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Fractional-Reserve Banking is Pure Fraud, Part IV
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Fractional-Reserve Banking is Pure Fraud, Part IV
Written by Jeff Nielson (CLICK FOR ORIGINAL)
Part I of this series explained how most of what we call “banking,” and in particular “fractional-reserve banking,” is inherently criminal and fraudulent. What the banks call “business” would be a crime if perpetrated by any other entity in our societies.
Part II of this series noted how after the Big Banks blew up our financial system in 2008 (with their reckless gambling and systemic frauds), both the Big Banks and our corrupt governments promised “never again.” They agreed to reduce the insane “leverage ratio” (i.e. fraud ratio) of the Big Banks back to quasi-reasonable proportions.
What they actually did was the exact opposite. Instead of requiring more than the microscopic capital reserves of the old “Basel II” rules, the new “Basel III” rules effectively allowed this financial crime syndicate to operate with near-zero reserves. “Fractional-reserve” fraud has now become no-reserve fraud.
Why would the tentacles of this financial consortium even want to operate with virtually zero reserves? As they march our markets higher and then lower, these corrupt organizations will absorb some losses ontotheir own balance sheets. The response of the Big Bank crime syndicate is simple: “who needs reserves when we can steal as much as we want , any time we want?”
What happens when a Big Bank suffers a supposed “catastrophic loss?” It runs crying to one of our corrupt governments for a bail out. Of course, the banks have already looted every penny out of our public treasuries, with the $10s of TRILLIONS they extorted from our governments at the end of 2008.
Now, when the banksters want to steal capital to cover the losses from their gambling and illegal frauds, they demand a bail- in. This is another example of their euphemistic liar-language, which simply meanstaking other peoples’ property (to which they have no legal claim, whatsoever) in order to cover their own losses.
Part III of this series pointed out the obvious truth that we don’t need any of this. Fractional-reserve fraud is not a necessary tool of economic development. Rather, it is a reckless short-cut, guaranteed to sabotage our economic development over the longer term.
Today, attempting to produce a slightly higher rate of growth (through the borrowed capital of fractional-reserve fraud) comes with a guaranteed cost: it will lead to lower growth when either the debts must be repaid or the whole system simply implodes ( i.e. Debt Jubilee ). When we attempt to “have more” for ourselves today, we do so by mortgaging the future of our children.
At this point, many readers may be thinking to themselves that it can’t get any worse. We have a financial crime syndicate which sits legally above our governments, dictating the rules of a “system” (i.e. organized crime) which transforms our entire markets and economies into a playground of crime. Here, the criminals fleece their victims with reckless, rapacious impunity because they know they will never be punished – no matter how many times they are caught breaking laws.
Worse still, with a “leverage ratio” (fraud ratio) which is becoming limitless, this crime syndicate can conjure, out of thin air, near-infinite quantities of funny-money to fuel their financial crimes. We see this demonstrated with what bankers call “the derivatives market”: a private, illegal, unregulated, crooked casino, where the quantum of the bankers’ gambling exceeds twenty times the size of the entire, global economy.
However, we still have not seen the pinnacle of this criminalized, financial insanity. In order to make this corrupted system infinitely worse, our governments have allowed the Federal Reserve racketeers to impose an additional element of infinite fraud: 0% interest rates.
There is no such thing as “a 0% loan.” Just ask the Tax Man. Try giving or receiving any 0% loans in your own financial affairs, and before the ink is dry on your virtual tax return, the tax enforcers will be knocking on your door.
They will tell you that your 0% loan is a sham transaction, prima facie fraud. They will tell you that the transaction is legally null-and-void, and that they will treat the so-called “loan” as what it really is: a gift. Yet in the ultra-fraudulent realm of our financial system, once again what is totally illegal for ourselves is just “business as usual” for the One Bank.
When the Federal Reserve claims to have “loaned” countless billions or trillions to the One Bank (we don’t know how much, because it refuses to fully disclose these activities), it has actually been giving these billions/trillions to the crime syndicate. It is free money, in every sense of the word.
Meanwhile, when our local or provincial/state governments need financing to help people survive the economic penury inflicted upon them by the One Bank, every penny of their money is always borrowed –really borrowed, at a real rate of interest.
How do these governments pay the ever-increasing interest payments on this debt? More and more, we see these governments do so by selling off assets: the assets of the People. Generally it is our best assets, and generally the asset-sales are at pennies on the dollar, because these governments are desperate. It is a distressed liquidation.
Who is the receiver of the ever-growing interest payments on these debts? The One Bank. And who is the buyer of most of these choice assets? The One Bank. It buys the best assets of the people (at pennies on the dollar) with its mountains of free funny-money, which starts with the 0% gifts from the Federal Reserve. This is a violent economic violation.
However, we still haven’t reached the culmination of these fraudulent, financial atrocities, which is combining “fractional-reserve” fraud with “0% interest” fraud. This is best illustrated through a simple numerical example. We’ll pretend the system is less-fraudulent than it is, and pretend there are less of these Big Bank tentacles than there are, in order to maintain more comprehensible numbers.
