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Guest Post: The Unadulterated Gold Standard Part 3

Tyler Durden's picture





 

Authored by Keith Weiner,

In Part I , we looked at the period prior to and during the time of what we now call the Classical Gold Standard.  It should be underscored that it worked pretty darned well.  Under this standard, the United States produced more wealth at a faster pace than any other country before, or since.  There were problems; such as laws to fix prices, and regulations to force banks to buy government bonds, but they were not an essential property of the gold standard.

In Part II , we went through the era of heavy-handed intrusion by governments all over the world, central planning by central banks, and some of the destructive consequences of their actions including the destabilized interest rate, foreign exchange rates, the Triffin dilemma with an irredeemable paper reserve currency, and the inevitable gold default by the US government which occurred in 1971.

Part III is longer and more technical, as we consider the key features of the unadulterated gold standard.  It could be briefly stated as a free market in money, credit, interest, discount, and banking.  Another way of saying it is that there would be no confusion of money (i.e. gold) and credit (i.e. paper).  Both play their role, and neither is banished from the monetary system.

There would be no central bank with its “experts” to dictate the rate of interest and no “lender of last resort”.  There would be no Securities Act, no deposit insurance, no armies of banking regulators, and definitely no bailouts or “too big to fail banks”.  The government would have little role in the monetary system, save to catch criminals and enforce contracts.

As mentioned in Part I, people would enjoy the right to own gold coins, or deposit them in a bank if they wish.  We propose the radical idea that the government should have no more involvement in specifying the contents of the gold coin than it does specifying the contents of the software that runs a web server.  And this is for the same reason: the market is far better at determining what people need and far better at adapting to changing needs.

In 1792, metallurgy was primitive.  To accommodate 18th century gold refiners, the purity of the gold coin was set at around 90% pure gold (interestingly the Half Eagle had a slightly different purity than the Eagle though exactly half the pure gold content).  Today, much higher purities can easily be produced, along with much smaller coins (see http://keithweiner.posterous.com/pieces-of-50).  We also have plastic sleeves today, to eliminate wear and tear on pure gold coins, which are quite soft.

If the government had fixed a mandatory computer standard in the early 1980’s (some governments considered it at the time), we would still be using floppy disks, we would not have folders, and most of us would not be using any kind of computer at all, as they were not user friendly.  When something is fixed in law, it is no longer possible to innovate.  Instead, companies lobby the government for changes in the law to benefit them at the expense of everyone else.  No good ever comes of this.

We propose the radical idea that one should not need permission to walk down the street, to open a bank, or to engage in any other activity.  Without banking permits, licenses, charters, and franchises, the door is not open to the game played by many states in the 19th century.

“To operate a bank in our state, you must use some of your depositors’ funds to buy the bonds sold by our state.  In return, we will protect you from competition by not allowing out-of-state banks to operate here.”

Most banks felt that was a good trade-off, at least until they collapsed due to risk concentration and defaults on state government bonds.

State and federal government bonds are an important issue.  We will leave the question of whether and when government borrowing is appropriate to a discussion of fiscal policy.  There is an important monetary policy that must be addressed.  Government bonds must not be treated as money.  They must not become the base of the monetary system (as they are today).  If a bank wants to buy a bond, including a government bond, that is a decision that should be made by the bank’s management.

An important and related principle is that bonds (private or government) must not be “paid off” by the issuance of new bonds!  Legitimate credit is obtained to finance a productive project.  The financing should match the reasonable estimate of the useful life of the project, and the full cost must be amortized over this life.  If the project continues to generate returns after it is amortized, there is little downside in such a conservative estimate (though it obviously makes the investor case less attractive).

On the other hand, if the plant bought by the bond is all used up before the bond is paid off, then the entrepreneur made a grave error: he did not adequately deduct depreciation from his cash flows and now he is stuck with a remaining debt but no cash flow with which to pay it off.  Issuing another bond to pay off the first just extends the time of reckoning, and makes it worse.  Fully paying debt before incurring more debt enforces a kind of integrity that is almost impossible to imagine today.

With few very limited and special exceptions, a bank should never borrow short and lend long.  This is when a bank lends a demand deposit, or similarly lends a time deposit for longer than its duration.  A bank should scrupulously match its assets to its liabilities.  If a bank wants to buy stocks, real estate, or tulips, it should not be forcibly prevented, even though these are bad assets with which to back deposits.  The same applies to duration mismatch.

Banks must use their best judgment in making investment decisions.  However, the job of monetary scientists is to bellow from the rooftops that borrowing short to lend long will inevitably collapse, like all pyramid schemes.

There should be no price-fixing laws.  Just as the price of a bushel of wheat or a laptop computer needs to be set in the market, so should the price of silver and the price of credit.  If the market chooses to employ silver as money in addition to gold, then the price of silver must be free to move with the needs of the markets.  It was the attempt to fix the price, starting in 1792 that caused many of the early problems.  While “de jure” the US was on a bimetallic standard, we noted in Part I that “de facto” it was on a silver standard.  Undervalued gold was either hoarded or exported.  After 1834, silver was undervalued and the situation reversed.  Worse yet, each time the price-fixing regime was altered, there was an enormous transfer of wealth from one class of people to another.

Similarly, if the market chooses to adopt rough diamonds, copper, or “bitcoins” then there should be no law and no regulation to prevent it (though we do not expect any of these things to be monetized) and no law or regulation to fix their prices either.

If a bank takes deposits and issues paper notes, then those notes are subject to the constant due diligence and validation of everyone in the market to whom they are offered.  If a spread opens up between Bank A’s one-ounce silver note and the one-ounce silver coin (i.e. the note trades at a discount to the coin) then the market is trying to say something.

What if an electrical circuit keeps blowing its fuse?  It is dangerous to replace the fuse with a copper penny.  It masks the problem temporarily, and encourages you to plug in more electrical appliances, until the circuit overheats and set the house on fire.  It is similar with a government-set price of paper credit.

A market price for notes and bills is the right idea.  Free participants in the markets can choose between keeping their gold coin at home (hoarding) vs. lending their gold coin to a bank (saving).  It is important to realize that credit begins with the saver, and it must be voluntary, like everything else in a free market.  People have a need to extend credit as explained below, but they will not do so if they do not trust the creditworthiness of the bank.

Before banking, the only way to plan for retirement was to directly convert 5% or 10% of one’s weekly income into wealth by hoarding salt or silver.  Banking makes it much more efficient, because one can indirectly exchange income for wealth while one is working.  Later, one can exchange the wealth for income.  This way, the wealth works for the saver his whole life, and there is no danger of “outliving one’s wealth”, if one spends only the interest.  In contrast, if one is spending one’s capital by dishoarding, one could run out.

No discussion on banking would be complete without addressing the issue of fractional reserves.  Many fundamental misunderstandings exist in this area, including the belief that banks “create money”.  Savers extend credit to the banks who then extend credit to businesses.  The banks can no more be said to be creating money than an electrical wire can be said to be creating energy.

Another error is the idea that two or more people own the same gold coin at the same time.  When one puts gold on deposit, one gives up ownership of the gold.  The depositor does not own the gold any longer.  He owns a credit instrument, a piece of paper with a promise to pay in the future.  So long as the bank does not mismatch the duration of this deposit with the duration of the asset it buys, there is no conflict.

If people want to vault their gold only, perhaps with some payment transfer mechanism, there would be such a warehousing service offered in the market.  But this is not banking.  It’s just vaulting, and most people prefer the convenience of fungibility.  Who wants the problems of a particular vault location and a delay to transfer it elsewhere?  And who wants a negative yield on money just sitting there?

A related error is the claim, often repeated on the Internet, is that a bank takes 1,000 ounces in deposit and then lends 10,000 out.  Poof!  Money has been created—and to add insult to injury, the banks charge interest!  The error here is that of confusing the result of a market process (of many actors) with a single bank action.  If Joe deposits 1,000 ounces of gold, the bank will lend not 10,000 ounces but 900 ounces (assuming a 10% reserve ratio).

Mary the borrower may spend the money to build a new factory.  Jim the contractor who builds it may deposit the 900 ounces in a bank.  The bank may then lend 810 ounces, and so on.  This process works if and only if each borrower spends 100% of the money and if the vendors who earned their money deposit 100% of it, in a time deposit.  Otherwise, the credit (this is credit, not money) simply does not multiply as Rothbard asserts.

This view of money multiplication does not consider time as a variable.  Gold  payable on demand is not the same as gold payable in 30 years.  It will not trade the same in the markets.  The 30-year time deposit or bond will pay interest, have a wide bid-ask spread, and therefore not be accepted in trade for goods or services.

This process involving the decisions of innumerable actors in the free market may have a result that is 10x credit expansion.  But one cannot make a shortcut, presume that it will happen, and then assert that the banks are “swindling.”

If one confuses credit (paper) with money (gold), and one believes that inflation is an “increase in the money supply” then one is opposed to any credit expansion and hence any banking.  Without realizing it, one finds oneself advocating for the stagnation of the medieval village, with a blacksmith, cobbler, cooper, and group of subsistence farmers.  Anything larger than a family workshop requires credit.

