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Why The Fourth Branch Of The US Government Needs To Be Abolished, And Why "Authority" Should Never Be Trusted
- Ben Bernanke
- Ben Bernanke
- Central Banks
- Christina Romer
- Council Of Economic Advisors
- Excess Reserves
- Federal Reserve
- fixed
- Lehman
- Market Crash
- Monetary Policy
- President Obama
- Purchasing Power
- Quantitative Easing
- Reality
- Recession
- recovery
- Reserve Currency
- Stagflation
- University of California
- White House
Yesterday we presented Dylan Grice's thoughts on why economists and their opinions should be summarily dismissed as nothing but mere noise on the steep downward slope of a series of failed "authoritarian" policy decisions, which seek to validate one false choice after another, by presenting a hypothetical and fallacious counter-outcome as a certain reality (just consider the "apocalypse" we would be living in if Goldman had failed: of course, there is no justification for this except for what Bernanke et al claim is the one true alternative reality based on nothing but their own conflicted interests), which does nothing but discredit the "science" of economics more and more with each passing day. Yet in the grand scheme of things economists are merely pawns in the hands of the landed elite: the financial system set only on perpetuating the status quo of capital and wealth reallocation from the lower classes onto itself (until there is eventually nothing left), and a government whose only prerogative is to usurp ever more control and authority, until the entire system is one of central planning in economics, social affairs, religion, and every aspect of people's daily lives, all the while pretending to operate under the guise of a democracy, which, at least in America, died long ago. Today, we present the observations of Bill Buckler from his Privateer report, which picks up where Grice left off and demonstrates why one must not only never rely on economists but on form of "authority" in general. Putting it all together is Buckler's close analysis at the glue that makes it all possible: the Federal Reserve, also known as the fourth branch of government, and the entity that provides the endless funding for all of the system's failed policies. As Buckler points out, any reversion to a system that follows the constitutional precepts of the founding fathers will need to do away with the Fed first and foremost, as "the issue is not the political will of the US government to go on spending beyond its means, it is the political will of the rest of the world to go on accepting the unworkable global system indefinitely. They will not do it." In other words, in the step leading up to the last and most important defection in the global prisoner's dilemma, it is up to the American people to take the necessary step to restore the systemic balance (which will happen regardless eventually, only in a far more violent fashion). Everything else that happens on a day to day basis is completely irrelevant.
From Bill Buckler's The Privateer report, Number 661.
NEVER RELY ON “AUTHORITIES”
On the evening of November 23, 1942, Adolf Hitler was deep in “consultation” with the chief of staff of the Luftwaffe (the German air force) on the possibility of supplying the surrounded German 6th army in Stalingrad by air. On hearing of this consultation, Reichsmarschall Goering, the head of the Luftwaffe, promptly contacted Hitler and assured him that the air force could maintain the 6th army for as long as necessary.
All of Goering’s officers on the spot near Stalingrad knew that this was absolutely impossible. So did Goering’s chief of staff. So did Goering. And so did Hitler. Goering had already been proven wrong a little over a year earlier when he insisted that his Luftwaffe could clear the way for an
invasion of Britain. That was not even considered. What WAS considered was that no matter how fanciful or how contradictory to the FACTS on the ground, a method had been found to prolong the illusion that the war could still be won. And besides, how would any of them know that it could not and would not work if they didn’t try it?
They did try it. It didn’t work. The fate of the 6th army in Stalingrad is history. So is the fate of the Nazi regime.
The March Of Folly:
The American historian Barbara Tuchman published a book with that title in 1984. She lists four kinds of what she calls “misgovernment”. There is misgovernment by tyranny or oppression, by excessive ambition, by incompetence or decadence or both, and finally by folly or perversity. The author concentrates on government policies afflicted by folly or perversity, a rich field of enquiry stretching back to the dawn of history. Mrs Tuchman makes the point that folly is “independent of era or locality, is timeless and universal ...and is unrelated to type of regime. Monarchy, oligarchy or democracy produce it equally.”
She has one further principle for the study of government folly. “...The policy in question should be that of a group, not an individual ruler, and should persist beyond any one political lifetime.” That brings us into the realm of political economy, more precisely the dogged clinging to the central role of government in the economy, and particularly in the financial system upon which the economy rests. That policy has been clung to for far more than a political lifetime. It has been clung to at the highest levels of government for almost a century.
The Fed’s March Of Folly:
This road has been taken ever since the Fed was created in 1913. Specifically, the “final frontier” was entered with the FOMC’s decision on August 10. It’s all downhill from there.
Politics and Economics:
The present global monetary system (on life support as it is) remains the one that was hammered out in Bretton Woods in 1944 with the US Dollar as the world’s SOLE reserve currency. As long as this remains the case, the follies of the US government will remain the most important in the world and the follies of their central bank - the Federal Reserve - will remain paramount. By Barbara Tuchman’s criteria, a folly worth examining must “persist beyond any one political lifetime”. In June this year, Senator Robert Byrd, the longest serving politician in US history, passed away at the age of 92. Senator Byrd entered the Congress in 1953. Bretton Woods was in 1944. The Fed was created in 1913.
The other point which needs to be made concerns what could be called the dynastic nature of the Fed. Mr Bernanke is the fourteenth Chairman since the creation of the Fed almost 97 years ago. That’s not many - over the same period there have been seventeen US Presidents. Here we get down to the divide between the political and the economic aspect of political governance.
The Politics Of It All:
There was a time when a president and his party could be and were voted out of office because the people preferred the policies offered by the opposition. That ended in the 1930s, when the “criteria” became which party could almost literally “buy” the majority of votes by directing the redistribution of funds where it would do them the most good. That became entrenched by the late 1960s. Since then, the “platforms” of the major contending parties have been all but indistinguishable. Most US elections have been decided either on the “lesser of two evils” principle or on disgust with the incumbents.
Both sides of US politics have been equally assiduous in their major task as they see it. That task is to safeguard and increase (as far as they are able) the involvement of government in as many aspects of the lives of the people as possible. That is why the euphemism for modern politicians, especially those in the US Congress, is “lawmakers”. It is only VERY recently that politicians from either party have given serious consideration to the problem of paying for it all or whether they CAN pay for it all. For most of the past century, they have not concerned themselves with that. That is what the Federal Reserve is for.
The Economics Of It All:
In essence, the Fed (like any central bank) is the “fourth arm of government”. The executive branch makes policy. The legislative branch translates it into legislation. The judicial branch is supposed to ensure that legislation is permissible under the Constitution - the law which GOVERNMENT must obey. Originally, the system was set up to ensure a division of power between the branches. A “government bank” or “central bank” was not deemed necessary because the powers of government were thought to be limited by the Constitution to the extent where “financing” these operations would not be necessary. They weren’t (except for the post Revolutionary and Civil War periods) for well over a century. But by the turn of the twentieth century, the US government, like so many governments before them, decided that their reach should extend beyond the borders of the nation they governed. This promised to be expensive.
The Fed was initially set up under the pretense that an institution was necessary to provide an “elastic currency” to meet the needs of business. An elastic currency was deemed necessary alright. But it wasn’t to meet the needs of business, it was to meet the needs of government. And that is what the Fed has been doing ever since. As the powers of government expanded and as the COST of government soared, the Fed was always there, the banker of last resort, the branch of government which would “pay” for whatever government chose to do. The government needs the Fed as a guaranteed buyer of its debt.
It is obvious to anyone who takes the time to EXAMINE the situation that the Fed is the fourth and specifically, the economic/financial branch of the US government. It should be equally obvious that this marriage of convenience has been progressively impoverishing the American people. Apparently, it isn’t.
When A Folly Comes Out Of The Closet:
For many decades, the “co-operation” between the US government with their Treasury requirements and the Fed has been taken for granted. Whole systems of “economics” (notably the one popularised by J.M. Keynes in the mid 1930s) have grown up around the practices of “financing” the ever increasing “needs” of government. The terms “inflation” and “deflation” have been moved from defining movements in the amount of money being created to movements in the prices influenced by this manipulation. A vast pile of books has been written and post-graduate university courses designed around the alleged difference between debt incurred by government and debt incurred by the dwindling “private sector”.