Let’s start with the $800 billion or so in new, official funny-money which the Federal Reserve was cranking out – each year – between 2010 and 2014. Every penny of this money was handed, for free, to the One Bank.
Let’s assume that there are only four Big Bank tentacles in this crime syndicate (in reality, there are dozens). Let’s assume that the actual leverage ratio/fraud ratio is the most stringent number officially on the books in the “Basel III” rules: 16:1 (rather than the de facto no-reserve fraud which these Big Banks are actually allowed to perpetrate). To make it even simpler, let’s assume that the Fed hands its entire free of $800 billion to a single tentacle: Big Bank A.
What does Big Bank A do with that $800 billion, all free money, from its 0% loan? It “loans” all of that money at 0% to Big Bank B, except multiplied by the 16:1 fraud-ratio of our fractional-reserve system. Suddenly, the mere $800 billion in free crime syndicate money becomes $12.8 trillion in the hands of tentacle B. All loaned at 0%; all free.
What does Big Bank B do with its free windfall of $12.8 trillion? That’s right, it loans it all to Big Bank C, at 0%, except once again multiplied by the 16:1 fraud ratio. Now the $12.8 trillion becomes $204.8 trillion, but why stop there? Big Bank C then loans its $204.8 trillion to Big Bank D at 0%, again multiplied by the 16:1 ratio. What began as a paltry $800 billion of free money in the hands of Big Bank tentacle A has become an insane mountain of free, conjured paper totaling $3.3768 QUADRILLION (or $3,376.8 trillion), in the hands of Big Bank D.
Remember that this ocean of funny-money, in the hands of history’s most-rapacious crime syndicate, would come from just one year of Fed money-printing. This was the subject of a commentary in April called The Multi-Quadrillion Dollar 0% Interest Scam. That commentary drew little reaction at the time, showing how numb people have grown to the rapacious frauds of the One Bank.
As a reminder; the numbers used in the previous hypothetical example were not real. In reality, the One Bank is not comprised of a mere four Big Bank tentacles, but rather dozens. In reality, the current fraud-ratio in our “fractional-reserve” system is not 16:1, but rather near infinity. Thus the reality is infinite mountains of free, fraudulent, funny-money.
We have a word for currency conjured out of fraud: counterfeit. Our official “fractional-reserve” monetary system, with official 0% lending rates, essentially zero regulation, and literally zero law enforcement is a system of institutionalized counterfeiting. The crime syndicate that sits atop the system is legally allowed to counterfeit all the money it could ever desire to finance its Empire of Crime.
Naturally, conjuring infinite quantities of funny-money can have only one outcome: hyperinflation. This is the near-infinite dilution of a currency, as its corresponding exchange rate plummets to zero. Thus the One Bank isn’t finished. It has declared an unofficial War on Cash, pressuring its puppet governments to “ban cash” in our (supposedly) “free societies.”
In our current system of fraud, we voluntarily “deposit” our wealth into the hands of criminals. They then use that wealth as a financial tool to control and mistreat us, and then they simply steal that wealth. Instead, the One Bank wants a system of absolute coercion. We would all be forced to place all of our wealth into the hands of history’s most-rapacious thieves – except for what we (prudently) protect in the form of “hard assets,” such as gold and silver.
Whatever wealth we choose to shelter in history’s most reliable wealth-preservation vehicles is immune to the banksters’ rapacious, paper system of infinite fraud and infinite theft. This is why the One Bank relentlessly attacks the precious metals market. It attacks these markets with relentless (and illegal) price-suppression. It attacks these markets with relentless (and absurd) propaganda, attempting to discredit these wealth-preservation vehicles to an unknowing general public.
We live in a system of infinite financial fraud: the fraud of “fractional-reserve banking,” multiplied by the fraud of 0% lending. The goal of this institutionalized fraud is nothing less than the theft of all of our wealth. The only answer to such infinite fraud is the absolute protection afforded by history’s ultimate safe havens: gold and silver.
A fractional-reserve fraud system, in any form, could never be justified in any legitimate society. However, we have today something much, much worse than mere “fractional-reserve banking.” Instead, we have a system of infinite debt, infinite gambling, infinite counterfeiting, infinite fraud, and infinite crime. A criminal bankers’ paradise.
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Fractional-Reserve Banking is Pure Fraud, Part IV
Written by Jeff Nielson (CLICK FOR ORIGINAL)
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I notice in this conversation a lack of the word capital - as if debt and promises are the same as capital.
From my perspective capital is saved production - without living beneath your means there is no capital, just debt on future earnings.
For Glee to get his MOE in use he needs the exact same thing the metals advocates need - repeal of legal tender laws.
The USC requires the central government to establish the value of money.
Producers should be the only ones providing any credit. And only to the extent that they can back up with their own production. Not future production either.
Why? Any trader with integrity (i.e. delivers as promised) should be able to create credit. Credit is about the "future". You don't create it to enable anything but trades that span time and space.
As long as the one extending the credit stays tied to it its all good. Sadly its not conected to anyone alive yet now.
As long as the one extending the credit stays tied to it its all good.
There is no "one" extending the credit. It is "the process" and "the marketplace" that extends the credit.
