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Mike Krieger Explains Why Fiat Money is Immoral

Tyler Durden's picture




 

Sumitted by Mike Krieger of Kam LP

The people must be helped to think naturally about money. They must be told what it is, and what makes it money, and what are the possible tricks of the present system which put nations and peoples under control of the few.

- Henry Ford

U.S. investors should welcome, not fear, climbing commodity prices.  The increases are "largely a reflection of the fact that the pace of economic growth, particularly in the U.S., has picked up," said Nariman Behravesh, chief economist at consultants IHS in Lexington, Massachusetts, and a former Federal Reserve official who has been covering the global economy for more than 35 years. "It's not something to be worried about." 

- Bloomberg article from yesterday

Why Fiat Money is Immoral

Today’s email is going to be a little different.  A couple of weeks ago a friend of mine from NYC who is not in the business but is on my weekly email distribution list asked me to explain fiat money and why I think it is the wrong way to go.  Below I am going to paste my response to her.  There is so much disinformation out there about money it is scary.  Sadly, the strategist at my former employer added to this several weeks ago.  He wrote:  “Gold, which is effectively just another fiat currency.”

Clearly he failed to look up the definition of fiat currency.

Fiat money is money that has value only because of government regulation or law.

Definition of Fiat:  An authoritative or often arbitrary official order or decree.  THIS DOES NOT EXIST TO GOLD AS MONEY TODAY AT ALL. 

Gold is not money under “fiat” in any country at the moment.  Rather the market is making gold as money today which is the OPPOSITE of fiat money.  

With that off my chest, here is the response to my friend…

Ok, so let’s do a brief thought exercise on why I believe commodity money is preferable to fiat money.  When you have fiat money, a government, or in the case of the United States today, a banking cartel (the Federal Reserve), is granted exclusive authority to create the nation’s money.  Laws are used to enforce the use of this money otherwise people probably wouldn’t use it.  Under a commodity money system, where let’s say the U.S. issues dollars but those dollars are backed or convertible to a commodity (in many cases gold but it can be other things) there is a limit to the amount the government or banking cartel can print or issue and this is in relation to the amount of the commodity that exists or is available to the government or central bank.  The current propaganda that is rife throughout economics textbooks and the like tell is the notion that commodity money is bad since it stifles human innovation in relation to the amount of gold or whatever commodity used.  They say this is bad and that there should be no “limit” on money creation based on something as arbitrary as a commodity and that this is bad for growth.  This is complete nonsense and is used to keep people in the current fiat system where money power is exercised most egregiously by the few against the many.  The reason they defend the current system is simple.  With the power to create unlimited currency at will (via the Federal Reserve) you possess total and absolute power over almost EVERYTHING in the economy and society at large.  The Fed not only creates the money but they distribute it where they want.  In QE1 and QE2  they decided to buy specific assets.  In the case of QE1 where they bought toxic assets, this was just another bailout of the banks and others that made poor investment decisions.  Did the money go to build new schools?  No.  Did the money go to build high speed trains as is done in China?  No.  Did it go to building out massive alternative energy infrastructure?  No.  It went to save the banks because at the end of the day the Fed exists as a backstop to the banks and it is to the banks that the Fed answers to at the end of the day.  It is a brilliant scam that 95% of Americans do not comprehend.  So in this case all of the money is going to the banks (which destroyed the global economy in the first place) and other players in the financial world.  Remember, the banks ARE the Fed and the Fed creates the money.  Gate keepers at the Federal Reserve and academia make understanding economics, the Fed and money seem so “complex” but the scam is really VERY simple.  

I am not saying that I necessarily back the classic gold standard but it is much more of a moral and genuine capitalistic system than what we have today.  One of the arguments against the gold standard is that the rich have all the gold anyway and they will still have the power.  Ok, well let’s suppose this is true.  Under a gold standard they would need to mobilize this gold to exercise their power and influence and pay people off to do their bidding.  This has a real cost to them.  Gold will be spent.  At some point they will choose not to spend it on this or that and ultimately they will lose their power/money by spending too much gold.  They can’t just create more out of thin air to exercise unlimited money power on the populace. 

This is in complete contrast to how things work today.  With the dollar they can create more and more everyday and buy people off without ANY cost in the short term (until the dollar itself collapses).  This is why the most dangerous thing that can happen would be a global fiat currency to replace the U.S. dollar.   They could start over in their never ending system of money power with a new currency that can be printed at will and used to buy up the world and all its resources at no cost to them.  The end result would be slavery for the masses of humanity.  The global monetary system as it stands is one of the most immoral social structures ever created by man.  Most of us in America do not understand this since we have been the beneficiaries of it up until now.  We are like the feudal lords in pre-revolutionary that couldn’t see the world beyond their favored social status until they lost their heads.  The system as it stands has led extreme exploitation and corruption, not true capitalism.  If we continue on this path the next stop is a feudalistic fascism. 
 
