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The future of currency

by on October 17, 2010

A most fundamental and crucial debate that I have been anticipating for years is now all of the sudden in full swing.

The two main protagonists are the Goldbugs and the Interest Free Money community. The battle was ignited by Gary North who assaulted Ellen Brown, calling her a ‘Greenbacker’ and expecting to have some fun with destroying her. Here’s Ellen Brown’s retort. Here’s a high class framing of the debate by Eric Blair which was widely posted.

The Goldbugs and the Interest Free Money people have been living in peaceful coexistence for many years because of the common enemy: paper based fractional reserve banking. But now that the chances of the FED collapsing are becoming more real the question what to do next becomes acute.

Most people awakening to the Fractional Reserve hoax simply assume that the problem can be solved by Gold based currency. After all: Gold cannot be printed.

But besides the system in use, there is also the question who is in control of it. We cannot solve our current problems without addressing both questions.

Even if your filters do not allow you to accept the ‘International Bankers Rule the World’ narrative, we can see clearly who is really in control from the trillions that Governments worldwide handed over to the Banking Fraternity.
It is clear that nobody else would have been able to coerce so many States to cough up such massive handouts.
We are all whining about the environment, all those poor hungry African people, our crumbling infrastructures and not a dime can be reserved for these causes for lack of cash. Then the bankers start squeeking and all of the sudden a trillion is a mainstream concept.

The Goldbugs say that Government cannot be trusted with the control of the money supply because politicians will always finance their deficits with the printing press. There is much truth in this, but please tell me: what Government has been in control of its own money the last century? In Europe privately owned Central Banks were the norm since the 17th century. Most Central Banks in Europe were nationalized after WWII but nobody in his right mind can say that they have been under Government control since then. Although Central Banks will always print all the money politicians ask for, they do so in the form of interest bearing debts, so it is quite clear who’s boss.

We are facing the advent of World Currency, which, quoting Eric Blair “… is not conspiracy theory mumbo-jumbo anymore, but rather cold hard fact.”

What is at stake here is this: are we going to cheerlead the advent of this World Currency because it is Gold Based and we are fed up with Fractional Reserve banking? And thereby showing ourselves to be the dumb little serfs they assume we are? Or are we going to get to the full picture and get it right this time.

The Problems with Gold
Ignoring the issue of control of the money supply is reckless and irresponsible at best. Because any supply of currency, including Gold, can be used by it’s controllers as a tool for wealth transfers.

The Goldbugs have been very effective in analysing inflation as such a tool for robbing the many. It is therefore very strange that they would not have noticed the many boom-bust (inflation-deflation) cycles of the past. After all: the Gold Standard is the standard of yesterday and a cool headed analysis of history is possible to evaluate the effectiveness of Gold as currency. And it’s lessons are unequivocal: especially Europe has been badly abused in continuous booms and busts.

And not by accident either. American Banker magazines from the end of the 19th century have editorials in them calling for the calling in of loans to deflate the money supply. And a few years later the same editors called for loose money to set up the next cycle. As it has been said: “The American People don’t read”, and although the bankers have become more discrete, anybody with eyes to see must notice not much has changed since we left the Gold Standard.

So both inflation and deflation can easily be produced during a Gold Standard and this means that the Goldbugs can’t even solve their most basic problem with the current system, which is inflation.

An even more important and glaring oversight by the Gold community is interest. It cannot be said they completely ignore it, they have some primitive rationalizations for interest, but they simply miss the excruciating costs of money through interest. Interest is one of the few things that is better understood in Europe than in America, primarily through the brilliant analysts Helmut Creutz and Margrit Kennedy. They managed to quantify the impact of interest. Their most important conclusions were published on this site yesterday.

The most important aspect of interest is that the poor borrow money and so pay interest, while the rich lend out and so receive interest. This results in a wealth transfer amounting to trillions per year worldwide from the poorest 80% to the richest 10%.
Even if you have no debts at all, it transpires you pay 40% of your disposable income because of costs for capital included in prices for daily commodities.

Gold is not a freely traded commodity. The people at www.gata.org have been exposing the Gold market manipulation for years, but the fact of the matter is that insiders have been controlling Gold for much longer than that. Gold has been controlled ever since Central Banks started to make their impact, starting at the Amsterdamsche Wisselbank in the 17th century.

The controllers of Gold will NEVER allow their Gold to be used as currency without interest.

So fine! Let them eat their yellow cake!

Another function of Gold is that of the canary in the coalmine. When paper sinks people notice because Gold rises. But the simple fact is that prices of everything rise when paper is inflated. So even for this we can do without this precious metal.

Gold does, of course, has a use as a store of wealth in times of inflation. But even for this it is superfluous. Silver at this point is a better investment, but why not just hoard a good stash of Scotch and other spirits and cigarettes and other (semi) durable goods? You’ll be fine in the coming periods of scarcity and your wealth intact. Goods such as these are always in demand and easily bartered. They do not loose their value when money does.

