Part 1: A Plan to Use Gold as Money
Why Gold?
The two key reasons for convertibility of paper money to a
commodity (such as gold) with intrinsic market value, which people can exchange
at a bank on demand, are to; 1. Limit excess expansion of the money supply
(inflation; loss of value) by the government, and 2. Provide a market-based
store of value. The commodity could be wheat, iron, diamonds, or pearls, but
gold works best for many reasons (see details in ‘Four Monetary Rules’ below).
Silver and copper supplies and costs are more volatile (more new
production, consumed for industrial use, etc.), so are less attractive,
but useable.
History shows us that when countries use sound money (such as
convertible to gold) they have zero or low inflation, zero or minor 'cycles' of
economic panic or depression, and more peace, liberty, and prosperity (smaller
governments). For example, the number of grams of gold needed to buy a barrel
of oil has been very steady over the years. Thus, we would expect all countries
to use sound money, except the leaders want more money than they can get by
just taxing, especially for wars. They want a way to create money ‘out of thin
air’. Un-backed paper money (we call ours ‘Federal Reserve Notes’) serves this
purpose. Even when some level of convertibility exists, they often 'suspend'
convertibility before, during, and after wars (the US did for the
Revolutionary, 1812 and Civil wars), and then must be pushed to restore it
(often with less value).
To avoid the inevitable crash in value of
its money, the US
should provide convertibility of paper money to gold, and coins made of
gold alloys (or base-metal coins redeemable in gold).
The US ended the right for other nations (FDR took it
from mere people in 1933) to convert paper dollars to gold when Nixon
abrogated the Bretton Woods Agreement on August 15, 1971 due to our serious
financial problems such as; a. We were running out of gold; France and others
were converting their 'Euro-Dollars' to gold (USDs accumulated in Europe due to
our postwar spending there); b. The US was poor after spending on Vietnam
and LBJ's 'Great Society', etc. Under this pressure, Nixon
illegally 'floated' the USD (no fixed-price for gold; no fixed exchange
rates with foreign currency), and ended convertibility to gold by any
person or government. This meant the US could make dollars out of thin air
at will, and did they ever!
Again, the main purpose of convertibility of paper (or
electronic dollars) to gold is to prevent excess expansion of the money supply
('inflation') by the government, and thus reduction in purchasing power.
Without convertibility, this 'easy money' is an unlimited 'piggy-bank' and
credit card for the government. Hence, the government cannot be
trusted to not abuse it. The excess money has allowed damaging,
unconstitutional, corrupting, massive increases in government spending for
wars, welfare, and pork. It has also created the growth in the number
of lobbyists seeking favors. Prices started their 'hockey stick'
shaped rise a few years after 1971 as the effect of
excess money and spending trickled to the world economy. Within in a few years,
all nations worldwide ceased convertibility, even the prudent Swiss floated the
Swiss franc (SF), but have been less abusive than others; hence while 1 USD =
about 4 SF in 1961, it is now about 1 US = 1 SF, so they only inflated by 2.5
while by 2008 the US inflated by 10; 4 times more! The US has
been the worst abuser among developed nations (older
countries remembered their lessons from past monetary
failures). The US has created so much new 'free, fake
money' since 1971 that the USD has lost about 80% of its purchasing
power since then (this excess expansion of the money supply is called ‘monetary
inflation', like a balloon) with its consequent price increases called
‘price inflation’. Check prices of common 'commodity' items (that are not
imported, subsidized, cheaper due to new technology, or under price
control), such as a pizza, a restaurant meal, or even a car. Good
examples are: 1. A room at a 'Motel 6' cost $6 in the 1950s but is now in
the $60 range in 2009 (same type of room and service), and 2. A family car cost
about $2,000 in the ’60s but is now about $20,000 in 2009. There is your 10X loss
of US$ value! This goes along with a 95% loss since the Federal Reserve
monopoly was created in 1913! The only reason we can get away with this is
because the USD is the world's 'reserve currency' (any person or bank will take
and keep it as if 'good as gold'), because it is viewed as a share in
'USA, Inc.', the world's strongest economy, which sadly is fading (faster since
2007) as we continue the long abuse of our economy (by spending, taxing, and
harmful intervention 'management' by the Fed and government) and money (by
excess expansion of the supply). The era of US world dominance is ending,
as it doesith all empires.