Compare it to insurance. There is no "one" assuming the risk. It is the pool of insured paying premiums that assume the risk.
What really has to be preserved and protected is the process ... just as the insurance company and its process must be preserved and protected.
I searched in vain for any suggestion of alternatives to "fractional reserve banking" in this amateur piece of work. In addition, Neilson has made a number of statements which are patently false, for example his notion that the banks are currently operating with zero reserves.
Since Neilson has failed to do so, let me suggest an alternative to fractional reserves. This would be to make all money in the US from Treasury currency. Before the Fed was established in 1913, a substantial portion of US money was Treasury currency. These were silver certificates based on silver stocks at the Treasury, and United States Notes (greenbacks) based on the full faith and credit of the United States. These continued to circulate into the 1950's. Of course, some kind of mechanism would have to be installed to prevent the unlimited issuance of this money by the Treasury instead of the Fed. Otherwise we would be no different from those underdeveloped countries which have issued unlimited amounts of their own treasury currency, and then defaulted in hyperinflation.
These were silver certificates based on silver stocks at the Treasury, and United States Notes (greenbacks) based on the full faith and credit of the United States.
There is nowhere near enough of the stuff to base the money in circulation on silver ... even if you take all the silver (and gold) in the world, let alone the treasury.
Greenbacks were as close as I've seen us come to real money.
Real money is "a promise to complete a trade". In the case of the greenbacks, it was the USA that was promising to complete the trades. And from what I've read, they did complete the trades. The greenbacks were recovered and destroyed. That's how an MOE management process should work.
However, I don't know what the USA used to recovere the greenbacks. They probably used silver certificates ... or more likely counterfeit money they created to replace it and have never removed from circulation (through tax collections).
Starting in the 50's, commercial banks collected outstanding US Notes and Silver Certificates and exchanged them for Federal Reserve Notes from the Fed, who destroyed them. Incidentally, up to 1950, all one dollar bills were silver certificates.
I know. I was there. I can still remember how angry it made my mother. But other than that, there was no immediate effect. Truth be told, all those Silver Certificates could never have been redeemed for silver. It was a lie. The FRNs removed the illusion. They were now backed by the "full faith and credit of the US Government". Now that we are an occupied country that faith is also a myth ... yet their credit exists as always, through counterfeiting.
Why did WTC7 fall down?
But as you state it ends up in the same place. The issue is the coin has no real value. All the BS stops when the coins buying power is fixed and verifiable by everyone. What you prapose is another sceam to trade our labor for another fictional coin. This is not a good solution. It also still keeps the war complex in charge of the planet.
It also still keeps the war complex in charge of the planet.
Wrong. Under a proper MOE management process, DEFAULTs are monitored and immediately mitigated by INTEREST collections. It's an actuarial process where the propensity of the trader to DEFAULT is estimated and the INTEREST is collected in advance.
Keeping that in mind, the propensity of the "war complex" to DEFAULT is 100% ... it is a certainty. They have "never" delivered on their trades. They just roll them over ... and that is DEFAULT.
Thus, when they present their trading promises for certification and pass through the actuarial sieve, a 100% INTEREST collection is imposed. Their trading promise is DOE.
As it is now, they have maintained the hoax that they are the most reliable trader. That has never been the case, but we (the trading public making up the marketplace and economy) for some reason allow it.
We must stop allowing it. A properly managed MOE process "will" stop allowing it.
Ya lost me. Please explain in more detail.
First, know money is "a promise to complete a trade". This is evident from examination of trade: (1) Negotiation; (2) Promise to delivery; (3) Delivery. In simple barter exchange, (2) and (3) happen simultaneously on-the-spot. Money allows (2) and (3) to happen over time and space ... and thus is obviously just a record of an in-process trading promise.
Here's the genesis:
Thus, for every individual certified trading promise, no money exists before nor after the trade. Consequently, INFLATION can be nothing but zero. The operative relation is INFLATION = DEFAULT - INTEREST = zero.
Now consider governments. They make trading promises on which they never deliver. They just roll them over and that is DEFAULT. Further, they charge themselves minimal interest so those DEFAULTed certificates are never recovered. They compete in circulation with real trading promises (thus devaluing the MOE).
The result is that governments sustain themselves on INFLATION. It's a well know fact governments barely collect enough taxes to pay the minimal INTEREST they levy on themselves ... they never pay down principal.
Now consider a government with no "super-trader" advantages (i.e. an ability to counterfeit and get away with it). They would be ostracized from the marketplace by the 100% INTEREST load imposed on their trading promises. They couldn't wage war.
Simple enough? Specific enough?
You and others can create any kind of scam or scheme you want, and you can go right ahead and practice that scam or scheme with anyone else who wants to.
HOWEVER...
Money is NOT a promise.
Or if you manage to rip-off and destroy the valid concept of "money", then we need a replacement for what money SHOULD mean. Namely, a specific quantity of a real, physical, valuable good that people "price" their goods, goodies and services against.
The best money is "gold" and the best unit is "one-gram-of-gold".
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Now, let's be clear. The fact is, the meaning of concepts are utilitarian and not inherent, specified or defined by any "authority"... partly because the concept "authority" is inherently fiction, not real.
