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The Invisible Vacuum Cleaner.
The Quantity Theory of Money.
Destruction of the Gold Standard and Discrediting the Real Bills Doctrine
Are Two Sides of the Same Coin.
The Working Man As the Guardian of Sound Money.
Lending versus
Clearing
I dedicate this lecture to the memory of Ely Moore,
the first union official ever to have been elected to the Congress in 1834. He
was a solid gold-standard man who believed, with Daniel Webster, that
"Of all the
contrivances for cheating the laboring classes of mankind, none has been more
effective than that which deludes them with paper money."
In the first two Lectures I dealt with a new
blueprint for a gold coin standard for America and the world, designed
to avoid two great pitfalls: (1) the pitfall of breakdown of social peace
between creditors and debtors, (2) the pitfall of entrusting gold coins that
represent the savings of the people to the banks. In this Lecture I shall
recommend that the guardianship to preserve the system of sound money should,
instead, be entrusted to the laboring classes and their representatives, the
Credit Unions, which would be the only financial institutions chartered to
carry deposit accounts denominated in Gold Eagle coins, and which would act
as clearing houses for the circulation of real bills.
Recall that real bills provide credits to move
urgently demanded consumer goods from the producers to the retail outlets. We
don't need banks for that. In any event, short term commercial credits arise
not through lending but through clearing. As the supply of consumer goods emerge in production, purchasing
media to finance its movement to the consumer emerge simultaneously through
the process of clearing. No lending is involved. Coin,
credit, circulation, clearing - the four C's - are central ideas that
economics has ignored. We are going to revive them here in preparation to
pave the way to a new gold coin standard.
The Invisible
Vacuum Cleaner
Imagine that General Motors has come into the
possession of a fantastic contrivance: an invisible vacuum cleaner capable of
siphoning out of the pockets of every worker two dollars for every dollar
that his union had won for him in wage contracts at the bargaining table. Further
imagine that the invisible vacuum cleaner would operate secretly and
unobtrusively (just like other contrivances did in the recent accounting
scandals of Enron and Westcom) so that the theft or embezzlement could not be
detected. What would be the result of the wholesale application of the new
device? Well, labor would have to run twice as fast on the treadmill just to
stay abreast, while the union could pat itself on the back for having
negotiated a good contract. In the meantime the public would be told again
that the process of collective bargaining was working fairly and efficiently.
This parable is, of course, far too fanciful to
approximate truth. General Motors would find itself in the center of a
devastating legal challenge and public relation fiasco if and when the theft
eventually came to light. It is doubtful, to say the least, that the
existence of a contrivance of this kind could be kept in secret forever. Another
problem with the scheme is the tacit assumption that the workers and their
unions is a bunch of illiterate boors unfamiliar with the four rules of
arithmetic.
Combating
Inflation
Yet the parable is not
quite as fanciful as it may appear at first sight. Actually, there is
an invisible vacuum cleaner. It is called "deliberate currency
debasement". Just substitute "government" for "General Motors", and pieces of the jigsaw puzzle immediately
fall into place. Unlike General Motors, the government cannot be sued for
siphoning off labor's gains fraudulently and surreptitiously. The modus
operandi of the government=s invisible vacuum cleaner is known to and
condemned by many a courageous critic, but to no avail. The media ignores the
criticism and the public=s ire is not raised. Some monetary experts are
blackmailed, and some economists are bribed with fat government contracts and
grants. To add insult to injury, the funds used for bribing have come out of
the loot. The chorus of servile economists suppresses the voice of the
critics. To the former deliberate currency debasement, which they prefer to
call "inflation" with a connotation that, far from being man-made,
it is a natural phenomenon, is merely a minor irritant. They see no moral
dimension to the problem. As long as inflation is barely noticeable,
everything is fine. Economists cheer on the government for its valiant
efforts to "combat inflation" - as if it weren't the same
government that has been both the engineer and the beneficiary of what is
being combated.