History shows us
that the use of 'real money' (convertible to a commodity with intrinsic value
market such as gold, by anyone, on demand; not just paper) is fundamental to
the long-term success and survival of a nation. 'Fake Money', paper and
base-metal coins created and 'managed' by the Federal Reserve System
(Fed) is what allows the massive spending and debt for wars and domestic
pork and welfare. The pork and grants have corrupted the ethics of our
Federal government ('here's some pork, vote for me'), and the citizens,
business, universities, and academics, etc. who happily accept it.
Congresspersons brag on their web sites about how much pork they have obtained
for their districts or states. This 2-way corruption is a fatal sign of a
failing Empire.
Redick’s Four Monetary Rules
Scientists use
theories and hypotheses to describe their research and to help make predictions. I offer below, ‘Redick’s
Four Monetary Rules’ to describe the requirements for a monetary system
using ‘real money’ (money made of, or convertible to, a suitable and valuable
metallic commodity such as gold, silver or copper).
First Rule:
A. Coins can be
of two types; 1. ‘Commodity’, where they are pure gold or silver (or a few
percent of a hard base metal alloy to reduce wear and shape damage; with the
amount or percent of precious metal they contain marked on them), or 2.
‘Representative’ (or ‘Token’), where they are made of base metals such as
copper, aluminum, zinc, nickel, and alloys thereof, and are marked as
convertible to a certain weight of gold or silver. Commodity coins must be made
of a material that is: 1) Rare, with a low amount in existence now, and
limited new supply, 2) Malleable, so can be made into coins, 3) Stable
physically and chemically; doesn't break, rust, or rot, 4) Easy to determine
purity; gold is by weight, 5) Difficult or impossible to counterfeit, 6)
Homogeneous in content (a melted chunk is the same throughout), and 7) High
value per ounce (not bulky to handle or store). Gold fits these requirements
best, but silver and copper can have a role in parallel, with no fixed ratios
set as to value per gram (i.e., no bi-metallic standard). The coins must be
valued and marked by weight of their precious metal content (such as
‘milligrams’), or the amount they can be converted to.
B. Paper money
must be; 1) Valued and marked by weight of precious metal it represents (Such
as ‘grams’; No ‘name’, such as ‘dollar’, is needed); and 2) Convertible to such
metal by the Bearer on demand to the Issuer (mint) of the paper at Issuer’s
various premises, with such premise locations disclosed on request.
Second Rule:
No government laws shall apply to
control the Issuers, foreign or domestic, of coins and paper currency, except
to assure full disclosure of content (% purity and % mixture of base metal,
thus hard metals may be included to decrease wear) of issued coins, and ready
access for inspection of the amount, and purity, of precious metal on deposit
to convert paper.
Third Rule:
Money issued by the government, if any, shall have no special status, or
privilege, over money issued by persons, or privately owned firms. Such money
would be issued by the nation’s Treasury Department, and there would be no
‘central bank’.
Fourth Rule:
There will be no designated ‘World
Reserve Currency’, set by agreement between nations, but such status might be
set de facto by free market forces.
Thus, buyers and sellers will decide which are the ‘preferred’
currencies, and fake or debased money will be avoided.
**********************
Examples of former world reserve currencies are the French Franc,
British Pound, and now the US dollar (USD) is approaching ‘former’ status.
In the US, these
rules would require abolition of the legal tender laws (as a start), and
curtailment of fractional-reserve banking to ensure adequate gold for
convertibility, and refund of deposits. Banks would be free of government
control (including foreign bank branches in the U.S., starting a new bank, and
multi-state banking), but would be required to publicly disclose their
reserves, loan amounts, and obligations.