So when I say "money is not a promise", that's simply because your definition sucks from a utilitarian point of view. The reason it sucks is... because there are no other synonyms for what I mean by money. Which means, if I let you or others steal what I consider the proper meaning, I and others would have no way to express the absolutely important concept that we mean by "money".
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So, I have a proposal. Since your meaning of "money" is "promise", why not just say "promise" and eliminate any confusion. After all, you DO have synonyms for what you mean by money, while we don't.
Otherwise, those of us who INSIST on money being a real, physical good that has value would need to coin a whole new term.
But you know what?
If we did that... a pack of other authoritiarian predators would appear and demand that our new concept meant "promise" or something else.
This is the classic approach of human predators... to make the most important topics literally impossible to consider or discuss, because the key concepts required to consider or discuss those topics do not exist because they were co-opted.
I don't have any special attachment to the character sequence "money". In fact, in other languages the character sequence is different.
But damn it... those of us who know what money SHOULD MEAN... and must mean to be safe from diabolical manipulation and fraud by human predators... NEED A STABLE WAY TO CONVEY THE CONCEPT.
Since you have other ways (like "promise"), we hereby claim "money" for our meaning.
If you need another synonym for "promise", go ahead and invent one. Just don't choose the character sequence "money". Us sane, honest folks need it.
Because ?
Why do you assume these certificates will circulate as currency ?
Stopping war.....your MOE is international ?
Is your MOE an alternative to the SDR ?
Because ?
Because as I have illustrated, they never lose their value; they are in free supply; and supply is guaranteed to perpetually equal demand. Thus, they are universally accepted in simple barter trade. Nothing else delivers those attributes.
Why do you assume these certificates will circulate as currency?
The definition of currency seems to be illusive. To me, it has always meant a "paper representation" of money ... as opposed to a "coin" representation or a "record" representation. But it is just that ... a representation of money ... a representation of "an in-process trading promise". They circulate, not by edict, but by traders choice. And paper is only one form of their possible circulation ... a form, like coins, that is being used less and less. The key to all of this is to guarantee the representation actually stands for an in-process trading promise (i.e. is not a counterfeit). This is no small task but current solutions (which we can improve on ... especially when we remove the largest counterfeiter ... governments) are a good starting point. Cryptography will be useful. Better authentication of traders (creating the money) will also be necessary. Anonymity at the point of creation cannot be allowed as it would destroy the necessary transparency of the process.
Stopping war.....your MOE is international ?
First, it's not "my" MOE. I just describe the obviously proper process. There is "no" necessity for government intervention, thus no boundaries. It doesn't have to be an exclusive franchise. It is international to the extent that governments don't outlaw it.
Is your MOE an alternative to the SDR ?
It is a MOE process. The SDR is too, but not a widely adopted MOE. It's just used between countries ... not between traders. I think they're positioning the SDR to replace the dollar after they have successfully destroyed the dollar. The SDR (which will be mismanaged in the same way as the dollar is now) cannot compete with "any" properly managed MOE process. This is because there is only one process that can deliver the optimal set of attributes. They can only mimic that process. To try to do anything else, they will have to "outlaw" the proper process. Once people understand the obvious definition of money (not the myth the capitalists have foisted on us), the SDR managers will have a difficult time imposing their scheme.
Wars will be problematic when governments can no longer openly counterfeit for their funding.
So the assumption is that the NEW MOE will attract users, the demand.......
How can this MOE get that much demand to get started ? Your MOE requires labors to trade their human action to create value - why would I do that ?
Greshams Law - How does this apply to your MOE when it will compete with other MOE's and tools of barter ?>
The global stall. Then hunt um all down, catch them put them all on trial in real court. With me so far?
Then we set up a coin with a real measurable value. An energy backed coin.
Any questions?
Any questions?
Yes.
The main problem is the coins real value without force.
Free choice.
Because all forms of energy can be consistantly be measured.
Same as last answer.
Thanks for asking good questions.
Because all forms of energy can be consistantly be measured.
This statement is very far from true. And even if it were true, it's the measure that is at issue ... it's the valuation that's at issue. The cost of energy is anything but static.
For a properly managed MOE process, the unit of measure should be unvarying. I submit an Hour of Unskilled Labor (HUL) is a far more static unit of measure than any energy based measure. The joule doesn't change ... but the cost of creating one changes dramatically. Comparing to gold, the ounce doesn't change ... but the cost of creating a new ounce of gold changes dramatically. And the valuation of an ounce of gold changes even more dramatically.
Another thing giving a HUL an advantage: As the marketplace expands (more people), HULs expand in virtual lockstep. As a marketplace contracts (fewer people) HULs contract in virtual lockstep.
I dont see how unskilled labors value has been stable. Not that skilled labors value has been either.
How is measuring energy tricky?
I dont see how unskilled labors value has been stable. Not that skilled labors value has been either.