Credit and credit expansion is a process that has a natural brake in the gold standard when people are free to deposit or withdraw their gold coin.  Each depositor must be satisfied with the return he is getting in exchange for the risk and lack of liquidity for the duration.  If the depositor is unhappy with the bank’s (or bond market’s) offer, he can withdraw his gold.

This trade-off between hoarding the gold coin and depositing it in the bank sets the floor under the rate of interest.  Every depositor has his threshold.  If the rate falls (or credit risk rises) sufficiently, and enough depositors at the margin withdraw their gold, then the banking system is deprived of deposits, which drives down the price of the bond which forces the rate of interest up.  This is one half of the mechanism that acts to keep the rate of interest stable.

The ceiling above the interest rate is set by the marginal business.  No business can borrow at a rate higher than its rate of profit.  If the rate ticks above this, the marginal business is the first to buy back its outstanding bonds and sell capital stock (or at least not sell a bond to expand).  Ultimately, the marginal businessman may liquidate and put his money into the bonds of a more productive enterprise.

A stable interest rate is vitally important.  If the rate of interest rises, it is like a wrecking ball swinging into defenseless buildings.  As noted above, each uptick forces marginal businesses to close their operations.  If the rise is protracted, it could really cause the affected country’s industry to be hollowed out.  On the other hand, if the rate falls, the wrecking ball swings to the other side of the street.  The ruins on the first side are not rebuilt.  But now, capital is destroyed through a different and very pernicious process: the burden of each dollar of (existing) debt rises at the same time that the lower rate encourages more borrowing.  From 1947 to 1981, the US was afflicted with the rising interest rate disorder.  From 1981 until present, the second stage of the disease has plagued us.

Today, under the paper standard, the rate of interest is volatile.  The need to hedge interest rate risks (and foreign exchange rate risk, something else that does not exist under the gold standard) is the main reason for the massive derivatives market.  In this market for derivatives, which is estimated to be approaching 1 quadrillion dollars (one thousand trillion or one million billion), market participants including businesses and governments seek to buy financial instruments to protect them against adverse changes.  Those who sell such instruments need to hedge as well.  Derivatives are an endless circle of futures, options on futures, options on options, “swaptions”, etc.

The risk cannot be hedged, but it does lead to a small group of large and highly co-dependant banks, who each sell one another exotic derivative products.  Each deems itself perfectly hedged, and yet the system becomes ever more fragile and susceptible to “black swans”.

These big banks are deemed “too big to fail.”  And the label is accurate.  The monetary system would not survive the collapse of JP Morgan, for example.  A default by JPM on tens or perhaps a few hundred trillion of dollars of liabilities would cause many other banks, insurers, pensions, annuities, and employers to become insolvent.  Consequently, second-worst problem is that the government and the central bank will always provide bailouts when necessary.  This, of course, is called “moral hazard” because it encourages JPM management to take ever more risk in pursuit of profits.  Gains belong to JPM, but losses go to the public.

There is something even worse.  Central planners must increasingly plan around the portfolios of these banks.  Any policy that would cause them big losses is non-viable because it would risk a cascade of failures through the financial system, as one “domino” topples another.  This is one reason why the rate of interest keeps falling.  The banks (and the central bank) are “all in” buying long-duration bonds, and if the interest rate started moving up they would all be insolvent.  Also, they are borrowing short to lend long so the central bank accommodates their endless need to “roll” their liabilities when due and give them the benefit of a lower interest payment.

The problems of the irredeemable dollar system are intractable.  Halfway measures, such as proposed by Robert Zoelick of the Bank for International Settlements that the central banks “watch” the gold price will not do.  Ill-considered notions such as turning the IMF into the issuer of a new irredeemable currency won’t work.  Well-meaning gestures such as a gold “backed” currency (price fixing?) might have worked in another era, but with the secular decline in trust, why shouldn’t people just redeem their paper for gold?  One cannot reverse cause and effect, trust and credit.  And that’s what a paper note is based on: trust.

The world needs the unadulterated gold standard, as outlined in this paper, Part III of a series.

In Part IV, we will look at one other key characteristic of the Unadulterated Gold Standard: The Real Bill…

 


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Fri, 12/21/2012 - 20:57 | Link to Comment TheSilverJournal
TheSilverJournal's picture

The world doesn't need a gold standard. The last thing the world needs is putting the monetary system in the hands of central planners who think they know what the world needs. Capitalism and free markets work best.

Just as there's a seperation of church and state, there should be a seperation of bank and state. The ONLY thing the state should be doing with money is coining it, or penalizing counterfeiters.

Fri, 12/21/2012 - 20:59 | Link to Comment trav777
trav777's picture

gold standard is a dumb idea.  There's no reason gold should get a Real Bill and coal shouldn't, or any other real thing.  Let Real Bills be what are traded as paper

Fri, 12/21/2012 - 21:14 | Link to Comment SAT 800
SAT 800's picture

my goodness you get confused, easily.

Sat, 12/22/2012 - 00:47 | Link to Comment Boris Alatovkrap
Boris Alatovkrap's picture

Better is vodka standard. If is fail, so what, drink and be happiness!

Sat, 12/22/2012 - 04:35 | Link to Comment Yen Cross
Yen Cross's picture

You and your Vodka. What a lame excuse for a liberal you are? You loft loner! At least Trav has some nuts, you giant labia!

Sun, 12/23/2012 - 00:08 | Link to Comment goldfish1
goldfish1's picture
'I gather not all the bars belong to us': Queen's solid gold quip about bullion sell-off
  • Comment said to George Osborne at Cabinet meeting the Queen attended
  • It was in reference to Gordon Brown selling half the country's gold reserves
  • He sold them for £2billion in 1999 when price of gold was at a 20-year low

http://www.dailymail.co.uk/news/article-2252245/I-gather-bars-belong-Que...

Sun, 12/23/2012 - 07:50 | Link to Comment TwoShortPlanks
TwoShortPlanks's picture

I've been buying physical for a small group of buyers over the past few years, you know the deal, BTFD (Physical) by racing out there with cash in hand before the traders bounce it while these guys/girls are at work. Well, very recently I was approached by two entities, one from Sri Lanka and the other the USA. They were looking to buy with long term secure storage in a third separate country. The Sri Lankan buyer was after at least 10,000oz per month ongoing (obvious reason); the USA was three trial buys followed by a one-off 3,000kg buy from a very specific seller. I did intros for the Sri Lankan deal and walked away, but the second deal, because of the origin of the product, I decided to step well away from. Looks like the dirty Gold is being sucked into the vacuum; we're cavitating.

Recommend you listen to the following two (amazing) podcast interviews with Andrew Maguire on KWN.

Part I: http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/12/22_Andrew_Maguire.html
Part II: http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/12/23_Andrew_Maguire__Part_II.html

Fri, 12/28/2012 - 14:06 | Link to Comment Boris Alatovkrap
Boris Alatovkrap's picture

Why is to think Boris is liberal!? Boris has nuts is make Yen Cross to be jell-o™

Sat, 12/22/2012 - 04:32 | Link to Comment Yen Cross
Yen Cross's picture

You're just plain retarded! My goodness, do you teach kindergarten? What exactly do you have to offer in a financially redeeming way?  Beat it!

Sat, 12/22/2012 - 02:24 | Link to Comment Yen Cross
Yen Cross's picture

 You might be right.  The silver (xag) standard works for me. Regarding "Truth in Faith" vs natural resources/  Remember Fukushima?

 Arnie Gunderson ate you for lunch..      I wish the Skipper ate all the libtards.

Sat, 12/22/2012 - 02:25 | Link to Comment Yen Cross
Yen Cross's picture

Hey fuck head! Yea you!  I gave you a green arrow earlier/ fuck off!

Sat, 12/22/2012 - 19:03 | Link to Comment Banjo
Banjo's picture

Try putting $1000 of coal or oil in your pocket. Or how to store $100,000 of coal for 50 years (once mined of course)

Sun, 12/23/2012 - 13:00 | Link to Comment dlmaniac
dlmaniac's picture

What the world needs is a form of hard money that cannot be created outta thin air. That way you force people to earn it so cheaters cannot just pop it outta thin air and then abuse it to create collapses everywhere. Hard money genuinely flows into the hands of productive people as productive people produce things that people are willing to pay for. Once in productive hand that money tends to be well spent to create legitimate growth.

Fri, 12/21/2012 - 21:11 | Link to Comment SAT 800
SAT 800's picture

People like you are very discouraging to people like the author; and myself; who actually know what we're talking about. It's difficult to tell if you can't read, or you just can't think. A Gold Standard is the only thing you have ever heard mentioned to you that is a free market; and does NOT involve central planners. That;s the essence of the whole idea. How did you mange to mis-understand this?

Fri, 12/21/2012 - 21:44 | Link to Comment BlackSea
BlackSea's picture

The gold standard was flawed from the beginning and only worked when governments passed laws stopping redemption on specie.

The gold standard needed repeated government intervention during each and every crisis period in order to stay alive. Eventually it was done away with as unworkable.

That does not mean that gold will not have a major role to play in the future monetary system, but it will be as a reserve asset only, not as currency. Think of it as the new floating gold standard.

Sat, 12/22/2012 - 00:23 | Link to Comment AUD
AUD's picture

The gold standard...... only worked when governments passed laws stopping redemption on specie.