The goal is to
engage in a transition to Real Money in the USA, then promote the same
transition worldwide. This is likely to work, because fake money, or money from
issuers with inadequate reserves of gold for convertibility, will, 1. soon be
refused as payment, 2. be discounted (or the Seller will ask a higher price to
accept it), or 3. not be held as savings or investments. This shows the error
in Gresham’s Law which states ‘bad money drives out good’. It does not consider
1, 2 and 3 above, because it only applies where the exchange rate between
currencies is fixed by law, and legal tender laws exist.
Results from the Rules
Some of the
results of using these Rules are;
1. Stable
Purchasing Power:
Purchasing Power will be stable, or increase, in the long-term (hundreds of
years), with; a) possible minor and gradual decreases as new gold is mined, or
b) increases (appreciation) if some of the existing supply is taken out of
circulation, or as economic activity grows, causing an increase in demand for
the existing supply of gold. The appreciation is a positive incentive to save,
and avoid debt. For example, gold is now worth about $1,000 per oz., so it
would take about 20 oz. to buy a car. Maybe after 50 years on the gold
standard, it will take only 15 oz. to buy a car. The opposite affect exists
with today’s fake, depreciating money. With the USD losing value at over 5% per
year, it makes no sense to save cash in a bank at 2 or 3% interest, so people,
funds, and firms are obliged to try high-risk stock and real estate
investments. Of course, the $1,000 (1 dollar = 1/1,000 oz.) figure is false
because it does not consider convertibility of the trillions of USD now in
circulation worldwide, and in USD denominated assets. Thus, if we went to a
gold standard today, the current ‘dollar’ might be valued at 1 10,000 oz. of
gold, or less. A valid ratio can only be
set when the Federal government and Federal Reserve Bank disclose how much gold
they have (see Plan on p. 72 below). The transition to 'grams per dollar' can
be set so there are enough reserves (say, 80 to 100 percent for demand
deposits, and 20 to 40 percent for savings) to avoid a 'run' of holders
converting their paper to gold. Thereafter, the term 'dollar' would fade and
all currency would be valued in grams of gold (or milli-, or micro-). This
subject is discussed in depth in Nobel Laureate F. A. Hayek's 'Denationalization of Money: The Argument Refined', 1976, which puts
forth the case to; 1) end the government monopoly on money creation, 2)
let anyone create money, and 3) let the free market determine which type of
money is used (just as I suggest above). The point is to end government
politicalization, abuse, and fraud in creation of money. Remember,
the plan is to get rid of currency
‘names’, and just label them as to the weight of gold. The sooner we change,
the better.
2. Reduction
of Excess Spending, and Its Damage: With real money, people, firms and governments will not be able
to engage in excess spending because they will run out of money. This gives
incentive for them to engage in honest, rational, positive acts such as; a)
spend carefully, b) save, and c) plan ahead. As a result there will be; a)
fewer and smaller wars; b) no major bubbles in housing, Silicon Valley, or Wall
Street; c) less welfare, pork, subsidies, etc. which make people, schools and
firms dependent on DC money, and attract lobbyist to ‘buy’ legislators so they
can get favors (a nice side-effect is that most lobbyists will go out of
business because their will be little or no pork and subsidies available from
DC; just favorable laws; also, campaign funding will dry-up, so campaigns will
be cheaper, and more ‘normal’ people will be able to run for office); and d) no
excess imports, and resultant ‘off-shoring’ of US jobs, factories, and
professionals, because there will be no unlimited supply of fake money,
injected into the economy by the Fed to fund this abuse and corruption! These
limits will be automatic. Some will say, this is a loss of needed ‘liquidity’,
but I say it is a good brake on unfettered (dare I use the Liberal’s
pejorative?) spending. The ‘feel good’ heroin analogy applies. The result is a
positive incentive due to APPRECIATION of purchasing power of the money.
