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Guest Post: The Unadulterated Gold Standard Part 4 (Intro To Real Bills)

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.

In Part III we looked at the key features of the gold standard, emphasized the distinction between money (gold) and credit (everything else), and looked at bonds and the banking system including fractional reserves.

In this Part IV, we consider another kind of credit: the Real Bill.  We must acknowledge that this topic is controversial because of the belief that Real Bills are inflationary.  This author proposes that inflation should not be defined as an increase in the money supply per se, but of counterfeit credit.


Let’s start by looking at the function served by the Real Bill: clearing.  This is an age-old problem and a modern one as well.  The early Medieval Fairs were large gatherings of merchants.  Each would come with goods from his local area to trade for goods from other lands.  None carried gold to make the purchases for two reasons.  First, they didn’t have enough gold to buy the local goods plus the gross price of the foreign goods.  Second, carrying gold was risky and dangerous.

The merchants could have attempted some sort of direct barter.  But they would encounter the very problem that led to the discovery and use of money originally.  It is called the “coincidence of wants”.  One merchant may have had furs to sell and wants to buy silks.  But the silk merchant does not want furs.  He wants spices.  The spice merchant may not want silks or furs, and so on.  It would waste everyone’s time to run around and put together a three-way deal, much less a four-way or a 7-way deal so that every merchant got the goods he wanted to bring to his home market.  They developed a system of “chits” to enable them to clear their various and complex trades.  In the end, all merchants had to settle up only the net difference in gold or silver.

Clearing is necessary when merchants deal in large gross amounts with small net differences.

The same challenge occurs in the supply chain of consumer goods.  Each business along the way adds some value to the product and passes it to the next business.  For example the farmer starts the chain by selling wheat.  The miller turns wheat into flour and sells it to the baker.  The baker turns flour into bread and sells it to the consumer.  These businesses run on thin margins, and this is a good thing for everyone (though the baker, the miller and the farmer might disagree!)  The question is: on thin margins, how are they to pay for the gross price of their ingredients before selling their products?

This is an intractable problem and it only gets worse if they attempt to grow their businesses.  Further, it would be impossible to add a new business into the supply chain.  For example, a processor to bleach the flour might be a separate company.  And then it may turn out that when the bakery grows and grows, that it is more efficient to operate a small number of very large regional bakeries and then the distributor enters the supply chain to buy the bread from the baker and sell it to another new entrant in the chain, the grocer.

With each new entrant into each supply chain, the supply of gold coins would have to grow proportionally.  This is not possible.  Fortunately, it is not necessary.   If there were a means of clearing the market, then only the net differences would have to be settled in gold.  If consumers buy 10,000 grams of gold worth of bread from the grocer, the grocer could keep his 5% profit of 500g and pass 9,500g to the distributor.  The distributor would keep his 2% profit of 190g and pay 9310g to the baker.  The baker would keep his 10%, 931g and pay 8379 to the flour bleacher, and so on up the chain.

The obvious challenge is that the payments move in the opposite direction compared to the goods.  Whereas the wheat is eventually turned into bread as it moves from the farmer to the consumer, the gold moves from consumer to farmer.  The Real Bill is the clearing mechanism that makes this possible.

Without the Real Bill, the enterprises in the supply chain would have to borrow using conventional loans and bonds, which is less efficient and more expensive.  Or else the division of labor along with highly optimized specialty businesses would not be possible.

As we discussed in Part III of this series, everyone benefits if it is possible to efficiently exchange wealth in the form of savings for income in the form of interest on a bond.  The saver’s money can work for him his whole life, and he can live on the interest in retirement without fear of outliving his money.  The entrepreneur can start or grow a new business without having to spend his career saving a fraction of his wages, working a job in which he is underemployed.  Everyone else gets the use of the entrepreneur’s new products, and thereby improve their lives.

The same analogy applies to the efficient clearing of the supply chain for every kind of consumer good.  This is especially true as new entrants come in to the chain and make the process more efficient (i.e. less expensive to the consumer).  And it is also necessary for seasonal demand, such as prior to Christmas.  Clearly, there is an increase in the production of all kinds of consumer goods around September or October.  Everything from chocolates to wrapping paper must be produced in larger quantities than at other times of the year.  Without a clearing mechanism, without the Real Bill, the manufacturers would be forced to limit production based on their gold on hand.  There would be shortages.

In practice, the Real Bill is nothing more than the invoice of the wholesaler on the retailer.   In our example, the distributor delivers bread to the grocer and presents him with a bill.  The grocer signs it, agreeing to pay 9500g of gold in 90 days (probably less for bread).  It is an important criterion that Real Bills must be paid in less than 90 days, for a number of reasons.

  • First, the Real Bill is for consumer goods with known demand.  If the good does not sell through in 90 days, that indicates a problem has occurred or someone has misestimated the demand.  The sooner this is realized, the better.
  • Second, 90 days represents the change of the season in most countries.  What had been in demand last season may not be in demand in the next.
  • Third, the Real Bill is a short-term credit instrument that is not debt.  At the Medieval Fair, there was no borrowing and no lending.  The same is true for the Real Bill.  The wholesaler does not lend money to the retailer.  He delivers the goods and accepts that he will be paid when the goods sell through to the consumer.  The retailer agrees to pay for the goods when they sell through, but he does not borrow money.
  • Finally, if a business transaction requires longer-term credit, then it is appropriate to borrow money via a loan or a bond.  The Real Bill is not suitable for the risk or the duration.  Longer-term credit means that it is not simply being used to clear a transaction, but that there is some element of speculation, storage, and uncertainty.

What has happened in different times and in different countries is that Real Bills circulate.  Spontaneously.  No law is required to force anyone to accept them.  No banking system is necessary to make them liquid.  Real Bills "circulate on their own wings and under their own steam" in the words of Antal Fekete: The Real Bill is the highest quality earning asset, and the highest quality asset aside from gold itself (incidentally, this is why Real Bills don’t work under irredeemable paper—it would be a contradiction for a Real Bill to mature into a lower-quality paper instrument).

Opponents of Real Bills have a dilemma.  They can either oppose them by means of enacting a coercive law, or they can allow them because they will spring into existence and circulate in a free market under the gold standard.  We can hope that the principle of freedom and free markets leads everyone to the latter.

It is not the job of government to outlaw everything that experts in every field believe will lead to calamity.  And those experts should be cautious before prejudging free actors in a free market and presuming that they will hurt themselves if left alone.

In Part V, we will take a deeper look at the Real Bills market, including the arbitrages and the players...


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Thu, 01/17/2013 - 23:31 | 3165115 francis_sawyer
francis_sawyer's picture

Any 'new' system will be AS CORRUPT as the 'old' system... That you can count on...


'SYSTEMS" aren't designed with 'fairness' in mind, they're designed to generate massive PROFITS for the 'system putter in place-er-ers'...

Thu, 01/17/2013 - 23:44 | 3165153 Thomas
Thomas's picture

BTW-My bank won't give me an access card anymore; it insists that I must get a debit card. This troubles me to no end. What really troubles me is that they also said that I have to let them know if I will be using my card out of town. When asked where that meant, they said, "For example, if you are in Philadelphia it won't work." I am in Ithaca. ATM machines all over the country and I cannot use them. Nice (or is it NYSE?)

Thu, 01/17/2013 - 23:51 | 3165168 Buckaroo Banzai
Buckaroo Banzai's picture

Time to close that bank account.

Fri, 01/18/2013 - 00:09 | 3165206 Raymond K Hessel
Raymond K Hessel's picture

Yeah, I agree with Buckaroo...that's some ghetto bank bullshit account you got.  Did you get a free shiv for opening up a savings account with them?

Fri, 01/18/2013 - 02:00 | 3165371 strannick
strannick's picture

K. Weiner cant fathom that gold is manipulated. His theories are just more academic dungeons and dragons fantasia. 

Fri, 01/18/2013 - 06:36 | 3165542 Irish66
Irish66's picture

I love Greece

Fri, 01/18/2013 - 07:58 | 3165596 GetZeeGold
GetZeeGold's picture



I'm long marxists.........they give you stuff.......until they run out of other peoples money.


Then you throw them in the trash and wait for the next one.

Fri, 01/18/2013 - 06:58 | 3165554 paddy0761
paddy0761's picture

Hey strannick have a read through Antal Fekete's work. It is worth the time.