In a Fiat System Banks Must be Like Utilities

At the Sanford Bernstein conference several years ago Joseph Stiglitz spoke and said a good and healthy financial system is a small financial system.  I couldn’t agree more.  This is especially the case in a purely fiat money system.  Money is too important to allow greedy children in expensive suits on Wall Street and dangerous academics at the Fed to play around with.  I do not claim to know what the ideal money system is but I want to be very clear on this point.  If we have a fiat system like today the banks should be the most regulated industry on the planet and operate like utilities.  They are supposed to help the productive economy innovate and create wealth.  They are not supposed to be parasites that suck the lifeblood out of the real economy and compose 16% of the weight in the S&P500 (only technology is bigger at 17%).  Something is VERY, VERY wrong here. 

I placed the quote at the top of the email to demonstrate just how entirely disconnected the corrupt elite class is in the United States is today from the average citizen.  Many historians assert that Marie Antoinette never said “let them eat cake,” but surely she made comments similar to those at the top of this email from the Bloomberg article.  What is happening now is nothing new.  It has happened over and over again for millennium.  The elites of every era always think they will stay in control no matter what.  They will be wrong once again.

Watching the circus from Colorado,
Mike

 

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Thu, 01/20/2011 - 14:49 | 890580 doomandbloom
doomandbloom's picture

if the end goal of our life is 'economics'...then does it matter if the money is gold, fiat or any other material?we will have the same problem over and over again...

 

 

Thu, 01/20/2011 - 15:01 | 890618 SheepDog-One
SheepDog-One's picture

BTW Narihman Bahrivesh...FUCK YOU very much! Why dont you go back to India, nothing to worry about right?

Thu, 01/20/2011 - 15:04 | 890631 Sudden Debt
Sudden Debt's picture

You do realise that by insulting a guy from India that:

 

1. You might never be able to catch a cab IN YOUR LIFETIME

2. NO more Tech support if you have troubles with your PC

 

And that are 2 basics in life man...

Thu, 01/20/2011 - 15:26 | 890700 RockyRacoon
RockyRacoon's picture

I'd shy away from curry dishes in restaurants as well.

Sun, 01/23/2011 - 06:11 | 896885 Hephasteus
Hephasteus's picture

Dollar's looking about a hour past ugly.

Thu, 01/20/2011 - 18:55 | 891610 Ignatius
Ignatius's picture

Wrong, Mike.

Gold is money.  Gold is a wealth reserve.  Far more valuable than a currency.

Currency -- fiat -- is a unit of account and medium of exchange that is highly efficient and that's why we use it.  "Book your trade balance in dollars, but pocket your profits in gold."

Failure of a gold backed -- exchangeable -- currency is a given in history due to an age-old human habit of cheating.  The US government defaulted on the American people in '33 and the world in '71.

I would support our currency being issued as an asset by our government and run centrally as a utility, but I ain't holding my breath.

Thu, 01/20/2011 - 15:49 | 890790 Eureka Springs
Eureka Springs's picture

I've been reading here and elsewhere trying to understand the big ponzi... and you, sir, seem to have hit the nail sqarely upon its head as anyone.

The questions in re currency and damn near everything else is... do we all play by the same rules. And, to what end...are we doing or promoting anything.

Criminals are in charge of our country... switching ponzi fiats wont fix a thing.

Thu, 01/20/2011 - 16:02 | 890853 faustian bargain
faustian bargain's picture

Which is why currencies should be sound, and selected by the marketplace, not by fiat.

Thu, 01/20/2011 - 16:57 | 891160 Sean7k
Sean7k's picture

+10000

Thu, 01/20/2011 - 17:25 | 891161 Sean7k
Sean7k's picture

.dp

Thu, 01/20/2011 - 17:14 | 891263 michael.suede
michael.suede's picture

+10000

Thu, 01/20/2011 - 18:43 | 891581 asdasmos
asdasmos's picture

+1 Trillion Bernanke US$ Note

Thu, 01/20/2011 - 16:03 | 890860 faustian bargain
faustian bargain's picture

It doesn't seem like you read the article.

Thu, 01/20/2011 - 14:52 | 890596 Sudden Debt
Sudden Debt's picture

Immoral...

 

I had to look up that word. I sounds so negative...

Thu, 01/20/2011 - 14:59 | 890600 SheepDog-One
SheepDog-One's picture

'Immoral'? Well what does THAT matter, long as stocks go up! Fabric of the nation destroyed, countless businesses and families destroyed...WHATEVER who cares! Stock congo line starts to the right behind Harry and RainbowTrader!

Thu, 01/20/2011 - 15:02 | 890621 Sudden Debt
Sudden Debt's picture

MORE WHERE THEY CAME FROM!

 

AND AS I TURN OUT....

 

10% OF THE IRISH WANT TO RELOCATE AND MOVE ABROAD!

 

 

Thu, 01/20/2011 - 15:15 | 890669 Trundle
Trundle's picture

Only 10%?- wait a few hours until they metabolize the Guinness.

Thu, 01/20/2011 - 15:03 | 890627 something fishy
something fishy's picture

IMO until this society regains some semblance of moral authority it doesn't deserve to remain politically or economically dominant. 