The supposed
need for a ’government-managed monetary system’ is a key fault held by those
economists who support the Fed concept (the 'Keynsian' and ‘Chicago School’ economists, and
all Progressives). They state that the money supply must grow to provide
liquidity to a growing economy. They need this because their fake money has no
appreciation. To the contrary it loses (95% since 1913) due to excess money
creation, which doesn’t happen under Redick’s Rules. The key is to get
government ownership and ‘management‘ (controls, monopoly, legal tender laws,
setting a ‘price’ for gold, excess money creation, etc.) out of the monetary
system, and abolish the Fed.
Notice that 2-d)
above solves the problem of excess imports causing loss of jobs due to
off-shoring. With the finite supply of real money, US importers will find
themselves short of money, and start buying less, or producing locally. Free
trade is good, unless importing is taken to extremes by the use of fake money.
Note again, this can only happen if the fake money is also the world’s reserve
currency (until demoted!). Poor citizens in third world countries that have
little ‘real money’ to buy imports, will have incentive to work hard, innovate,
and earn gold from exports.
Many articles have been written about causes and cures of the
current economic crash since it started in late 2007. Politicians want various
versions of ‘stimulus’ (more spending) to fix a problem caused by too much
money in the economy. This will make things worse after a few months of fun
spending. What they should do is cut taxes, end wars and empire, end all
subsidies, end the Dept. of Education and others, and take broad measures to
reduce government spending. Free-market capitalism will rise from the ashes,
and produce honest, sustainable, jobs, peace, and prosperity. Pres. Obama, N.
Klein, R. Reich, P. Krugman, and others whine that ‘capitalism was tried and
failed’. What a joke! The US economy has had a declining percent of capitalism
since fake money was started in 1913, and the above positive benefits of
capitalism have fallen even faster since the end of partial-gold backing of our
money in 1971. It is Socialism (a government managed economy, with much
government ownership of firms, run by Liberals, Progressives, Empire-building
war-mongers, Bush-Neocons, etc.) that has harmed us most since 1913. The
whiners are either lying, ignorant, or engaged in self-serving rhetoric to
enhance their ‘change-based’ jobs.
I don’t
underestimate the difficulty of, and opposition to, a transition to real money.
Some will say we should set less ambitious goals, but I say these lesser goals
are just steps along the way and must never stop striving for the ultimate goal
of eradicating the government from our monetary system. Maybe if we
hit bottom hard enough
(2010?), in the coming depression people and the government will start to
listen to us ‘real money’ folks, and go for it.
Cong. Ron Paul
has been a leader for many years in the fight for ‘sound money’ and compliance
with the Constitution as to reduced spending and intervention at home and
abroad. Former U.S. Sen. Chuck Hagel issued warnings in 2004 and 2005 about
impending trouble at the GSEs, but was ignored. Bravo to these leaders, plus P.
C. Roberts Ph. D., and others .
Because the Fed
gives it an unlimited supply of funding, the U.S. Federal government has become
an arrogant master that dominates and abuses its citizens, the U.S. States, and
other countries, while providing big incomes and privileges to those people and
firms that have ready access to it. Over half of the federal government
spending and projects (Medicare, Social Security, wars for empire, bailouts,
grants, subsidies, pork, etc.) are unconstitutional, but Congress, the people,
and the Supreme Court don’t seem to care. Our national disease is that it is
deemed ‘normal’ to have the government supply whatever is ‘needed’, and most
people want ‘somebody else’ to pay for it (‘the rich’). This mode of living is
immoral and unsustainable, and reveals the classic signs of decadence in a
failing empire.
Fighting the
system is hard, but I predict Ghandhi's aphorism will prevail: "First
they ignore
you, then they ridicule you, then they fight you, then you win."
A Plan to Introduce Gold as
Money
This plan builds
on the work and ideas from Founder Charles H. Carroll (1794–1865,
U.S. Congressman for
New York), F. A. Hayek
(1899-1992), Murray Rothbard (1926-1995) in his 1991 book ‘The Case for a 100%
Gold Dollar’, Congressman Ron Paul M.D (1935- ) by his many essays, House Resolutions, and books, and other free-market
thinkers. My plan offers more
details on how to implement the transition to gold, and the benefits to expect.
There have been three types of gold standards in the past; 1. Gold Specie, 2.
