations control the creation, supply and usurious distribution of the fiat debt tokens currently called "money" NOW! THAT is the problem! Pretending that governments control money creation, supply and distribution is a total LIE! Jewish private banksters CONTROL those processes and that is why the global financial, banking, economic and societal system is fucked! Money creation and supply MUST be controlled by the community at large, NOT a "private" allegedly competitive, "truly market-based money and banking system" whatever that is supposed to mean!].
But nevertheless, in the meantime, a gold standard can serve as a form of a “monetary constitution” setting formal limits and imposing restraints on those in government who would want to abuse the monetary printing press, similar to the way political constitutions, however imperfectly, are meant to limit the abuses of power-lusting monarchs and the plundering majorities in functioning democracies.
If it fails, it should not be for want of trying. And a gold standard can be one of the positive institutional reforms in the attempt and on the way to a fully free market monetary system.