The invisible vacuum cleaner can only be operated by
the government which is free to bend the legal system to its advantage. It
can even violate the Constitution with impunity at pleasure. The Constitution
of the United States
expressly forbids the use of "bills of credit" as legal tender, but
this has never inhibited the Treasury from printing the legend on every
Federal Reserve note that it is "legal tender for all obligations,
public and private". Since the executive arm of the government controls
the judiciary (certainly as far as jurors' compensation is concerned), no
wonder that the latter condones the fraud of siphoning off labor's wage
gains, and no legal challenge to the operation of the invisible vacuum
cleaner can ever succeed.
The Pleasure of
Being Cheated
Not only does the government bribe the economists'
profession, it also uses its control over public education to throw dust into
the eyes of every new generation of workers entering the labor force. Docile
teachers fail to instruct their pupils about the importance of the virtue of
thrift, about honesty in dealings between the government and its subjects, or
between the government and its creditors. Instead, they preach the
desirability, nay, the necessity for the government to manage the nation's
money supply, which is just as absurd as the idea of the government's
managing the nation's soap supply. The citizens are immersed in a barrage of
government propaganda from womb to tomb. Small wonder that the workers are
confused and their unions are blinded to official duplicity and chicanery.
The invisible vacuum cleaner reaches not only into
the pockets and bank accounts of domestic workers: it is equally effective in
siphoning off the savings of foreign workers. It is the Moloch of the world.
It can reach into the vaults of central banks and the mattrasses of poor
peasants the world over, wherever dollar bank notes or balances are held. U.S.
Treasury bonds in the hand of foreigners are, in effect, irredeemable
promises. At maturity the holder of the old issue can only exchange it for
another scrap of paper carrying another irredeemable promise. The promisor
assumes no responsibility except for the quality of ink and paper to make
counterfeiting harder. If at maturity the dollar is worth only a fraction of
the value of the dollar with which the bond was purchased 30 years earlier,
that's too bad. But it is entirely the problem of the foreign holder of the
bond. Why under these circumstances are foreigners so foolish as to buy and
hold U.S. Treasury securities?
"Doubtless the
pleasure is as great of being cheated as to cheat."
Samuel Butler (1600-1680), Hudibris, Part 2, Canto
III
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Foreign holders try to beat their own central bank. They
are proud that they have outsmarted their home-grown looters as the
securities of their own government lose value even faster than those of the U.S.
Presidential
Lies
Former president Clinton declared from the White
House that the dollar's strength was due to the "impeccable record of
the U.S.
to pay its obligations meticulously". He claimed that "there has
never been a case of the U.S.
defaulting on its bonds in the entire history of the Republic." This, of
course, is an outright lie. Financial annals record two cases of American
default, the first under a Democratic, and the second under a Republican
president. After the Roosevelt
administration devalued the dollar in 1933, it paid bondholders in diluted
dollars. It did this in spite of a gold clause written into the bond. Apart
from an insignificant number of unimportant cases, Roosevelt
failed to make amends after in 1935 the Supreme Court reviewed the case of
abrogating the gold clause, and ruled that the government had no power to
alter unilaterally the contract embodied by the bond, concluding that
bondholders were entitled to the dollar-equivalent of the value reserved by
the gold clause.
35 years later, in 1971, the Nixon administration
defaulted on the gold obligations of the United States held by foreign
governments. It did this in spite of the solemn commitment confirmed by four
presidents to honor the gold redeemability of the dollar for foreign
governments. The injured parties never sued C presumably as a result of some
behind-the-scenes diplomatic arm-twisting. Yet this default was the root
cause of the heart-rending depreciation in the value of all the currencies of
the world that followed, wiping out 90 percent of the purchasing power of
savings denominated in paper currencies. First the dishonored dollar went to
a deep discount in terms of gold and foreign exchange. Then other governments,
in an effort to protect their export industries, felt obliged to follow suit
and debased their currencies to approximate the debasement of the dollar.