And that's about the dumbest fucking thing that anyone has ever posted on ZH in the couple of years I've been a reader.

Sat, 12/22/2012 - 21:19 | Link to Comment StychoKiller
StychoKiller's picture

Get thee to skool:

"The Creature From Jekyll Island, a Second Look at the Federal System", 5th Ed., G. Edward Griffin, ISBN:  978-0-912986-45-6

Fri, 12/21/2012 - 21:46 | Link to Comment TheSilverJournal
TheSilverJournal's picture

How do you feel about silver? Or would you like to centrally plan gold as the must-use money?

Fri, 12/21/2012 - 22:33 | Link to Comment Bindar Dundat
Bindar Dundat's picture

This Silverjournal guy is as dumb as an old tennis shoe.  Troll maybe?

Fri, 12/21/2012 - 22:50 | Link to Comment TheSilverJournal
TheSilverJournal's picture

Nice personal attack without even presenting an idea. Move along.

Sat, 12/22/2012 - 21:21 | Link to Comment StychoKiller
StychoKiller's picture

Silver is gradually being consumed via industrial usage(s).  Poof, there goes yer munny.

Of course, this means that the $/(Ag Toz) should be perpetually rising.

Sat, 12/22/2012 - 10:13 | Link to Comment Sean7k
Sean7k's picture

Did you read the article? Or are you so intent on giving your opinion, you wallow in ignorance. The author pointedly asserts there must be a free market in money. 

Sat, 12/22/2012 - 13:34 | Link to Comment TheSilverJournal
TheSilverJournal's picture

The author also pointedly asserts a gold standard. Which is it?

Sat, 12/22/2012 - 14:01 | Link to Comment Sean7k
Sean7k's picture

Both. You have a gold standard, not determined by government with other commodities and or bank currencies competing as money. A gold standard doesn't mean other commodities cannot eclipse its' position as silver often did in the 1800's. It is the free functioning of these competing currencies that make sure gold is not manipulated.

Sat, 12/22/2012 - 14:40 | Link to Comment TheSilverJournal
TheSilverJournal's picture

That all sounds good if that is truly the case the author is presenting. He then should be calling it "free banking" and not a "gold standard." Names matter. Ideas matter. Most consider the Bretton Woods System being on the gold standard, which is very dangerous.

Sat, 12/22/2012 - 20:12 | Link to Comment James
Sat, 12/22/2012 - 21:23 | Link to Comment StychoKiller
StychoKiller's picture

Gold serves the same purpose as an Intertial Frame of Reference.  All else is using rubber measuring implements to determine prices.

Fri, 12/21/2012 - 22:27 | Link to Comment ball-and-chain
ball-and-chain's picture

Eventually, gold is going to really break out.

There's no getting around it.

You might see it climb to more than 5,000 dollars an ounce.

But that could be years down the line.

If the powers-that-be have the skills to keep Japan afloat for the past two decades, then they are certainly good at their jobs.

No denying that. 

However, how long can you keep fooling the markets?  That's the real question.

http://www.angrysinner.blogspot.kr/2012/12/yesterday-i-didnt-drive-jim-t...

 

Fri, 12/21/2012 - 22:51 | Link to Comment TheSilverJournal
TheSilverJournal's picture

I expect gold to hit at least $10K, but silver will outperform gold by at least 5X over the next few years.

Sat, 12/22/2012 - 00:20 | Link to Comment JeffB
JeffB's picture

True dat. The government should just get out of "the money business" altogether and let the individuals and the free market determine what will be used as money.

Prof. George Selgin had an interesting book on the history of coinage. Private minters' coins were preferred over the government issued ones.

While not a full treatment, here's one article he wrote:

mises.org/daily/3168/Get-Government-Out-of-Coin-Manufacture

another:

http://mises.org/daily/3072/A-Ramble-Round-Old-Birmingham

A video on the privatization of money:

http://mises.org/media/4318/The-Private-Supply-of-Money

Murray Rothbard on private coinage:

http://mises.org/money/2s7.asp

Audio version:

https://mises.org/media/2712/Private-Coinage

Rothbard:

III. Government Meddling With Money
6. Summary: Government and Coinage

http://mises.org/money/3s6.asp

 

Sat, 12/22/2012 - 10:43 | Link to Comment rg
rg's picture

Rep. Ron Paul sponsored Selgin's Congressional lecture on Why Was the Federal Reserve Created? Selgin expounds on the banking issues in the latter 19th century that led to the creation of the FED.

Selgin's talk with EconTalk host Russ Roberts about free banking with historical examples.

Sat, 12/22/2012 - 16:52 | Link to Comment boogerbently
boogerbently's picture

Find "separation of church and state" in the Constitution.

It is the ongoing separation of "church" from "state" that has spawned the NEED for separation of bank and state.

Sat, 12/22/2012 - 16:52 | Link to Comment Doña K
Doña K's picture

You just need competing currencies no matter what they are.

Fri, 12/21/2012 - 20:58 | Link to Comment knukles
knukles's picture

Mary looks out her kitchen window and sees that a mole has practically destroyed the back lawn, so she tells her husband, Paddy, to go out and kill it and to show no mercy. After ten minutes, Paddy comes back into the house with an evil grin on his face.

"So," says Mary, "did you drown the feckin' mole then?"

"Nah," says Paddy, "much more cruel than that. I buried the little fecker alive." 

Fri, 12/21/2012 - 20:59 | Link to Comment BlackSea
BlackSea's picture

Wow, so many fantasies in one post...

One would need a huge police state to enforce all the "don't"s in here.

Not too mention obvious business killers as : "sorry, we can't lend today, regardless of how good your project sounds because we have no coins" or depositors not getting their money back on bank failure even when initially the bank was very prudent in lending (see oil financing during 80s, after 20+ years of risk-free )

Conclusion: fantasy, not real world. You need a reserve used in international settlement that is not currency, is finite, and floats in currency terms. So gold will be that, and currency will be whatever. Currency it's not for saving, reserves are.

Fri, 12/21/2012 - 21:17 | Link to Comment SAT 800
SAT 800's picture

Sir; the gold standard has been tried in the real world and it works perfectly. Your fantasies about understanding economics are understandable; human egoism is universal and universally delusional.

Fri, 12/21/2012 - 21:36 | Link to Comment BlackSea
BlackSea's picture

Sir,

With all due respect, it was tried and it failed. Because that which is lent is devalued. And using gold as the government's currency inevitably leads to abuse of the gold's role as store of value. Not to mention saving(soon to be called hoarding) in gold when gold is currency removes currency from the market and creates a liquidity squeeze that no government has or ever will tolerate.

Let gold be a wealth asset, break the good derivatives paper market but don't shackle it again as currency.

Sat, 12/22/2012 - 05:22 | Link to Comment zhandax
zhandax's picture

sorry, we can't lend today, regardless of how good your project sounds because we have no coins

Edit:  That opening had me so worked up, I failed to read your last two sentences.  If you are in favor of real-asset backed reserves, we can agree.  But re-read the article.  There was credit paper used to facilitate trade in the 1800's.  It had it's flaws (and most of them, greedy-banker induced), but it helped generate the most radically prosperous economy the world had seen to date.

Sat, 12/22/2012 - 04:52 | Link to Comment Yen Cross
Yen Cross's picture

How do you sleep at night? 16.3 Trillion in debt. 5 trillion spent in 4 years/ You're delusional!

Sat, 12/22/2012 - 05:06 | Link to Comment AnAnonymous
AnAnonymous's picture

How do you sleep at night?
__________________________

'Americans' solved this issue. All kinds of drugs to be taken to sleep well.

Sat, 12/22/2012 - 05:16 | Link to Comment zhandax
zhandax's picture

New meds, AnAnonymous?

Sat, 12/22/2012 - 13:58 | Link to Comment akak
akak's picture

No, he's just been making more frequent visits to the People's Liberation Opium Parlor and Internet Cafe.

Sat, 12/22/2012 - 10:33 | Link to Comment Sean7k
Sean7k's picture

I wish people would read before commenting. This article clearly states: no government involvement whatsoever. Actually, it was government involvement that allowed banks to forego specie redemption while requiring debts be paid in specie that caused problems with a gold standard. It was monarch's diluting the composition of coins or shaving them. It was government determining value that caused problems.

The gold standard  has done quite well- much better than the current system of fiat debasement. Therefore, why defend the undefendable, when a better alternative is available? 

The reason you change its' status is the effects it has on government spending and war. It sharply reduces both. Not to mention the criminality of bankers and traders. 

The only time a good idea has been want for funding has been the abuse of state power at the behest of a competitor. 

 

Sat, 12/22/2012 - 17:06 | Link to Comment TheSilverJournal
TheSilverJournal's picture

Yes, central planners love to counterfeit in order to gain from the inflation tax.

Why not then call this system the "no government involvement whatsoever" system instead of the "unadultered gold standard," since the rules outlining the system really have nothing to do with gold except that it allows the free market to work and the free market will choose gold as a main component of the monetary system? A better name than "gold standard" would be "the unadultered gold, silver, and platinum standard." And an even better name for this system would be "free banking."

Sat, 12/22/2012 - 19:03 | Link to Comment Sean7k
Sean7k's picture

Probably because that is what an "unadulterated" gold standard is. It is not influenced by government or a central banking system.  I try not to get hung up on the semantics and look at the components to the system. 