Through it all, the quality of the money has declined in lock step with the increase in the amount of money (of all descriptions) in circulation. There have been two defining moments in the entire process. The first came in 1933-34 when Americans were prohibited by law from owning Gold. The second came in 1971 when the final constraints on government fiscal discipline were removed as the final promise to redeem the US Dollar in Gold was jettisoned. On August 15, 1971, the folly came out of the closet. That lasted a decade, during which funded government debt rose by 150 percent. Then came a quarter century of “serial” debt bubbles which lasted until 2007. Over that period, government debt grew by 1000 percent. With the onset of the GFC in 2007 and the near death financial experience of 2008, the closet door opened again. And this time, in stark contrast to the end of the 1970s, it CANNOT be closed.
Shutting The Door On An Empty Room:
In the era of “stagflation” (the 1970s), there was actually an extensive debate about the nature of the money which was fuelling an obviously dysfunctional system. The main reason for this was that the concept of “risk” was still one which was current in investment markets. The steady increase of interest rates, which accelerated as the 1970s were coming to a close, was a contributing factor. So was the cost of living - which was accelerating along with interest rates. So was the “price” of Gold, which now had a “price” since it was no longer “fixed” to the US Dollar. As the 1970s ended, the price of Gold in US Dollars accelerated along with US interest rates. This was not and is not supposed to happen. High interest rates are said to be “bad” for Gold. They certainly weren’t in the last three years of the 1970s.
The door was slammed shut by Chairman Volcker in late 1979 when he took his hands off the Fed’s interest rate controlling mechanisms. US rates skyrocketed, “stagflation” turned into (deep) “recession”, Gold soared and then slumped. And, finally, the world was lured back into the paper US Dollar.
The US government had jettisoned the concept of “risk” as far as their borrowing “requirements” were concerned in the aftermath of the 1929 stock market crash. They did so just as the ensuing depression elevated risk aversion in the private US economy to a level it had never seen before and has not (yet) seen since. It took 50 years, the abandonment of Gold and an attempt to combine a welfare state with a war for the fear of “risk” to resurface - in the 1970s. It took interest rates which reflected that fear of risk in the MARKET to get it to subside. It did, in the early 1980s. Then came the era of serial credit “bubbles”.
Blowing The Door Off Its Hinges:
The Global Financial Crisis (GFC), and particularly the “authorities’” reaction to it, has done more than just open the door again to the money machinations which are built into the foundation of modern government. It has laid that entire mechanism bare for anyone to see. But look at what has happened during most of the three decades since the beginning of the “Reagan Bull” in 1982. Twenty-five years of recurrent market booms anaesthetised an entire generation. In the process, the obvious truths that savings must precede investment and that wealth is not a function of the creation of money were buried beneath an avalanche of transfer payments and “bull” (in BOTH senses of the word) markets.
It is hard to awaken from such a long period under the influence of “authorities”. These things take time.
The Mechanism Itself:
To illustrate how pervasive the mechanism is and how it has long since been taken for granted, only one fact is necessary. Since 1931, there have been a grand total of SIX financial years when the funded debt of the US Treasury did not increase. These were fiscal 1947, 1948, 1951, 1956, 1957 and 1960. The US federal government has not run a budget surplus for 50 years. Under the original theory concocted by the “authorities” and elevated to economic holy writ by Mr Keynes, governments can compensate for any slowdown in the economy by spending more than they tax. Then, when the magic bullet of government “stimulus” has done its work, they can pull in their horns and diminish their debt. Governments “can” do that, but the US government hasn’t actually done it for 50 years. The Clinton “surpluses” of the late 1990s are a myth, of course, concocted by applying the “surplus” generated by social security funds to the government’s bottom line. There are no social security “funds”, the entire pile is composed of non-marketable Treasury IOUs which can only be serviced and/or repaid by the productive capacity of this and future generations.
For many years, we here at The Privateer (and many others) have been explaining the mechanism by which the production of real wealth has progressively been taken over by the production of “purchasing power”. The onset of the GFC exposed these mechanisms to public scrutiny to an extent not seen since the 1970s, or before that, the 1930s. The GFC itself, especially in nations (such as the US) where its impact has been most sorely felt, has greatly increased two things so far. One is the ever growing unease and indignation of the public. The other is the lengths to which the “authorities” will go to keep the REAL reasons for the present malaise away from pubic view and, above all, from public understanding.
Now What?:
The first answer to that question was given on August 10 when the FOMC announced that the Fed would NOT be shrinking its balance sheet as it has promised to do ever since it massively expanded it almost two years ago. On top of that, the FOMC let it be known that the Fed would resuscitate its quantitative easing QE) program of directly monetising Treasury debt.
On August 27, Ben Bernanke expanded on the Fed’s future plans at his Fed symposium speech at Jackson Hole, Wyoming. Mr Bernanke began by startling his listeners, telling them that the Fed would do “all that it can” to rekindle confidence in the “mechanism” (financial system). His listeners, both inside and outside the conference room, had long since assumed that there is nothing that the Fed can’t do. The Fed’s “omnipotence” is a foundation stone in the entire edifice of trust in the “authorities”. Nothing would rock this more than a revelation that there ARE things the Fed can’t do.
To stave this off, Mr Bernanke listed three things that the Fed can still do. It can buy “more” long-term securities. It can reduce the interest rate it charges on excess reserves to get the banks to lend them instead of storing them with the Fed. And finally, it can “modify the Committee’s (the FOMCs) communication”. Let’s take the first two. When the FOMC announced that the Fed WAS going to buy more long-term securities on August 10, they admitted that the first foray into QE hadn’t worked. When Mr Bernanke talked about reducing rates charged on Fed reserves, he neglected to mention that existing rates have been at 0.25 percent ever since the Lehman scare of 2008.
The third future task for the Fed , “modifying communication”, is one known by “authorities” in all ages and times. Today, when they speak about doing it themselves they call it “public relations” or, less politely, “spin”. When they speak about other authorities doing it, they call it “propaganda”, or more impolitely “disinformation” or still more impolitely “lies”.
The Fed’s real message was delivered on September 1 by departing White House chief economist Christina Romer. She said that the US needed to find the “political will” for more economic stimulus.
The Only “Solution” Left?:
For months now, Nobel prize winning economists, eminent educators, individuals in charge of $US TRILLIONS of investment “capital”, and political “authorities” of all sizes, shapes and descriptions have been unanimous in one message. The “system” can be fixed easily. We have discovered that we didn’t print enough money. No problem. Just print more, preferably MUCH more!
Here’s how Christina Romer put it during her speech to the National Press Club: “The only sure-fire ways for policymakers to substantially increase aggregate demand in the short run are for the government to spend more and tax less. ...I desperately hope that policymakers on both sides of the aisle will find a way to finish the job of economic recovery”.
Ms Romer, one of the chief architects of President Obama’s 2009 stimulus package, has resigned her position as the chair of the President’s Council of Economic Advisors, effective on September 3. Once an “authority”, always an “authority” - she is returning to “academe” by returning to her old job as an economics professor at the University of California, Berkeley. While she was there, she was engaged in research on fiscal and monetary policy from the 1930s to the present. Mr Bernanke would approve.
The Political Will:
Yahoo in the US described the speech as a plea that the US find the “political will” for further stimulus. This is in itself very revealing indeed, especially given Ms Romer’s contention that the only way to “fix” the problem is for the US to “spend more and tax less”. Politically, this has been the only solution resorted to in the US for at least half a century. What is never mentioned by all those who so glibly push this solution to the problem is the reason why the US has been able to get away with it for so long.
To do so would risk moving the debate to the area where the “authorities” dare not go. That is the area of the nature of the global financial system and, even more fundamentally, the nature of the “money” which underpins it. When a government spends more and taxes less, they go ever more heavily into debt. For a “normal” government, this process can only continue until the obvious risk factor shows up in the interest rates they have to pay on their borrowings. At that point, they have no choice but to pull in their horns.
The US government is different because the US Dollar is the world’s reserve. Because it is the world’s reserve, it has a global demand as the underpinning for financial systems everywhere. Yes, it is true that non US central banks are holding increasing amounts of other currencies in their reserves. But the basic system as hammered out at Bretton Woods in 1944 has NOT been altered. The US Dollar remains the world’s only official reserve currency. That means that the US is the only country that can buy goods with debt paper created by their Treasury and payable in “money” created by their central bank.
You have likely read this before - in The Privateer and in many other places. No matter how many times it is repeated, this remains the most important FACT which is never discussed by “authorities”. The issue is not the political will of the US government to go on spending beyond its means, it is the political will of the rest of the world to go on accepting the unworkable global system indefinitely. They will not do it.
