I came
across an interesting article. I would like to briefly deconstruct and
attack the arguments made.
Myth:
The gold standard is a better monetary system.
Fact:
The gold standard causes deflation and depressions.
Summary
The
far right advocates the gold standard because it gets government out of the
business of controlling the money supply. They fear that printing money
creates inflation, and retracting money causes recessions. But the opposite
is also true: printing money cures recessions, and retracting it cures
inflation. Governments in the last 60 years have used these policies with
tremendous success. There has not been a single depression or bank panic in
any nation anywhere in the world using Keynesian monetary policies. But
during the Gilded Age of the late 19th and early 20th centuries, depressions
and bank panics were common. The historical record is so strong that
mainstream economists reject the gold standard almost universally.
The
Rebuttal
The
assertion of the fact confuses causation with effect. Inflation
encourages risk-taking and increases the appetite for debt. After a
surplus of risk has been taken with debt borrowed and extended eventually the
risk averseness returns. This risk averseness results in the debt
appetite diminishing with the resultant deflation and depression.
Borrowers cannot increase their debt load perpetually and therefore the
corrective measures of economic
law must be asserted sometime.
Just
like a ball thrown into the air reaches a zenith so likewise during a credit
expansion the inflation and debt appetite increases. However,
eventually a zenith is reached and then like gravity a credit contraction and
deflation happens.
The gold
standard prevents the vast amounts of inflation. By analogy
it assets a stronger pull on the ball when it is thrown into the air so
therefore it does not fly as far which means the descent is not as long.
The net effect is that the entrepreneurs are able to perform
more accurate value calculations and the inefficiency from
excessive risk-taking is minimized. This leads to a more sustainable
economy and more productive use of capital and allocation of resources.
Therefore, the
gold standard is not the cause of the deflation and depression. The cause is economic law.
The gold standard
results in wise obedience to that economic law. By analogy the fall
suffered under a gold standard might be 8 feet while a fully fiat worldwide
monetary system, like the US$ system that has entered a credit contraction, might be 800 feet. Which fall
will cause more damage?
Central
economic planning backed by the barrel of a gun will always lead to less
efficient allocations of resources than a free market. If it could ever
result in more efficient allocations then the gun would be unnecessary.
For example, if there was a Central Egg Commission that controlled the
supply and price of eggs throughout the entire United States how efficient do
you think the egg market would function?
So
likewise the Federal Reserve System centrally controls the supply and price
of currency with the aid of unconstitutional
and immoral
Legal Tender Laws. How efficient do you think the currency market is?
The United
States
Constitution intended the currency market to be a free market using
voluntary transactions not a violently forced centrally planned market.
Government
has abused the currency market for the last 100 years. What has been
the result? One of the bloodiest periods of history with hundreds of millions
individuals have been killed by their governments. The Time Men of the
Year Stalin (1942), Rooselvelt (1933) and Hitler (1938) along with many
others used confiscation through inflation to abuse currency and fund their wars.
Only through
abuse of currency were they allowed to engage in genocide on a worldwide
scale.
This
is in addition to their other horribly mismanaged enterprises such as the
socialized roads in the United States that result in about 40,000 deaths per
year when private enterprise would perform cheaper, more efficiently and have
an estimated 10,000 deaths per year. Aided by their control over
currency and following Keynesian dogma governments have had ‘tremendous success’
doing what they do best; lying,
robbing and murdering.
Mises wrote, “It
is impossible to grasp the meaning of the idea of sound money if one does not
realize that it was devised as an instrument for the protection of civil liberties
against despotic
inroads on the part of governments. Ideologically it belongs in the same
class with political constitutions and bills of rights.”
Lastly,
there is a good reason why most ‘mainstream economists’ eschew
the gold standard. The gold standard is the advocate of voluntary
transactions. Fiat currency is the advocate of coercion and force
through the instrumentality of government. Most ‘mainstream
economists’ are professors at universities that receive funding from
governments.
Will the ‘mainstream
economists’ bite the hand that feeds them? If
they truly added value to society then they could or would earn their living
through a voluntary
transaction instead of relying on the fruits of ill-gotten gains. They
derive their income from governments who stole it using force or the threat of
force against innocents. Of course most ‘mainstream
economists’ will weave sophistries to rationalize their immoral
behavior. But
why believe them?
They are merely
court economists who derive an income by aiding and abetting governments and
leaders like Stalin, Roosevelt and Hitler in their lying, robbing and
murdering.
Governments
have so abused the currency that now the political machinations are ruining
the stability of nations.
The people are distrusting money.
By extension people are distrusting governments. This is
evidenced as all major fiat currencies are breaking down against gold.
In this Kondratieff Winter economic
law is being asserted. GoldMoney is a new type of
gold standard.
In conclusion,
like a criminal defense
advocate attorney the gold currency advocate is in favor of peace and
voluntary transactions. On the other hand, the fiat currency advocate
is in favor of fraud, theft and genocide.
Trace Mayer
RuntoGold.com
Trace Mayer,
J.D., holds a degree in Accounting from Brigham Young University, a law
degree from California Western School of Law and studies the Austrian school
of economics. He works as an entrepreneur, investor, journalist and monetary
scientist. He is a strong advocate of the freedom of speech, a member of the
Society of Professional Journalists and the San Diego County Bar Association.
He has appeared on ABC, NBC, BNN, many radio shows and presented at many
investment conferences throughout the world.
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