Fri, 01/18/2013 - 07:50 | 3165590 francis_sawyer
francis_sawyer's picture

I love getting junked for the first comment... It truly demonstrates either how naive people are, or how naive they wannabee...


The "system" that I refer to doesn't just have to do with banking, it is ubiquitous in nature... One doesn't think, for example, that a spider spins a web with 'fairness' in mind?... No way Charlie... The spider puts it in the EXACT spot to catch the most unsuspecting [& the most] prey imaginable... I have a huge deck system in the back of my house [with a lot of vegetable & plant boxes & things]... Watching what the spiders do & the locations of their webs is really fascinating... Clearly ~ the spiders aren't trying to make it a fair fight between them & the insects...

Fri, 01/18/2013 - 08:40 | 3165644 BandGap
BandGap's picture

I junked you for bitching about being junked.

Fri, 01/18/2013 - 10:26 | 3165915 TruthDetector
Fri, 01/18/2013 - 09:13 | 3165695 bernorange
bernorange's picture

Rep. Paul Broun Jr. of Georgia has introduced the "Free Competition in Currency Act of 2013" in the 113th Congress (bill H.R. 77). This bill contains the same provisions as bills previously introduced by former Congressman Ron Paul, which seek to repeal legal tender laws and prohibit taxation on certain coins and bullion.

Sat, 01/19/2013 - 00:25 | 3168390 MeelionDollerBogus
MeelionDollerBogus's picture

Jesusfuck, get your story straight.

Everyone knows he's going to be a veterinarian. And he knows it because Tyler's still got his ID.

Which space-monkey are you?

Fri, 01/18/2013 - 00:02 | 3165195 DoChenRollingBearing
DoChenRollingBearing's picture

@ Thomas

That is the first time I have read of this, + 1.

Carrying $500 or more with you at all times partly will alleviate the problem.  And do keep three months (or so) os CA$H at home somewhere, well hidden.

Fri, 01/18/2013 - 00:19 | 3165223 ACP
ACP's picture

Yeah, that is until the Journal News starts publishing the names and addresses of illegal cash and PM holders...

Whoops, my bad, I'm skipping a year ahead in US History.

Fri, 01/18/2013 - 05:13 | 3165510 Daily Bail
Daily Bail's picture

This is pretty awesome.

Fri, 01/18/2013 - 08:25 | 3165626 mick_richfield
mick_richfield's picture

He's going to have to do a lot of pretty awesome things to make up, in my book, for endorsing Mitt.

But -- yes, this is a +1 for him. 

Fri, 01/18/2013 - 07:49 | 3165589 krispkritter
krispkritter's picture

Had an account with a large bank. Driving back from Philly to FL after my father's funeral, at 2AM my card stopped working at some backwoods 7-11 off 95. The C/S number on the back was punched out by the card number. Had left my only other card at home and spent most of my cash so there was no way I had gas money to get home. Called my sister and luckily they had stashed some 'mad money' from the estate in my stuff. Made it back and called the bank and was informed they deactivated it for 'security reasons'.  As I wasn't using the card in say, Mexico, I chewed them a new one. The next morning went to the bank branch to close the account. The lady made the mistake of asking me why. I told her exactly why, along with expletives, in a voice the whole bank heard. You could hear a pin drop. As it was Halloween, she was dressed up like a cow or something, she looked scared and mortified which was made even more comical by the stupid costume. I left with a smile on my face, drove down the street and deposited the check in a local bank. Never again...

Fri, 01/18/2013 - 09:46 | 3165764 Sweet Chicken
Sweet Chicken's picture

Stupid cow!


Condolences for your loss.

Fri, 01/18/2013 - 10:12 | 3165852 lincolnsteffens
lincolnsteffens's picture

Got rid of Citi Cards three years ago. Told them I didn't want to do business with criminal enterprises.

Fri, 01/18/2013 - 08:02 | 3165599 nmewn
nmewn's picture

Cash and a gun...I don't leave home without them.

Thu, 01/17/2013 - 23:59 | 3165188 Buckaroo Banzai
Buckaroo Banzai's picture

What you are confused about is this: Real Bills was the OLD system, and it worked great. When the Real Bills system was dismantled in 1914, that's when our troubles began.

Fri, 01/18/2013 - 00:10 | 3165208 Raymond K Hessel
Raymond K Hessel's picture

This kid is a troll.

Fri, 01/18/2013 - 01:59 | 3165370 ultimate warrior
ultimate warrior's picture

We will be back on a gold standard. Just a matter of when not if.  Shit is hitting the fan as we speak....the fan is just moving slower than us Zerohedgers thought. I'm losing my job shortly at a nuclear power plant (oh my god nuclear radiation kills babies..sarc) but don't feel bad. I got PM's, lead, food, and I plan on taking unemployment benefits for as long as I can. Fuck the system. I paid in over $100,000 in taxes in just the last 5 years so I figure I am due some "reparations" plus I figure I'm helping in taking the system down a little quicker with me being "on the dole."


Fri, 01/18/2013 - 03:09 | 3165438 fourchan
fourchan's picture

lol i want my social security back before its gone. and i also hope to hasten the quickening.

Fri, 01/18/2013 - 01:11 | 3165309 JOYFUL
JOYFUL's picture

...Any 'new' system will be AS CORRUPT as the 'old' system...


You of all people here should know that the massive sionist psy-op which, through it's stranglehold on media and education, embargo's all real knowledge has simply prevented people from realizing the obvious. Before the hegemony of the sionist criminal caste was established over East as well as West, perfectly good 'systems' of trade operated with maximum stability and social harmony as their central features. Their replacement by the opposite is a subject awaiting rediscovery by those in the West unhappy with their status as debt slaves to the moneypower.

In 1294 A.D., Kai Khatu, the Mongol ruler of Persia, on the advice of his vizier and in imitation of his brother monarch, Kublai Khan in China, introduced paper money into his realm. This action aroused such resentment among the merchants that a riot ensued. The vizier was seized by the mob, torn to pieces, and thrown to the dogs. The edict establishing paper money was withdrawn and no Persian monarch until the twentieth century dared impose paper money upon his subjects.

The standard of value and the common medium of exchange continued to be silver of high purity. Paper money was an alien device until 1931, when the modern-minded Reza Shah introduced a national bank of issue and gradually withdrew and melted down the silver coinage in circulation.


While the author of this piece peddles the standard variation to the banks' version of monetary necessity, he carefully preserves the primacy of usury\interest - therefore inveigling the reader into continued belief in  the fictions of the moneychangers.

With Executive Order 11110, which gave the U.S. the ability to create its own money backed by silver. JFK attempted to close the door upon them. He was crucified by order of the Imperial Magisters of International Bnai Brith, operating out of Montreal Canada. Since then, no one has dared to discuss the truth about money and real 'free enterprise,' versus the fictions of capitalism and debt economies.

Nothin new under this ol sun.

Fri, 01/18/2013 - 03:25 | 3165448 Raymond Reason
Raymond Reason's picture

embargo's all real knowledge

Enjoyed reading you post.  This embargo on real knowledge is something more than than providing cover for a con.  I took me a while to realize that these psychopathic control freaks want more than just money and power.  In the same way that having a billion in the bank is not good enough.....but rather having a billion in one's pocket, and everyone else having nothing in theirs.  These greedy narcissists want to hoard truth and knowledge, and hide it in a warehouse, not only to perpetuate a fraud, but for greed and exclusiveness.   Beginning to understand the passage, "those who seek the truth, shall find it" , because truth will never be handed to you on a platter...or a big screen.

Yes, all is vanity...


Fri, 01/18/2013 - 09:20 | 3165705 tarsubil
tarsubil's picture

Maybe it is that any new system will ultimately succumb to corruption just as the old system. Just because we've seen the Sun set, doesn't mean it won't rise again. When the gold standard comes back, enjoy it while it lasts.

Fri, 01/18/2013 - 11:05 | 3166052 falak pema
falak pema's picture


Gaykhatu (Mongolian: Gaikhalt; Mongolian Cyrillic???????, died 1295) was the fifth Ilkhanate ruler in Iran. He reigned from 1291 to 1295. During his reign, Gaykhatu was a noted dissolute who was addicted to wine, women, and sodomy, according to Mirkhond.[1] HisBuddhist baghshi gave him the Tibetan name Rinchindorj.

His name means "amazing/surprising" in the Mongolian language as in "gaikhakh" (to get surprised)............................