Thu, 01/20/2011 - 15:05 | 890604 Mudflap
Mudflap's picture

"A little parable may prove useful: Today an ounce of gold sells for $300, more or less. Now suppose that a modern alchemist solves his subject's oldest problem by finding a way to produce unlimited amounts of new gold at essentially no cost. Moreover, his invention is widely publicized and scientifically verified, and he announces his intention to begin massive production of gold within days. What would happen to the price of gold? Presumably, the potentially unlimited supply of cheap gold would cause the market price of gold to plummet. Indeed, if the market for gold is to any degree efficient, the price of gold would collapse immediately after the announcement of the invention, before the alchemist had produced and marketed a single ounce of yellow metal.

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Of course, the U.S. government is not going to print money and distribute it willy-nilly..."

From a speech by The Bernank in 2002...

http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm

Thu, 01/20/2011 - 15:06 | 890637 Bastiat
Bastiat's picture

"Now suppose that a modern alchemist solves his subject's oldest problem by finding a way to produce unlimited amounts of new gold at essentially no cost."

At which point Bennie woke up and had to clean himself up.

Thu, 01/20/2011 - 15:23 | 890690 Mudflap
Mudflap's picture

Bernie 'the modern alchemist' saves the day!

Thu, 01/20/2011 - 15:26 | 890695 SheepDog-One
SheepDog-One's picture

If it was possible to produce as much gold as anyone wanted at no cost, then wouldnt gold become worth nothing? Hmmm and basically its what Bernank is already doing, creating as much money as he feels like for nothing, making it worthless.

Thu, 01/20/2011 - 15:29 | 890710 RockyRacoon
RockyRacoon's picture

Oh!  I get it.  You mean like dollars?  Well, that would depend upon the level of financial education amongst the masses, would it not?

Thu, 01/20/2011 - 15:32 | 890722 Mudflap
Mudflap's picture

According to him it's all about staving off the dreaded deflation.  He believes that there will never ever be deflation again - just induce spending through the printing press - problem solved by forced inflation - at any cost.  All it takes is a 'determined government' (i.e., him).  It's his religion.

Thu, 01/20/2011 - 18:18 | 891500 naughtius maximus
naughtius maximus's picture

"Of course, the U.S. government is not going to print money and distribute it willy-nilly..."

I wouldn't bet on that with people like Bernie Sanders in congress.

Thu, 01/20/2011 - 14:58 | 890609 Misean
Misean's picture

The exchange of nothing for something is always immoral...it's called stealing.

Thu, 01/20/2011 - 15:19 | 890682 Trundle
Trundle's picture

Or God's work- depending on perspective.

Thu, 01/20/2011 - 17:27 | 891328 Sean7k
Sean7k's picture

absent police power, there is nothing immoral about it. The whole purpose of exchange is to get a better deal. :)

Thu, 01/20/2011 - 18:19 | 891503 naughtius maximus
naughtius maximus's picture

So by extention, in total anarchy, rape is as moral as apple pie?

Thu, 01/20/2011 - 18:37 | 891559 Sean7k
Sean7k's picture

That is not an exchange- it is theft, kind of like government. If you add Anarchy + Private property law, now were talking the ultimate in individual sovereignty and elite impotence. 

Thu, 01/20/2011 - 14:59 | 890611 haskelslocal
haskelslocal's picture

Market going green! So much for healthy retreats! All together now, "Here we go PoMo here we go!" (Clap clap)

Thu, 01/20/2011 - 15:10 | 890652 Sudden Debt
Sudden Debt's picture

Tomorrow BAC will report prémarket.

Staying in is pretty risky.

So drop before end or aftermarket.

 

The rise could also be there because a lot are setting up for a crash and buying puts.

Option expiration day tomorrow while there are so many longs, is also a reason to worry.

Thu, 01/20/2011 - 15:14 | 890666 Boonie
Boonie's picture

here, here

Thu, 01/20/2011 - 16:17 | 890634 P Rankmug
P Rankmug's picture

All that is needed is to link currency to gold and maintain its value through currency supply.  It is not necessary to back it with gold or have it convertible to gold.  If it has the same value why would you convert it?  It would be like exchanging 5 nickels for a quarter.  It is not necessary for gold to be hoarded or stored, though some could be held to make people feel better.

The problem now is to determine the proper price to link the dollar to gold so creditors and debtors are in balance.  Even if there is error it would be far better than the current system of fiat currency linked solely to Bernanke's feeble mind. 

 

Thu, 01/20/2011 - 15:09 | 890646 chinaboy
chinaboy's picture

Thank you zerohedge for reminding us of the issue of right and wrong with regards to the money printing press

Thu, 01/20/2011 - 15:09 | 890648 mule65
mule65's picture

Did ya buy that dip?  Great buying opportunity of a lifetime!

-HammyWanker

 

 

 

Thu, 01/20/2011 - 15:13 | 890664 Arch Duke Ferdinand
Arch Duke Ferdinand's picture

World War coming very very soon.

...Over food shortages...

Billions of people, especially in Asia, icluding Oil rich countries will begin revolts.

The only safe quadrant in the World are the....Western Canadian Provinces.

A plethora of food and natural resources w/ only 12.5 million people.

...Led by it's Gateway City of Vancouver BC....North America's Geneva of Switzerland.

http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/01/vancouverthe-geneva-of-switzerland.html

Thu, 01/20/2011 - 17:38 | 891370 SWRichmond
SWRichmond's picture

A plethora of food and natural resources w/ only 12.5 million people.