It is characteristic of the enormous deterioration
in public morality that, while in 1935 workers and savers in the United
States could still take the federal government to court charging that
property was taken from them without due process of law, and in so doing they
could draw attention to the official fraud and duplicity, such challenges
were no longer possible in 2001. That year, when the workers' pension funds
cashed in their 30-year Treasury bonds issued in 1971, they received 10 cents
on the dollar in purchasing power. The missing 90 cents represented wealth
stealthily confiscated by the government. But since the law does not allow a
distinction between the 1971 and the 2001 dollar (in spite of the hypocrisy
that the government's own Labor Department explicitly makes such a
distinction for approved purposes), the government is spared the
embarrassment of lawsuits by the unions charging that property was taken
unconstitutionally from the working and saving public.
Nothing shows the success of official brain-washing
through public education and through the activities of economists in the pay
of the government more clearly than the fact that the unions are not
protesting the progressive and stealthy confiscation of wealth held by their
pension funds, and neither the Congress nor the media took Mr. Clinton to
task for lying publicly about the dismal history of the dollar.
The Quantity
Theory of Money
How could the government, to which the Constitution
granted only limited and carefully enumerated powers, grab unlimited power
symbolized by the invisible vacuum cleaner? How could the government get away
with robbing workers of their wage gains and savers of their savings, not
only in this country, but world around? How could we account for the travesty
that the government, while doing these things with impunity, earns high
praise for "combating inflation?"
The short answer to these difficult questions is
that the government has, over a period of time involving several generations,
successfully indoctrinated people with a most dangerous and vicious doctrine,
the Quantity Theory of Money. According to it the value of money is
determined, not by its quality, but solely by its quantity. The obvious
motivation of the Quantity Theory is the a priori removal of all moral
considerations from the debate on debt-based money. Since regulating the
quantity of money involves regulating the banking system, it follows that the
task can only be entrusted to the government. Only the government can make
the ponderous decisions impartially which are involved in the problem of
increasing the quantity of money in uniform doses, year in and year out. The
Quantity Theory of Money uses an impressive array of mathematics such as the
Equation of Exchange MV = PQ (where M is the stock of money, V
is the velocity of money in circulation, P is the price level, and Q
is the physical volume of transactions). The purpose of the exercise is to
persuade the uninitiated that human action, just like mechanical action, can
be reliably predicted via mathematical formulas. However, individuals are not
molecules and, therefore, the essence of human action cannot be captured by
equations. Human individuals have what molecules have not, namely, free will. You may plug in space, time, mass, force, etc., into
your equations. But you can never plug in free will.
The trouble with the Quantity Theory of Money is
that it is palpably false. Monetarists have utterly failed to come up with a
universally acceptable definition of money. This is evident from the
proliferation of the monetary aggregates M1, M2, M3,...,
etc., ad nauseam. (Milton Friedman tried to get around the problem by
confining his version of the Quantity Theory called "monetarism" to
"high-powered money" defined as the deposit liabilities of the
Federal Reserve banks. Nice try, but has anybody ever used high powered money
to buy a loaf of bread?) If we cannot agree on what money is, then how can we
expect to regulate its quantity? Monetary scientist Walter E. Spahr had this
to say in 1954:
"Apparently
no quantity theory of money which has thus far been stated has validity... The
evidence alone is sufficient to dispose of such an assumption. But, the
reasons for the lack of relationship between the supply of currency and
prevailing prices need to be understood. Currency is a two-dimensional
entity. Besides supply there is velocity. Often velocity - the rapidity with
which the supply of currency is used - is a more important factor than is the
supply of currency in affecting prices."
The Federal
Reserve Act of 1913
It could be objected that it is hardly fair to blame
the government for the outcome of a scientific debate that has ended with the
triumph of the Quantity Theory of Money. This triumph, it is alleged, has
come about through meticulous statistical research, not through crude
government interference with scientific inquiry. Or did it, really? To
adjudicate this issue it will be necessary to examine how the competing
doctrine, the Quality Theory of Money, also known as the Real Bills
Doctrine, has been dethroned and ostracized through the crudest interference
in science by the strong arm of government. The Real Bills Doctrine, as we
know, has the most impressive credentials. Adam Smith made it the corner
stone of his Wealth of Nations in 1776. It has served as the
scientific basis on which the monetary system of the German Reich was
constructed after it adopted the gold standard in the 1870's.