A Vested Interest In AUTHORITY:
From time immemorial, the “authorities” in charge of political and economic policy in a nation have clung to “remedies” that would not work - even though they KNEW they would not work. We started this essay with one example. There are countless more. Once you understand this, you will know that “authority” is NEVER to be trusted, no matter how many adhere to it or how long it seems to have “worked”. The only viable alternative to more authority is LESS authority, and therefore more freedom.
Today, no “authority” in the world wants to discuss that. Least of all the ones in the USA.
h/t Robert
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10-4 Hulk and Rocky!
Caviar is a real source of wisdom here in Zerohedgelandia!
Of course there is enough gold to serve as currency. What did FDR do in 1933? He revalued gold from $20/oz to $35/oz in order to fund his stimulus programs and make the amount of gold "match" the dollar value attached to those programs.
It is perfectly reasonable to believe that when the US dollar fails as the world's reserve currency (all previous fiat currencies have failed) that the free market will, if allowed to operate, adopt gold and perhaps silver as a currency based on its most outstanding fiduciary quality -- gold is an asset which is not simultaneously someone else's liability. Gold does not default.
Should markets demand sound money in the form of gold then the wealth of the world will be recalibrated in units of gold. That may, in fact, be happening right now.
Okay, so you've proved the how, but what about the WHY?
Why do people need to trade labor, for dollars that represent labor, for gold, for a sandwich?
What use does gold have in this equation?
Your wishing that gold will increase is not a reason to use gold as a currency.
"What use does gold have in this equation?"
What use do dollars have in that equation...?
"...wishing that gold will increase is not a reason to use gold as a currency."
The reason to use gold as a currency is that gold has no counter-party risk. Not sure why/how you have come to misunderstand the nature of money and currency... it's been explained to you - directly - a hundred times over on this board. You seem to have a problem with gold bugs, and this clouds your understanding of money/currency.
Trade gold for a sandwich? Sure, why not. Trade FRNs for a sandwich? Sure, why not.
That which will be traded/accepted as money or currency is not a function/decision of authorities... it is a function of the will (or confidence) of the marketplace. Markets WILL reject FRNs, sooner or later. FRNs are just another fiat fraud mechanism... the "Fourth Branch" article we are commenting on here explains this dynamic perfectly.
That argument is simplistic to the point of being wrong, Crockett. You might want to look at the Great Britain when you are thinking about gold revaluations during that period of time.
Agreed 100%.
Notice that he can't rebut my reply, so he merely junks it?
Junking is the last bastion of a desperate fool.
Johnny I didn't junk you. Just one more opportunity for you to admit that you were wrong.
Why do people need to trade labor, for dollars that represent labor, for gold, for a sandwich?
What use does gold have in this equation?
There is something called The Division of Labor. Folks have different skills and therefore produce different products and services. This is a good thing because each man does not have to produce all of this own supplies and he can trade to obtain them. But a system more efficient than batter can be developed to facilitate the flow of goods from the hands of the producer to the hands of consumers.
The best method for facilitating such exchanges is the use of money. Money has three qualities. Money serves as a medium of exchange, a store of value and a unit of account. Gold displays all these qualities of money. Paper money could display these qualities if those in charge of monetary policy would be capable of restraint in the creation of currency.
Take a look into the history of debased and failed fiat currencies. It's a long list and spans thousands of years. Then take a look at one of your FRNs and ask yourself, "This time, will things work out differently?"
So if money fills all the functions of money that gold fills, and gold does not prevent a currency from collapsing, what use is there to have a gold backed currency?
Can I not store value with dollars? Can I not buy a sandwich with dollars? Can I not account for transactions with FRNs?
Did the dollar decline from 1913 or didn't it?
Did gold prevent that decline?
What good does having a gold exchange rate set by the government do for the currency, besides keeping the prices of gold artificially low because of government controls?
gold does not prevent a currency from collapsing,
It is not gold's fault that bankers and governments default. Such defaults are perpetration of fraud upon those holding the currency in question. You might as well say that paper money is useless because somebody can hold you up at gunpoint.
Can I not store value with dollars?
Of course you can't. Have you listened to a word anyone here has said to you? You repeatedly misuse the US Dollar Index to show that the FRN is worth the same now as in 1987 but that is incorrect. The USDX only tracks the value of FRNs in comparison to the currencies of other nations. It does not measure the loss of purchasing power through inflation.
Did the dollar decline from 1913 or didn't it?
Did gold prevent that decline?
I answered that above. It's not gold's fault that bankers perpetrated fraud on note holders. It is the fault of the bankers themselves and people like you who say that such fraud is a good thing.
What good does having a gold exchange rate set by the government do for the currency,
It does no good at all. The superiority of price discovery through market action is as desirable for gold as it is for anything else. Let the market decide, not the government.
All you've done is fancy-up the wording for "you can't eat gold". The rebuttal is, and remains, the same.
Suggestion: Why don't you take up the counter argument and see where the exercise leads you. Kind of like moot court, or taking an assigned position on a debate team. That's why they do those things. It might do you some good to just jump the fence and argue the opponent's case.
Johnny,
You got junked 16 times -- hardly the work of one rebuttal.
It's quite obvious that people who aren't agreed with get junked here on ZH - whether they are making a valid point or not. So much for your "populist" sentiments. Reminds me of a quote from C.A. Bayly's Birth of the Modern World:
"It matters little that historians have shown that many of these popular revolts were not really led by the 'wretched of the earth,' and that the revolutionaries were often men who were embittered but relatively privileged."
So much for the populist desire to "let the people know what's happening" and "get people fired up." The moment someone disagrees even a little, you turn on them. That isn't exactly going to win hearts and minds - and even if there is a collapse, that attitude wouldn't make many of you good leader material, now would it?
Scratch a teaparty/gold-guns-collapse/libertarian and get someone who has something to lose. Quite frankly, it is a pretty tiresome line to continue to hear laments about a "Third World America" coming from a group privileged enough to participate in financial markets. You lost your money trading? That's still a lot better than most. It also makes you completely out of touch with what it is like to be truly desperate - even while claiming to be looking out for the "little guy."
So how does the ZHer obscure his embarrassment for being part of the privileged classes while [ironically] complaining about others with [more] privilege?
...By taking on the trappings of some fictional so-called anarchist who is not beholden to reality and bears no responsibility for his actions. Do you really think the fictional Tyler Durden cares about your trade strategies? I think not.
Junk count? That's groupthink in action, boys. Consider yourselves heroes.
We are on a GOLD STANDARD RIGHT NOW..Anybody can take there frn's at anytime you choose and trade it for Gold or Silver right now today....
Yes, I've made that argument before myself.
Yet, I can trade my dollars for marshmallows. Does that mean we're on a marshmallow standard?
A marshmallow is a commodity and is meant to be consumed. It is not a convenient nor durable way to store your labor/wealth. The fact that "you can't eat gold" is what makes it suitable for being a currency as well as a store of wealth. You KNOW this yet you continue to make the same arguments. I think there are some psychotropic drugs that could help you retain learning. If they don't help at least you'll have a good time. Check it out.
Well then why not use diamonds, for example?
Because you think it should be gold?
What's wrong with you, boy. We've been over and over this. (Take a serious look at that drug suggestion.)
Gold is divisible, try that with a diamond. Yeah, you could carry a bunch of different sizes but there is no standard that is easily used to determine quality without being an expert. Even though one can (and you certainly would) make the same argument about gold, it is too universally accepted to be fooling many folks.
(1) Value of material;
(2) Portability;
(3) Indestructibility;
(4) Homogeneity;
(5) Divisibility;
(6) Stability of value;
(7) Cognisability.
...and to that I would add that gold is considered a luxury not affordable by all.
The luxury aspect makes gold the "useless" commodity which is so often touted. In fact, that would be a favorable attribute. It is sought for its non-utility as jewelry.
Okay, so what about platinum, steel, silver, etc.
Also, if the currency was backed by gold, it's not like you'd need to carry different denominations of gold around, only different denominations of currency.
Last, but not least, the previous gold standard didn't stop the devaluation of the currency, so why would a new gold standard?
Tangible goods are (arguably) worth more than gold.
I'd rather have a sweet television than an ounce of gold, for example...