Sounds like a target to me.  How will you muster enough adults to defend it?  Ukraine, anyone?  Not sure I'd be so anxious to brag about it.

Thu, 01/20/2011 - 19:08 | 891630 High Frequency ...
High Frequency Traitor's picture

I doubt it Canada has a serious peacenik attitude and some draconian gun laws. Michigan, on the other hand put 700,000 rifle-armed citizens in the feild last deer season, and aside from the Detroit area is also loaded with foor and natural resources (heck, we even have a small oil field of our own).

Thu, 01/20/2011 - 15:18 | 890675 tgatliff
tgatliff's picture

The money supply must correspond to the growth rate of individuals.. That is not possible in the current world which is why the Gold Standard will never happen again. 

Actually if you think about it... You have two side of the coin.  One side is the Gold Standard which is ideal for creating future generations that provide zero productive capacity, but own all of the wealth.   On the other side you have a Fiat currency which will always end in implosion because it is too temping to play with the money supply...  In the future, hopefully there will be a middle ground found.

 

Thu, 01/20/2011 - 15:45 | 890771 TheDavidRicardo
TheDavidRicardo's picture

I believe your right regarding the whole Gold Standard and population growth issue. 

And even if you did figure out a way to have it implemented, they would just fudge the population numbers.

Thu, 01/20/2011 - 15:53 | 890807 Pants McPants
Pants McPants's picture

The money supply must correspond to the growth rate of individuals.. That is not possible in the current world which is why the Gold Standard will never happen again.

Not true.  Prices and exchange rates can fluctuate to accommodate an increase or decrease in population and/or gold.  A gold standard protects and preserves wealth for present as well as future generations.

Aristotle's five characteristics of money - durable, portable, divisible, intrinsic value.  Gold IS money, regardless of how many people use it.

 

Thu, 01/20/2011 - 16:29 | 890981 JLee2027
JLee2027's picture

+1 McPants

Thu, 01/20/2011 - 23:12 | 892246 Milestones
Milestones's picture

Pants 1) durable 2)portable 3)divisible 4) intrinsic value 5)?????????????     Milestones

Thu, 01/20/2011 - 17:12 | 891249 Peace is the x-axis
Peace is the x-axis's picture

"...because it is too temp(t)ing to play with the money supply..."

Herein lies the challenge, and the opportunity. To find a way to have the beneficial effects of fiat currency, while eliminating the risk.

Recommend reading Ragnarok's link to FOFOA above. Also worth studying is Silvio Gesell's 'Natural Economic Order' and concept of 'Freigeld' (free money), along with the instances where this has been tried successfully (eg, "the Miracle of Worgl", Austria in Great Depression) until shut down by the C-Bster money elite (and ask yourself WHY the banksters always shut this down).

"The money supply must correspond to the growth rate of individuals..."

There is a way to achieve this. Decentralise central banking. How?  Developing alternate / Complementary Currencies, that work better, and thus over time can outcompete the (likely collapsing) existing currency system/s.

As food for thought, see by way of less-than-perfect example The Ripple Project:

http://ripple-project.org/

Think about what is possible through (eg) peer-to-peer technology, and encrypted systems.  Is it not possible to develop a system where every individual effectively becomes their own Central Banker, creating their own "demurrage" currency credits, subject to pre-programmed cap limitations?

If We The People do not employ our creative genius to develop something better, from the grass roots, then I fear we will forever remain enslaved to 'money' (and those claiming the exclusive 'right' to issue currency) ... rather than money being a slave to us.

 

 

 

Thu, 01/20/2011 - 17:31 | 891342 Sean7k
Sean7k's picture

Easiest way- eliminate legal tender laws.

Thu, 01/20/2011 - 17:36 | 891364 Peace is the x-axis
Peace is the x-axis's picture

Not so easy when those who claim exclusive rights on currency issuance also control those who pass the laws. I see Congress took no notice of the Will of the People viz. TARP. 'Nuff said.

Thu, 01/20/2011 - 18:39 | 891569 Sean7k
Sean7k's picture

If they won't, create black markets and trade in alternative currencies without reporting to the government. Force the issue.

Fri, 01/21/2011 - 00:51 | 892454 Peace is the x-axis
Peace is the x-axis's picture

Correct.

Thu, 01/20/2011 - 15:17 | 890676 bronzie
bronzie's picture

"Under a commodity money system, where let’s say the U.S. issues dollars but those dollars are backed or convertible to a commodity"

"backed by" won't change the existing system - the central bankers will still retain the power to control and manipulate the monetary system and everything in it

the only way to change the system is to have a fully convertible currency or use a valuable tangible good as the circulating currency

it is the people's CHOICE TO HOLD OR CONVERT the currency that limits the bankers' control - when the bankers get out of hand the people convert the circulating currency into the tangible good thus removing the bankers' power

look no further than the Euro for a currency that is 'backed by' gold (15% at its inception) - the 15% backing was just a marketing gimic to help people accept a new, purely fiat currency

Thu, 01/20/2011 - 15:24 | 890693 tgatliff
tgatliff's picture

I agree with what you are saying, but not with the principle...