I don't know why he wants to emphasize gold so much, probably because it has been used historically, personally I would just like to see legal tender laws eliminated. 

Sat, 12/22/2012 - 19:49 | Link to Comment TheSilverJournal
TheSilverJournal's picture

Me too. The author only drops a couple sentences in the entire article that an unadultered gold standard = free banking, but he's right on track. The inflation tax is the single most destructive force to productivity, and therefore humanity, and I would really enjoy living in a place without government sanctioned siphoning of wealth through counterfeiting ponzi schemes.

Sat, 12/22/2012 - 21:10 | Link to Comment Silversinner
Silversinner's picture

Gold (not the gold standard) worked for a thousand years

in the Byzantine empire,case closed.

 

Fri, 12/28/2012 - 01:33 | Link to Comment Ctrl_P
Ctrl_P's picture

Not too mention obvious business killers as : "sorry, we can't lend today, regardless of how good your project sounds because we have no coins"

 

And we lent it out to all those economics students for their PhD's that we wont get paid back because they are all working min wage at McDonald's.

 

There fixed it for you.

Fri, 12/21/2012 - 22:21 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

I think FOFOA's idea is better.  Just unshackle the roles of gold and fiat$.  Gold needs fiat$.  Spend currency.  Save in gold.  Gold is best thought of as pure wealth, a store of value.  As it has few other uses, yet people want it, it is good as, or better than, anything else (land, etc.) for holding wealth.  FOFOA explains (at length though) this far better than a Bearing with a hole in the middle where a brain would normally be...

fofoa.blogspot.com

No to a gold standard!

Let a thousand currencies compete! (TM)

Fri, 12/21/2012 - 23:53 | Link to Comment JeffB
JeffB's picture

I don't think gold need "fiat", or "money" created out of thin air. The free markets in the past, however, did have a role for paper notes issued by banks that could be redeemed for gold or silver or whatever the parties freely agreed to.

 

 

Sun, 12/23/2012 - 12:36 | Link to Comment dlmaniac
dlmaniac's picture

"Gold needs FIAT"??!! BWHAHAHAHAHAHAHAHA.  Absolutely, 100%, slam-dunk, ISO9000-certified banker propaganda, no doubt whatsoever.

It's bankers that need FIAT which is why their propaganda minions go around spreading this Freegold nonsense that dictates people to transact in bankers' FIAT, which makes it an obvoius scam. 

Sun, 12/23/2012 - 15:29 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

dlmaniac wrote:

 

"It's bankers that need FIAT which is why their propaganda minions go around spreading this Freegold nonsense"

Reference or link please.

Sat, 12/22/2012 - 01:23 | Link to Comment MurderNeverWasLove
MurderNeverWasLove's picture

Freegold, bitchez!  Fiat is just numbers in our head.  Gold takes care of itself fine, and can rightly be called wealth.  Gold is hard money for savers.  Credit/fiat is soft money for currency/accounting/credit/debt.  By forcing savers and borrowers to try to both find a home in fiat land will always set them at odds unnecessarily.  Let hard money be hard and soft money be the currency.

I am maybe 60% through with FOFOA site, but recently read the Aristotle/Another/FOA Hall-of-Fame posts.  

The two "Moneyness" posts are my current favorites.   I say 60%, because now I'm trying to get through the comments.  whew!

Sun, 12/23/2012 - 12:29 | Link to Comment dlmaniac
dlmaniac's picture

Freegold is a paper scam designed to let bankers keep on enslaving the world. FOFOA folks are either banker shills or fools suffering from FIAT Stockholm Syndrome.

It matters not if you save in a different medium. As long as you are forced to transact in bankers' phony paper only you are under their control for, unlike the average folks who have to work for that paper, bankers can simply print the paper and then steal from the public with it as they do today.

Freegold offers no cure for banker theft which is the root cause of current crisis. It merely builds a mirage as if the problem would be solved to divert gullible people's attention away.

Sun, 12/23/2012 - 15:30 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

dlmaniac:

"Freegold is a paper scam designed to let bankers keep on enslaving the world. FOFOA folks are either banker shills or fools suffering from FIAT Stockholm Syndrome."

Reference(s) please if you have one or more.

Fri, 12/21/2012 - 21:05 | Link to Comment MachineMan
MachineMan's picture

Forget gold and silver, I am buying Kryptonite. 

Fri, 12/21/2012 - 21:52 | Link to Comment Cheesy Bastard
Cheesy Bastard's picture

I tried that, but every time I get near that stuff I can't fly, and am no longer bullet proof.  Well, unless I bring a bottle of tequila.

Fri, 12/21/2012 - 22:46 | Link to Comment bobert
bobert's picture

Green arrow for the tequila drinker!

Fri, 12/21/2012 - 21:07 | Link to Comment nestle
nestle's picture

When muppets cry fault and whine, it means time to get long!!

Fri, 12/21/2012 - 21:22 | Link to Comment Debugas
Debugas's picture

the problem with hard currencies like gold is that rich people (those who control resources and manufacturing capacities) horde all the money and leave ordinary people (who control no resources and or manufacturing capacity) without money. The latter then have to shift to some form of soft money (fiat govenrment issued paper, or even city council issued local city-wide currencies etc)

we are off gold standard for a reason and the reason is uneven distribution of control over manufacturing capacity

Fri, 12/21/2012 - 21:30 | Link to Comment tictawk
tictawk's picture

The REAL problem that I see is that the TRILLIONS in FIAT DEBT would have gold backing if the dollar was backed by gold.  The FIRST thing that needs to happen is a debt collapse.  Unpayable debt is wiped off the books.  It is only after this process that the dollar can backed by gold at a reasonable rate.  Without a collapse, trillions in bad fiat debt will be converted to a hard currency debt.  Clearly a hard currency debt will be harder to payoff and result in defaults.  The Fed has enabled the proliferation of fiat debt mostly created by the govt.  Defaults and liquidation will have to be part of the cleansing process. 

Fri, 12/21/2012 - 21:44 | Link to Comment Debugas
Debugas's picture

completely agree that most of the debt has to be written off before we even try to go onto gold standard. But writing-off debt is not enough. What i was sayig is that to go onto gold standard we would also need to redistribute wealth (control over resources and manufacturing) more evenly and also redesign taxation system (so that it takes off of the rich and gives money for new startups)

Sat, 12/22/2012 - 10:39 | Link to Comment Sean7k
Sean7k's picture

Redistribution of wealth never works. Please read some history. The roles of lender and debtor are well detailed for the last 5000 years. You cannot make a society of economic equals. Unless you want totalitarian government, inefficient economic production and a paucity of production. 

Fri, 12/21/2012 - 22:52 | Link to Comment bobert
bobert's picture

Perhaps this (debt default) is why the POTUS can go golfing in Hawaii while we overspend at a pace of $150 B per month.

Dust off your bible and open it to Ezekiel 20:29 to see the origin of his last name.

I don't think the man has a clue as to how he's being used.

Sat, 12/22/2012 - 05:05 | Link to Comment zhandax
zhandax's picture

Before you can go on to any 'improved' standard, you will need to break up the corporate megaliths which have completely corrupted our economy, our courts, and our congress.

Sat, 12/22/2012 - 21:31 | Link to Comment StychoKiller
StychoKiller's picture

Hmm, so you're saying finances are becoming a more level playing field without any frame of reference?  Do unicorns poop out skittles on yer planet?

Sat, 12/22/2012 - 00:08 | Link to Comment Yen Cross
Yen Cross's picture

 I read ' Scarletts Web letter in grammar school. (pernicious & secular) 

Sat, 12/22/2012 - 14:53 | Link to Comment RockyRacoon
RockyRacoon's picture

Did you mean Charlotte's Web?

I can't find a reference to the other.

Sat, 12/22/2012 - 16:33 | Link to Comment falak pema
falak pema's picture

don't even try and reason Swastika Cross, he is enibriated with his hubris beyond the tropic of Capricorn. Ask any dame, who can tell cross from double cross. Charlotte is just one dame. 

Fri, 12/21/2012 - 22:25 | Link to Comment hairball48
hairball48's picture

Assuming we killed the Federal Reserve Bank and went to "State" chartered banks. Gold would work just fine as  cuurency, if and only if, Bank issued "notes" were redeemable ON DEMAND for gold coin at the note issuing bank.

And regarding "wealthy people" hoarding all the "hard currency"(gold) and us ordinary folks left to use gov't issued paper, or other lesser forms of money. That would never happen.

One cannot hold their gold coins(hoard) and lend to the bank(save) at the same time. Rich people get rich not by hoarding but by saving...allowing others, or themselves, to invest that saved wealth  creating yet more wealth. Savings must always occur before investment can happen.

And of course gold can't have a government "set price". Gold must be freely traded. Keeps those banksters honest in the long run.

That's Hairball's "redneck" take on gold as money :)

Fri, 12/21/2012 - 22:55 | Link to Comment bobert
bobert's picture

You like so many others here get a green arrow for making a lot of sense.

Or is it that the wife let me get my hands on the tequila bottle and everything makes sense and is absolutely brilliant tonight?