Platinum, steel, and silver have all been used as currency at one time or another. Platinum would undoubtably have been used more often were deposits of it more widespread (the first European reference to it was in the 1500's describing it's appearance in the sands on a riverbank in Mexico). Steel and silver have both been money, in this very country.
The problem such metals tend to run across is their lack of stability (ie oxidation) and their industrial applications (industrial use discourages stockpiling, and stockpiling is useful for price stabilization, as it reduces the fluctuation of supply to below noise levels).
Would you rather have a television today, or buy an ounce of gold that will buy you two televisions tomorrow? Price deflation is a wonderful thing. The productive capital that you provide to society allows you much greater purchasing power in the future, with very little risk. The only real risk is theft, which is assured under a fiat system (and goods can be stolen just as easily as money).
Dollars don't oxidize.
Go withdraw your life savings, pour gasoline on the little pieces of linen paper your bank gives you, and light them on fire, then come back and tell me that dollars don't oxidize.
Don't need gas. It burns fine anyway plus the cocaine on it acts as plenty of accelarant.
i heard there's cocaine on a lot of dollars. curious. didn't really think people still do cocaine. oh well.
It would explain why so many people are so in love with the dollar, and why they hate gold so much.
lol!
It would explain another fluctuating trend, too.
I heard the highest percentage of FRN having cocaine remnants is in DC!
Johnny, you realize they destroy "worn out" dollars, right? What if they didn't? What if you got stuck with the ones that started tearing in half or falling apart, what would their value be?
Definitely going in the ZH quote hall of fame!
You can't eat a television. I'm just sayin'....
What if it's an organic led?
Sorry RR, not true:
http://en.wikipedia.org/wiki/Michel_Lotito
Where do you get this shit? Google "eat television"?
You have a contrarian streak a mile wide. That's why I like you.
If the general consensus was that the sun had come up you'd argue the opposing view.
My kinda guy.
Yeah, natural causes. Right. His colon was chrome-plated and his asshole was the diameter of a fire hose. Planes that fly over his grave are prone to compass malfunction. Other than that his death was natural.
LMAO, I watched this fellow on TV years back and obviously it made quite an impression.
Why do you keep looking at the money supply when our problems dpn't come from there.
Gee, the money supply is currently at $8.5 trillion but the total credit markets are at $52 trillion.
Obviously constraining the money supply by backing it to the supply of Gold would have done nothing to prevent our debt bubble.
If you keep ignoring the way credit gets created and the role of credit and credit derivatives and its impact on the economy, you're obviously looking at the wrong side of the problem.
If I lend you 100$, I don't create any money. But I create debt.
For crissake, the whole goal of "financial innovation" was to expand credit far beyond what the money supply permitted. The Fed and its primary dealers control the money supply but has no way to control the shadow banking system and the HUUUGE credit derivatives market that expanded credit far beyond what anybody could have imagined..
Reverting back to gold standard won't change a thing as long as financial innovation and the shadow banking system will find ways to pump new bubbles by expanding credit orders of magnitude beyong the money supply.
MONETARISM IS LONG DEAD
When will you guys finally understand how the system works?
Rather than junking me, try to explain why the supply of money ($8.5 trillion) is only a tiny fraction of the overall supply of credit ($52 trillion)...
The Fed controls a tiny fraction of the supply of money which itself is a tiny fraction of the supply of credit. How do you want the Fed to control the supply of credit? It doesn't.
They can't make an argument. That's why they junk you.
no. people get 'junked' because the same argument has been put forward and rebutted . ad nausium.
and instead of the 'junked' person researching his argument and trying to understand what has been said. just comes back with the same response ,over and over. you can take a horse to water........
I still haven't heard a single reason why the dollar needs to be backed by gold.
What for?
It doesn't prevent the debasement of the dollar, and it puts the price of gold in a place where it will be manipulated by the government.
It doesn't help anybody, except for goldbugs that think their investment will increase.
It will make their investments decrease.
"....haven't heard...." are you fucking deaf
It's funny that you say that when this page is FILLED with arguments against you. You can't come up with real, logical arguments so you dismiss the arguments of others out of hand. This is the mark of an intellectual coward.
You can choose not to be a coward, Johnny Bravo, but thus far, you have allowed your ego to rule your actions, with one exception, which you are breaking in this very thread (ie that you would "leave the gold bugs alone").
Which arguments against me have I not answered?
Also, personal attacks hardly count as arguments.
Nobody has answered the question why gold needs to back the currency.
Nobody has said how gold would prevent the currency from being devalued.
Sorry if I miss your replies while I'm out having a life!
Right, I'm sure you're at a nightclub, posting from your iphone. Beats be rippin, and booty be callin', yo. It's 10:00 on a Sunday, and you're posting on ZH. Stop trying to pretend that you have something else to do.
It's awfully convenient to categorize dozens of responces as personal attacks, isn't it?
You are an intellectual coward, sir.
So you haven't read the personal attacks then? Or are you just denying that they exist, much like you deny the rest of the truth in my arguments?
That's funny. Every time I come on here and call uptrends in markets, every stupid bear makes wrong calls every time.
There's nothing cowardly about the way I make arguments. I reply to EVERY post somebody makes to me.
Just because I wasn't on the computer for several hours, doesn't mean that I didn't reply to anybody.
Who would go to a nightclub on a Sunday night anyway? Maybe fat old men that lost all their money investing until their wife left them, so they post on ZH.
Who would go to a nightclub anyway? Ewww.
Who would buy an iphone anyway? Ewww.
Lives involve more than nightclubs. They involve friends, family, and women.
The point is that you are being an ass claiming you "have a life" implying no-one else does anything but post on ZH. It is an immature ad hominem.
Funny, I thought you were going to stop trolling, yet here you are.
As for the personal attacks, yes there are a few, but they are in the minority. Probably 80+% of the people who reply to you offer valid arguments, which you either refuse to engage, or which you respond to with false facts, ad hominems, or nothing comments full of bravado, like the one above.
And tell me, exactly which friend or family member are you having all these adventures with at 10:00 on a Sunday night? You might claim to have a woman, but a woman hardly takes up a bunch of time on a Sunday night. Obviously you have time to reply, so I doubt if your woman is begging you to come to bed. Women don't really like immature boys like you for the most part.
Who kept the global megabanks alive and stopped the implosion of the shadow banking system and the collapse of that mountain of credit?
Whose policies on innovation and 'derivatives' were instrumental in ensuring zero regulation of the SBS thus enabling its current size? Whose interest rate policy is keeping a broken system gunning as fast as it still possibly can, ensuring that when it breaks the accompanying destruction will be all the greater?
There weren't any "policies" on financial innovation and derivatives.
The absence of policies and the dominant free market mantra of deregulation was what enabled the mountain of credit. Not monetary policy.
What we need is a system that controls debt, not one that controls the money supply and lets debt creation completely free.
In any case it's not by abandoning the Fed that credit will be controlled any better. We need a Fed and a Government who control the financial system, not a financial system who controls the government and a fed who refuses to control what is important.
I agree (except I think abandoning the Fed would be a positive move).
But you are incorrect - Greenspan (along with Summers and Rubin) was instrumental in making sure the CFTC did not regulate 'derivatives' (I'm using ''s because CDS, for example, aren't derivatives, but are somehow treated as such for the purposes of zero regulation).
On the subject of subprime, Greenspan described how innovation had enabled everyone to better manage risk (whilst talking up the benefits of adjustable rate mortgages!) and we've seen how that all turned out. On monetary policy, many commentators trace some of the blame for the current crisis to the record duration of 1% or 1.25% interest rates from 2001, and then of course we have the current ZIRP policy which is keeping the zombie banks staggering along.
That all said, I totally agree debt and credit insanity is the problem. I just think that, whilst there is a huge amount of blame to spread around, the Fed owns plenty of it. "[T]he dominant ["]free market["] mantra of deregulation" - that is Greenspan in a nutshell, no? What's changed with his successor? These people weren't just asleep at the switch - they lived that mantra with every breath.
Oh but I do blame the Fed. I blame them for their absence. Getting rid of the fed isn't going to solve that problem. And reverting to a gold standard won't have any sort of impact on the creation of credit.