If it is the people's "CHOICE TO HOLD OR CONVERT" a currency, then they must not be allowed to carry it over to the next generation.   I agree 100% that those who earned the wealthy (creating productive capacity) should be in complete control of the wealth they made.  However, passing that wealth to a future generation that potentially does not have the capacity to produce productive capacity should not be allowed...

In short... Freedom to succeed at its core is giving people a fair chance at demonstrating their abilities.   When you transfer wealth from one generation to another errespective of abilities, then you infringe of the future generations potential to demonstrate their abilities...

Thu, 01/20/2011 - 15:39 | 890747 Misean
Misean's picture

Bwahahahahahahaha! Yeah property rights stop there...moron!

In such a system, if those inheriting can't make it, they'll loose it. Further, you envious twit, what business is it of yours what someone does with their money. The only response to the sort of theft you have in mind is to piss it away before one dies. That'll do a lot for capital formation.

I can't even believe someone so clearly mentally and morally deficient as your statement shows you are has the capacity to type.

Thu, 01/20/2011 - 16:41 | 891057 papercanteen
papercanteen's picture

Freedom of opportunity, not freedom of outcome.  As families acrue wealth through whatever means, and as the generations pass either those skills that earned the wealth in the first place will be passed down and the wealth will be used to create new wealth (i.e. business and jobs) that, if run successfully will succeed.   If subsequent generations do not have those same or similar skillsets, the wealth will be squandered, and not available for subsequent generations who will then have a very different experiance and be motivated to re-gain through taking risks, working hard, innovating etc.

The only time this doesn't work is when the system of risk/reward breaks down and more wealth = access to markets or opportunities where you cannot place a losing bet, only winners.  That's where we find ourselves now - The initial climb to wealth is just fine, but that wealth is used to purchase political power to protect and grow it rather than through entrepenurial risk/reward type actions.  

We should strive for success and applaud those who achieve it.  We should fight moneypower corruption wherever we find it.  As the old gypsy curse goes, "May you live in interesting times!"

Well, we certainly do.

 

 

Thu, 01/20/2011 - 15:18 | 890677 Inthemix96
Inthemix96's picture

Absolute power corrupts absolutely, don't forget that these blank minded mother fuckers care not one iota what happens to you and me, not one jot.

The blind are trully leading the blind here methinks.

Stop and restart is what is needed, with folks who think of others as their equals not below them.

Thu, 01/20/2011 - 15:28 | 890708 Quinvarius
Quinvarius's picture

Gold's greatest quality is the ability to humiliate technical analysts.

Thu, 01/20/2011 - 15:32 | 890721 RockyRacoon
RockyRacoon's picture

Greatest?  Well, I'll concede to that being in the Top 10 for sure.

Thu, 01/20/2011 - 15:33 | 890709 baddress
baddress's picture

Personally I think a return to the gold standard is a really bad idea. Follow the yellow brick road. Who has all the gold? Banksters. What we need is to abolish the Fed. The Romans had it figured out back in the day - more money, liquid money, and no gold standard. I watched the Wizard of Oz and I know what it means.

Feel free to shoot holes in this argument.

Thu, 01/20/2011 - 15:34 | 890727 RockyRacoon
RockyRacoon's picture

You read the article, right? 

One of the arguments against the gold standard is that the rich have all the gold anyway and they will still have the power.  Ok, well let’s suppose this is true.  Under a gold standard they would need to mobilize this gold to exercise their power and influence and pay people off to do their bidding.  This has a real cost to them.  Gold will be spent.  At some point they will choose not to spend it on this or that and ultimately they will lose their power/money by spending too much gold.  They can’t just create more out of thin air to exercise unlimited money power on the populace.

Thu, 01/20/2011 - 15:38 | 890741 baddress
baddress's picture

Yes, I read the article, but I don't agree. This documentary explains it better than I can.

The Secret of Oz - http://www.youtube.com/watch?v=U71-KsDArFM

TThe issue to me would be the quantity and velocity of gold-backed money on a gold standard would not be sufficient in my opinion for modern commerce. Those are all details to be worked out later however. We can all agree the current system is bonkers.

Thu, 01/20/2011 - 15:44 | 890768 Misean
Misean's picture

You don't eat gold. The supply is quite sufficient as it is just another commodity. It has no fixed value. An ounce of gold is exchanged for whatever the two making the trade decide. If that happens to be a 747/ounce, then so be it. It matters not. Other "inferior" commodities and metals always pick up the slack. Just get the government out of the money business. People will make their own choices. Might not even be gold...

Thu, 01/20/2011 - 16:09 | 890889 faustian bargain
faustian bargain's picture

+1

People should have the right to use whatever they like as money, as long as the parties in a transaction agree on it.

Thu, 01/20/2011 - 17:18 | 891285 RockyRacoon
RockyRacoon's picture

Old and stale argument that there is not enough gold for commerce.

I am so bored that I don't even want to go there.

Sorry to be a clod in all this, but it's been hammered out here too many times.