Fri, 12/21/2012 - 23:04 | Link to Comment Yen Cross
Yen Cross's picture

anejo?

Sat, 12/22/2012 - 00:46 | Link to Comment bobert
bobert's picture

You've  talked me into it.

Don't hesitate in sending me a bottle.

Sat, 12/22/2012 - 01:20 | Link to Comment Yen Cross
Yen Cross's picture

I have a hunch, a Z/H reunion is in order. We'll be imbibing lots of "Devil Juice" soon...

Sat, 12/22/2012 - 00:01 | Link to Comment Radical Marijuana
Radical Marijuana's picture

This article is old-fashioned BS which was all too little, way too late!

Human reality is always organized lies, operating organized robbery.

The only actual standard for backing up "money" is some murder standard.

The problem is that the established systems of fiat money frauds, backed by force, have ALREADY robbed everything worth robbing. There is no way to freeze that situation now, by going backwards to some commodity based money. Human reality is based on processes of robbery, which are never absolute and never finished. What has already happened is that we have developed a global electronic fiat money fraud, backed by weapons of mass destruction. Both have been amplified to astronomically magnified sizes by advances in science and technology through the social pyramid systems.

Commodity based money is an old-fashioned idea based on the conservation of matter, as an aspect of natural laws, which then are not able to be changed by human beings, in order to be bent towards fraudulent purposes, since matter can never be made out of nothing, or sent to nothing. Gold is an element that symbolized that the clearest. However, the postmodernizing world has to cope with the FACT that matter is merely another form of energy. It is now the conservation of energy and momentum which are the best current approaches to the laws of nature that human beings currently understand. Furthermore, the basic laws of thermodynamics have been extrapolated through information theory.

THE BEST CURRENT APPROACHES THAT HUMAN BEINGS HAVE TO SCIENTIFICALLY UNDERSTAND THE WORLD ARE ENERGY LAWS AND GENERAL SYSTEMS THEORY, AND THOSE IDEAS SHOULD BE THE BASIS OF THE MONETARY SYSTEM.

The overwhelming problem with that, however, is that when one applies energy laws and systems theories to human realities, that then reveals WHY real human history made WAR KING, then made FRAUD KING.  The reality is that money is backed by murder. It always was, and it always will be. The only ways forward that make sense require that we go through profound paradigm shifts in both the ideas about militarism, as well as the monetary system.

The reason WHY we have a privatized fiat money system today is that the best organized gangs of criminals, the biggest gangsters, the banksters, were able to covertly take control of governments, through bribery and intimidation, and assassination of politicians that could not be otherwise bribed or intimidated. The current fiat money system exists because it is backed by sovereign powers that force people to use the fiat money to pay taxes, by defining that fiat money as legal tender. The ONLY real reasons why that fiat money works is that it is backed by the power of governments to rob, and to murder those who resist being robbed. Any "money" based on commodities does not change that. Most superficial ideas about "monetary reform" are based on deliberately ignoring that, or taking for granted a preposterous series of political miracles whereby the sovereign powers are not going to be what they actually are, simply because enough "good people" wish that to be. Sovereignty is based on the power to rob. That is the history that made War King, and then developed during the previous few Centuries, at an exponential rate, to make Fraud King. The international banksters are the current Fraud Kings, who control sovereign countries to us the power to "We the People" to rob the People more and more, worse and worse.  Going back to any commodity based money does NOT deal with the deeper problems, which are that there MUST BE SOME MURDER SYSTEM.

The problem with real murder systems are that those actually are operated by the people who are best at deceits. Those who were the best at being dishonest became the Fraud Kings, who covertly control our governments, to use the powers of those governments to benefit the Fraud Kings. Those Fraud Kings have already been able to make so much money out of nothing, as debts, for so long, that they have thereby been able to assert "ownership" over almost everything worth robbing, through the means of their symbolic robberies, through their fiat money system.

Articles like this one above, and many others published on Zero Hedge for a fair while, are silly, and so superficial as to appear to be deliberately stupid to me! There are no easy solutions! The FACTS are that money is backed by murder, and therefore, a gold standard would become another cruel joke, since the reality would continue to actually be that the real money system was a murder based system. The only genuine solutions require that "We the People" understand and accept and address the basic situation that the money system IS, and MUST BE, based on a murder system. The only way that the debt controls have meaning is that they are backed by the death controls.

Furthermore, those are the only concepts which are central to the realities of ecology enough so that the economic system can be understood within the bigger contexts of the need for there to be integrated systems of human ecology, industrial ecology, and natural ecologies. The ONLY ways that can be done is by approaching political economy using the basic concepts of our best evolving understandings of energy laws, and systems theory. HOWEVER, as I said, when one consistently does that, then one understands WHY the real money system was always based on a murder standard, and why military success depended on deceits and spies, and therefore, WHY the FRAUD KINGS currently dominate the global monetary systems.

None of the various old-fashioned ideas for monetary reforms, proposed by various reactionary revolutionaries, have any practical political potential, since their ideas to resolve social problems by going backwards to one old-fashioned ideology or another are NOT practically possible within the real political context of the runaway triumph of the Fraud Kings, who are collectively a group of trillionaire mass murderers, who already almost totally dominate a global system of electronic money, backed by atomic bombs. Tragically, we are already way too late to stop this runaway system of fraud backed by force from driving itself through its own insane overshoot, and collapse into chaos.

The most probable futures include more insane death controls, as the result of the debt insanities going more out of control, and therefore, the most probable futures include more genocidal wars, along with democidal martial law. ... It will continue to be deliberate social stupidity to advocate going backwards to any old-fashioned gold standard. There is really an infinite tunnel of deceits, which we are already travelling through. The only money system that makes sense is one that understands that money is based on murder. Such an understanding must cope with the profound paradoxes inherent in that situation, such as the paradox of enforcement.

This kind of article above is too superficial to bother to have to deal with that paradox regarding the rule of law. There is NOBODY that guards the guardians, other than perhaps natural selection, in the bigger contexts, which is practically the same as saying "NOBODY."  Presuming that a return to any commodity backed money will solve the social robbery, and runaway murder problems, is preposterous! Any and all commodities that could be thought to back up the meaning of money ONLY have meaning inside of some context whereby those meanings are enforced, and the ultimate enforcement of the meaning of that money are murders.

The bigger problems behind the superficial problems regarding monetary systems are the human ecology problems. That is why no monetary reforms are sufficient, and why there must be monetary revolutions. The bigger problems driving all of these events are the paradigm changing kinds of progress in science and technology, which made it possible to develop the social pyramid system to channel electronic fiat money frauds, backed by atomic bombs.

The bigger solutions to these problems must understand how and why those sciences and technologies enabled human beings to become many orders of magnitude more powerful than ever before in known human history. Any genuine monetary revolutions must be based on breakthroughs in the scientific understanding of human and industrial systems, which are able to be integrated with natural systems. The PROBLEM with doing that is that it must address and resolve the role of militarism in making War King, and then making Fraud King. There are no ways to stop those processes. It is not possible to stop money from being based on some murder standard. There are only possible ways to continue to go through those transformations, and perhaps to adapt to cope with those developments.

Sat, 12/22/2012 - 05:12 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

RadM... What you are advocating, along with many others that post all over the net, is a change to human nature.

"The only ways forward that make sense require that we go through profound paradigm shifts in both the ideas about militarism, as well as the monetary system."

Not gonna happen.

Christ, along with countless other martyrs, advocated the same thing. How well has it worked out?

Since human nature is not going to change, voluntarily or otherwise, a system of checks need be placed on human actions to limit the damage caused by human nature. The gold standard did go part way toward limiting state warfare but nothing, including the gold standard, can prevent those in power from taking 'their' state to war.

The gold standard did give governments pause prior to going to war because gold for finance of war was, in theory, a limiting factor to the size and length of wars. Of course governments get around the limiting feature of gold by issuance of bonds and other credit instruments (all paper) to finance wars. Without paper credit instruments the modern construct of The State would not exist. And, the redistribution of wealth to the degree that we know it could not exist without paper.

I see no solution to this paradox. If the specter of a deity that sends to an unspeakable hell all that do not tow the line of the 10 commandments (or their equivalent in religions other than Christianity) then what chance is there for humanity? What greater threat exists to protect humans from their baser instincts (human nature)?

Sat, 12/22/2012 - 07:27 | Link to Comment nmewn
nmewn's picture

Nicely stated Snidley.

Sat, 12/22/2012 - 20:54 | Link to Comment margaris
margaris's picture

As the great carl sagan once said, there is not just ONE human nature, but many natures put together.

We as a species have survived so long because we are adaptable, meaning if our surroundings change we change with them so we can continue our existence.

If our human nature were so fixed and limited as some guys here believe we would have long siezed to exist.

 

Also I like to mention stefan molyneux's ideas: Imagine a world where we wouldn't hit and traumatize our kids, and we wouldn't put them in prison-like schools for a decade where they learn obedience in authority, where they learn to be slaves...

If an alien visited our planet he would ask us why we hate our children so much and why we make them go thru hell. We take everything from them, we indept them and murder their minds.

Hell is for children!

The key is our children and how we treat them. Think about that next time you mention "human nature"!!!