NEVER going to get that, and really thats the basis for the argument for gold. Gold is a global liquid storage of wealth, not a medium of exchange. Gold is a currency that is a standard against fiat, just look at the exchange rate from fiats to gold. There is no way we could ever have a gold backed currency again in our present system of welfare states. So when someone says we need a gold backed currency, what that implies is we need a complete new system that does not include theft and welfare, but thats two separate arguements right? No. For a gold standard to function, the engine of wealth creation will once again actually require work to be performed, and a true free market. A complete system crash will be required but the way things are now, a gold standard will not happen. The system is bloated and out of control and will collapse under its own weight of debt, bringing currencies down with it.
Rather than junking me, try to explain why the supply of money ($8.5 trillion) is only a tiny fraction of the overall supply of credit ($52 trillion)...
The Fed controls a tiny fraction of the supply of money which itself is a tiny fraction of the supply of credit. How do you want the Fed to control the supply of credit? It doesn't.
A currency which is redeemable in gold puts the breaks on excessive monetary inflation. That's why Nixon closed the gold window in 1971. The French kept redeeming paper for gold at $35/oz. But the Fed was creating too many FRNs and gold became worth more than 35 fiat dollars per ounce. That's why Nixon defaulted. It wasn't gold's fault that Nixon defaulted. It was the fault of all the idiots who think that inflation is a virtue.
Additionally, US banks employ a 10% fractional reserve system. This means that a bank must keep 10% of the money they control in reserve. Most folks think this means that if a bank has deposits of $100 then they can lend out $90 and hold $10. But in reality a bank which has taken in $100 in deposits can then lend out up $1000. Yes, it's fuckin' magic. The kind of magic that always comes back to bite you in the ass.
That's how a $8.5T money supply can lead to $52T (or more) in available credit. All the monetary problems which are coming to a head are the direct result of the deliberate policies of the Federal Reserve and the US Treasury. Because there is no free market in money, we are all chained to this system of funny money and our livelihoods and savings are at risk.
Reality is worse than you think.
10% reserve ratio has long gone the way of the dodo. It's only an academic exercise for the gullible student.
Reserve ratio is 0 for non-demand (time-deposits) accounts.
From the horses mouth for demand (transactional) accounts:
http://www.federalreserve.gov/monetarypolicy/reservereq.htm
But, the nightly sweep program allows the banks evade the requirement for demand deposits, effectively making 0 reserve requirement for all accounts.
Discussions on the sweep program from the horse's mouth:
http://research.stlouisfed.org/aggreg/swdata.html
Bernanke wants to remove even that see-through veneer:
http://finance.yahoo.com/tech-ticker/bernanke-wants-to-eliminate-reserve...
They use every trick in the book. When those no longer work they come up with enough new tricks to fill a new book. This is foisted upon the public as being the work of economic genius.
Disgusting.
We do not live in a fractional reserve money system but in a credit money system !
In a fractional reserve system total money created equals reserves plus total credit created, where reserves are a small fraction of credit outstanding. So credit would be always smaller than the broad money supply.
Today we have total money created 8.5 trillion, if reserve requirements were 10% you'd have $850 billion in reserves and 7.65 trillion in total credit. If reserve requirements were 0, we would have 0 in reserves and 8.5 trillion in total credit created.
Reality is that we are now at $52 trillion in credit more than 6 times the amount of money created under fractional reserve banking.
When will you guys finally understand this ?
Fractional reserve banking explained :
example with 10% reserve requirement
Initial amount deposited : 1000$
Cash kept in reserve : 100$, loan 900$
new amount deposited : 1900$
Cash kept in reserve : 190$, credit created 1810$
etc...
after numerous itterations you get :
Total amount deposited (money created) = 10000$, cash kept in reserve = 1000$, credit created = 9000$
As one can see, in a fractional banking system, the total money created from the initial deposit is superior to the total credit created.
Reality is very, very different. That's because we don't operate in a fractional banking system any longer, but in a pure credit system.
"A currency which is redeemable in gold puts the breaks on excessive monetary inflation."
First, this is patently false, currency debasement has existed since currencies exist, for the last few thousand years. Currency debasement from gold stems from the fact that those who earn it hoard it so there is eventually not enough gold and the ruler is obliged to debase it. This is not a new problem but a thousands of year old problem.
Second, monetary inflation is what enabled the money supply to grow to $8.5 trillion, not what enabled credit to grow to 52 trillion. Fractional banking only affects the growth of the money supply, not that of the overall supply of credit. The money supply is a small fraction of that of credit. What enabled the growth of credit during the last 30 years was black and sholes and computer technology and over optimistic valuations, not fractional banking.
You don't even seem to understand how credit gets created in our modern system. Commercial banks and fractional banking only create a small fraction of the total credit supply. The shadow banking system does the rest, it has no money creating capacities but it does have immense credit creating capacities. The shadow banking system does not operate under any fractional banking.
In any case it is completely moronic to believe that getting rid of the fed and reverting to a gold standard is going to affect fractional banking and reserve requirements when fractional banking predates the creation of the fed and the abandonement of the gold standard.
If the fraud perpetrated by bankers and their allies in government when they inflated the money supply beyond the supply of gold which supposedly backed the currency means that any attempt at safeguarding wealth is impossible then you might as well go out in the street and give away all your money right now.
Criminal activity is not a reason to abandon safeguards, it is a reason to enhance safeguards.
Both fractional and full reserve banking predated the creation of the Federal Reserve. But today one has no choice but to use Federal Reserve Notes. If the Fed was abolished or if competing currencies were permitted to come into existence and circulate then individuals could chose which banks and which systems they trust. Free market competition consistently provides the most reliable products and services.
" If the Fed was abolished or if competing currencies were permitted to come into existence and circulate then individuals could chose which banks and which systems they trust."
For individuals to chose which bank to trust they need to understand and have made avalable all the information. First 99.9% of the population doesn't understand financial information. Second, information assymetry is so high that they won't get the information that counts.
Your system is completely irrealstic in today's world which is dominated by extremely complicated financial instruments. For crissake, not even Bernanke or Trichet understand it and you want the butcher around the corner to know who to trust?
Gee, look at the real world for a second, today the vast majority of the population think they can trust their bank and completely ignore the enormity of the problems that are looming on the financial system.
Also why do you keep talking of the problem of monetary inflation as if it's the central problem when monetary inflation and currency debasement from gold has existed since humans started trading gold, 5000 years ago?
Kings started debasing gold because gold was hoarded by those who earned it and soon enough there wasn't enough gold available to serve as means of exchange.
Aren't you hoarding gold? I am.
Gold is the best store of wealth there is, therefore it gets hoarded. That's why as a currency it's debasement is inherent.
Geebus, why is it so difficult to understand that any currency that would keep its value would get taken out of circulation by those who've earned it and therefore force its debasement?
Honest money and the value of saving for a rainy day are basic concepts which anyone can understand. The current system is made incomprehensible because that is the nature of any con game. The grifter can only benefit by confusing his prey. Witness the "shell game." It is the progenitor of the Federal Reserve system. The Federal Reserve con is more sophisticated, of course, as inflation creates the illusion that the "marks" have gained wealth when in fact they have lost wealth.
People are not stupid , however, they can be convinced to trust in systems which are inherently fradulent. But people can be alerted to such dangers and that's why I make the effort to respond to naysayers such as you. It's not for your benefit that I type these words but for the folks who come here looking for real answers to their problems.
No, the system wasn't rendered incomprehensible by anybody in particular. it became incomprehensible because it got taken over by tens of thousands of math wizzards and developped in an uncontrolled semi-anarchic way. The fed didn't create the shadow banking system, hedge funds, LBOs, the alphabet soup of credt derivatves and other weird financial instruments. This was the most unregulated venture that has ever existed, the fed ignored it and never understood nor took part in any of it.
For crissake all this mess is because of the absence of regulation of the shadow banking system and you want to do away with regulation of commercial banks now? All this based on your hypothetical irrealistic monetary system and your ridiculous assumption that all problems will be solved by the magical invisible hand of the free market. You are just going to ensure that the financial system controls the world even more.
If people can be convinced to trust in today's fraudulent banks, that will only get worse when you deregulate the commercial banking system.
Our misery comes from deregulation, and you want to deregulate even more because of your dogmatic axioms? The only thing that will thrive from more deregulation are the financial parasites. No thanks.
No thanks.
Your thanks or lack thereof is not required. I do not ask for your participation in my life. I demand my sovereign rights as an individual. I will stand or fall by my own actions.