Now we know the origin of the word "gay"...Gay as Rinchindorj. 

Do you think that name influenced Rintintin?

I shudder at the thought! 

His father Abaqa was son of Hulagu who destroyed Bagdad and its house of wisdom.

In my novel "the last Occitan", final episode of Crusader trilogy  I write about this period; when Marco Polo crosses into Abaqa's lands on his way to Cathay via the Afghan pass at Badakhshan in 1274. 


Fri, 01/18/2013 - 10:07 | 3165831 Apostate2
Apostate2's picture

To this I agree. It is a dance to the music of time. Happy or crazy feet?

Fri, 01/18/2013 - 10:25 | 3165906 TruthDetector
Thu, 01/17/2013 - 23:30 | 3165121 IridiumRebel
IridiumRebel's picture

"Second, carrying gold was risky and dangerous."

Store it at the Fed! It will TOTALLY be safe there!



Thu, 01/17/2013 - 23:35 | 3165127 A Lunatic
A Lunatic's picture

All of your monies are belong to us; that is the future of money...........

Thu, 01/17/2013 - 23:36 | 3165131 Yen Cross
Yen Cross's picture

I'll gladly pay you Tuesday, for a Whimpy Burger today.

Thu, 01/17/2013 - 23:37 | 3165137 francis_sawyer
francis_sawyer's picture

Will that be Appaloosa or Mustang?

Fri, 01/18/2013 - 00:28 | 3165156 Yen Cross
Yen Cross's picture

  I like My Clydesdale,full of oats. Not French.francis_sawyer

I was being facetious regarding French OATS.bonds/  I have deep respect for you. I apologize if I offended you in any way.

Thu, 01/17/2013 - 23:36 | 3165132 akak
akak's picture

I guess the moral of the story in the article above is that our current fiat "money" consists of unreal bills.

Fri, 01/18/2013 - 09:42 | 3165750 Apostate2
Apostate2's picture

Moral to the story sounds oxymoronic to me. But what do I know. Those bills (snark) just bought me some drinks and congenial least for tonight....

Thu, 01/17/2013 - 23:39 | 3165141 Thomas
Thomas's picture

Excellent series.

Thu, 01/17/2013 - 23:52 | 3165175 Buckaroo Banzai
Buckaroo Banzai's picture

If you like this, go to the source, and read Antal Fekete's work on Real Bills.

Thu, 01/17/2013 - 23:41 | 3165146 Yen Cross
Yen Cross's picture

Zero Hedge is a trading {conduit} and nothing more.  Bone headed wanabes need to sell their flu shots somewhere else.

 Basic algebra should be a prerequisite for logging in .<>

Fri, 01/18/2013 - 09:37 | 3165740 Apostate2
Apostate2's picture

SHRIEK. I sucked at Algebra but I loved Geometry. Am I a requisite? Can I still log in?

Thu, 01/17/2013 - 23:44 | 3165154 Orly
Orly's picture

Gosh, give up the gold thing already, y'all.  It's getting embarrassing.

Thu, 01/17/2013 - 23:46 | 3165159 Yen Cross
Yen Cross's picture

She lives.

Thu, 01/17/2013 - 23:49 | 3165166 Apply Force
Apply Force's picture

Really... most here only have access to clean water if they turn on the tap - so, gold or potable water?

Thu, 01/17/2013 - 23:58 | 3165183 akak
akak's picture

Gosh, give up the repeatedly discredited faith in governmental promises and IOUs backed by nothing and fiat currency created at whim --- it's getting embarrassing already (for you).

Fri, 01/18/2013 - 00:00 | 3165192 Orly
Orly's picture

Hello, ak.

I do hope you have something of substance today. No name-calling?

Fri, 01/18/2013 - 00:08 | 3165203 jimmyjames
jimmyjames's picture

I do hope you have something of substance today


Ha--AK has it all so fucked up he cant even interpret a simple chart-

Fri, 01/18/2013 - 00:11 | 3165210 Orly
Orly's picture

I don't know.  At least he believes in something and that is noble in itself.


Fri, 01/18/2013 - 00:52 | 3165280 Harbanger
Harbanger's picture

Like a noble savage, he lives in harmony with fairy tales.

Fri, 01/18/2013 - 00:18 | 3165216 akak
akak's picture

And JimmyJames believes, in contrast to the government's own (if lowballed) CPI statistics, and in contrast to all economic reality itself, that the US dollar has APPRECIATED in value over the past eight years!  That's right, folks --- we have been suffering from deflation for the past decade!   You heard it here first!

I mean, who are you going to believe, JimmyJames or your own lying eyes (and thinning pocketbook)?

Fri, 01/18/2013 - 00:32 | 3165245 jimmyjames
jimmyjames's picture

 that the US dollar has APPRECIATED in value over the past eight years!


Complete ass covering bullshit as usual--i said USDX at 0.80 in 05 and today 0.80-

So i would guess n your twisted logic-USDX falling from 120 to 70 didn't mean it fell at all-it actually went up?

Answer this--can you buy more house today with a dollar than in 05..or not...can you buy more oil with your dollar today than in 08 or not..can you buy more gold with your dollar today than 18 months ago?

btw--assuming asshole--i'm not a dollar bull-i just try to deal in reality-

Fri, 01/18/2013 - 00:42 | 3165255 akak
akak's picture

Why cherry pick 5 years ago? The post you're commenting to uses 2005-2013 vs $ vs gold-


Prove the dollar has lost purchasing power within  that time frame-


I know you can't-


You really are a stupid fuck.

And for the last damned time, you twit, the (artificial, contrived and outdated) US Dollar Index has NOTHING to do with the actual purchasing power of the US dollar, and changes thereof.  It has NO connection in ANY way to the absolute value of the US dollar, and you know it.  Not that that doesn't stop you from disingenuously trying to constantly trot it out as some kind of "proof" of your absurd appreciating US dollar thesis.


Fri, 01/18/2013 - 00:44 | 3165263 jimmyjames
jimmyjames's picture

Just answer the fucken questions--yes or no

Fri, 01/18/2013 - 00:54 | 3165282 Orly
Orly's picture

The DXY is nothing more than the anti-Euro trade.  It means that the dollar has moved forward or against the European currencies.  That's it.  It has nothing to do with purchasing power of the USD relative to anything except at a given time in a given market.

So I can buy a bottle of Spanish wine for four euros one day and five euros the next.  So what?

It is the same as the dreaded "fear index!"  The VIX.  It is not a measure of "fear."  It is a put/call ratio that can be easily manipulated to make it say whatever the Fed wants it to say, nothing more.

Deflation can be seen all over the place.  Buy a house in Detroit for fourteen bucks.  Cars, refrigerators, hammocks, wheelbarrows.  None of that stuff is moving so what happens to the price?  It comes down.  That's all.

Fri, 01/18/2013 - 01:15 | 3165315 Bay of Pigs
Bay of Pigs's picture

What planet do you live on? Average house in Vancouver, BC is a million dollars. You check out college tuition these days? How about the price of food and energy? TAXES?

You're a complete numbskull.

Fri, 01/18/2013 - 01:53 | 3165361 Big Slick
Big Slick's picture

Litmus test for real wealth: drop the item on your foot and ask 'did that hurt?'

Fri, 01/18/2013 - 10:03 | 3165815 Badabing
Badabing's picture

JJ, enjoy the water in your beer.

Fri, 01/18/2013 - 14:11 | 3166784 AustriAnnie
AustriAnnie's picture

"None of that stuff is moving so what happens to the price?  It comes down.  That's all."

A collapse in demand for certain goods relative to others is not deflation.  Try again.

And the fact that you are focused on price is another telling sign that you are falling into the flawed mainstream view that rising prices = inflation.

Fri, 01/18/2013 - 03:32 | 3165451 delacroix
delacroix's picture

at least he's an asshole with a good sense of humor.

Fri, 01/18/2013 - 03:41 | 3165458 akak
akak's picture

Well, as I have always said, if you're going to be an asshole, at least give them something to laugh about too!

As I once told my dad as a kid (and got smacked for), "I'd rather be a smartass than a dumbass."

Fri, 01/18/2013 - 17:49 | 3167568 jimmyjames
jimmyjames's picture

"I'd rather be a smartass than a dumbass."


I'm sure you would AK--all you need is a 180 degree reboot-

Fri, 01/18/2013 - 00:34 | 3165250 Orly
Orly's picture

We are in a deflationary cycle, no question about it.  Why do you think they are blowing so hard to keep everything up?