Gold Exchange, and 3. Gold Bullion.
I now re-introduce standard four, the ‘Private Gold
Standard’ (a version first offered by Ron Paul in 1982, but ignored), which is based on
‘Redick’s Four Monetary Rules’ shown above, and implemented by the 6-step plan shown below.
First, we must
be clear that money was invented by people, not governments. Thus, we don’t
need to rely on the government to devise and implement this plan, but we must
convince them to stay out of the way.
Again, money is
a; 1. Convenience in buying and selling (a medium of exchange; better than
barter), 2. Store of value (saving), and 3. Unit of account. Most societies
find that gold works best (see First Rule above). Silver and copper supplies
and costs are more volatile (more new production, consumed for industrial
use, etc.), so are less attractive, but useable. Also, note that Article 1,
Sec. 8, of the United States Constitution grants Congress the authority; ‘To
coin money, regulate the value thereof…’
We say the ‘value’ should be in weight of precious metal. Note that this is
a ‘restriction’, and does not grant the government a monopoly.
The new coins and money should be designated as worth a certain
weight in gold (xx grams), and names like 'dollar', or 'quarter' will not be
needed. This would make the US dollar (USD) worth about 1/1,000 ounce of
gold at today’s market price of $1,000 per ounce. If this were done, the
question is; 'Does the US have enough gold to back-up convertibility, and thus
avoid 'runs' to convert paper and base-metal coins?' The answer is yes,
but since the U.S. has trillions of fiat 'dollars' in circulation worldwide,
the market value of a USD for conversion (trade-in) purposes might become
1/10,000 of an ounce, with a corresponding 'price' of gold at $10,000 per
ounce! If it were not a secret as to how much gold the government has at
Fort Knox and in Federal Reserve facilities, a better estimate could be made.
Conversion is a tricky process to avoid panic and uncertainty among current
owners of fake money. Thus the plan below allows the Federal Reserve Notes to
be backed by gold right away (but no new ones created), and used for five years
(or less) before they must be ‘turned-in’ for new notes or coins from any mint.
The 'new' convertible currency would be introduced in a Six-Step Plan as follows:
1. Repeal: a.
All legal tender laws so private firms (mints) can issue new money, b. Laws
that tax increase in market value (then to be known as ‘purchasing power’) of
precious-metal coins (formerly considered numismatic), and c. Any other laws
that prevent, inhibit, or tax the new money. The only government role would be
to prevent fraud, and to verify by physical inspection that reserves are as
advertised (but with no reserve ‘requirements’). The Federal Reserve would be
abolished five years after private money became legal (or if Congress refuses
abolishment, let it atrophy to death from lack of customers and income).
2. Private
firms would introduce new gold-backed money labeled by the weight of gold a
coin contains, or that paper money represents. They would be required by law to
publicize the amount of gold they have as a reserve for conversion of paper
money, and the value of paper money issued, and allow unscheduled physical
inspections to confirm that the gold is in their possession. The same would
apply to base-metal coins. The ‘unscheduled’ requirement will prevent
relocating the same gold stocks to be put on display at different mints! The
results of these inspections could be advertised by Internet web site,
newspaper, poster in the bank, etc. Mints with strong reserves will promote
their strength to attract customers. The free market at work!
3. Require
the Treasury Dept. to allocate an amount of gold to be used for convertibility
of existing coin or paper currency (such as M1, see P. 35) on demand, based on
a certain weight per Dollar. The Federal Reserve would not be involved in such
conversions.
A Federal
Reserve money supply report in Oct-2009 showed a seasonally adjusted M1 (cash
and near-cash demand deposits) of $1.672 trillion. On Nov. 4, 2009, and article
by J. Blas of the Financial Times newspaper (of London UK; US edition;
www.FT.com) said the U.S. has 8,100 metric tonnes of gold in its reserves (77%
of total US reserves; see weight definitions in the Glossary at item ‘N’ on P.