I don't know how to describe it in simpler terms. The key is not "value". The key is "unit of measure". The value of a hole created by a HUL is in the eyes of the holder. But the number of HULs required to create the hole doesn't change over time and space (assuming the same kind of dirt being removed and the same size person holding the shovel). It's not "perfectly" stable in individual cases ... but in aggregate it "is" perfectly stable. That can also be said for energy ... but timing devices for measuring HULs are more widely available than they myriad of devices you need to measure energy (and work) in all its various forms.
How is measuring energy tricky?
I can tell you precisely how much time went into delivering this reply. I have no easy (non tricky) method of determing how much energy went into this reply. That's just one "for instance".
Thank you for writing this series
This article is complete FRAUD! Fractional reserve banking is NOT pure fraud. Are there problems with the federal reserve system, YES!, but that does not make fractional reserve fraudulent!
Fractional Reserve Banking is NOT Fraud
WRONG.
WRONG.
WRONG.
And EVERY honest individual can easily see fractional-reserve practices are fraud.
ONLY supporters of predatory authoritarianism advocate and support fractional-reserve practices, which tells us exactly what you are... an authoritiarian predator.
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In short, there are only two kinds of people and two ways to live:
#1: Those who create/produce the goods and goodies they need and want to survive, prosper and enjoy life.
#2: Those who steal from others the goods and goodies they need and want to survive, prosper and enjoy life.
In shorter, producers and predators. And if the producers allow predators to grab the goods and goodies they create, they are also prey.
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EVERYONE who supports fractional-reserve practices is trying to get something they did not earn. EVERY ONE OF THEM.
In short, there are only two kinds of people and two ways to live:
How about people who provide a service? Do they not have a way to live?
HonestAnn, consider things at the limit:
We, through services and production, in time create automatic solutions for everything ... agriculture, education, manufacturing, natural resource processing ... everything.
At that point, neither of the two kinds of people you cite exist at all. And we know that's the direction we are going. All I have to do is a simple subtraction of how things were 70 years ago (when I started) and are now (as I finish). An astonishing number of things being done manually 70 years ago are being done automatically now. And that trend is growing geometrically.
Your premise is false on its face by simple examination.
A service is one type of goodie.
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Don't let terminology or side-issues confuse you.
One reason you may assume that a "service" is not a "goodie" is because of the FACT that you can't "save a service". And indeed, that is true.
You can save real, physical goods.
You can save real, physical goodies.
You cannot save a [real, physical] service.
And that does mean there is a difference between a "service" and all other goods and goodies. The difference is, you cannot save value in the form of "services".
To be sure, you can try. You and a massage therapist could write 10 paper agreement "coupons" that say the therapist owes you a one-hour massage (per agreement coupon).
In a manner of speaking (but not in reality) you have "saved 10 one-hour massages". You might even imagine you are saving the value of those 10 one-hour massages (which can change over time), since you might be able to trade those coupons with other individuals for other goods and goodies.
But you haven't actually saved anything real. The massage therapist might die before you "trade them for massages", or she might catch some fatal communical disease like ebola that renders those coupons worthless. Unlike a physical good or goodie, those coupons have no value in and of themselves.
So there IS a difference between a "service" and a "goodie".
However, in terms of trade, a "service" is one type of "goodie".
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As an aside, I never stole from anyone. Not when I was born, not in the past, not in the present, and not in the future.
I am a producer, not a predator.
You could claim I was a parasite when I was a child, since I did not produce anything of value, but consumed food, clothes, shelter, etc. That's a bit of a stretch in the sense that I was not yet capable of being a producer. However, the fact is, you would be literally correct to make that claim, and I accept that.
HonestAnn:
It's hard for me to see how your reply relates to what I wrote. Regarding saving stuff rather than records of stuff or promises, it is easy to illustrate where "both" are perishable. With today's technology, it is now easier to protect records of stuff than of the actual stuff. Historically, that hasn't been the case.
I grant you, record keeping is a "social" process and employes discipline. Storage of stuff is a "physical" process and employs force. I choose the former. You choose the latter. Perhaps you are stronger than I am.
You said that I claimed that "people who provide a service have no way to live".
Apparently you came to that conclusion because you assumed "a service" is not either "a good" or "a goodie". I simply clarified that a "service" is one form of "goodie"... at least for purposes of trade (but not savings).
My take is that you are very close-minded and subject to propoganda.
But, assuming you are not here just to bitch and complain, and you are truly as smart as you think you are, I would invite you to read the article I posted so we can have a serious discussion.
Well said Ann.
I would be very interested in your thoughts on an energy backed coin.
Philosophically, it is none of my business what other humans choose to accept for the goods and goodies they produce.
As for my preference, I prefer people exchange real, physical, valuable goods for the goods, goodies and services they want to acquire. This way every transaction is COMPLETE once the transaction takes place, no third parties are involved, and no assumptions or additional promises exist (like "you can actually get a barrel of oil for this coin).
Thus, I prefer to buy goods, goodies and services with coins that have value in and of themselves, with no external promises, no other assumptions, and no indirection (like "you can get silver, gold or oil for this coin or piece of paper").
Obviously a coin tied to oil is better than pure fiat. But since gold and silver coins work so well, and avoid all sorts of other problems that can arise, I prefer gold and silver coins and/or other real, physical goods and goodies (when those transacting can agree upon them).