Fri, 01/18/2013 - 00:52 | 3165266 akak
akak's picture

Yeah, deflationary (snort!).

That's why the cost of living, and virtually all prices across the economy, continue to rise and NEVER fall (aside from the collapsing bubble assets of housing and real estate).

You clearly do not know what "deflation" actually means, or entails.

Fri, 01/18/2013 - 00:58 | 3165291 jimmyjames
jimmyjames's picture

You clearly do not know what "deflation" actually means, or entails.


Tell us what it entails AK--

Rothbard and Mises explained it in about 20 words- i'm sure you can do better with your long winded shit drivel that you constantly spew-

Fri, 01/18/2013 - 01:01 | 3165293 akak
akak's picture

Deflation: a decrease in the total supply of money, usually accompanied by a falling general price level.

There, I did it in 16 words.

Your turn, idiot.

Fri, 01/18/2013 - 01:12 | 3165311 Harbanger
Harbanger's picture

The money supply never decreased, the temporary deflation was caused by the last 2 bubble bursts and a slowdown in economic growth not by a decrease in money supply.  The next bubble of all bubbles to burst is fiat.

Fri, 01/18/2013 - 01:34 | 3165343 jimmyjames
jimmyjames's picture

the temporary deflation was caused by the last 2 bubble bursts and a slowdown in economic growth not by a decrease in money supply.


The deflation was not temporary--it was hidden in level 3 assets-where it continues to grow like a mold-

Do you suppose that when the CDO/SIV market exploded which was leveraged at 30-90 to 1 has somehow magically gone away-that's what bernanke wants you to believe-


Fri, 01/18/2013 - 01:23 | 3165325 jimmyjames
jimmyjames's picture

You missed the part about credit contraction--otherwise-you did pretty good for a beginner-

Fri, 01/18/2013 - 00:59 | 3165294 Orly
Orly's picture

Sorry.  It's just the opposite.

You have no idea what inflation means and have trouble discerning spikes in prices when the Fed is trying to move the price up as opposed to when the Fed is actually trying to keep prices down.

The fed is not trying to keep prices down.  It is trying to target a 2% inflation rate; a rate one full percentage point higher than it is right now.  They are trying to raise prices but the experiment is failing miserably.

Wealth effect, reflating the bubble, all that stuff.  Just not happening.

That, ak, is a deflationary cycle.

Fri, 01/18/2013 - 01:09 | 3165306 Bay of Pigs
Bay of Pigs's picture

What a bunch of nonsense that is. Utter buffoonery.


Fri, 01/18/2013 - 01:24 | 3165320 akak
akak's picture


The fed is not trying to keep prices down.  It is trying to target a 2% inflation rate; a rate one full percentage point higher than it is right now.

Orly, if the above was intended as a serious and honest statement of the current level of price inflation (dollar depreciation), then you have lost all credibility with me.

Fri, 01/18/2013 - 01:51 | 3165359 LetThemEatRand
LetThemEatRand's picture

Let them eat iPads.  The older ones are going for cheap.  Ergo, deflation.  Real food on the other hand (what most of the world eats) not so much.  But who cares other than a few billion soon to be starving people.   I got a free Starbucks today for spending $50 on coffee last week.

Fri, 01/18/2013 - 01:56 | 3165366 Yen Cross
Yen Cross's picture

 Just You/ You are a good person!  You have balls!

Fri, 01/18/2013 - 02:14 | 3165380 LetThemEatRand
LetThemEatRand's picture

Wanna hear balls?  I stuck it to the man and ordered extra chocolate sprinkles on my free Starbucks.  Not only that, but I increased some sprinkle miner's salary by trickling my gold card free coffee income to him, so I doubly fucked the man.  My limo driver agreed and I gave him the night off without pay as a reward (though he is on call in case I get too drunk on 25 year old Scotch.  Oh, and I enriched a Scotch grower in the process.  So a full balls deep day on the man, no lube, if I do say so myself).

Fri, 01/18/2013 - 02:27 | 3165394 Yen Cross
Yen Cross's picture

 Thats what I'm talking about!  Take no prisoners.

  No bullshit surmising. Eat your Brussel Sprouts bitch.

Fri, 01/18/2013 - 02:41 | 3165411 LetThemEatRand
LetThemEatRand's picture

Speaking of prisoners, can you believe all of the hostages killed in Mali because a few guys with Military Style weapons who shot back at $100M aircraft equipped with $500K each laser guided hell fire missles?  I hope they institute some solid gun control over there.  How many hostages were kids, for God's sake?  All of those Paul Simon wannabes ("you can call me Al") seem to think their nation's gold belongs to them.  

Fri, 01/18/2013 - 02:50 | 3165422 Yen Cross
Yen Cross's picture

I have some choice words, but the sun is getting ready to rise. You understand the whimps that bitch. ( Tall Hat no  Cattle) pussys.

  I'm stepping up. I'm taking a stand. I'm retaining council to fight! I love my country! I have balls enough to sacrifice!

 The hell with King Otool. That fuck will be impeached!

Fri, 01/18/2013 - 02:56 | 3165429 LetThemEatRand
LetThemEatRand's picture

London?   Cheers.

Otool won't be impeached.  He's one of them, by which I mean the same people who would have controlled O'Romney.

Fri, 01/18/2013 - 06:11 | 3165508 Yen Cross
Yen Cross's picture

 Bilderberg/ Meatballs take the time for my jokes?

Fri, 01/18/2013 - 05:21 | 3165516 John_Coltrane
John_Coltrane's picture

The confusion of prices which, when not manipulated by the government are set by supply and demand and the deflation of credit (debt destruction) is very common.  Thus, all three commenters (AKAK, ORLY, James) have certain aspects correct.  But in a debt based fiat money system, the important thing is whether credit is contracting (deflation) or not.  Since 2008 Debt/credit is being destroyed even though the FED and .gov are attempting to counteract (unsucessfully as ORLY points out) this huge private credit contraction.  A lot of this debt destruction not been recognized and is hiding off the books though it is just a unlikely to be repaid as is 2008.  This is ORLYs point and it is true.  Thus we are in credit deflation.  This might be thought to guarantee price deflation as well, but not when demand exceeds supply in rather inelastic goods like food and energy.   The worse cases of price inflation occur due to price fixing by .gov.  Examples are subsidies for health care, education, green energy etc. which distort the natural market price always inflating it.  This is what the consumer sees and correctly identifies as inflation.   The normal state would be price deflation with a sound money system since productivity and competition improvements lower the production costs.

Fri, 01/18/2013 - 14:23 | 3166842 AustriAnnie
AustriAnnie's picture

Inflation is a monetary phenomenon.

In Weimar Germany they printed and printed, and yet people were still hungry.  They could not "reflate" the collapse, yet you cannot deny inflation?

Inflation is an expansion of money and credit.  If that expansion occurs in the midst of reduced productivity and reduced prosperity for a population (as often occurs in inflationary collapses), that does not mean there is no inflation.  

In today's environment where the dollar is losing purchasing power, it should be no surprise that people are shifting priorities in their purchases.  Hence the rising prices in some goods but not others.  TPTB can print the money.  But they cannot fully control where it is spent.

Secondly, we are not witnessing a credit contraction, we are witnessing a transfer of credit from private to public.  With the state as the backstop for the economy, they have simply decided to borrow on our behalf and distribute the loot.  The credit-expansion has not stopped, it has been relocated to a different balance sheet.

Fri, 01/18/2013 - 17:43 | 3167545 jimmyjames
jimmyjames's picture

The credit-expansion has not stopped, it has been relocated to a different balance sheet.


Very good-but the "losses" still exist as the assets decreased in value-so what has really happened is-the losses have been transfered and or hidden-but they sit on "someones" balance sheet and are not marked to market-

Banks are hoarding cash now-not lending it-

Except for the student loan/debt for life trap (non recourse) which has about had its day-

Fri, 01/18/2013 - 03:42 | 3165459 Raymond Reason
Raymond Reason's picture

The newspapers and news magazines that tell us we are in a deflationary (or non-inflationary) cycle, keep getting more expensive. 

Fri, 01/18/2013 - 03:46 | 3165463 akak
akak's picture

LOL!  Indeed!

I rest my case.

Fri, 01/18/2013 - 11:34 | 3166213 falak pema
falak pema's picture

a propos being smacked : its good for your cheek complexion. Or so they say if done the right way...