It must be admitted, however, that Gold is a good investment. So if you want to enhance your wealth, instead of safeguarding it, Gold is a good bet, although silver, again, is even better. The reason is, that, unlike the case with Scotch, there is no free market price for Gold. In a free market Gold would probably be at 3, 4 or even 5000 dollars. And just like the era of the FED is ending, JP Morgan’s short positions on the Comex seem to be at their end of life too. Therefore another major wealth transfer is in the offing: from those who don’t own gold to those who do.

Keep in mind though the Tao states it is unwise to hoard scarce goods and there is a lot of wisdom in that. We cannot serve two masters and Gold is the archetypal symbol of the Adversary.

The Merits and Problems of Interest Free Paper Money
Of course, paper money is now a metaphor for electronic money. We still have paper cash, but the printing press of today is a computer program. This is wonderful, because it is now even cheaper to create money than ‘slapping ink on a perfectly useful commodity like paper’.

If there is one thing the Banking Boys have shown us, it is that we can produce all the money we will ever need at virtually no cost at all. Let this lesson not be wasted!

If there is one comforting thought after all the untold trillions that we have payed for our money system in interest and bailouts in the last few centuries, it is this.

No doubt, such a powerful producer of money is easily abused to flood the community with excess cash resulting in rising prices. We don’t what that. The reason it happens all the time is because we have sociopaths controlling the computers and the many don’t understand what is happening, so they let it continue.

To say then that we need something intrinsically scarce like Gold is a no go because of the arguments above. What we need to do is grow up. To stop hiding behind ‘experts’, ‘economists’, ‘Governments’ and what have you but start thinking for ourselves.

A growing number of people are saying that this is exactly what this age we live in is all about. That for the first time independent thought by the individual will become the norm.

Apocalypse means Revelation and it has been promised that ‘what has been hidden shall be revealed’. The nature of money is one of these things.

We need to decently organize the production of the means of exchange. We need printing presses printing ENOUGH (in stead of too much) money. And since this production can be done at virtually no cost, it stands to reason that it’s supply must be not only stable, but also dirt cheap.

We need to fire, defame and prosecute those who abuse the powers invested in them when we allow them to run the system.

Government vs. Private Money
However, I do believe that the Goldbugs have a point with their distrust of Government. It is unfortunately the case that sociopaths gravitate to power centers and concentrating too much power in the hands of Government is a recipe for disaster.

Since currency is just a commodity like all others, there is no reason why its production cannot be run by private, free market institutions.

The Goldbugs unfortunately fall for the foolish idea that banking is a free market. It is not, of course. There is instead a Banking Cartel controlling all the production of money.

In a truly free market for money you would have many different currencies competing with each other. On a regional, national or sectoral level.

Already available are electronic, hand held devices which are basically purses containing credits in several units. The future is, that you will have income in several units. Some regional, some national, some international, some sectoral.

The unit with which you pay with will depend on the context of your transaction. Where you are, who you are dealing with, which currency you have a lot of, etc.

In such a free market for currency interest bearing units will not have a place, simply because they are outrageously expensive.

15 Comments
  1. Paul Paskey permalink

    Gary North: How Max Keiser Was Betrayed By Ellen Brown
    Nov. 22, 2010

    Ellen Brown’s defection to Bernanke’s camp on November 20 will create great consternation in the camp of the Greenback faithful. She had seemed like the deliverer of a moribund movement. She delivered it, all right: into the open arms of the Federal Reserve System. “Oh ye prodigal sons — welcome home!”

    Thanks, Ellen.

    Of all her naive and enthusiastic followers, no one has been chewed up and spat out more than Max Keiser…

    http://www.garynorth.com/public/7289.cfm

  2. Two points—-

    The booms and busts occurring under a gold standard had nothing to do with gold as money. They were caused by the fraudulent issuance by bankers of banknote claims to gold that were not actually backed-up by physical gold.

    Under a gold/silver monetary system bankers cannot corner the supply of gold, even by lending at interest. Bankers spend money like everyone else. Over time that money leaves their hands and ends up in the pockets of someone else. Deprived of the power to issue money ex nihilo, they must forgo possession of money when they make purchases from producers. The ownership of the gold is transferred to others, who are free to save it and make new loans from that stock of money, if they so desire. This weakens the power of banks and more widely distributes the source of future loans.

    • Hi acudoc,

      Even under a full reserve gold/silver system it would be quite easy for the banks to withhold currency from circulation. This is because they control about 2/3 of world supply.

      This can be done by simply hoarding Gold (i.e.: not lending) with deflation as a result and then opening their vaults again with inflation as a result.

      So it is not Fractional Reserve Banking that is causing the inflation-deflation cycles, it is their control of the supply enabling them to manipulate the flow of money.