I'd like to ask you to explain something to me. Why do people have such a strong psychological need for problematic currencies when gold/silver money works great, and avoids the many kinds of scams that human predators can concoct to take advantage of the dependencies and indirection inherent in other [usually paper] alternatives?
PS: And do understand, human predators will ALWAYS look for ways to take advantage of EVERY SINGLE MECHANISM, SITUATION and BEHAVIOR to fleece producers. Why would anyone prefer to adopt a scheme that makes that possible if not easy for them?
Thanks Ann for the well thought out and clear answers.
As to your question. Its all bartering when it comes right down to it with the metals as money. They are finite and dont scale well and of course will lead right back to a fiat. Its a cycle that seems to be repeting. Sucking for producers every step of the way. Now tying the metals value to all the other stuff people want or need should provide the scalability we have been missing. The thing is to have a coin that protects the value of my/our labors. Gold and silver wont do that by themselves. Besides the coins quality cant be assured easily. Energy can by very well measured with ease.
Its all bartering when it comes right down to it with the metals as money.
Why metals? What advantage do they have over non-counterfeitable methods of record keeping? We already know creating non-counterfeitable metals has always been a problem ... especially as the metals become sufficiently valuable for dealing in large exchanges.
Yep. Good luck fooling an old deisel pump.
Energy has some great attributes in modern times, but other attributes are worse compared to gold, silver and some other metals.
I don't see why gold and silver fail to scale well, or why they lead back to fiat.
The ONLY way any scheme leads to fiat is by fiat. A government could decree that turds are currency, and that would be fiat too.
ANY form of fiat is corruption, because it allows human predators to steal from human producers via whatever form and formulation the fiat is.
If you believe there isn't enough gold and silver in the world to function as good money, then what will happen is the price of gold and silver rises far beyond cost of production. If that starts to happen, but does not spur sufficient additional production, then you and others can start spending platinum coins, or palladium coins, or rhodium coins, or any of several other metals and elements with acceptable properties (not poison, not radioactive, etc). And if that's not sufficient, which seems impossible, then add even more real, physical goods to your list of "barter currencies".
Personally, all I care is... I'm trading value for value with no fiat involved, no indirection involved, no way for human predators to insert themselves into my private trades.
Note that adding a great many other kinds of coins is not a problem. You still keep the "gold standard" (which means everyone lists the price of their goods and goodies in grams of gold), and that list contains the prices of grams-of-platinum in grams-of-gold, grams-of-palladium in grams-of-gold, and so forth. This retains the simplicity of having only one price for every good and goodie, but lets anyone who wishes exchange other goods and goodies in their barter transactions.
As you say, when you're trading ANY real, physical, valuable good as currency, what you are actually doing is barter. The only actual enhancement of the "gold standard" is having that one standardized price list in terms of grams-of-gold. That doesn't mean anyone must barter with gold, it simply provides the means of easily knowing the relative value of ANY two goods.
Thanks for the good questions Ann.
The scale issue with savers messes the metals idea up. Its finite so say the five or ten richest people on the planet decide to hoard it bigtime. They could basically stop a large portion of all trade simply do to lack of coin to trade with.
The amount of coin does need to keep pace with demand and population and production levels.
Now with an energy valued coin the ability to keep pace with both production and populations should also somewhat fix golds actual value permenatly to a cost of production of said gold.
Obviously you're not old enough to remember the insane long lines (and insane higher prices AKA exchange-rate) at gasoline stations in the 1970s (I think that's about when it was). Which is just to say, oil and energy are not immune from the problems you worry about.
Note that I never said the price of any good must be eternally fixed in grams-of-gold. Just like today, any producer or supplier of goods can change his price at any time.
I don't see why gold and silver fail to scale well, or why they lead back to fiat.
Try this. There is only one ounce of gold per person on Earth. There is only `1/5 that value in silver per person on Earth (thus an aggregate 1.2 oz of gold value per person on Earth).
As measured in dollars, that's less than $2,000 ... chump change ... petty cash.
And you can't just say we'll call that $20,000 or $200,000 or whatever because the cost for miners to produce and refine it will go up in the same proportions. You accomplish nothing.
And then you have the clumbsyness of gold when compared to record keeping methods.
What could be more obvious????
I think you need to read your own comment. It contains the answer to your objections.
But on top of that, never forgot "the velocity of money". If a given gold or silver coin turns over 10 or 100 times per year, the value of goods exchanged has increased by 10 or 100 times relative to the instantaneous value (exchange rate) of the coin.
There never has been any need for sufficient money to exist to buy everything of value on the planet. That's what your worries assume.
BTW, consider your worry that "there is only one ounce of gold per person on Earth". That got me thinking. Do I wander around with $1200 or $2500 in my purse? No, I never did (unless I was on my way to buy a car).
Also note my other messages above that make totally clear that humans can exchange lots of other real, physical goods besides "grams-of-gold" coins. The "gold standard" simply means the PRICE of all goods is LISTED in terms of grams-of-gold (by convention, not by law). Given that list, you can exchange any durable good for any other good or goodie or service. You just divide the value of each item of trade/barter by the other to compute the exchange rate of the two goods/goodie/service being exchanged.