Deflation is probably the true situation but inflation is due to the QE infinity pump which is artificial. We are therefore into biflation : true economy deflation and oligarchy economy inflation.

As the ZH article on major banks indicate / 860 billion deposit surplus all feeding the virtual economy thus creating inflation of picked assets/commodities that the Oligarchy wants to inflate, deflating those it wants down...As far as the general trend of real economy under the carpet, it has to be downhill as you correctly say. Its the inevitable route for the real stuff once the sham stuff hits the asymptote...Some sectors are already feeling the attrition.

Now may I spank you some?  (only being tongue in cheekingly virtual!)

Fri, 01/18/2013 - 17:32 | 3167511 Thisson
Thisson's picture

It's actually both, depending on the unit of measurement: deflation if you measure in gold; inflation if you measure in dollars. 

Thu, 01/17/2013 - 23:47 | 3165163 alfbell
alfbell's picture

I don't have time for any of this...

I'm about to find out if a guy who rides bikes took drugs... what Michelle Obama is wearing to the inauguration -- and why she changed her hairdo style to bangs all of a sudden (can't wait to know cuz I love her new look)... what's going on with the next American Idol... then a look into some celebrity's vacation homes... and finally who is being traded to what sports team.

Please... someone... shoot me?

Thu, 01/17/2013 - 23:58 | 3165182 Orly
Orly's picture

I'll shoot you but not before I shoot Nicki Minaj.  She is totally making a mockery out of any semblance of entertainment on American Idol. She's a real jerk, all right.

I can't stand it!


Fri, 01/18/2013 - 00:18 | 3165224 lasvegaspersona
lasvegaspersona's picture


how do you have time to watch all that? I get stuck in the YouTube for hours...I got lost in there once for days.

Fri, 01/18/2013 - 01:35 | 3165344 Harbanger
Harbanger's picture

Ever wonder how start watching one video, then another and another and then suddenly you end up on the weird side of youtube?

Fri, 01/18/2013 - 00:00 | 3165193 e_goldstein
e_goldstein's picture

"Only gold is money, everything else is just debt."

JP Morgan

Including your surreal bills. 

Fri, 01/18/2013 - 00:14 | 3165217 Yen Cross
Yen Cross's picture

Lighten Up on Orly fellas.  The woman has some ideas,and my ears are open. ( You have the forum Orly)

 I Respect a fellow trader.

Fri, 01/18/2013 - 00:30 | 3165236 Orly
Orly's picture

Oh, it's cool YC.  I only jump in the fray when I need to be slapped around a bit.  I don't know why but...

Anyways, how are you?  I haven't spoken to you since the New Year.  I hope things are good for you.

The Aussie looks to be making a sweep above 1.06 to maybe 1.10-1.11.

I'm not sure if I am buying Abe and the BoJ's BS any more.  As Shakespeare said, "I think thou dost protest too much."  They sure are making a big, big deal out of the monetary policy announcement on Monday, even though they have already said...over and over and over...what it is they plan to do.

I say sell the news.  There was word of a giant US bank getting long the UJ yesterday morning to the tune of one billion USD nominal.  The market seeks out maximum pain and that just might be the target.  I am adding in shorts in the overnight and going to keep them (hopefully...) until Monday's giantest nothingburger of all time.

How do you think?


Speaking of, as I was typing, some guy Hamada comes out and re-hashes some stuff that Abe said three weeks ago and boom!  the UJ goes through the roof for absolutely no reason whatsoever.

Seems they are too desperate to make it stick.


Fri, 01/18/2013 - 00:36 | 3165243 Yen Cross
Yen Cross's picture

  My name is (yen cross)?   You have some excellent ideas. Can we talk later?  ( Professional)

Fri, 01/18/2013 - 00:44 | 3165264 Orly
Orly's picture

Catch me later.


Fri, 01/18/2013 - 00:16 | 3165220 lasvegaspersona
lasvegaspersona's picture

Hate to say this (especially here ) but fiat WORKS. The problem is the lie that it is as good as gold. It does not work as a Store of Value. Fix that and got a workable system.

Fri, 01/18/2013 - 02:34 | 3165407 Harbanger
Harbanger's picture

Fiat money by definition is not convertible into gold.  So it's not a lie, they're telling you up front that it's not as good as gold.   Until 1971 the USD was convertible into gold.

Fri, 01/18/2013 - 02:43 | 3165417 akak
akak's picture


Until 1971 the USD was convertible into gold.

To be honest, even the quais-Gold Exchange Standard under the Bretton Woods arrangement was just as much a sham and a farce as is the current, purely fiat arrangement.  The USA never had more than 25% gold backing for the dollar under Bretton Woods, and even that low figure steadily fell over the 27 years of the sham, until the dollar barely had a 5% gold backing.  That was why DeGaulle demanding gold for dollars finally blew up the system altogether.  And note that even under Bretton Woods, the dollar was only (supposedly, theoretically) exchangeable for gold by foreign governments --- individuals, whether domestic or foreign, could NOT redeem their dollars for gold.  The whole rotten system was just another unsustainable Ponzi scheme from the start.

Having said all that, my best guess for what we might see going forward in the USA is a re-establishment of this exact Bretton Woods quasi-Gold Exchange system --- including the former prohibition on US citizens holding gold.  Can't have mere individuals excercising any control over the money supply and US federal government fiscal profligacy!

Fri, 01/18/2013 - 08:52 | 3165667 BandGap
BandGap's picture

Not only that, fiat currency is necessary.

Fucking human nature is what gums the shit up.

BTW, you can't base deflation on the price of shit no one wants. In an applied sense what we have going on now is inflation. It's the cost of the four basic elements - earth, wind, fire & water that are going up.

Fri, 01/18/2013 - 00:18 | 3165225 Yen Cross
Yen Cross's picture

 Personally, I'm short risk. I'm flat, but I might play the ALGO FRY-Day close.

Fri, 01/18/2013 - 03:04 | 3165235 Rusty Shorts
Fri, 01/18/2013 - 00:47 | 3165271 monopoly
monopoly's picture

Hey All!

Just got an Email from “shadowstats”, one of my subscriptions. Seems the Treasury released its 2012 numbers. Here is his initial take.
Based on tentative calculations from numbers in the report, total U.S. government obligations—including the NPV of the unfunded-liabilities of social programs—is around $88 trillion, or nearly six-times annual U.S. GDP.
Even so, significant accounting problems with the statements continue, including “material” issues raised by the auditor, the Government Accountability Office (GAO). As a result, the GAO does not offer an opinion on the statements. With fully-proper accounting, the actual 2012 deficit likely topped $7 trillion, with the 2011 deficit topping $5 trillion, as discussed in Special Commentary (No. 485), Section III.

Anyone here still want to sell their gold.
Good Night.

Fri, 01/18/2013 - 00:50 | 3165278 Sizzurp
Sizzurp's picture

When the gold standard was reinstituted after WWI is was done without the international bill market, and it failed.  If we are going to have a gold standard, we need to reinstitute the clearing mechanism, the market for real bills, otherwise the wage fund is destroyed. Fekete is right."Open the US mint to free and unlimited coinage of gold." 

Fri, 01/18/2013 - 05:49 | 3165529 Poor Grogman
Poor Grogman's picture

Fekete is right to a point.

He confuses his audience however because he overcomplicates what is really a simple issue. A real bill is simply another form of IOU but instead of it being based on the so called full faith and credit of the government it is based on the credit of the issuing entity.

Therefore it is money in and of itself period.

Any government intrusion into this system such as setting a maximum maturity period such as the 90 days proposed by Fekete would cause market inefficiency.

The great thing about such a clearing system is that it is based on the smallest possible economic unit, that being the single transaction.

The bad thing about it is that I don't see how you could prevent real bills from quickly building up to the point where there would be more of them in circulation than actual gold coin, unless you were prepared to universally and Arbitrarily set a short maturity period which would then create problems in the market.

Thus real bills priced in gold would lose value as their supply increased..

Catch 22

I would like the professor to explain this problem perhaps I am not seeing something?

Fri, 01/18/2013 - 10:02 | 3165812 acetinker
acetinker's picture

The mechanism discussed by Fekete and Wiener is already in use, every single day, in B2B world.  It works pretty damn well, until somebody goes belly-up (trust me, I know).  Now, did I go to my politicians to demand relief?  Nope.  But I damn well ain't issuing credit to them again!  I know I said belly-up, should have said bankrupt I suppose.  That entity (or parts of it) WILL turn up again in another guise.  Point being, it is NOT without risk!