Sat, 12/22/2012 - 08:39 | Link to Comment Radical Marijuana
Radical Marijuana's picture

Human nature is going to be forced to be changed, one way or another, sooner or later. Obviously, we already can do genetic  engineering upon ourselves! Adapting human nature to things like electronics, and atomic power, etc., is going to be forced to happen!

I expect it to be forced to happen mostly in worst possible ways. However, it may also be catalysed somewhat by consciousness. I agree that there are deeper problems, inherent in the nature of life, that all living things would share, and those things generate chronic political problems which never disappear, and must be resolved. That is, there is a nature deeper than human nature, which is even more impossible to change ...

However, everything evolves, and maybe even the laws of nature evolve, in a bigger context.  Human nature is not fixed. Selection pressures, acting over time, can and will change it. The real questions are not whether it will change. There is no doubt that human nature will change. The questions are how that will happen. Mostly, I believe that human stupidity will cause disasters, that become the biggest selection pressures upon ourselves, to force us to change, or rather, that the survivors will be changed, by being the survivors.

Sat, 12/22/2012 - 09:48 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

RadM... I wish that I could agree with you.

I am and have been for 60 odd years a history buff. I have read a lot. I have seen no indication that humans have evolved, especially in the area of basic human nature. I agree that the occasional altruist comes along and finds his/her way into a position of power and makes good decisions for his/her citizens and improves their lot for a while but this is the exception, not the rule.

I don't understand this sentence... "Adapting human nature to things like electronics, and atomic power, etc., is going to be forced to happen!" ...and, I don't see why you assume anything is going to be 'forced to happen'. It is more likely that we destroy ourselves in a nuclear conflagration, as almost happened on several occasions in the past. If Hitler had at his disposal nukes he would have used them and we wouldn't be having this conversation. People similar to Hitler come along all the time but once in a while conditions are just right for the potential Hitler to come to power and do enormous damage. Hitler arose out of economic dispair, starvation, rediculous reparation demands from the allies of WW1, etc. Tough economic times and austerity are breeding grounds, the perfect conditions, for the worst of humans to come to power.

"I expect it to be forced to happen mostly in worst possible ways." When has human nature been forced to change? Rather than change, leaders will lead their states to absolute destruction at times, rather than admit that they were wrong about anything or are on the wrong course for the good of their citizens. You are certainly correct that we have been the beneficiaries of great technological innovation but now that innovation is being used to spy on us and take away our privacy and our liberties. I don't see this as a benefit to us, but a road back to serfdom, a road to the East German Stazi and their citizen informers. Do you see any evidence of a change of course by the US Federal Reserve? I see only more of the same Fed failed policies that we have seen since this 'economic crisis' began. The Fed is unwilling to take a different approach, unwilling to let the bad banks fail, unwilling to jail the bankers that are known crooks... why? ... Because to do so would be an admission that the Fed has been wrong. The human nature of those in power at the Fed and in government will not allow them to admit that they were wrong because it would mean that they have to relenquish power, lose their cushy jobs, see an end to their careers. They are willing to crash the entire world financial system before they admit that they were wrong about anything.

"However, everything evolves, and maybe even the laws of nature evolve, in a bigger context." I see absolutely no evidence of truth in your statement after a thorough study of history.

"There is no doubt that human nature will change." I see absolutely no evidence of truth in your statement after a thorough reading of history.

"Mostly, I believe that human stupidity will cause disasters, that become the biggest selection pressures upon ourselves, to force us to change, or rather, that the survivors will be changed, by being the survivors." We are the survivors of countless disasters caused by an endless array of human stupidity throughout human history! We have failed to learn a damn thing from past mistakes so each new generation repeats the mistakes of the past! By your very comments you are living proof that you have learned nothing about learning from past mistakes! You are only putting on display your own wishfull thinking and hoping that, somehow, a group of humans with a different human nature, a group less likely to destroy all of humanity by their hubris, enslave all of humanity by their greed, make all workers into serfs, pauperize all but 1% of humanity, will somehow evolve. We are the living proof that this has not happened, after all the wars, past and present... and, I see absolutely no reason to believe that human nature will suddenly changeIf the 60 million dead of ww2 didn't change human nature, just what the hell do you think it would take?

 

Sat, 12/22/2012 - 10:44 | Link to Comment Sean7k
Sean7k's picture

I don't think you could be any clearer on the subject. Amazingly, people believe you can change human nature. History be damned. Nice comment and well worth reading.

Sat, 12/22/2012 - 13:16 | Link to Comment falak pema
falak pema's picture

spot on. Hubris reigns until nemesis pains and history disdains creating new power vacuum; and it all begins again. 

Sat, 12/22/2012 - 14:58 | Link to Comment RockyRacoon
RockyRacoon's picture

Analogy:  My "domesticated" dog will chase down a rabbit or squirrel and kill it just for sport.  How long will it take to remove that tendency that is woven into its nature?  I reckon we as a species will meet the high and mighty standard that has been set when our coccyx is totally gone, all our teeth look alike, the appendix has disappeared, and we no longer have hair.  Quite a while.

Sat, 12/22/2012 - 16:56 | Link to Comment Anusocracy
Anusocracy's picture

It took 50 years to selectively breed a domesticated fox from wild foxes.

Quite probably, a non-hunting dog could be selectively bred in 50 years.

Sat, 12/22/2012 - 16:48 | Link to Comment Anusocracy
Anusocracy's picture

You are wrong. Human nature (an average of behaviors) does change as what is necessitated by survival changes.

What doesn't change is the nature of those drawn to power. Their survival is based on the ability to maintain power and always has.

History focuses on leaders which distorts your interpretation of changeability.

Sun, 12/23/2012 - 02:49 | Link to Comment AgAu_man
AgAu_man's picture

The aristocracy and the complicit Church have been 'breeding' their serfs for centuries. Hence all the sheeple we have. :-/, What's new now?

Sat, 12/22/2012 - 19:13 | Link to Comment Radical Marijuana
Radical Marijuana's picture

There is nothing in previously known human history that compares to the existence of atomic energy, and the rest of the panoply of paradigm shifting sciences developing awesome new technologies! There is nothing in the history of natural breeding that compares to genetic engineering technologies.

I must agree that, so far, within the lifetime of the generation still alive, things like atomic energy and genetic engineering have done nothing to change the social pyramid system, except amplify it to more astronomical sizes. The basic political economy today is the same structure as the one that has existed for several Centuries.  We have the same old social systems, based on triumphant frauds, backed by force, that have existed for thousands of years ... and, so far, the emergence of a global electronic fraud, backed by the threat of force from atomic bombs, has NOT changed anything significant.

You are certainly RIGHT, Snidley, that, so far, nothing significant has changed human nature, as displayed for thousands of years of human history, repeating itself. However, I continue to maintain that, one way or another, sooner or later, the unleashing of powers that are trillions of times BIGGER than anything ever before in known human history WILL be selection pressures that do change human history.

Of course, I agree that, at the present time, my thoughts appear to be nothing but wishful thinking. There is no doubt that the real world today runs the same old social pyramid system as it has for many thousands of years, where the vast majority of people act like Zombie Sheeple, while a small minority act like Vicious Wolves. I am well aware of the practical impossibilities of changing the brain dead sheeple to become better wolves. However, I still maintain that events are going to force us to change, and that those changes will be sufficiently profound to drive basic changes in human nature.

I tend to believe that most of the population of human beings are going to win an all-star "Darwin Award" in the sense of wiping themselves out through the consequences of their own collective stupidity. The way that nature causes species to adapt is by changing a few, while wiping out the rest. The basic problems which are innate to the nature of life may never be overcome ... However, the contradictions between human progress through paradigm breaking sciences, developing real technologies that ARE trillions of times more powerful, MUST change human nature, one way or another, sooner or later!

The fact that there was nothing before in human history like atomic energy, and electronic communcations, and the fact that, so far, the only things we have done with those is to grow the same old social pyramid systems of lies, backed by violence, to greater and greater SIZES, does not stop the future from going through transformations that are outside of anything previously known in human history.

I like to daydream that more conscious understanding of that MIGHT assist catalyzing those transformations. However, the basic force, the selecitons pressures, that WILL primarily impinge are going to be genocidal wars, along democidal martial law, when the runaways systems of frauds, backed by force, amplified to unprecedented astronomically amplified sizes, finally drive their own transformations!

I agree, Snidley, that I am putting on a display of my own wishful thinking, by hoping that we MIGHT better catalyze those transformations, IF enough of us understood them better.  I do not actually believe that will happen without the back-up systems of natural selection forcing that kind of artificial selection to happen.

The bottom line is that sciences HAVE gone through a series of radical paradigm shifts, which HAVE enabled technologies which are trillions of times more powerful than anything before in human history. Therefore, I think that it IS possible that human sciences could do similar things. IF so, then, there is no doubt that the technologies already exist, or could be developed, to deliberately change human nature, by deliberately changing our genetics, and our cultural environment. We are already doing those things, in an uncontrolled global experiment, with everyone as the test subjects ...

Who knows what MIGHT be possible AFTER some, say 90%, of the current population was wiped out due to their collective stupidities, and refusals to understand and adapt??? Unless ALL traces of science and technology were utterly destroyed by those events, then the scientific method and technological genies are OUT of their bottles.  Human nature, such as it was, IS going to be blown away, despite the facts that, NOW, the established systems do nothing with their powers but to try to amplify the same old things that they always were before, during the previous thousands of years of human history.