99). At 32,150 troy oz. per metric tonne, the US has 260,415 million troy
ounces. Others say the US currently
holds 261.5 mill. troy ounces, and 265 mill., but these figures are all close.
The same FT article shows China holds
about 1,000 metric tonnes, Russia 700, India 550 (including their 200 tonne
purchase in Nov-2009), and the IMF 3,000. If the IMF is dissolved, one would
assume its gold would be distributed to its 186 shareholders, of which the US
is by far the largest with 16.79 percent of the votes (Japan is #2 at only 6.02
%). On this basis, the US owns another 503.7 tonnes.
If the existing
M1 dollars were backed by all of our gold there would be 0.000156 oz per
dollar, or at $1,000 per oz., a value of $0.16! This means we could only
support our M1 with 16% reserves of gold. Not good! M3 (= M1+ M2 + long term deposits) may be the better number to
use, but it hasn’t been published since 2006 (another Fed secret). Private
sources put M3 at about $14 trillion worldwide in late 2009, which our gold
reserves could back at 0.000019 oz. per dollar, a value of about $0.02
at late 2009 gold prices, which is a 2% reserve of gold and a 98% loss in
purchasing power (1/50)! Pathetic, but at least honest!
It remains to be
learned just how many ‘Fed Note’ dollars need to be backed, and how much gold
we have. Allocating gold to back these numbers would use-up our supply
quickly.
Once the legal tender
laws are repealed; a. No additional pieces of the old ‘Fed-Note’ money will be
issued. The free market will provide new money as needed; if the Fed isn’t
required to stop creating new money at first - politics, etc.- the new private
money should proceed in parallel; let the best money win!, b. Holders of old
‘Fed Note’ money would be
required to convert it to new private money within five years of private money
becoming legal, c. The government must
accept payments to them of ‘new private money’ if the issuing firm’s reserves
are at least forty percent, and have been verified to the public and
government, and d. The Federal Treasury Dept. and State governments can issue
new gold-backed money, but it would have no privileges over private issue.
4. Abolish the
unconstitutional GSEs such as Fannie, Freddie, Ginnie Mae, FHA, Pension Benefit
Guaranty Corp (PBGC), FDIC, all TARP-Like projects, ‘special’ bankruptcies,
corporate-takeovers, Recovery-Stimulant Acts, the Exchange Stabilization Fund
(ESF), the Export-Import Bank, etc., etc.
All of these are part of the government’s intervention in, and
manipulation of, money, private business, and banking.
5. Terminate US
membership in the IMF, World Bank, BIS, G-20, G-8, United nations,
etc. Their ‘manipulation’ role ends with use of money valued in weight of
gold. Free trade and embassies are adequate for communication with other
nations.
6. Work to
repeal or change other unconstitutional and counterproductive Federal laws
and policies that intervene in our lives, economy, and the world.
********************
That is a
formidable list of legal changes, and of course most people in government (all
branches, and all levels; city to federal) will oppose them initially. However,
as our economy and the US dollar crash (2010, 2015 ??), the pressure for change
will be enormous, and we will win many converts to gold. An advantage of this
plan is that just the removal of legal tender laws will allow gold-backed money
to prove its benefits. Other changes can follow.
Some
people prefer to just reform the Fed (audits, transparency,
etc.), because it would be impossible to abolish it. We say the Fed should at
least lose its monopoly because it is a preposterous,
damaging, and unconstitutional scheme, and will fail anyway when, a. The
new money takes all of their business, or b. In absence of the new money, the
US dollar and economy fail.
Once the new
gold money is introduced, I predict all nations will soon follow in converting
to their own gold-backed money as their fake money is refused as payment by
Sellers and Lenders; a reverse form of Gresham's Law (without legal tender
laws). In this case, good money drives out bad. This would end the
justification by governments for money-control schemes such as
central banks and the BIS pursue worldwide.