Thu, 01/20/2011 - 17:33 | 891355 Peace is the x-axis
Peace is the x-axis's picture

Bollocks:

"Under a gold standard they would need to mobilize this gold to exercise their power and influence and pay people off to do their bidding. "

The inherent flaw in this argument stands out like dogs balls. The author wrongly ass-umes that spending (ie, losing physical possession / control of) their gold is the (only) way to make their control over large quantities of it (via direct possession, and/or ownership/control of mining) work in their favour.

Wrong.

Why do you think Lincoln and JFK were shot?

There is more than one way to use gold to acquire control over a nation. Spending it is only one of many ways to achieve that.

Does the author really believe these people are that one-dimensional in their thinking?!

Thu, 01/20/2011 - 15:37 | 890738 Bob Sacamano
Bob Sacamano's picture

So banks "are supposed to help the productive economy innovate and create wealth."  Wow - all these years, didn't know that.  What are chemical companies suppose to do?  How about real estate companies? 

We're going to need a bunch more smart central planners.  

How about just eliminating government guarantees of deposits or increase bank equity capital requirements to say 50% (more in line with other non-bank companies) and give them more freedom to decide what they're "supposed to do?"

 

Thu, 01/20/2011 - 15:48 | 890757 lynnybee
lynnybee's picture

Something is VERY, VERY wrong here.    Yes, something is wrong & it's been wrong for a long time now !   I try to tell my adult children that things were never like this when I was a kid (1950's) !!     This past century was a total wealth transfer / the century of inflation.   TPTB are done, they have brought it on themselves. 

Thu, 01/20/2011 - 15:49 | 890789 jus_lite_reading
jus_lite_reading's picture

Relax, will ya? China's got this! They are now "number 1" and as can bee seen by the major ass kissing by Teleprompter IN Chief, we're lucky if we're number 30 on the list. Sotake that to the bank and let's rally the stocks!

Thu, 01/20/2011 - 15:42 | 890763 apberusdisvet
apberusdisvet's picture

Inappropriate: grabbing your neighbor's wife's ass. (JPM)

Disgusting:  your neighbor's wife weighs 350 (BAC/Countrywide)

Unethical:  Asking a $3 hooker for change. (TARP)

Immoral:  Screwing your wife's younger sister. (Obama/GM)

Obscene:  A reach-around on a Trannie. (Frank/Dodd)

Perverted:  Having sex with your wife's younger sister's dog. (Timmah)

All of the above can be rationalized if you are totally drunk, on LSD, or have had a total lobotomy. 

Thu, 01/20/2011 - 15:47 | 890779 jus_lite_reading
jus_lite_reading's picture

Wow, I never thought of it like that.

Thu, 01/20/2011 - 16:31 | 890990 Amish Hacker
Amish Hacker's picture

"Kinky" means using a feather; "perverted" means using the whole chicken.

Thu, 01/20/2011 - 23:23 | 892256 Milestones
Milestones's picture

Funny line.      Milestones

Thu, 01/20/2011 - 15:46 | 890775 jus_lite_reading
jus_lite_reading's picture

Mike you F'ing moron! Didn't you get the F'ing memo? The F'ing Fed CAN'T be F'ing insolvent, ever! And all the F'ing problems in the EU are F'ing solved. Poof. Like that. Which makes all the F'ing gold and silver in the world, F'ing worthless. All that matters, is not what people think of you or your standing with God or how you treat a fellow human, just simply money. And make that the now forever valuable Fiat Money!

Thu, 01/20/2011 - 15:50 | 890797 Seasmoke
Seasmoke's picture

someone needs to find the RESET button and push it .....FAST

Thu, 01/20/2011 - 15:57 | 890836 anonnn
anonnn's picture

 Any money-system that allows a privileged elite to  make changes at their whim, is doomed to favor only themselves.

As to any money-system, in general, can there be a workable and fair one if thereis no cap on the maximum income of any one citizen?...say, 1000 times the lowest workingman's wage?

Exactly who might be harmed by such? Farmers? electricians? factory hands? cooks? clerks? janitors? wet nurses? hospital staff? taxi drivers? CEOs? financial schemers? judges?

and what % of all citizenry would be offended?

Thu, 01/20/2011 - 16:06 | 890873 Jaw Knee Cash
Jaw Knee Cash's picture

Your avitar is exacerbating my coulrophobia

Thu, 01/20/2011 - 17:07 | 891220 Flushy De Toilette
Flushy De Toilette's picture

I must laugh outloud at the arguments in favor of commodity money. As if that system cannot be controlled by the corrupt elite bankers as well.

The simple solution is a currency system of, by and for the people... not the elites. Fiat or otherwise makes no difference.

It is in the set up and management of said system that makes the difference between wealth creation and enslavement of humanity.

Thu, 01/20/2011 - 17:20 | 891292 Peace is the x-axis
Peace is the x-axis's picture

"It is in the set up and management of said system that makes the difference"

+1.  See my post above.

Thu, 01/20/2011 - 17:27 | 891327 Peace is the x-axis
Peace is the x-axis's picture

"Fiat or otherwise makes no difference."