Although I agree with most of your criticisms, on the basis of the current social realities, nevertheless, my original comment was made inside the context that I outlined in this reply.  We "should" understand our own human ecology and political economy, which is something that the vast majority of people do not do now, and do not want to do, especially since those who do understand, do not want them to understand.

I believe that, one way or another, sooner or later, we will be forced to better understand ourselves, and change ourselves thereby. Indeed, all of the runaway political and financial problems that exist today are slowly forcing people to think about things that they used to much more take for granted. I believe it is theoretically possible that people could be forced to go through paradigm shifts in political science, whereupon all the rest of the sciences and technologies could be used to deliberately and directly change human nature. Indeed, I can not see how that could not happen ... but rather, the only questions are the relative ways that there will be dystopian and eutopian elements mixed up in those transformations. Of course, I believe that we are rushing towards the worst dystopian social situations. However, those are then also the reasons why people might be forced to think through how to transform in better directions. ... Hell, who knows, we maybe will see the emergence of new kingdoms of life, in the form of computer/machine entities, who outclass us by orders of magnitude, and take over, leaving us as a nothing but "pets," who no longer actually control our own destiny?

Perhaps we will have created conditions that change human nature that go that far out of our control?  While I mostly agree with you, Snidley, that, SO FAR, advances in other sciences and technologies have done practically nothing significant to change the basic social pyramid system, and its manifesting human nature, I do not believe that that social pyramid system can sustain being amplified to astronomically sizes, without radical transformations, driven by social storms without any precedent in previous human history.

I agree that, so far, the current generations that FIRST grew up with things like atomic bombs are living proof that we have NOT adapted ... However, the factual realities continue that everything that happened throughout the whole of World War Two is really relatively NOTHING compared to the possible uses of weapons of mass destruction in the future. We are currently sleep walking through a system which is trillions of times more powerful, but just as stupid otherwise as it ever was! So far, human nature has not changed. However, so far, human nature has not yet been forced to change, and therefore, no serious efforts have been made to deliberately direct that, in ways which ARE theoretically possible.

Sat, 12/22/2012 - 21:50 | Link to Comment StychoKiller
StychoKiller's picture

"The Singularity Is Near: When Humans Transcend Biology," by Ray Kurzweil, PhD; ISBN-13: 9780143037880

Sun, 12/23/2012 - 03:07 | Link to Comment AgAu_man
AgAu_man's picture

Kurzweil, my Chosen friend, why does this feel like a Deja Vu moment? Sounds akin to: "Ye shall not die if you eat of this fruit, but be like gods." Go ahead Eve, taste that cybertronic apple! -- Carry R. O'Light. >:~)>

Sat, 12/22/2012 - 00:27 | Link to Comment delacroix
delacroix's picture

keeping gold at home is hoarding, but lending it to a bank is saving?  Is it me or does this guy come off as a pontificating douche?

Sat, 12/22/2012 - 00:43 | Link to Comment AUD
AUD's picture

No, you just haven't thought through what he is trying to say. You call your dollars in your bank account savings don't you? The bank does not hoard your dollars, it buys, supposedly, productive assets with it, like mortgages, commercial paper etc.

Sat, 12/22/2012 - 05:22 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

"The bank does not hoard your dollars, it buys, supposedly, productive assets with it, like mortgages, commercial paper etc."

Much more than that... Without the banks lending our gold (held as our savings at the bank) there would be no expansion of economic activity... either good or bad economic activity.

Firestone, Ford, Edison, Marconi, Jobs, Gates, et al, would not have given us the products that make modern living what it is today.

IOWs, we would still be carrying buckets of water from the spring to the home, and heating the water with a wood stove, to take a bath.

On the other side of that coin... a town of 10,000 population would not have 40 nail salons.

Sat, 12/22/2012 - 00:36 | Link to Comment Yen Cross
Yen Cross's picture

 Teh libtard/union douches are out tonight/

 Greg Suhr, San Francisco Police Chief, Highest-Paid Cop In Nation

 

  You  fucking retard liberals need to be skull fucked!

Sat, 12/22/2012 - 00:51 | Link to Comment bobert
bobert's picture

San Francisco is a wonderful city in some respects, however, there are reasons why I wouldn't take his job for twice the pay :)

Sat, 12/22/2012 - 01:17 | Link to Comment Yen Cross
Yen Cross's picture

 You missed the point entirely/ I give up.  You liberals are so deluded. Just like that little puke with blinking eyes, that thinks he's smart.

 

Sat, 12/22/2012 - 12:44 | Link to Comment GMadScientist
GMadScientist's picture

You hate San Francisco for its freedoms.

Sat, 12/22/2012 - 21:52 | Link to Comment StychoKiller
StychoKiller's picture

The "freedom" to rob Peter in order to pay Paul ain't so good for Peter...

Sat, 12/22/2012 - 01:55 | Link to Comment akak
akak's picture

Isn't any talk of a new or reinstituted gold standard rather wide of the mark?

What we REALLY need is monetary freedom --- let the free market, and individuals acting within it, decide for themselves what "standard" they will use, and what form(s) of money they will use, whether that be gold, silver, platinum, diamonds, bitcoins or monkeys.  Let 1000 monetary flowers bloom!

Sat, 12/22/2012 - 02:26 | Link to Comment Yen Cross
Yen Cross's picture

 Sweetness/

Sat, 12/22/2012 - 05:29 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

akak... Pure capitalism is brutal. The smartest and most energetic prevail... all others fail.

Not so different than what we are seeing today but today's 'prevailing oligarchs' have the benefit and protection of an entire government and tbtf financial system backing them up. So, today's oligarchs are neither the smartest nor the most energetic... instead they are best connected.

Sat, 12/22/2012 - 21:53 | Link to Comment StychoKiller
StychoKiller's picture

Perhaps, but that path leads to room 101...

Sat, 12/22/2012 - 12:45 | Link to Comment GMadScientist
GMadScientist's picture

I'm only accepting payment in the form of blowjobs from now on.

Sat, 12/22/2012 - 18:19 | Link to Comment smiler03
smiler03's picture

I'd love to know how you will make payment ;O)

Sat, 12/22/2012 - 15:03 | Link to Comment RockyRacoon
RockyRacoon's picture

Doesn't it still boil down to maintenance of the rule of law?  Had we not had Supreme Courts reinterpreting what the Constitution laid down as "money", there would have been the development of these problems with fiat currency.  The same holds true in current banking:  Put some crooked bankers in prison, bunking with the regular population, and a lot of this crap will stop dead.

Sat, 12/22/2012 - 06:39 | Link to Comment SoundMoney45
SoundMoney45's picture

"If one confuses credit (paper) with money (gold), and one believes that inflation is an “increase in the money supply” then one is opposed to any credit expansion and hence any banking.  Without realizing it, one finds oneself advocating for the stagnation of the medieval village, with a blacksmith, cobbler, cooper, and group of subsistence farmers.  Anything larger than a family workshop requires credit."  This is only correct if real bills and bank credit are considered credit.  

The author needs to familiarize themself with real bills, as differentiated from bank credit.  Reading the page at this link would be a start:   http://thedailybell.com/3478/Real-Bills-Doctrine


Sat, 12/22/2012 - 09:57 | Link to Comment mogul rider
mogul rider's picture

Since the gold/silver pumpers are starting to show up again after leaving most of you with 1900 gold and 49 dollar silver I would assume that you are little wiser and little less sore in the ass.

How about you all just leave gold on the edge of the currency market as just another asset and leave world currency manipulation to the big boys.

Why is it gold bugs have to go balls in all the time? You got little dick syndrone?

Sit back enjoy the foreplay. This is fight club not dickhead central

When you become a dick like Paulson briagging about your short that fucked over the NY banksters and then telegraph your gold play, those who push buttons make a special case for you and fuck you over. This takedown lately was to take him out......

Now that he is screaming like bitch and buying AAPL longs, the upward trend in gold can continue.

You fucking goldtards just can't accept it.

But that's OK cause I need someone to buy my 4500 dollar gold and you are perfect cause you hold it for me when I buy it back 20 years later for 200.  Even then, yu'll be girating like a retard that the gold standard is coming.

By then Yuan will be the currency of choice backed loosely by all the physical on the planet since they are the ones BTD from you as you sell into the fall of last week. Again that is OK. Only to buy it again from at 4500.

Look I know you are trying to save yourselves from the Mayan bendover, I get it.

But after getting absolutely slaughtered last time at 1915 and 49ish can you simply admit you were wrong?

Gold will not be a standard, it will be a currency. One of a basket of currencies probably. But who cares,

IT IS A FUCKING TRADE!

Merry Christmas if that is still OK to say after you pablum pukers have sued people for discrimating against the minorities.