Yeah, and as far as gold-backed currency goes- I think it's ultimately entirely stupid and short-sighted to base our collective net worth on a commodity, of ANY kind.  Gold as a store of value is a great idea.  As a currency/currency backer, not so much.  BTW, who gives a shit what JPM had to say about it- He was a Goddamn crook!


Fri, 01/18/2013 - 17:38 | 3167523 Thisson
Thisson's picture

The mechanism is explained in Fekete's papers if you continue reading.  I think he argues that the real bills self liquidate and it does not matter how many notional real bills there are in comparison to gold.  That being said, opponents of the real bills doctrine do still have an argument that real bills are inflationary because there are instances where they will fail to self-liquidate.  One example would be where the consumer goods fail to sell at the expected price and there is a partial/full default.  What happens then?  If the failed bills are, in effect, monetized by a central authority then there will be inflation in the system.

Sat, 01/19/2013 - 05:22 | 3168549 Poor Grogman
Poor Grogman's picture

The fact that he throws 90 days as an arbitrary figure concerns me. It shows me that this is a contrivance rather than a free market mechanism.

For example what if I just wanted to use my real bills as money?
Or wanted them to have a one year maturity?

that is something that would happen in the real world you can be certain.

Before you know it you are back to fractional reserve banking?

It seems that the market must have More than one type of money and be able to select according to need?

This gets back to Ron Pauls competing currencies and a totally free market in money, that is where my money is.

Fri, 01/18/2013 - 01:01 | 3165296 q99x2
q99x2's picture

They could say screw all that and use bitcoin.

Fri, 01/18/2013 - 01:06 | 3165301 alfbell
alfbell's picture


I don't watch TV or cable. What I was spouting off was on the front cover of the newspaper, USA TODAY.

I always check it to see if there are any non-financial current events that might indirectly effect markets.

Can you believe the shit they feed the American public. The sad thing is the love it and eat it up. Well, the shit-eating American citizen is now circling the bowl. The price of willful ignorance and preoccupation with subjects and activities that have no significance at all in the scheme of life.

Fri, 01/18/2013 - 01:35 | 3165342 AUD
AUD's picture

The Real Bill is the highest quality earning asset, and the highest quality asset aside from gold itself (incidentally, this is why Real Bills don’t work under irredeemable paper—it would be a contradiction for a Real Bill to mature into a lower-quality paper instrument).

Yes, quality, it's all about quality.

The author is also correct in that;

inflation should not be defined as an increase in the money supply per se, but of counterfeit credit.

Though I would just say poor quality credit. There is only one standard of quality, something whose quality is eternal - gold. To be real a bill must be redeemable in gold.

Fri, 01/18/2013 - 01:58 | 3165368 Yen Cross
Yen Cross's picture

FWIW AUD you are a good trader. I enjoy your posts. You aren;t some pussy that bitches about the future.

Fri, 01/18/2013 - 01:36 | 3165345 oldman
oldman's picture


I like your story; all it requires is honorable human beings.

Of course, if there were such animals---even a fiat system would work, but having said this----I'll take any system with honest an honorable participants       om

Fri, 01/18/2013 - 02:53 | 3165423 Unpopular Truth
Unpopular Truth's picture

Great piece!

Chits exist today for netting: 1-g pieces of gold:

In today's prices these go for about US$ 60 each.

Fri, 01/18/2013 - 03:07 | 3165434 Gmacks
Gmacks's picture

No ablo espanol

Fri, 01/18/2013 - 04:08 | 3165476 luckylongshot
luckylongshot's picture

The Gold standard was introduced by the private banks as an earlier version of  the mechanism they currently use to steal the public wealth. It was called “English Economic Theory” and the first problem with a return to it is that it would keep  the parasites, that are the cause of the problems we are facing today in control.

The next problem is that a gold standard gives global control to the country that controls the gold supply and sees gold flowing from weaker economies to stronger ones. Meaning for weak economies gold is not the solution as they end up facing the same problems they face today. The third major problem with a gold standard is that a gold backed monetary system which is not easily expandable leads to deflation and depression when there are increases in productivity. This is the opposite of what should occur.

The solution is a return to public banking where the Government owns the right to create money, has the ability to issue money interest free and links the issuance of money to productivity. Despite this articles claims to the contrary the truly explosive periods of economic growth in America occurred when it operated under public banking.

For example when Abraham Lincoln resorted to issuing greenbacks he managed to: Build and equip the largest army in the world, smash the British financed insurrection, abolish slavery, turn America into the greatest industrial giant the world has ever seen, launch the steel industry, build a railroad system and provide free higher education. What was even more impressive was that he did all this within four years.

The only answer to the current problems is to return the right to issue money to the people through Congress, who Thomas Jefferson claimed is the group to whom this right properly belongs.

Fri, 01/18/2013 - 04:43 | 3165493 akak
akak's picture

LuckyLongShot, your post is so full of anti-gold, anti-hard money revisionsist nonsense and outright historcial fabrications that it is difficult to know where to start to try and counter all the half-truths and lies within it.  I do necessary blame you for dishonesty here, though, suspecting instead a heavy reading of the malicious, disingenuous anti-sound-money arguments of Bill Still the Fiat Shill and Ellen Brown the Money Clown.

the first problem with a return to it is that it would keep  the parasites, that are the cause of the problems we are facing today in control.

Then why are those very same parasites so hostile to the gold standard, and gold in general, and have fought both for decades now with all their strength?

The next problem is that a gold standard gives global control to the country that controls the gold supply

This statement is empirically pure nonsense, as first, no single country "controls the gold supply".  No such control was ever exercised by those countries which mine the most gold, nor was such control ever manifested by those nations holding the most gold.  As annual gold mining adds not more than around 2% to the world's annual gold supply, and no nation produces more than 1/8 of the world's annual mined supply of gold, such 'control' is an illusion.

At their economic and military peak, the British Empire in fact controlled a surprisingly modest share of the overall world gold supply, actually less of a percentage than their share of total world economic activity at the time.

sees gold flowing from weaker economies to stronger ones.

Actually, that is half-right --- gold would flow from those economies exercising weaker monetary discipline to those exercising more responsibility, saving and long-term foresight.  As it should be.

The third major problem with a gold standard is that a gold backed monetary system which is not easily expandable leads to deflation and depression when there are increases in productivity

No, you have it exactly backward --- not being "easily expandable" is the very STRENGTH of the gold standard!  It enforces fiscal discipline on irresponsible and spendthrift politicians.  That is why they hate it with every fiber of their being.

As for "deflation and depression", you conflate the terms misleadingly and erroneously.  They are NOT interlinked!  The USA saw its greatest, and longest, period of rising prosperity and economic growth, from the early 1870s to 1900, during a period of gently falling prices and overall deflation --- one of the few such episodes of actual deflation in all of monetary history.

The solution is a return to public banking where the Government owns the right to create money, has the ability to issue money interest free and links the issuance of money to productivity.

No, the REAL solution is to cut the links between government and money completely and irrevocably, instituting a regime of monetary freedom, with NO legal tender laws of any kind and NO government issuance of money of any sort.  Just as we wisely have a separation of church and state, we much more desperately need a separation of money and state.  Let freedom rule!

Fri, 01/18/2013 - 06:49 | 3165546 luckylongshot
luckylongshot's picture

While I accept your right to believe whatever you want, some of the statements you made in your reply were untrue.

You claim I am anti-gold however I am a complete gold bug. I am invested 100% in gold and silver and have been invested in these for the last 20 years. The reason for this is that it was obvious 20 years ago that the financial system was a fraudulent Ponzi scheme and that it was going to collapse at some point. What I am opposedto is returning to a gold standard and I set out the reasons why in my original message.

You claim the private bankers that currently own the right to create money out of thin air are opposed to a gold standard, when there are regular reports that the central banks they own are buying gold. It also makes no sense that they are opposed to a gold standard as if they remain in control of the system they eventually, thanks to compound interest end up owning all the gold anyhow.