  3. William permalink

    I’m glad that people are trying to think outside of our current economic box.
    When thinking about post-scarcity and steady-state economic ideas one has to ask: Why have any currency at all?

    Money is a virtual resource. With current information technology we can directly track physical resources. Why should we tolerate the corruption which money promotes (via accumulation, psychological manipulation, economic opacity)?

    Markets are only needed where resources are scarce. Since only a small percentage of the population in developed countries actually perform jobs that provide for our physical needs, there seems to be a great deal of artificial scarcity being created in order to justify the existence of money and markets.

    P.S. Thanks for sticking up for Ellen!

  4. Hank permalink

    History teaches us, that the “little people” (courtesy of Leona Helmsly) always loose. Either figthing wars for the elite or paying them through the noses for everything. You seem not to get much out of history. On the one hand you are dismissing gold as a backing for money (something the Founding Fathers already had figured out would be a good thing), and on the ohter you are not giving a solution other than some interest free coinage system, wich is bound to fail when the you-know-whos are getting their hands on that system as well. It is simply a matter of time and certainly inevitable. You have to eliminate all psychopaths out of society in order to come to a reasonable financial system in which ALL people feel safe and secure. Good luck with that! As long as people will not take up their arms, kill the banksters and fight for hard earned money and their property, be it gold, real estate or pension plans, the psycho’s will be there to collect their not so fair shares. Read Lobaczewski’s “Political Ponerology” and you know what I mean. There is no solution, all you can do is stay informed and act defensively (rip up all your credit cards etc.).

  5. But having so many different currencies will give rise to a new class of middle man that will act as a clearinghouse.

    Currency has to be trivialised because it is not rocket science. There is no need for n currencies once people understand currency and any twelve year old can.

    The challenge is keeping money simple so the discussion does not move from what I am producing, why and for whom.

    By taking the centimeter and deciding to convert it into a scarce commodity by requiring carpenters to keep a log of every unit they use and requiring them to obtain centimeter long rulers in bags that they have to get at interest. Is clearly in our minds an absurdity. But once realised such an absurdity is it not just as absurd to revert back to an interest free centimeter system but with a clearing house of n different units? Such an absurdity is only possible in a world that has forgotten how well the simple interest free single unit standard worked in the first place.

    We need a single open money standard now! And put money in its place once and for all!

    • The trivialization is what I’m all totally for Marc.

      Money is a science and trade like all others and needs demystification more than anything else.

      The ‘how’ of the future is still very open. I’m sure a standard like you are proposing is contributing to it.

      The ‘what’ is fairly simple to me: currency or currencies that provide for the basic needs of everyone and the ‘nice to have’s’ of quite many. At almost no cost compared to total output of the community using the money.

  6. Niko permalink

    Brilliant! One of the very places on the web where this is discussed.

    I have my suspicions about the libertarians and their gold agenda, seems too parochial and unsophisticated to be a genuine economic treatise.

  7. Paul Paskey permalink

    “We need to decently organize the production of the means of exchange. We need printing presses printing ENOUGH (in stead of too much) money.”

    Who is “we”, Kimosabe?

    • We the People Paul.

      The time of hiding behind technocrats is over.

      • Paul Paskey permalink

        “With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.”

        F.A. von Hayek, Nobel laureate

        Patrick Henry had it right: the purse and the sword belong in the hands of the people.

        And the purse held gold of a guaranteed weight and fineness, not paper money.

        • Citing Noble prize winners does not score points with me Paul………
          I think lightly of Nobel Prize frauds nor National Debts

          Do you really believe it’s the People who are owning Gold?
          So you believe it is the many that are going to profit from a Gold Standard?

    • Paul Paskey permalink

      Yes, I do. The people own it when it is a gold coin standard, not gold-backed paper money. North says it better than I can:

      “Third, the reason why a nation adopts a gold coin standard is because the voters understand that they are at risk if the national government has the right to create paper money. A gold coin standard is a system that restricts the issuing of money to IOUs to gold, which means that paper money or digital money is legally exchangeable for specific quantities and fineness of gold coins. If the government inflates, people can take go to a bank and exchange the money in their bank accounts for a predictable quantity and fineness of gold coins. When the government begins to run out of gold, is forced to restrict the expansion of money. So, the purpose of the gold standard is to make certain that gold reserves are sufficient to meet the public’s demand for gold. It puts government in a golden straitjacket.”

      • Than we’ll have to agree to disagree. Most of the world Gold reserves are in the hands of the banking community. Once they start circulating it, normal people would only be able to obtain it in the form of interest bearing debts to banks.
        It therefore does not stop the wealth transfer from poor to the extremely rich.

      • Paul Paskey permalink

        And letting government slap ink on linen to purchase goods and services insures transfer of wealth from the poor and not-so-poor to the government.

        Do you know how the expression, “Not worth a Continental,” came about?

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