To tell the truth, the Federal Reserve Act of 1913
was also crafted on the scientific basis of the Real Bills Doctrine. The
Federal Reserve was conceived as a commercial-paper based system with the
real bill as the only asset category eligible for re-discounting. In more
detail, real bills were the only type of paper the Federal Reserve banks were
by law allowed to purchase from their member banks. Treasury bills were
ineligible. The Federal Reserve banks were not allowed to monetize government
debt. The original Act refused to give the Treasury a free ride. The idea was
that government debt ought to be exposed to the vicissitudes of the market,
without offering it refuge in the portfolio of the Federal Reserve banks. The
only way these banks could come into possession of government securities was
through a penalty-provision. Whenever gold reserves fell below the legal
limit of 40 percent of note and deposit liabilities, the Federal Reserve bank
was assessed a tax penalty on a progressive scale. It had to make up the
deficiency by putting government securities in the asset portfolio, but there
was a tax penalty on the interest income from those securities amounting to
several hundred percent. The Act had a built-in disincentive for the banks to
hold government securities in their portfolio.
However, the original Act was never put into effect.
It was violated on the very day the Federal Reserve banks opened their doors for
business in 1914. There was no way for the U.S. government to finance the
war effort of the Allied Powers through a commercial-paper based banking
system which made the monetization of government debt impossible. No problem.
A subterfuge would do the trick. The Federal Reserve banks deliberately
dropped their gold cover below 40 percent of liabilities, and started loading
up on government securities, to punish themselves for the violation. Maybe
the Treasury will 'forget' to collect the tax penalty. You guessed it: that's
just what the Treasury would do. Why should it tax an activity that it liked
and wanted by all means to encourage? You scratch my back, and I'll scratch
yours.
Ever since 1914 every chairman of the Federal
Reserve Board, and every dollar of research money spent by the banks, has
served to undermine the original concept. With each amendment of the Act, the
dollar was diluted. The amendments cast the net ever wider for eligible
paper, with an unmistakable intent to make room for government securities in
the portfolio of the Federal Reserve banks. Step-by-step, what was conceived
as a commercial-paper system to furnish an elastic currency for the benefit
of the people, was converted into a fiat money
system to monetize government debt. The beneficiary was no longer the general
public, but the federal government itself, transgressing its constitutional
limits and assuming unlimited power.
Finally, the amendments to the Federal Reserve Act
progressively reduced and ultimately eliminated the gold reserve requirement
mandated for Federal Reserve notes and deposits in stages from 40 to 35 and
then to 25 percent. On February 21, 1968, the U.S. House of Representatives
voted 199 to 190, and on March 14, 1968, the U.S. Senate voted 39 to 37 to
repeal all gold reserve requirements against Federal Reserve notes. (Those
against deposits had been repealed earlier.) The president signed the bill on
March 19, 1968, thereby converting the dollar into fiat money. Under the
original Federal Reserve Act of 1913, the government would have been forced
to compete with private borrowers for the savings of the people. By 1968 the
government could sell all the debt it wanted. If people wouldn't buy it,
there was always a cozy corner in the portfolio of one of the Federal Reserve
banks where the Treasury paper could take refuge.
Science by
Government
Thus was the Real Bills Doctrine overthrown in the United States
between 1914 and 1968, not by a committee of scientists acting in the service
of truth, but by the same government that had overthrown the Federal Reserve Act. Scientific justification, so called, came later, to
provide the fig leaf to cover up the power grab. This is a shameful chapter
in the history of science showing how scientists may go out of their way to do
the bidding of the powers-that-be in exchange for material advantage.