Key changes
to expect, all based on
free market reality, not laws or G-xx agreements:
1.The concept of
a 'reserve currency' would no longer be needed because any gold-backed
money would be accepted in world trade,
2. When most
nations convert to gold-backed money, the concept of a ‘price’ for gold will
vanish. The reverse will occur, as money is ‘valued’ in the weight of gold it
contains or represents, and Sellers advertise ‘prices’ in grams or ounces of
gold,
3. The foreign
exchange business (Forex) with banks will wither and die as it becomes useless,
as will government manipulation such as the U.S. ‘ESF’ (see page 38), and the
futures trading on the Chicago
Mercantile Exchange (now merged with CBOT as CME Group, Inc.), and
4. People like
to give ‘names’ to money (Dollar, Franc, etc.), but these would be social terms
and would not need to appear on the money (though grams of gold would), unless
the minter chooses to do so. A fun classic is the 1987 Canadian dollar coin
(replaced the paper dollar) on which a loon (a type of duck) appeared, and was
commonly called a ‘loonie’. When in 1996 Canada introduced a two-dollar coin it
was called a ‘toonie’. Yeah!
5. Nations will
convert to gold-backed money on their own terms, as and when needed. There will
be no need for grand conferences (G20, G180?) to set rules, although some
‘Agreements’ may occur, and then whither when the ‘rules’ become onerous and
counterproductive.
6. There will be
no ‘weak’ or ‘strong’ currencies or ‘pegs’, all of which were part of the
manipulations in the past. Gold will be the great equalizer and honest broker.
The games will be over (and most of the wars).
There will be a shocking ‘day of reckoning’ when we finally
connect our gold reserves as backing for our money supply. Based on the above
calculations, the dollar faces a big drop in purchasing power. Most other
nations will have the same problem, but the currency of some nations
(Switzerland?) will gain.
As painful as this may be, it is better than the hyperinflation
(with currency values approaching zero) that is otherwise 99% likely to occur.
Once the transition occurs,
the people in all countries can start working for real money, and enjoy its
benefits as they are rewarded by the free-market for being productive. The
hustlers on Wall Street, and most economists, will need to look for honest
work.
Part
2: The New Gold-Money Era
The
Challenges of Introducing Gold
Some will say
that this plan for new
money is too simplistic, and will not work in today’s complex world. I say they
are wrong, because most of the complexity is created by government manipulation
of their fake money, and those problems will end when fake money ends. Most
(99%) of today’s politicians and economists have bought the idea that; 1. the
government must run the ‘economy’ and monetary system, 2. all financial
activities must be tightly regulated to avoid abuse, and 3. there must be a
central bank. Of course they are biased, because they want the jobs,
grants, and perquisites that come with this approach, and have been so
brainwashed in college and work that they truly can’t imagine another way, and
they are WRONG! The new era will depend more on incentive than
regulation. The heroin-upper effect of loose money will be gone (see Heroin
Analogy on page 32). People operate differently when using limited funds,
without the prospect of a bailout. A fake and excess supply of money creates a
pot of honey that breeds irresponsibility and bad ethics as people scramble to
get more of it. Gold-backed money puts a damper on this frenzy because
governments can’t create it out of thin-air, short of reducing reserves for
paper money, which has its limits too.
What about ‘hoarders’
who might store the
new ‘good’ money? Remember that the former fake Fed Notes are now convertible
to gold (for five years) so this is not an issue.
What will other
nations do? The people,
merchants, and governments will prefer the new gold-backed money, and it will
prompt conversions to gold in other nations since their fake money will soon be
rejected as payment by Sellers and Lenders. They will not be able to hoard it
(reduce supply available to others) because it would only hurt their ability to
buy, and not produce interest.
Thus, I see no
‘downside’ to the new
money, except the political fight to get it approved.
Benefits of a Gold-Money
World
We can expect the following benefits form the new money:
1. More Peace: Wars cost money. The absence of an unlimited
supply of fake money will inhibit the starting of wars; Diplomacy will be used
instead. Imperialistic aggressors will have trouble getting funded.
2. More Prosperity: Gold-backed money will increase in
purchasing power if economic growth exceeds the addition of newly mined gold.
Savings will be rewarded, and more money will be available for investments.
3.
Less
Government: Governments need money to grow.