I will say "no thanks" to you and your oh so humane regulation at the point of a gun. Why do you statists always insist that you must institute compassion by exercising a monoploy on violence? Why do you insist on the supremacy of your contrived system of so-called safety nets and then demand that others be compelled to live by rules which they find morally reprehensible and personally injurious?
If people are as corrupt as you claim then how can you believe that the regulators will be just? There is a class of people who seek to exercise control over their fellow men and that desire can be tempered in a free market where only merit can succeed in the long run. When you empower sociopaths with the tools of government you create a class of super criminals. And that's what we have today.
Don't tread on me. That's not a plea. It's a warning.
If you chose violence instead of rational discussion, you're a fanatic.
You chose to reply to "no thanks" and with your silly presuppositions about how I want to rule your life and with threats of violence. But I can return the same to you : you are the one who wants to rule my life with your deregulation that will only serve to give more power to the bankers. And you want to use guns, I'll be forced to use mine.
But you ignored my arguments which are only words because you have nothing to answer to them.
I'll ignore you in the future crockettalmanac. You're too dangerous.
People who are arguing over which side of a clad coin is counterfeit is fun to watch.
You both agree more than you disagree. Thanks to you both for your input and knowledge.
Rocky,
I stand for the right of the individual to live his own life by his own lights. There is no disparity between the knowledge of my own needs and desires and my own talents and goals. No "counterfeit" quality exists therein.
Just an illustration. Not meant to pass judgement on your views.
chrisina said: you are the one who wants to rule my life with your deregulation
Your charge that I am trying to rule your life through an absence of rules proves that you are quite insane.
The regulations for which you beg can only be enforced at the point of a gun by people who live to exercise power over people they do not know and for whom they have no concern. I have threatened no violence against you but I will reiterate my right to self defense against moochers and looters of all kinds.
I share with you the conviction that our current system of government and our financial system are fatally flawed and will eventually collapse. I share with you the conviction that Gold is freedom from this fatally flawed and waiting to collapse system.
I just don't share with you the conviction that a minimal federal government, sound money, free banking and free market principles will serve us, the American people, any better than the corrupt system we have now.
I have spent the last two years trying to understand what went wrong, why we have this mess. I have spent more than 8 hours a day reading, studying, listening and I have reached the conclusion that as long as people do not understand that we are not operating under a fiat based fractional banking system but under a pure credit system all their ideas will be wrong headed.
You should start by reading this blogpost:
http://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/
Read it carefully, it will open your mind and you will finally understand the difference between a credit money system and a fiat fractional banking system.
perhaps we're confusing deregulation with enforcing transparency.
i've seen this before. pure capitalism can work if veryone can see every transaction. otherwise, it's all an insider's game.
i think it's the best thing going because it acknowledges human nature, but what we have isn't anything like real capitalism, and therefore the arguments can get lost in that mire.
i just want to be free to be left alone... is that possible anymore?
Chrisina,
This was the most unregulated venture that has ever existed, the fed ignored it and never understood nor took part in any of it.
The FED chairman Greenspan totally dismissed Brooksley Born's warnings. He told the politicians that she didn't know what she was doing and didn't understand derivitives when she wanted to regulate the derivitives market 12 yrs. ago ( The banks and the FED pressured the politicians to take away her authority to implement regulation in which they were successful). Then LTCM blew up and the FED stepped in to help bail them out thru a consortium of banks, this goes against his theory of "the market will take care of itself" theory. Many examples of this kind of behind the scenes interference.
As far as regulation or deregulation, I think that much of the regulation we have is worthless and is full of loopholes, the good regulation isn't enforced because of the corrupt government agencies and politicians that let it go on even when they are aware of it.
You provided your own answer. Fractional reserve is forgery. Criminalize it.
Again you are confusing the creation of debt with that of money.
The money supply is 8.5 trillion, debt 52 trillion.
Financial innovation created debt. What enabled this was black and sholes (1973) and computer technology. None of this existed in the 19th century.
Btw fractional banking existed in the 19th century, way before the creation of the fed and the abandonement of the gold standard.
So why on earth do you think getting rid of the fed and reverting to a gold standard is going to impact fractional banking or the creation of debt?
What level of fractional lending existed in the 19th century? I'm going to hazard a guess that it was much less than we have today. The credit bubble was facilitated by fiat paper currency. The primary dealers are among the first recipients of newly created money.
When people know they can go to a bank and demand gold (or silver, or whatever works best) for their paper notes, the banks are going to be much less inclined to keep a low reserve ratio.
On top of this, it might be reasonable to create some rules either defining fractional reserve lending as fraud, or walling it off as inherently risky gambling that is not part of depository banking.
There's been tremendous bubbles in the past and they haven't been facilitaded by fiat currencies. Look up the tulip bubble for an example.
There were no reserve requirements prior to 1863. Transaction costs to redeem notes into specie were very high and there was little information available on the solvency of the issuer which confined the use of an indvidual bank's notes to a small geographical area and population (the equivallent of a small US town today). There was also no electronic money back then, no computers, no international trade and finance...
A full reserve banking system with fixed money supply would necessarily result in deflation of the circulating money supply as a growing number of people who earned money would chose to hoard money rather than invest it. Eventually it would collapse just as much as our monetary system will eventually collapse.
A full reserve banking system with fixed money supply would necessarily result in deflation of the circulating money supply as a growing number of people who earned money would chose to hoard money rather than invest it.
If people chose to save money rather than spend it most will put it into a bank in order to obtain security and interest payments. The banks then lend the money. Prudent bankers will lend only to those whose ventures offer a high probability of success. This benefits the borrower who grows his business, the depositor who gains security and interest payments and bankers who earn their just reward. Borrowers who request loans for ventures with a low probability of success do not obtain funding and the malinvestments which lead to bubbles and recessions are nipped in the bud.
This system worked more often than not during the course of the 19th century and not only powered the Industrial Revolution but also led to "The Miracle of Compound Interest" by which owners, managers and workers were able to bank their savings, earn interest and see the value of their money increase rather than decrease in the marginally deflationary environment which spanned that era.
With the founding of the Federal Reserve in 1913, The Miracle of Compound Interest which had liberated generations of American savers was replaced by The Rat Race with turned the average man and eventual his wife as well into wage slaves.
Who is supposed to be the overseer of that system?
There is no overseer of the system. The debt creating system is a machine , a "matrix" dominated by a network of millions of agents with computers running financial algorithms distributed all over the world. The fed doesn't control any of this.
Why do you think abandoning the fed and reverting to a gold standard is going to control that system any better? The debt creating matrix will just keep running unhinged as it has been for the last 30 years...
A gold currency with a floating, free market "price" is the only fiduciary instrument which is not simultaneously some one else's liability. Those who chose to hold their wealth in free market gold (not attached to a "dollar price" by fiat) will not be effected by the tricks and traps of a shadow banking system.
Agreed. Gold has always been the only long tem store of wealth, nothing new here.
But I don't see your point.
btw, I've been hoarding Gold for the last ten years, so you don't need to convince me about the value of Gold as a store of wealth.
I see a "gold standard" and a "gold currency" as two different things. That's why I think you guys should agree on terminology first, and debate later.
I say no to a gold or bi-metallic standard in which the "price" of either gold or silver is artifically linked to denominations of a paper currency or to a ratio between the metals themselves. I ask for free market money. This is achievable through the abolition of legal tender laws and taxes on "profits" from gold and silver as these metals serve not as investments but as means to protect wealth from the ravages of inflation.
You're right that the Fed doesn't control any of it, but it damn well should! It eagerly chose not to, and when the SBS was shown to be not so separate after all (when SIVs were having to be put back on balance sheets, for example), it kept alive the banks that are up to their eyeballs in that system so as not to have to deal with all the problems it has maniacally facilitated.
I'm fairly sure we agree to a large extent, but it is a little like saying BP shouldn't be held culpable for problems in the Gulf because it's the oil that hurts the fishies.
Agreed. And I blame both the Fed and BP for not having taken the measures they should have.
But saying that getting rid of the Fed or BP is going to solve the problems resulting from their inaction is what I'm opposed to.
True - but got to start somewhere! The Fed weren't just absent, they were deeply deeply complicit.
You're entirely correct that just abolishing the Fed won't immediately lead to happy days, though. (And I personally stay out of the gold discussions, other than occasionally asking a naive question, because I'm at the very start of any learning curve in that regard. Moreover, I can't afford any gold anyway, so even if it is the answer, I'm screwed either way!)