Also gold and silver coins are anything but clumsy.
BTW, if you are one of the endless horde of MORONS willing to trust large financial institutions with your wealth and savings, nobody will stop you from giving them your gold coins, and buying with debit (or credit) cards linked to your account. That's up to you and the rip-off artist you trust your wealth with.
However, I must say, if this was how the world worked, I am quite certain individuals and corporations who ran these debit-card companies would compete to invent more and more secure and reliable ways to assure they weren't stealing depositors gold. And so, the risk of loss would probably be low.
Nonetheless, I personally have a firm policy to TRUST NO ONE, so I'll hold onto my own wealth in some physical form. That doesn't mean gold coins or silver coins or any specific other form. If I chose to worry much about changes in the value of my savings, I'd invest some time, effort and research to figure out what physical goods would probably rise in the future, and keep most of my savings in those physical goods.
You need to be mentally flexible to understand how ANYTHING real would, could or will work, which you are not. The real [free] world is not some fixed, static situation decreed by some absolute authority. The gold standard in actual practice is nothing more than a (standard) convention to price goods, goodies and services in grams-of-gold. It does not mean you or anyone else is required to barter or transact in gold, and does not mean you or anyone else is required to save your wealth as gold. Which means, most people wouldn't... and a whole industry would arise to estimate what real, physical goods are best to save at any given time, just as whole industries have arisen today to estimate which bond, stock or other instrument is best to save at any given time.
Hell, the gold standard even lets you hold fiat, fake, fraud, fiction, fantasy, fractional-reserve pieces of toilet-paper debt-bits... or monopoly money... or anything else you wish as a free, independent being. All the gold standard does is price every good in terms of grams-of-gold. You are free to do whatever you want, including sucker for whatever fraud you wish to be screwed by.
But on top of that, never forgot "the velocity of money".
Velocity of money is only relevant to an improperly managed MOE process. With a proper MOE process, money (certified real trading promises) is in free supply. Supply and demand for the MOE is in perpetual perfect balance ... it's the nature of every trade. If there's not enough money in circulation to make your trade, you just create it by making an explicit trading promise; get it certified; and proceed to deliver on your promise.
Similarly, "time value of money" is only relevant to an improperly managed MOE process. A proper MOE process guarantees zero inflation of the MOE itself. Thus, the zero value of the "i" term in the (1+i)^n expressions makes "n" irrelevant.
Well, I think the problem we may have is the notion of "manage".
As far as I'm concerned, as long as 7-billion people are managing their own lives and property, I'm fine with "manage".
However, I am NOT fine with any notion of "manage" that is done by any so-called "authority" (banksters, central-banks, governments, financial corporations, other).
I think maybe you (like many others) misunderstand the whole thrust of my messages about this and many topics. And the misunderstanding virtually always traces back to the "authority" fiction.
You see, I have ZERO objection for you to participate in any kind of activity you want, as long as that activity does not require me to participate or suffer bad/good/neutral consequences from your activities. Same goes for everyone else.
Which means, you and everyone else can save or spend soiled diapers if you want... or fiat, fake, fraud, fiction, fantasy, fractional-reserve debt-bits... or anything else you want.
When I propose something (action, behavior, financial, anything), I'm just stating my personal preference. That's because I explicitly REJECT all forms of force and authority. In fact, I have only one idea when it comes to attempts to force me, and that is to exterminate whoever attempts that, or to evade them if that seems more appropriate at the time.
Sadly, almost everyone else on this planet, when they discuss issues, they implicitly or explicitly adopt the inherently authoritarian attitude. That is, they are stating a system that they prefer be shoved down the throats of everyone. Their basis premise is the absurd but almost universal notion that "everyone must be forced to adopt the same way of doing everything".
To me, that's insane, and just about the most extreme corruption.
This difference makes my conversations and the conversations of most other folks FUNDAMENTALLY DIFFERENT... even if we are discussing exactly the same topic (like how to trade/transact/exchange goods, goodies and services with others).
You and I have run into this problem many times, often in regard to this notion of "promises".
As a personal matter, at the current time in history, I do not trust human beings. Which means, I have almost no interest in "promises". To tweak a cliche, "a promise made is not a promise delivered". Not in current times, anyway.
However, I am not telling you not to deal in promises (either to make them or accept them). That's up to you. The most I would do is to say "no way would I do that", which you could reasonably call "advice". But it is nothing more than advice, which is simply a preference based upon my inferences of human beings and other aspects of reality at the present time in history.
Maybe it would help this conversation to point out something about how my brain works (given the way I've consciously programmed my own brain). As soon as anyone starts talking about how any forced system works, my brain immediately and strongly blares a warning horn, which screeches "not going there" or "violates fundamental premise" or something like that. In other words, it is telling me to not bother wasting my time and energy investigating a topic that is inherently irrelevant or UNACCEPTABLE in one or more fundamental ways. Anything that assumes force, or for everyone to adopt the same scheme, immediately sets off that siren.