What you failed to mention was the abuse of power that has occurred while the private bankers have owned the right to create money in the west. I suggest you update yourself on this by looking at the work of  Vitali, Glattfelder and Battiston(2011). They found that a single private banker controlled super entity has managed to gain ownership and control of 80% of the world’s wealth. In my opinion this is one of the most important pieces of research to ever occur in this area and these findings indicate the size of the theft that has occurred while the private banks control the right to issue money. I do not believe it is possible to solve the current crisis, while allowing the criminals that have amassed this fortune to remain in charge. So I stand by everything I wrote initially.

While advocating letting freedom rule sounds nice, the reality is that this is a  naive statement as there is no true freedom in the world today.

Fri, 01/18/2013 - 04:40 | 3165492 Dr. Engali
Dr. Engali's picture

How would you like to be this guy?

Prospector finds a 12# gold nugget wit a metal detector.

Fri, 01/18/2013 - 04:49 | 3165497 Thoresen
Thoresen's picture

Fekete expalins Real Bills better than most.

Gold Standard plus 90 day Real Bills would solve all our problems if only we weren't where we are now! This will all happen after the great default that's coming..... although bankers will probably get the politicians to keep using a system that lets the bankers keep siphoning off endless fees.

Fri, 01/18/2013 - 06:16 | 3165536 Yen Cross
Yen Cross's picture

  GBP/JPY looks good for 100 pips.

Fri, 01/18/2013 - 07:28 | 3165577 falak pema
falak pema's picture

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....

I have a problem with this statement : It led to the collapse of Pax Britannica and the crash of 1929...So how did it work prettey well?

And why in PArt II did "heavy handed state intervention" occur?...

'Cos Part II is the sequel of PArt I, where the Pound standard melted down unable to play the balancing role against deadly Gold; and the USD was in the shits because of 1929 exuberance and "laisser faire" hubris...

How come your analysis conveniently hides this under the carpet...?

Cause and history. Your demonstration neglects facts, the most important ones, to make a theoretical demonstration based on economic ideology.

I can buy ANY ideology that does not negate fact to support dogma.

But I can't support any ideology that puts theory over practice. Don't burn Galileo for saying the world is round. Don't burn Keynes for saying self supporting free markets are a chimera....

Fri, 01/18/2013 - 12:52 | 3166463 shovelhead
shovelhead's picture

and the USD was in the shits because of 1929 exuberance and "laisser faire" hubris...

Naturally, the increase of money supply (by 62%), velocity, and credit (and introduction of margin accounts) prior to 1929 had absolutely nothing to do with this mysterious phenomena and was entirely due to 'animal spirits' and LF hubris.

 Those animal spirits must been walking on a flat Earth. Maybe they angered the money gods?  Was it the shoeshine boy who placed those first large sell orders that created a huge downdraft?

Did you forget that Britain tried to return to Sterling without devaluation for the excess printing to pay for the war?

It failed. No free lunch.

I'm sorry but I can't share your 'faith' in animism.

I hope I'm not sentenced to be burned at the alter of Bernanke.

Fri, 01/18/2013 - 07:58 | 3165597 supafuckinmingster
supafuckinmingster's picture

If you speak German, you must mute the video below before playing....

Fri, 01/18/2013 - 08:39 | 3165642 WhiteNight123129
WhiteNight123129's picture

People should start Real-bills cleared with BitCoins. Same principle.

If the entire credit system freezes, this one could emerge. Similarly people could link to say a Goldmoney account and have real bills cleared with electronic transfer of goldmoney.

Bills of Exchange are a great thing, is the pool to finance wages.

Bill of exchanges are absolutely not inflationary, you can have a real bill endorsed 10 times during 90 days, and the Gold will be used to extinguish the counterparties one by one. So long as the bills are good quality, nothing happen. If one is not good quality, it is not inflationary, you have a credit crunch, some people go out of business some banks go out of business and new bills are created from a sounder basis.

A reference to Gold and Silver was never meant to have all circulation in Silver or Gold but to strengthen credit and limit and avoid bad credit. The Gold reference is the plunger on bad credit.When you have bad credit in a credit circulation with a Gold reference, teh Gold acts as an early flush so do not keep on accumulating bad credit.

If you had fantastic innovation and great new products, the Bills of Exchange could circulate 100 times, it would not create a single bit of inflation.




Fri, 01/18/2013 - 10:25 | 3165909 FreeNewEnergy
FreeNewEnergy's picture

OK, enough on the gold standard-masturbation exercise, because it's not going to happen very soon. There's a "meantime" that must be dealt with, that being the time between NOW and some future monetary system replacing the crap we have now.

As I've ventured through the past five years, it's occurred to me that the people who will do the best in all circumstances (fiat, gold, barter, or whatever standard you entertain) are those who can create their own economy.

By this I mean having a business or trade that does not rely directly upon the system, but operates both in and outside it and can adapt.

Without being obtuse, here's my example. I have multiple income streams of fiat, one of which is the arbitrage on certain goods (I buy low (mostly on craigslist or through my own website) and sell as high as the market will sustain (on ebay or my own website).

I work from home. I have no employees. I keep a garden for food and a wood lot for firewood. I buy silver at regular intervals regardless of price (I even arb that with sero-interest funding via ebay offers - Pay Me Later or whatever they call it).

I learn new skills constantly, be it gardening, building, repairing by vehicle (believe it or not, I drive less than 3000 miles a year).

The current system of economic repression (and anyone who doubts we are economically repressed by the banks and the government is just not paying attention) has forced me to re-examine my own priorities and develop new ones that allow me to live unrestrained by government or debt.

I have credit cards but almost never use them. If I do, they are paid back in full in the current cycle.

Now, to some of you, this may sound like a very humble, boring existence. While it is certainly humble, it is not boring. Evry day is a challenge to defy and defeat the status quo and it is challenging, to say the least.

Now, I may be wrong, but, I think I'll be much better off than many of my friends, neighbors and relatives who have jobs, pensions, health care, etc.

I am self-reliant and self-supportive. If everything falls apart - which I believe to be a mathematical certainty - I will have my garden, my firewood, my silver, my sanity and my self-respect. I will survive, if not prosper.

There's been a lot of talk on here about human nature, so I guess that my point is that the most basic of all human natures is the survival instinct and that's become front and center for me during this period of unprecedented economic malaise.

Sure, survival isn't very glamorous, but it is necessary. There will be time for progress and prosperity, but not until this epoch ends, which it eventually will. When, I do not know.

Sorry to go so long with this comment, but I felt a desire to express the simplicity and comfort of living within one's means and being self-reliant. It's the only way I've been able to manage not completely freaking out, though my frustration at our current condition sometimes is overwhelming.

Good luck to all. Make your own economy.

Sat, 01/19/2013 - 00:40 | 3168403 MeelionDollerBogus
MeelionDollerBogus's picture

Works for me. I'm much the same but literally zero credit cards. No trace of me in the credit system.

Fri, 01/18/2013 - 10:44 | 3165991 Weaver
Weaver's picture

fair game if this sounds retarded, i am a neophyte, but could one of you really smart guys explain to me why we must have a gold standard? are there any other options?


why can't the government just issue it's own money without debt, and then citizens have private currencies that can be used along side it whether they be gold or pinto beans? would that make finance too difficult? 

Fri, 01/18/2013 - 12:12 | 3166347 Orly
Orly's picture

Any "money" created by fiat (that is, someone just says it is worth something...) is not actual money but what is called a credit.  Banks create fiat by way of the fractional reserve system.

A credit to a bank is a debit to someone else.  Therefore, all fiat money is actually debt.

Hope this helps.


By the way, welcome to the machine.  I hope you enjoyed the red pill.

Sat, 01/19/2013 - 00:39 | 3168398 MeelionDollerBogus
MeelionDollerBogus's picture

There's LOTS of other options. Anything with no central control, anything not issued by government, anything that's by consent will work. Now getting into more detail you'll find that some things work more slowly, less conviently. Useful things that are very heavy don't make good money most of the time - but if you're quite strong or swapping PLACES where those big heavy things are, so be it - maybe that works. e.g. generators, cement-mixers, farmland, that's hard to transport & carry by hand or impossible but has value. Find a way to swap use of it & you can make it money. It IS money, not traded FOR money.

Usually things which are liquid, dangerous (radiation, sharp), fragile, heavy, huge, etc., make poor money because people want to carry it. Anything requiring a power-grid is POOR money when the grid GOES and they DO FAIL. e.g. trading kilowatts as CURRENCY or BITCOINS is a Fail(tm) even if it works part-time. Once that grid is down & you need to BUY things to get it back up you've shot yourself in the foot.