Happy Labor Day! (If you're in the US, of course.)
You can afford silver! Go for it.
Always tend to see the value in your posts, Rocky, but that one just smacked me in the face & pulled me up short!
I am, officially, an idiot (not that there was a vast amount of unofficial doubt). Thank you! (Although you have probably just contributed to the propagation of semi-official idiots amongst the new-new-not-just-washing-machine-style normal if this ever does go full madmaxtard...)
PS Thanks again: I mean that! JFC: it's one thing not to see the wood for the trees; quite another to believe there are no such things as 'trees' because you happen not to be next to a redwood!
Argentum, bitchez! Hi-ho Silver, awaaaay!
To be more specific: $1 American Silver Eagles. A premium, yes, but that will disappear over time. Don't buy local if there is a sales tax involved. Don't pay high shipping from out of state dealers. I buy a few at a time and just put two rolls together and socked 'em away. There are some eBay dealers who get this stuff from bulk buys and sell at no reserve. I hesitate to post user IDs for fear of somebody thinking I have some an interest in their business, which I do not. Lots of 5 or 10 Eagles are easy to find. Just look at the feedback for all you need to know about the dealer's reputation. These sellers don't get away with cheating or shilling or giving bad service without it showing up in feedback.
No, it will not be "unhinged". Gold (or whatever other real asset the backs the currency) is the hinge.
Depositors at banks today...they can't get anything but dollars back from their banks. Most of these are FDIC insured. The FDIC is bankrupt, but still backed by the 'full faith and credit' of the US Treasury. Banks that fail - the depositors are reimbursed with dollars that come from...ultimately, the Fed, as they are buying Treasury bonds now.
Are the taxpayers going to pay all this debt back?
How does a gold standard impose debt on taxpayers? It doesn't. The fiat dollar DOES.
And yes, there is an overseer of sorts. The central banks exercise great influence over the actions of the financial industry, just by the nature of faulty monetary policy. The dollar has been debased, what, 97% since 1913? And that is directly related to the existence and actions of the Fed.
You still don't seem to understand that monetary inflation is not the only cause, and by far not the dominant cause of debt inflation. You can have debt inflation without any monetary inflation : if I lend you 100$ no money is created but debt is.
Look at the numbers :
between 1980 and 2008, the era of the greatest credit bubble mankind has ever seen, money supply expanded by a factor 5, credit by a factor 12.
I can assure you that if credit has expanded in line with money supply, ie a factor 5 instead of 12, we wouldn't be having any of the problems we are having today.
Moreover when Gold backs a currency and that currency isn't being debased for a long time, ie keeps its value, a growing number of economic agents prefer to take it out of circulation, hoard it, rather than invest it. Soon there is not enough currency in circulation to serve as a means of exchange and the issuer of the currency is forced to debase it.
The problem of monetary inflation is not a new problem, it's a thousands of years old problem. It doesn't date from 1913. Just look at the historical record on inflation. And it certainly isn't the main cause of our mega credit bubble as I've shown you above.
Notice that Johnny Bravo is not joining in this debate. There are good reasons why.
The mere premises of the debate are antithetical to his dogma. He defers to golfing pants instead... see immediately below.
If a clown removes his makeup, he's just some average guy. But with the greasepaint, rubber nose, wig and awful golfing clothes, he's the center of attention; even if it's just some kid's birthday party.
Golfing clothes are nice.
I like to wear plaid pants.
When you finally understand all this you will look back in utter embarrassment at the fool you are making of yourself. Sad.
It couldn't be as embarrassing as spelling your avatar name wrong.
Besides, plaid pants look awesome and they look cool while I'm crushing a 300 yard drive.
Suggestion: Why don't you take up the counter argument and see where the exercise leads you. Kind of like moot court, or taking an assigned position on a debate team. That's why they do those things. It might do you some good to just jump the fence and argue the opponent's case.
Bravo, you are a hoot!
Thanks for noticing. It's hard being the man.
And that's why you choose to be the boy.
He is a hoot. Full of fight too. But dead wrong...
That's why I am willing to slow down and help him rather than the pure insult route.
Good luck with that...
madras golf panted man turns the heck out of me. you go boy, stand your groud. huge ass fire on gold hill. can you see the smoke, JB?
a waste of FRN's
Being able to buy gold from your local bullion dealer doesn't mean that we are on a gold standard. Does being able to buy a hamburger with FRNs put us on a burger standard?
When the issued "credit note" is redeemable for something, FROM THE ISSUER, that means that the issuer is held to account for his promise to pay.
When the Arabs send the United Stares barrels of oil, the United States "pay" the Arabs with a paper note of credit that, under any normal transaction, legally and morally imposes an obligation to settle the account, with tangible goods or property of equal value.
The settlement of the debt is when the United States is brought to book. What are you going to settle with when the Arabs demand settlement. They hold approximately $1 trillion in US credit Notes. The US owes the world $13.5 trillion. With what will it settle?
Nixon abandoned any intention by the United States to pay for its imports via settlement in gold, in 1971. He thumbed his nose at the rest of the world and turned America into a house of thieves or Whimpy Burgers, (I will gladly pay you Tuesday for a hamburger today) refusing settlement of debt in gold, or in anything for that matter, only promising the claimant more US dollars, IOUs.
That is not a gold standard, that is theft.
Which results in a thriving black market. Whenever "something" is banned, entrepreneurs will emerge. For every action, there is an equal.....? What one resists, persists?
it means the big players are finally on the move.
tick tick tick tick
Johnny Bravo
I'm not seeing the mad rush to whever it is that started issueing Gold and Silver Dinars as currency.
Proves the dedication to Gold as currency.
The dinar isn't exactly a major currency.
See "fiat" and "reserve currency" for your answers to the question implied.
Reserve currency - the dollar. It's not backed by gold. It has maintained parity with other currencies since the mid to late 1980's.
It is backed by the labor in the United States and the United States military.
When it was backed by gold previously, it did not stop the debasement of the currency.
Johnny Bravo
Not the point. It's like the Americans who participated in the Spanish civil war, or the Mexican revolution. If you TRULY believe in something you support it with all your heart.
Too many of us get away with lipservice and hollow statements.
Actions will always speak louder than words.
The people who believe in the necessity of gold-backed currency are a very minute minority.
We've already seen that having a gold backed currency will not prevent the devaluation of said currency.
All it does is increase the value of gold that you get for the currency, which already happens.
In fact, a gold backed currency would do more to HURT gold's price than currently.
If the currency was backed by gold, people would have a reason to manipulate the price down even more than if it was a freely exchanged commodity, like it is now.
a proper gold standard keeps gold as a freely exchanged commodity. any other 'gold standard' is just market manipulation
So what is the necessity of backing currency with gold if:
1. It won't prevent the devaluation of the currency
2. It will ensure that the gold price is manipulated lower?
Wow. You've convinced me. I'm selling all mine tomorrow.
Thanks for saving me, Johnny.
If I send you all my money will you invest it in the market for me?
You do realize that points 1 and 2 contradict each other, right?
What's it like in your head? How do you keep track of all that doublethink? Oh, you don't. You just say whatever you can think of and hope it makes you look good.
The only way the currency would be devalued is if the nature of gold somehow changed. As if gold somehow became 'less goldlike'. This is assuming the currency was tied to a set amount of gold (like a 1/2 oz note, or something).
If banks are required to redeem notes with gold...how will they manipulate the price lower?
And this is not even taking into account the existence of competing metals or other materials that may be introduced.
Despite any problems, a metal-backed currency is always going to be more robust (and less damaging to citizens' purchasing power) than central-bank-issued fiat notes.
hey everyone..look its Johhny Shithead..where ya been boy......jerkin in the corner waitin for golds demise...brainless moron that you are...now go hide under the bed
Look, it's fat, stupid, fuck ZEITGEIST with nothing relevant to say, once again!
I got plenty to say shit head...youre a mutant Fed Loving piece of shit..the quicker we get rid of scum like you ..the better...you should be TARRED AND FEATHERED..thats what we did to traitors back then...and it would be fitting now...Howz that for something to say...you piece of nothing...
I would love to meet you in a dark alley, buddy.
dont worry...I will find you. in that dark alley....that is where you will be living ...keep up your Keyensian crap...I will bring you left over scraps from the table...fools fool..
I sure hope so!
I'll get some of the fat off your back and feed it to my dog!
Take him to the tower at once!!
