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Open Letter to Hugo Salinas Price

- Keith Weiner - keith weiner

Weiner just does not get it. He does not understand what money is. Money is a mental construct, not some substance found in nature. In the world in which we live, it is governments and only governments that dictate what we will use to represent our mental construct. He can say all he wants that gold is money, but that does not make it so. And that makes his statement that governments cannot embue gold with moneyness (a word of his own creation) factually incorrect, for it is only the government which can do so. That you can pay for something using gold today does not make it money. What that would be is a barter system. As for his assertion that people will not use their gold to pay for things they want or need to purchase, that too is not true. Yes, that might seem true today with gold going up in dollar terms, but gold does not always go up and when it is in a bear market, folks are only too happy to get rid of their gold. And while i am at it, let me also correct his assertion that a gold ring given to one's fiancee is what gives her (or him) confidence that the wedding is to follow. It is not a gold ring, but a diamond ring that is the cultural standard.

Now let me turn my attention to his notion that the twin problems we face are recapitalizing the financial system and financing production and that gold can be used to do both. Talk about a lack of understanding. The problem is debt. Perhaps he was asleep and missed it, but central banks have been extremely busy the past 4 years recapitalizing the financial system. Indeed, the world is awash in fresh cash. If it is not being used to finance production, that would be because it has become impossible to judge the credit worthiness of others since FASB 157 was changed from mark to market to mark to model. That plus the fact that central banks and not the market now dictate interest rates makes it even less attractive to put one's capital at risk. Indeed, as evidenced by the negative interest paid on short term notes, people are more concerned with a return of capital as opposed to a return on their capital. Using gold solves nothing in that the debt does not simply go away as a result. It just becomes payable in gold. And that is an intolerable possibility for those with the largest debts (governments) and because it is those very same governments which get to tell us what we will use as money, you can bet the kitchen sink that they will never switch from paper to gold.

Lastly, let me put it out there that there has never been a gold standard that has not failed. Weiner and others of his ilk will never tell you that. They will only tell you that all fiat systems but the ones currently in place have failed and predict that our current system will also fail. i would agree with their predictions of failure, but strongly disagree with their notion of why. It is not, nor has it ever been, what we use to represent money that has been the problem. The problem has always been a lack of discipline in how the money gets spent. Advocating that we go back to a system that has repeatedly failed as the solution to our current mess is the definition for insanity given by Einstein.

Commenté il y a 4382 jours

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Début de l'article : Dear Mr.Price: I read your piece: "On the Use of Gold Coins as Money" . I think you ask the right question.This is the elephant in the room.Why do gold and silver not circulate? I love your analogy of the Swiss asserting that they will "allow" gold to have a monetary role, this being like "re-hydrating water... Lire la suite

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