-1. It makes a helluva lot of difference. Any commodity-based system can be taken over by those willing and able to do so, by fraud, violence, etc. "Might is Right". Look at how the money powers have gained control over individual nations in millennia past - by issuing a competing currency* to that of the sovereign, by minting the gold/silver whatever that they have already acquired control over (in large quantity) elsewhere.  The issue with commodity-based systems is and always will be, WHO controls the supply.

*Hence, the way to beat them is to take a leaf out of their own playbook. Design and issue a currency that works better, for more people, from the grassroots.  If they can issue currency that is merely a token (digital entry), then there's no reason why We The People cannot do the same ... but without the usury component.

 

 

Thu, 01/20/2011 - 18:50 | 891593 Sean7k
Sean7k's picture

Sound money requires a clearinghouse capability to keep it honest. Without a specie exchange component, money will always be inflated. You can dicker over the asset, but without the ability to clear in real assets- all money systems fail.

Grass roots are for suckers. The people are a herd. The development of regulation is always a cover to fleece. Only by keeping a system in it's simplest terms can value be protected. 

All currency should be valued in grams @.999 purity. All currency should float. No currency can be legal tender. The market can decide.

 

Thu, 01/20/2011 - 17:42 | 891385 Don Levit
Don Levit's picture

Mike wrote:

"If we have a fiat system like today

Thu, 01/20/2011 - 17:51 | 891409 Don Levit
Don Levit's picture

Mike wrote:

If we have a fiat system like today the banks should be the most regulated industry on the planet and operate like utilities.  They are supposed to help the productive economy innovate and create wealth.

Mike, with this much power, with the ability to create money out of thin air, to provide an iinfinite supply of dollars, so that insolvency is impossible, is tantamount to the Fed being God.

Only God can create something out of nothing.

So, if the Fed is going to play God, it is going need to be regulated, to protect it from itself.

God provided the Jewish people with 613 commandments.

Maybe 150 or so commandments would do.

Don Levit

 

Thu, 01/20/2011 - 17:55 | 891421 SWRichmond
SWRichmond's picture

Everyone is ignoring the (almost) hidden final point: the public utility model of banking. If bankers succeed in pissing off too many proles, they will get the utility treatment.  If you are too big to fail, then you are too big to be allowed to run willy nilly and unregulated.  Pick one.

Thu, 01/20/2011 - 18:41 | 891575 savagegoose
savagegoose's picture

you need a central bank controlled by computers , not people. oh and some  clever people to make up the alogorithms.  and prob people smarter and less greedy than we have available to do it. then let it run the show, and make sure to have no back doors.

Fri, 01/21/2011 - 00:57 | 892473 Peace is the x-axis
Peace is the x-axis's picture

+1 ... exactly what I advocated above.

Thu, 01/20/2011 - 18:55 | 891611 Jerry Maguire
Jerry Maguire's picture

Commodity based money isn't really a "system"; it is the absence of a system, or at least a human designed one.  All a gold standard is, is defining the unit of account, e.g., the dollar, in gold terms.  That's all it is.  You abolish the central bank at that point becuase you don't need it anymore.  If the Treasury wants to issue notes it can.  If private banks want to issue bearer notes they can.  The point is, to make promises of "dollars" when you don't have the gold to back them up would be fraud.  Criminal fraud.

Anyway, anyone with input can go here:

http://strikelawyer.wordpress.com/2011/01/15/amending-the-constitution-t...

http://strikelawyer.wordpress.com/2011/01/15/us-constitution-28th-amendm...

http://strikelawyer.wordpress.com/2011/01/15/28th-amendment-first-and-se...

http://strikelawyer.wordpress.com/2011/01/16/28th-amendment-section-3/

http://strikelawyer.wordpress.com/2011/01/17/28th-amendment-the-rest-exp...

http://strikelawyer.wordpress.com/2011/01/19/28th-amendment-an-addition-...

http://strikelawyer.wordpress.com/2011/01/20/28th-amendment-some-final-t...

 

Fri, 01/21/2011 - 00:35 | 891903 Dr Hackenbush
Dr Hackenbush's picture

not even the root of the problem.  if lent into the system, there's never enough currency in circulation (heavens gold itself or freshly painted tungsten) equal the amount owed + interest.  the tendency towards fractional reserve begins by the very nature of necessity to catch that which is uncatchable.

then after, we can discuss endorsing a system backed by the "full integrity" of the electronic commodity exchanges & whether that makes any fricken "moral" sense at all....

he who owns the colo, owns the gold

Fri, 01/21/2011 - 00:39 | 892431 Temporalist
Temporalist's picture

China and the U.S. and EU are all con-artists in the same hustle of fiat.  Do you think China and the U.S. are actually going to battle over anything?  China buying bonds of NATO countries is about their leverage in their own scam.  They have everyone by the balls but their own country is on the precipice as well.  It's very much like the U.S. Govt., Fed, Banksters, Military Industrial Complex/Police/National Security, and Kleptocratic Corporatists all implicit in the same game and nobody able to leave the boat without it capsizing from the loss of their bloated carcass. 

When the answer to global insolvency is printing more fiat it is acknowledging default to their ponzi.