The written record of this piecemeal corruption of
the banking system and dilution of the U.S. dollar is there for everybody to
see, on the pages of the Federal Reserve Bulletins and research publications
of the individual Federal Reserve banks, from 1914 to date. In reading these
pages one cannot help but observe how the Real Bills Doctrine was gradually
discredited, and the Quantity Theory of Money promoted in its place as the
supreme fountain of truth and wisdom. Never ever was the question raised
whether the dismal results (such as the loss of 99 percent of the purchasing
power of the dollar during the 88 years on the Fed's watch) were due to the
dethronement of the Real Bills Doctrine. The
pseudo-research was most generously funded by the invisible vacuum cleaner. The
incestuous relation between the Federal Reserve banks, and academic
activities sponsored by them, make it abundantly clear that we are dealing
not with bona fide research, but with science by government.
Human Action or
Horse Action?
The Real Bills Doctrine, as well as The Wealth of
Nations, were conceived by their author as
merely one chapter in a more complete work on society. This work was to be
written in the great tradition of Scottish moral philosophy. In addition to
economics, it was to comprise natural theology, ethics, politics, and law. Unfortunately
Adam Smith (who was the professor of Moral Philosophy at Glasgow University)
could never complete his great project.
By contrast, the theory of money, as it is presented
today, is entirely devoid of any ethical considerations, and is completely
divorced from moral philosophy. Just as Milton Friedman has described it:
"even a clever horse can be trained to tread out the new money supply at
a steady pace at the treadmill". But honest money is not the result of horse
action or mechanical processes symbolized by the treadmill: it is the
outcome of human action. Honest money cannot be obtained as a solution
to the Equation of Exchange. Honest money, that the workers, widows and
orphans, and other people of small means can fully trust, comes about as a
result of the market process, the natural process of production aiming at
satisfying the urgent and demonstrable needs of the consuming public.
Returning the
Looted Gold
Milton Friedman and Anna Schwartz in their
"Monetary History of the United States, 1867-1960" write that gold
was nationalized in order to capture profits for the government that were to
accrue later to all holders of gold, after president Roosevelt has devalued
the dollar from $20.67 an ounce of gold to $35. When a fellow Democrat of the
president, Senator Gore from Oklahoma,
described the same sequence of presidential moves of appealing to the
patriotic feelings of the citizens to turn in their gold 'temporarily', and
then writing up its value, he used a somewhat different language:
"Henry VIII
approached total depravity as nearly as the imperfections of human nature
would allow. But the vilest thing that Henry ever did was to debase the coin
of the realm!"
Earlier, when president Roosevelt asked the Senator
for his opinion regarding these measures, he answered: "Why, that's just
plain stealing, isn't it, Mr. President?" (As reported in Benjamin M.
Anderson's "Economics and the Public Welfare", Indianapolis, 1979,
p 317.)
Be that as it may, time has come to return the
looted gold. Since there is no way to track down the beneficiaries of the
wills of the original owners, the gold should be used for endowing the Credit
Unions with capital consisting of gold. It will be the responsibility of the
Credit Unions, whose shareholders are the working people of this country, to
provide support for the circulation of Gold Eagles and to act as the clearing
house for gold credits (real bills) to finance production and trade of
consumer goods.
Only Credit Unions that have renounced the practice
of borrowing short to lend long, and declared publicly that they were ready
to support the new gold coin standard and the financing of the production and
trade of urgently needed consumer goods through the circulation of real
bills, will benefit from recapitalization in terms of U.S. Treasury gold. Only
real bills, to the exclusion of accommodation bills, anticipation bills, and
others of a non-self-liquidating nature, are eligible for investment purposes
by the Credit Unions.
Closed Shop or
Right to Work
Gold coin circulation is to be spontaneous and
voluntary. No legal tender laws will force it, as those laws are presently
necessary to force the circulation of the irredeemable dollar. People will be
free to continue using the irredeemable dollar in exchange for their goods
and services, and for the purpose of saving, if that is what they wish. But
they will not be coerced to do so. The legal tender status of the Federal
Reserve notes is withdrawn forthwith, effective on M-Day, the day the Mint is
opened to gold. Debt contracted before M-Day could be retired either with
paper dollars or with gold coins, at the option of the debtor. As far as debt
contracted after M-Day is concerned, provisions in the contract apply.