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Many people seem to have been suckered into the notion that "gold is bad money" because the quantity doesn't vary much from year to year... or when demand increases or decreases substantially. They have it exactly backwards! That's probably the very best feature of gold, and why gold is the best money ever found.
That doesn't mean someone can't concoct some extreme situation that would cause unusual variation in the "price of goods in terms of grams-of-gold", because one can easily concoct extreme situations. For example, a disease kills 99.9% of human beings (the remainder of whom go open all the vaults in the world and collect the gold). Or what if everyone on the planet decided "gold is perfect money, perfect currency and the perfect way to save, so henceforth I will transact and save exclusively in gold". Without a doubt, there would be too little physical gold around for this to work at the current exchange rate between "gram-of-gold" and "other goods, goodies and services".
However, these objections are pure imagination, not practical faults with gold, or with gold-as-money, or as gold-as-currency, or as gold-as-savings. First of all, they're not going to happen. Second of all, if they did happen, the natural feedback of the new situation would automatically move the situation into a stable state in very short order.
In ANY system that can be managed by any human "authority", producers are SCREWED... every single time. So as I said before, you can create or join whatever sane or insane system you prefer given your opinions and your preferences.
I won't participate.
And there is no reason you should care.
If you do care, you're an evil authoritarian who deserves to die. And if you show up and try to force me to participate, you will die. Just as I should die if I show up and try to force you to comply with any behavior that I wish to impose on you.
But maybe that's the key difference. I don't want to force you or anyone else to do anything. I'll hold onto my real, physical goods and goodies, and you do whatever you want (including exchange pieces of paper saying who promises whatever).
Many people seem to have been suckered into the notion that "gold is bad money" because the quantity doesn't vary much from year to year... or when demand increases or decreases substantially. They have it exactly backwards! That's probably the very best feature of gold, and why gold is the best money ever found.
And just how do you defend that assertion HonestAnn? It goes against very simple logic and arithmetic.
I and others have explained that a million times. And it doesn't go against any logic or math either. That is, unless you want to be a central bankster and steal from everyone by manipulating the supply of currency or money.
Yep. The energy valued coin should work well in keeping the metals from being manipulated by anyone. In turn making the metals a great long term store of value/wealth.
"Philosophically, it is none of my business what other humans choose to accept for the goods and goodies they produce."
So, then why don't you simply convert everything you have to gold and let other people participate in the fractional reserve system if they so choose? Or, is every human on the planet who has been using fractional reserve the last several hundred years just that stupid?
That's exactly what I have done. For the past 20 years 95% to 99% of my savings has been physical gold and silver.
4~5 years ago I converted about 95% of my savings into my self-sufficient digs in the southern hemisphere (that has lowered my cost of living to zero). But they too are real, physical goods and goodies, so that also consistent with my approach.
Are humans who accept fiat stupid? Yes. And they are free to do so. That's not the only way 99.999% of humans are stupid. They can't tell the difference between real and fiction, which is the most fundamental form of insanity [and stupidity].
The fact is, understanding this is at age 4 is what made me different from most other human beings. It was obvious, and should be obvious to every kid at age 4~6. In fact, it probably is obvious to every little kid... but they choose to be insane and stupid "to be accepted".
I assume I don't have to explain how obvious it is, and was to me at age 4. All it took was knowing that different people in different parts of the world and across the ages believe in a thousand different "gods". Even at age 4 it is obvious that at least 999 out of 1000 must be wrong. Which means at least 999 out of a 1000 people are perfectly willing to believe false claims. The same goes for endless other different beliefs, tastes and behaviors.
The obvious takeaway for me at age 4 was the obvious... if I want to actually understand reality, I cannot trust adults, I cannot believe what they say. The only way I had any chance to understand anything was... to observe and think for myself. And so, that's what I have done since age 4. And that's why I'm one of the few human beings who isn't insane. That doesn't mean I don't make mistakes, and that certainly doesn't mean I know everything. I does mean I don't believe the endless fiat lies and scams that most humans do, because I am self-conscious about the steps required to decide whether something exists (or is fiction), and what is its nature.
So yes, I do not exaggerate when I say 99.999% of humans are insane [and stupid]. Furthermore, they are insane in the most fundamental way possible --- they are incapable of telling: what exists versus what does not exist... what is real versus what is fiction... what is versus what is not.
Which is why I know all the following are fiction... they literally do not exist: law, legal, state, nation, official, authority, corporation, government (and dozens more). Yet what actions people take, and what most people think, assumes these fictions are real. Humans are mentally and physically manipulated by dozens and dozens of absolute nonsensical fictions. I know better. I am sane. I also try not to be stupid. Nonetheless, being sane gives me no "authority" to tell others how to live, so I don't (so-called "authority" is a fiction). So if humans want to accept fiat paper or soiled diapers for the goods and goodies they produce, who am I to object? So I don't.
Bottom line: yes, almost all humans are stupid, but worse than stupid, they are insane in the most fundamental way possible. I don't like this sad state of affairs... it is always much more fun to interact with sane, smart, honest, creative human beings.
4~5 years ago I converted about 95% of my savings into my self-sufficient digs in the southern hemisphere (that has lowered my cost of living to zero).
Good thing you didn't convert them to gold.