Mayan bendover cannot happen soon enough

Sat, 12/22/2012 - 10:21 | Link to Comment IridiumRebel
IridiumRebel's picture

People buy gold and hold it here because the debt will be monetized....nothing more and nothing less. Everything else you said was just a verbose jackoff to obviously make yourself feel better. You speak like a traitor/trader. Fucks like you are the resaon that commodities are so out of whack cuz you assholes drive it up and knock it back down so you can strip mine the crumbs. You will get yours. Go back to Yahoo finance and Marketwatch to be amongst your ilk. GOLD IS NOT A FUCKING TRADE! IT IS A STORE OF WEALTH. Go to China if you want the Yuan to be your next "trade" and quit having it both ways as you further fuck this country over some extra cash. Let's save the "in and out" for your Mayan boyfriend. 

Sat, 12/22/2012 - 10:53 | Link to Comment Sean7k
Sean7k's picture

Why is it so important to you? Especially if you are winning the trade? Talk about small dick syndrome. 

Surely, it will never matter to you what the standard is, because you will trade the variances and profit, whether it be gold, wheat, coal or corn. However, for others, those that haven't the ability to profit from trade, they may be concerned with something else: currency inflation. 

It hurts you, the trader, but it whacks the common laborer and saver. There is a reason Rothschild sought to control the currencies of the world- it gave him control over governments and economies. Gold and other commodity values frustrate this accumulation of power.

What profit you all the money in the world, if a dictator can eliminate it on a whim?

Sat, 12/22/2012 - 11:23 | Link to Comment IridiumRebel
IridiumRebel's picture

+100000

Sun, 12/23/2012 - 10:29 | Link to Comment ListLincolnBism...
ListLincolnBismarkRoosevelt's picture

1° (If you read Nicholas Swaxson, you will know that) Bretton Woods was under attack of the new off-shore british platform like bahamas. 

2° PM trade was manipulated by the venitian private empire.

Autoritarian like the "Free" market of the british opium/esclavagisme or competition that forbit nationaly owned industrie is ALSO a tool for the elite. It is obvious.

Sat, 12/22/2012 - 11:04 | Link to Comment Sean7k
Sean7k's picture

Mary the borrower may spend the money to build a new factory.  Jim the contractor who builds it may deposit the 900 ounces in a bank.  The bank may then lend 810 ounces, and so on.  This process works if and only if each borrower spends 100% of the money and if the vendors who earned their money deposit 100% of it, in a time deposit.  Otherwise, the credit (this is credit, not money) simply does not multiply as Rothbard asserts.

This paragraph is so problematic, it is a wonder it made it past any serious editorial effort. 

How can credit not be money? Does it never get spent? 

What happens when the percentage is reduced to 1% or zero? 

How is the monetary system not expended by increased loans on the same original capital ala Rothbard? No math skills?

It completely ignores the concept of risk, loss of production and malinvestment being corrected.

Sun, 12/23/2012 - 03:33 | Link to Comment AgAu_man
AgAu_man's picture

I concur. Furthermore, the author is either confused, or hopes we are... This point is a case of sophistry, as he uses semantics to bait the trap: Fact is, when Credit for a mortgage or loan (out if thin air) can --and sometimes does -- get converted to 'currency' it BECOMES 'money'. Even 'credit' for a house sale becomes 'money in the bank'. When credit can be converted to liquid 'currency' it becomes defacto money, no matter how much the slippery theoreticians try to reframe that reality. The FRB is a de facto procedural mechanism to do what is not possible in nature: Create something out of nothing, and to violate the laws of physics. While he may have valid on other points, on this one I too have to pull the BS card.

Sat, 12/22/2012 - 11:58 | Link to Comment tradewithdave
tradewithdave's picture

Can you reverse Gresham's law?

www.tradewithdave.com

Sat, 12/22/2012 - 12:47 | Link to Comment GMadScientist
GMadScientist's picture

"...no armies of banking regulators"

"save to catch criminals and enforce contracts"

Do you even read your drivel before you post?

Keith, you need to go relearn your real bills doctrine and realize that while the Fed and bank credit exacerbate problems, the boom and bust are fundamentally inherent to capitalism.

 

Sat, 12/22/2012 - 13:35 | Link to Comment ali-ali-al-qomfri
ali-ali-al-qomfri's picture

thank you Keith and ringmaster ZH, this was a great article series for and average Ali like me.

I however feel compelled to interject the notion of war and how governments “finance” war endeavors (Nixon since we uncoupoled the $ from gold to visit Vietnam), which if presented as a business proposition NPV/IRR, like forwarding money/credit (bonds) to build a productive factory that would potentially 1) provide jobs and 2) increase a quality of life/GDP, war spending provides for neither.

but how do we digest war bonds, especially a never ending series of wars?

a never ending series of bonds?

 

blessing to all.

Sat, 12/22/2012 - 14:08 | Link to Comment lakecity55
lakecity55's picture

"Oh, Timmah?"

"What, Bennie?"

"As long as you're going to the store, pick up another box of CTL-P for me."

Sat, 12/22/2012 - 16:14 | Link to Comment UrbanBard
UrbanBard's picture

If you allow banks to expand credit via fractional reserve, then expect bank failures. This may not be a bad idea, since many people will not be restrained by prudence or the law. They need real world bankruptcies to caution them.

A single bank is never "too big to fail." The problem is that bankers collude in putting off bank runs. This means that the problem of fiscal mismanagement expands until it becomes "too big to fail."

Also, you didn't mention "Real Bills." Real Bills are temporary (90 day) credit system which is noninflationary. It allows business expansion (to hire the factors of production) to fulfill a contract. This commercial credit would be discounted in the market place according to the partner's worthiness.

Personal credit expansion should be discouraged with high interest rates. Rarely does personal credit lead to higher earnings later, just debts. Those which  do should be viewed as a business decision. Sometimes it makes sense for a family or a community to invest in a person's education or venture. Some small towns, in the past, have sent a child off to become a doctor where the local market does not attract one.

The other part which you miss is that artificially lowered interest rates produce an undesirable expansion of the capital goods markets. This produces a boom - bust cycle because businessmen later discover that their expansion does not pay them a reward. This expansion was a chimera: it was never desired by the market. No one had lowered their current consumption to pay for a future gain.

Fractional Reserve Banking discourages savings. It exposes the saver to periodic bank runs or price inflation due to credit expansion. It encourages the politicians to collude with bankers to rob the population through price inflation.

This destroys the voter's control over politicians as the powerful buy votes through patronage. Ultimately, this devalues the currency and trust in government. The government, because it has unaccountable funds, will subvert the will of the population. This leads to tyranny.

Under what you have outlined, so far, ruin will still come, albeit slower.

Sun, 12/23/2012 - 10:08 | Link to Comment ListLincolnBism...
ListLincolnBismarkRoosevelt's picture

To big to fail didn't exist under full GlassSteagall.

Fri, 12/28/2012 - 13:22 | Link to Comment UrbanBard
UrbanBard's picture

The problem here was not the laws, however commendable. It was that the marketplace was not allowed to work. The market would have prevented banks from ever becoming too big to fail. They became big through credit expansion, not through market efficiency.

 

They always deserved to fail, but were prevented from getting what they deserved.

Sat, 12/22/2012 - 18:16 | Link to Comment dunce
dunce's picture

Any gold deposit that can not be demanded for 30 years will not be held for that period but quickly moved  elsewhere without notice to the depositor. After 30 years who cares about the consequences, after all what could go wrong? Now if your name is corzine you know there is no consequences for shifting assets.

Sat, 12/22/2012 - 20:05 | Link to Comment dojufitz
dojufitz's picture

Gold is a trade....lol!

Yeah...so is my 1955 Mercedes Gullwing.

Everything important that has ever needed to be said over the last 5000 years has been said......

It is just that we need to say it again because no one was listening. 

 

 

Sun, 12/23/2012 - 10:04 | Link to Comment ListLincolnBism...
ListLincolnBismarkRoosevelt's picture

People who didn't know the Marshall Plan, Bretton Woods and Glasssteagall always worry me. Wat kind of périod enrich the people without public debt that way in history ?

A contrario, with the venitian empire they were full private control of finance, PM and power. Wat happen then with callopse of the Bardi en Peruzzi bank ?

It is like if zerohedge aim to forget the golden 60' (Roosevelt Bretton Woods, Marshall plan en GlassSteagall) proof, not to mention de Bismark proof, not to mention the Lincoln proof,... Koom aan. 

Mon, 12/24/2012 - 00:35 | Link to Comment bilejones
bilejones's picture

Put more tonic in it.

Sun, 12/23/2012 - 12:11 | Link to Comment sink critically
sink critically's picture

The only standard we need is the one on which the two parties involved in a transaction agree. Everything else is a con game.

Sun, 12/23/2012 - 22:00 | Link to Comment tradewithdave
tradewithdave's picture

Vector gold

Mon, 12/24/2012 - 00:19 | Link to Comment bilejones
bilejones's picture

"Another error is the idea that two or more people own the same gold coin at the same time.  When one puts gold on deposit, one gives up ownership of the gold.  The depositor does not own the gold any longer.  He owns a credit instrument, a piece of paper with a promise to pay in the future.  So long as the bank does not mismatch the duration of this deposit with the duration of the asset it buys, there is no conflict."

The deal used to be that the bank was the safekeeper of the gold that was deposited: that ownership had not changed any more than it changes when you put your shit in a storage locker.

The Banksters lobbied long and hard to change that in law and succeeded in, I believe, the 1850's.

 

Your shit became the bank's, you were merely just one more general creditor

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