Labor organizations would ask their membership to
decide whether they want their wage contracts in Gold Eagle coins or in
irredeemable dollars. Where labor is not organized, a committee with labor
and management representatives (two labor votes for every management vote),
would make that decision. This is a very delicate issue, and we must well
understand that a great deal of educational effort is needed to make the
labor force see the implications of what is involved, which I now proceed to
outline.
Those laborers who want to retain closed shop, fixed
minimum-wage rates, unemployment insurance and social security benefits,
company pensions, health and other fringe benefits, as well as long-term
collective agreements to fix wages, should opt for the irredeemable dollar. The
downside for them is that the value of the dollar will continue to fluctuate
in terms of gold, and if history is any guide, the dollar-value of those
benefits will probably decline. Those laborers, however, who prefer right to
work to closed shop, and who would prefer fully funded health insurance and
pension benefits defined in gold units to unfunded government health
insurance and pensions schemes defined in terms of the irredeemable dollar, should opt for the Gold Eagle coins in which their
wages will have to be paid. Gold wage rates may fluctuate but, in return, the
threat of unemployment will be removed, and workers would be free to make
their own provisions for health care and pensions. Payroll taxes on gold
wages (such as Social Security levies) will not be authorized. Laborers who
have originally opted for wages payable in irredeemable dollars will be given
a chance to opt for wages payable in gold every time their labor contract
comes up for renewal (or annually, in case of unorganized labor).
Existing labor legislation to govern collective
agreements in dollar terms would not apply to wages payable in Gold Eagles. However,
new legislation should provide that gold wages should be at least ten percent
higher than comparable dollar wages calculated at the floating exchange rate
for the Gold Eagles, in order to compensate workers who have opted for wages
payable in gold for the fringe benefits available only to those workers who
have opted for wages payable in irredeemable dollars.
Limited Charter
of the Federal Reserve
I cannot condemn the Federal Reserve banks in strong
enough terms for their part in the great embezzlement of the wage-gains of
the workers for almost a century. The whole edifice of labor legislation
involving monetary rewards, including fixed minimum wage rates, escalator
clauses to supplement long-term wage contracts, unemployment insurance, etc.,
comes under what Daniel Webster described as cheating the workers, by
deluding them with paper-money magic. The value of all these
"achievements" is, in practice, diluted, nullified, or negated by
the invisible vacuum cleaner, operated by the Federal Reserve banks. For
their role in this travesty, their existing Charter must be revoked and
replaced by a new one limited for a ten-year period. After that, it may be
renewed for a further period of ten years only if demand for
irredeemable dollars stays above ten percent of the total demand for currency
made up by the gold money component and the irredeemable dollar component, as
measured in terms of gold.
Divorce the Mint
from the Treasury
It is further understood that the regulation of the
gold component of the nation's currency is not the task of the federal
government, or central bank created by the federal government. The power to
regulate the amount of gold money in circulation is reserved by the
Constitution for the people of the United States of America. The
symbol of this power is the United States Mint. To give better effect to this
Constitutional provision than was done in the past, the U.S. Mint should be removed from the control
of the U.S. Treasury and
the Executive Branch, and placed under the sole authority of the Legislative
Branch, specifically under the direct control of the U.S. House of
Representatives. This is not only fitting but is also in line with the
language and the spirit of the Constitution, which places all money-matters
into the hands of the direct representatives of the people. It follows that a
simple majority vote of the House of Representatives will suffice to
originate this transfer. For the same reason, regulatory power over the
Credit Unions must be retained by the U.S. House of Representatives, without
the interposition of the U.S. Treasury.
The Vampire
German mark banknotes are
tossed into a garbage bin in 1923. At this point money was more valuable as
scrap paper than it was in purchasing goods and services.
The above
banknote, issued in 1922, was nicknamed by the German people as "The
Vampire". Rotate it counter-clockwise through 90 degrees and see the
vampire in the shape of an old hag (her pointed nose jutting behind the ear
of her victim, and her black cap formed by his collar) as she is sucking
blood from the neck of the worker.