Sat, 01/19/2013 - 21:47 | 3169875 Radical Marijuana
Radical Marijuana's picture

Well, Weaver, see my comment below, as my kind of answer to your question. Orly's answer is correct on the first level, that what we call "money" today is the opposite of what "money" used to mean. However, the next "bonus" answer repeats the esstential fallacy that there could ever be "money" based on consent, rather than coercion.

Various people want to believe in impossible ideals so much, that they deliberately ignore reality, in order to promote their impossible ideals as the preferred "solutions."  One of the first and foremost such characters today in America is Ron Paul, who has done more than anyone else to popularize what is wrong with the Federal Reserve Board's fractional reserve banking, creating "money" out of nothing, as debts.

However, classically, Ron Paul promotes these kinds of backwards ideals, such as the ideal of "nonviolence." In reality, there is always violence, or some groups which will rediscover, and redeploy violence, which means that others are then forced to respond to that development. In fact, real human history has been primarily about militarism, and the money system evolved from the history that made War King then made Fraud King.

The world today is dominated by the Fraud Kings, the central banks, with the Bank of International Settlements being the King of Kings of Fraud. Various people like to pretend that is not the case, or that, just because it "should" not be the case, therefore, some series of political miracles might happen to make it no longer the case. The "Liberty Movement" that advocates "nonviolence" is the primary form of controlled opposition to the Fraud Kings today.

This series of articles was another of the many such efforts to promote idealized versions of what money could be, or should be, which are based upon deliberately ignoring the deeper realities that MONEY IS BACKED BY MURDER.

Fri, 01/18/2013 - 13:16 | 3166574 Random_Robert
Random_Robert's picture

My question is:

If we juxtapose the monetary properties of Real Bills with the Free Gold thesis proferred by Fekete, FOFOA, et al; then, in theory, does not governement issued currency already fill the roll of the Real Bill of credit, while Gold (or any real asset that carries intrinsic, but un-enforceable "value) fill the roll of, well, Gold?

It seems that the global monetary discussion is gradually raising the curtain as to why Central Banks still stack their vaults with pallets of yellow, barbarous, "non-money" 

At issue is the socially destructive nature of the willful issuance of Real Bills that have no social economic or trade basis, ie: currency debasement.

None of this changes my personal attitude that as a global price discounting mechanism, Gold will re-assert its dominance yet again in due order. 

I mean, it has to: Society has no other choice but to descend back into animalism; and I still refuse to believe that given the choice between civility, versus deliberately trying to ass-rape your neighbor, that the majority would prefer to conduct themselves in the latter manner.

Fri, 01/18/2013 - 17:46 | 3167557 Thisson
Thisson's picture

No, gov't currency does not fill the role of the real bill.  Real Bills self-liquidate automatically into real money (gold).  Gov't fiat paper doesn't do this.

Sat, 01/19/2013 - 00:35 | 3168394 MeelionDollerBogus
MeelionDollerBogus's picture

one-for-one private-issuance and expiration in less than 90-days with no devaluation is a critical feature of the Real Bill yet no government fiat currency can meet this criterion. Straight up, they don't expire in 90 days and straight up, they don't retain value across 90-day windows, and straight up truth, fiat currency isn't issued by private producers which is a critical purpose & feature of the Real Bill.

"At issue is the socially destructive nature of the willful issuance of Real Bills that have no social economic or trade basis, ie: currency debasement."

Seems Real Bills can't do this. You can get one-offs that are unpaid (money later) or otherwise faulty (bill for goods which themselves are faulty, e.g., soaked-cardboard posing as chicken or dough), but that quickly erases the reputation of those responsible (open market with open information about trades, deliveries, handling, producers, all consenting) and that leads to all future bills being zero value from the guilty parties with no government intervention.


Sat, 01/19/2013 - 21:29 | 3169811 Radical Marijuana
Radical Marijuana's picture

I will repeat what I said in response to the previous three parts to this part four.


The idea that money is a primarily a medium of exchange is superficial bullshit.

Economics is organized crime on a larger scale. The fundamental concepts should be subtraction and robbery, because those can be made consistent with other sciences, such as physics and biology, or with general energy systems. The real world ends up being controlled by the people who are the best at being dishonest, and backing that up with violence. "Money" becomes their symbolic means to engage in force backed frauds. The idea that real "money" was gold and silver coins, etc., traces back to the same set of bogus presumptions. Private property does not exist outside of some system of public violence. Nobody owns anything except by staking a claim, and backing that up with coercion. Those who pay others to do their violence for them tend to forget that, or to take it for granted, as already given. However, the paradox of enforcement, that nobody guards the guardians, is still perpetually present, as the fundamental political problem.

The BIGGER context of the existing globalized, privatized, fiat money as debt, electronic frauds, backed by weapons of mass destruction, such as atomic bombs, is that those are TRILLIONS OF TIMES BIGGER. The future could not be some goofy return to delusional ideals from the past. The future MIGHT only become better negotiations between the dominant organized crime gangs, regarding the ways that the death controls were done. The debt controls depend on the death controls. Nobody owns anything, nor can enforce that presumption, without some system of organized public violence behind them. Those systems of organized public violence become the various sorts of organized lies, operating organized robberies, that ARE the various manifestations of human realities.

Sorry, but this series of goofy articles was so grossly superficial as to be ridiculous. Money is backed by murder, and can never have any other backing. All other notions that money is backed by anything else but murder are delusionally divorced from reality. The EXTREMELY difficult dangers that we now face are that science and technologies have become trillions of times BIGGER, but the same old stupid social habits from Neolithic civilizations, for thousands of years, still dominate the minds of most.

Part 5 of this series will surely remain within its hermetically sealed little world, which continues to presume to take for granted the "rule of law" without addressing how that can be enforced, and therefore, the necessary paradoxes of enforcement that come with that package deal of any "rule of law." The real challenge for the future is to some how negotiate better systems of death controls, or murder systems, in order that there could actually be better debt controls, or money systems.

Of course, the chances of that happening in any sane ways appear less that winning several lottery jackpots in a row. The world is built on the biggest bullies' bullshit, presuming that the history of backing up money with murder, and claims over private property through paying for coercions, could be ignored as the foundation of the whole system.

This series of articles is another of the many examples of that, found in numerous Zero Hedge articles, which object to fiat money fraudulence, by proposing political miracles as the idealized "solutions." IN FACT, money is backed by murder, and private property cannot exist outside of that context. Therefore, money as a medium of exchange, that evolved from bartering, and could become better bartering, is BULLSHIT! Money evolved from the history of robbery, which became more and more symbolic, as frauds. The fundamentals are based on militarism. They will always be. The PROBLEMS are technologies making electronic frauds, backed by atomic bombs, being TRILLIONS Of TIMES MORE POWERFUL.

The same chronic political problems are inherent in the nature of life now, as always. They are becoming more amplified to astronomically larger scales. This kind of article skims across human ecology, (and industrial ecology, and natural ecology) as if those do not exist. That kind of ridiculously reductionistic abstraction is totally typical of the bullshit surrounding "economics," which refuses to admit and acknowledge that it is simply organized crime on a larger scale. The future for economics is actually the extremely difficult and dangerous renegotiation of the combined money/murder system, or debt/ death controls, between the established organized crime gangs that currently dominate the world, or which will dominate the real world systems in the future.

That will happen in the hardest possible ways, since those who dominate those systems now are the ones that used to be the best at deceits about what they were doing, and therefore, the best at being dishonest about themselves. This series of articles, on an "Unadulterated Gold Standard," so far, is just another bunch of tempests in little teapots, which are based upon deliberately ignoring the larger political and social storms that those are contexted within ...

Sun, 01/20/2013 - 04:50 | 3170285 MeelionDollerBogus
MeelionDollerBogus's picture

Dude, you're an idiot. Survival of all creatures on earth requires eating others. It's not MURDER just to eat, to keep others off your home terf and to kill some who are tasty. Humans, lions, even bacteria do this.

The most vicious murder possible is to declare NO ONE can have property because TERRITORY is inherent to ALL LIFE ON EARTH, even those living in ocean vents.

It's merely a higher abstraction of humanity that we claim territory with the ability to move on, but prefer not to, and claim property not just as our territory but things we make or carry.

Private property is what exists when we do NOT MURDER each other. To remove private property requires mass-murder by the millions DAILY until people are so far apart we can't travel to each other.

Thank you for being a fuckwit. Your time is over, now be gone.

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