"youre a mutant Fed Loving piece of shit"
lmao
Guillotines, bitchez!!
You're a poser.
I was the first person to spell bitchez with a Z on this site, to make fun of the ignorant people who parrot ignorant statements like "Gold bitches!"
It's a barb at the ignorance of the people that say stupid things like _____ bitches.
Of course, I wouldn't expect more from the site with more groupthink than any other investing site!
And the funny thing? The groupthink is consistently wrong. It's hilarious.
Of course, I wouldn't expect more from the site with more groupthink than any other investing site!
And the funny thing? The groupthink is consistently wrong. It's hilarious.
There are more intelligent, independent minded folks here than anyplace else I've visited on the net. There is no one poster with whom I agree 100% of the time. Lots of the folks I agree with on sound money are my opposition in foreign policy threads, especially those concerning Palestine.
The "group think" you see is the mass revulsion to your hit and run troll attacks. Today you are being a bit more mature and engaging in conversation to some degree, but I have little doubt that you will soon be back to making strafing runs on the "Morning Gold Fix" threads.
you are a numb nut johnO
Better to keep one's mouth shut and be thought a fool, than to open it and remove all doubt. :)
Come on, Zeit. The insults don't help Johnny figure it out.
Johnny aint never gonna figure it out, cause he doesnt want to.
He is a plant, a bug and a pain in the mental orbit.
He is here to disrupt and does a damn good job of it.
Just dont answer the maggot, hang him out to dry. I am disgusted by him, BP and our government.
And you're here to go "GOLD BITCHEZ" and not know an MF thing about trading.
Still haven't heard you say nice call for me predicting the uptrend last Thursday.
If you went short on the market based on your call, how much did you lose?
The same amount you lost before you came here to talk about conspiracy theories all day?
Figure what out? That you bears missed the greatest rally in history, and you'll still be holding onto your gold coins that you paid 1300 bucks for when gold finally tanks?
LOL. I already knew all that.
So if everybody suddenly wanted to trade with gold, they aren't allowed to just print more. Instead, the rates would have to go way, way up. You might get a few micrograms.
You can keep telling people there is not enough, but you'll just put a little haste in their accumulation.
Anyhow, there is has never been a time when everybody had some gold. There's never been that much. Always rare. So what? That's part of what gives it value. If there were plenty of gold for every person on this planet, then it wouldn't make for a good currency anyway.
Currencies are backed by labor and production, not gold.
I don't see a good argument for using gold, aside from it being rare.
Why do you even need an intermediary?
I trade my labor for dollars, which represents labor, for gold, for a sandwich?
Why do you need gold in that exchange?
You have unwittingly described Gresham's Law. (Or half-wittedly perhaps.)
http://en.wikipedia.org/wiki/Gresham%27s_law
Rocky, Johny Bravo et al,
A real example of Gresham's Law:
Six of my high school classmates and I went on a long weekend retreat up in the mountains. With not much to do and plenty of time, we decided to play friendly poker game with about two hundred dollars in total.
Soon enough two of us have broken the other four. In order to keep the game going, we started issuing little sheets of paper with our signatures. $10 denominations.
Two days later, the two of us who had won all the actual dollars, had put them away and continued playing with these IOU's and the IOU's had grown to thousands of dollars. Mind you that the risk taking had exploded, as you knew that you could create more IOU's.
Now the weekend came to an end and trying to cash out the IOU's was of course out of the question.
All the better money had disappeared in the pockets. The IOU's were being used as the fiat currency in the weekend poker microcosm.
How difficult is that concept?
BTW: You don't use PM's to trade. You sell them incrementally as needed and only when needed for the fiat currency in fad which you use to buy what you need for the week or the month depending on how bad things are.
It didn't stop the money from being printed before the gold standard ended!
Holding Federal Reserve Notes does not prevent thieves or embezzlers from taking your cash, therefore you cash is worthless according to your own criteria.
Just because someone can steal something doesn't mean that thing is worthless. In fact, the reason people try to defraud you and steal your assets is because they are valuable.
Sweetheart, here is the deal. You make the money by working. It has value X. You save the money. Your money is worth X - % more currency injected into the economy. You are aware that the dollar does not currently buy what it used to. You work, you buy gold, and at least, over time, the value of what you could get when you earned the dollars, buys you roughly the same things. Store of value. You don't need gold to buy a sandwich. But you will do better if you want to save for something bigger than a sandwich.
You get a lot of shit here. I give you some of it. What is heartbreaking is that the scam of stealing from you by stealing from the value of your dollar, without your vote, permission, etc. is being done to you and us. We are all having our "labor" stolen from us through this insidious theft. That dollar is supposed to help us store value. It does not. You are hurt by this too. People telling you to buy some gold are trying to protect you from being exploited. You seem to us like a lost lamb who does not want to believe in the evil that just is a fact of life.
Peace Johnny Bravo
Very well put, MsCreant.
JB, you can't go wrong by taking advice from a nice looking lady who has a gun in one hand and cigarette in the other!
We hold Gold because we want it. It lasts and holds its value.
She said Peace to you! I say the same.
...
I am still looking at your trade, the VXX, maybe will pull that trigger soon.
I can understand the argument about using a store of value against inflation.
I think that there are better ways to store value against inflation, and that's all fine. We can disagree on that. You're free to make the choice that you choose.
I think that making money on FAZ and VXX is more productive than storing my money in gold. My returns are arguably higher. Whatever, because that isn't the argument here.
First, did a gold standard ever stop the devaluation of the dollar before 1971 or 1973 or whatever year Nixon eliminated the gold standard?
Not at all.
Second, there's no valid argument for using it as a currency, aside from that it is a commodity with a store of wealth.
That could be accomplished in a plethora of ways.
You could back the dollar with diamonds, for example. It'd be the same thing.
So why gold?
We've already established that backing the dollar with gold does not stop the devaluation of the dollar.
Any number of commodities could achieve the same purpose as gold (like diamonds.)
I just don't see the valid argument for backing a currency with gold, as opposed to anything else.
I agree re not worthwhile to back currency with Gold.
Gold is the wealth preserver that humanity has chosen for over 5000 years. Gold works well as such a preserver, diamonds and marshmallows do not.
I hold nearly 7% in Gold because I know that part of what I own will do just fine.
...
Now, if I could ever master this trading shi'ite, SRS and FAZ worked out pretty bad for me. Maybe the day comes soon when I can get some of that back with VXX.
If you've had bad luck with SRS and FAZ, be careful with VXX as it trades pretty much the same way! VXX is just another way to effectively short the markets, as it goes up when the VIX goes up, which is typically when markets are going down.
I think that we see probably 17ish on VXX before it becomes a viable buy, but even then you want to keep vigilant!
I do not think most gold bugs would suggest backing the dollar with anything. Let it go. And while you're saying good bye, also give a fair well to the idea that we need to trade into something backed by something else. Just stick with the something else.
That's the fundamental argument among the "gold to 54000" crowd.
"If the dollar was backed by gold again, gold would go to 54000 an ounce."
So, gold bugs do support the idea.
Actually, it's more the other way around. By pegging the dollar to gold with a new backing at say 2000, the rise to 54000 could be stopped, depending on a lot of things, but would still be more likely to prevent 54000 than no backing. But that would mean massive deflation instead of QE, so it ain't gonna happen, and that's why gold has returned with silver at her side.
What, so you'd advocate getting rid of the free market in the gold trade?
The new backing to gold won't be at 2000. It'd be at the current market value (probably less than that, even, since they'd manipulate it), which isn't anywhere near 2000.
What we have here is a failure to communicate.
I'm drawing on historical precedence in this country. We've already been here, done this, to some degree. The last time, gold was bumped up, not down, for the new peg. No, I'm not for it happening again, nor confiscation, but it's not really in the cards this time around anyway, I don't think. Everyone wants the royal flush, good and evil, so we'll probably get it.
Many of us think gold and silver will increase their value as fiat currencies go down. It's not rocket science. The arguments have been presented at this site many times, sometimes well, and sometimes poorly. If you're not persuaded, that's fine. Time will tell. It is tiresome for people on either side of the argument to say the other side is stupid or worthy of ridicule. Of course there is adolescent quality of entertainment, but not more to recommend it.
I didn't call anybody stupid or worthy of ridicule.
Except for that Zeitgeist.
I thought people were being rude to you, JB. Teasing is fine, but some people forget their manners.