Note: This interesting graphic coincidence was not
the only reason why the German people nicknamed their irredeemable paper mark
"The Vampire".
* * *
"It is Grossly Offensive to Hear Such Ignorant Marxist Rantings
Associated with the Name of Ayn Rand"
From time to time I shall answer questions, comments
and criticism from my audience related to these Lectures. Mr. Claude Cormier
of Ormetal Inc., St-Basil-Le-Grand,
Quebec, CANADA
J3N 1H2, complains
that I have called foreign exchange and bond speculation "parasitic
activity". He suggests that foreign exchange and bond speculation are
honest market activities making the best out of a possibly bad situation. To
call these economic participants 'looters' and 'parasites' is nonsense. He
concludes his remarks by adding that "it is grossly offensive to hear
such ignorant Marxist rantings associated with the name of Ayn Rand".
I have written about bond speculation in my earlier
pieces (Economic Consequences of Mr. Greenspan,
www.gold-eagle.com/editorials, January, 2002; Revisionist View of the Great
Depression, parts 1-3, www.gold-eagle.com/editorials, March, 2002.) where I
stated my views in greater details, and I said, in part:
Bond speculation
is a parasitic activity on the body economic. Of course, this is not meant as
a smear on the character of any individual. Speculators acting on their own
can be, and we may assume that they mostly are, upright people. Like
everybody else, they are trying to eke out a living. They are certainly not
responsible for the establishment of this vicious system which, by staying
the 'invisible hand', victimizes the majority. The blame is entirely on the
government which is responsible for the institution of this iniquitous system
which, rather than promoting social cooperation, pits one citizen against the
other.
I made it clear that the real culprits are the big
banks. Small speculators could never create and feed a $100 trillion
derivatives monster.
I find it interesting that Mr. Cormier posted the
link to my Lecture, 'ignorant Marxist rantings' and all, on his mailing list
without giving me the courtesy of prior notice.
Reference
Relation
of Currency Supply to Economic Growth, by Walter E. Spahr,
The Commercial and Financial Chronicle, New York, January 21, 1954.
July 15, 2002
Antal
E. Fekete
Professor Emeritus
Memorial University
of Newfoundland
St.John's, CANADA
A1C5S7
e-mail: aefekete@hotmail.com
GOLD UNIVERSITY
SUMMER SEMESTER, 2002
Monetary
Economics 101: The Real Bills Doctrine of Adam Smith
Lecture
1: Ayn Rand's Hymn to Money
Lecture 2: Don't Fix the Dollar Price of Gold
Lecture 3: Credit Unions
Lecture 4: The Two Sources of Credit
Lecture 5: The Second Greatest Story Ever
Told (Chapters 1 - 3)
Lecture 6: The Invention of
Discounting (Chapters 4 - 6)
Lecture 7: The Mystery of the Discount
Rate (Chapters 7 - 8)
Lecture 8: Bills Drawn on the
Goldsmith (Chapter 9)
Lecture 9: Legal Tender. Bank Notes of Small Denomination
Lecture 10: Revolution of
Quality (Chapter 10)
Lecture 11: Acceptance House (Chapter
11)
Lecture 12: Borrowing Short to Lend
Long (Chapter 12)
Lecture 13: Illicit Interest Arbitrage
FALL SEMESTER, 2002
Monetary
Economics 201: Gold and Interest
Lecture
1: The Nature and Sources of Interest
Lecture 2: The Dichotomy of Income versus Wealth
Lecture 3: The Janus-Face of Marketability
Lecture 4: The Principle of Capitalizing Incomes
Lecture 5: The Pentagonal Structure of the Capital Market
Lecture 6: The Definition of the Rate of Interest
Lecture 7: The Gold Bond
Lecture 8: The Bond Equation
Lecture 9: The Hexagonal Structure of the Capital Market
Lecture 10: Lessons of Bimetallism
Lecture 11: Aristotle and Check-Kiting
Lecture 12: Bond Speculation
Lecture 13: The Blackhole of Zero Interest
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