Mon, 01/24/2011 - 04:23 | 892567 honestann
honestann's picture

It is eternally amazing to me how people who "get it" (know they're being scammed) just can't put their finger on the fundamentals.  I'll mention a couple here, but some of my (months) older posts go into much more detail.

fundamental #1:  Honest, ethical people produce goods; real, physical goods that other humans value in and of themself (meaning, not numeric digits on a piece of paper).  This is what distinguishes "civilized" human behavior (produce what you consume) versus "uncivilized" (predatory) human behavior (take or defraud what you consume).

fundamental #2:  In any exchange of goods, honesty and ethics demands there be no break in the "value chain".  The goods you trade have "value" because they benefit others, and therefore others need or want those goods.  The goods you trade for have "value" because those goods benefit you, and you need or want those goods.  An honest, ethical transaction is one in which you trade the value (goods) you produced for the value (goods) someone else produced.  Nobody is ever left holding something that has no value in and of itself.

Therefore, to exchange goods you produced for gold, or silver, or copper, or lumber, or ceramic tiles... leaves both producers holding goods that have value, and in fact, goods with value approximately equal to what they held before the exchange.  Neither producer was ever in a position of being "at risk" or "scammed" (assuming they were not defrauded about the quantity or quality of the goods exchanged).  There was never any break in the "value chain", because both traders held valuable goods at every moment.

However, if a producer exchanges his real, physical, valuable goods for pieces of paper, which have zero value in and of themselves, they have entered into an exchange that leaves them at extreme risk, especially today when "fraud is obsolete" (not enforced), "rule of law" is gone, and "color of law" exists only as a means for fiat-pushers to abuse honest, ethical, "small fry".

fundamental #3:  A "gold standard" does NOT mandate that anyone exchange their goods for gold.  No way, no how, and any claims to the contrary are blatant lies and propaganda.  The gold standard only provides a most convenient "standard" to compare the value of goods, and thereby determine "fair, reasonable, conventional" exchange rates for arbitrary pairs of goods.  You can exchange "eggs" for "lumber" under a gold standard almost as easily as "eggs" for "gold" or vice versa.  You simply refer to the exchange rate of "eggs versus gold" and the exchange rate of "lumber versus gold" --- then divide to find the exchange rate of "eggs versus lumber".  NOBODY is required to "accept gold" or "pay with gold" or "save gold" or any such blatant nonsense.  True, exchanging your goods for gold... then later exchanging your gold for goods is quite convenient, and makes "saving in gold" the easiest (but rarely the most lucrative) form of saving.  But that's all personal choice.

-----

The fact is, fiat currency is overt and inherent fraud.  One human invests time, effort, skills and resources to create real, physical goods... and some scumbag bankster exchanges worthless fiat "credits" that cost him zero to create.  That is fraud.  That is theft.  That is the road to total overt global slavery.

Fri, 01/21/2011 - 10:34 | 893025 JohnF
JohnF's picture

What is money?

Only one real answer: Whatever fulfills the function of money.

This means that while any government can declare something to be money, this only works as long as it fulfills the function of money: a medium of exchange.

Hence back in the good old days of communism in Eastern Europe, money was cartons of western cigarettes, since everyone was willing to do what you wanted them to do for that medium of exchange. Need your car repaired by the weekend? Pay the bill with worthless Zlotnys, but make sure the mechanic gets 2 cartons now and another 3 when the car is delivered on time; need medicine for your daughter for that operation? Not unless you've got 6 cartons or, even better, a case of cigarettes to make it worth someone's time to make sure that those medicines are anything more than distilled water. The corrosive discounting of official money in the command economies helped lead to their collapse, as scarcity was not one of price, but of availability. Unless, of course, you had something that worked better than the official paper money: cigarettes.

Gold has been and will be used as money, but there is nothing inherently valuable about gold (there are some commodity industrial uses, as well as the fact that it is used extensively in jewelry) in and of itself: the real reason gold is attractive is that all other monies are being so poorly managed.

If sheer rarity was the solution, then we'd base a currency on unobtainium.

 

Sun, 01/23/2011 - 06:21 | 896887 Hephasteus
Hephasteus's picture

It's all semantics. We are on a gold standard. It's a fractional reserve unredeamable gold standard but all currencies rank and measure themselves realtive to price of gold in that currency.

It's just semantics. You're not even taught what is the real system we use right now. Why would you expect to be taught how the new system works which what they have in mind is simply a more abstracted layer of the system we have now.

Gold shipments can be hijacked. It's best to leave it in a vault but they are all such thieves what they say they have is bullcrap. Buy gold and silver just to kill the present system. What is in everybodys best interest is use a pure scrip system with all the non cheating measures we can muster. NO electronic funds, no credit cards, non of the digital dollars which cant or never will be secured.

Gold meets all the requirements of money. It's abundant but not too abundant. It's beyond durable. The only real way to get rid of it permanently is to hook up a massive electrolisis machine and melt it into the oceans. But it doesn't meet the needs of being something that everyone needs and everyone has some access too. It's entirely monopolized by central banks.

Mon, 01/31/2011 - 02:35 | 919497 No More Bubbles
No More Bubbles's picture

Blah blah blah,  People are the ones who are immoral (and evil).

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