Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Gold Standard

Federal Reserve Notes Soon to Become Irrelevant in Oklahoma

This article first appeared at The McAlvany Intelligence Advisor on Monday, June 9, 2014:

 

Republic of Hawaii Banknote for 20 gold dollar...

Republic of Hawaii Banknote for 20 gold dollars, 1895. (Photo credit: Wikipedia)

Something that the lamestream media missed entirely happened on Wednesday, June 4, in Oklahoma: the governor signed into law a bill affirming what is already guaranteed to each state in the US Constitution: that gold and silver coin are legal tender. Historians looking back may recall that day as the day the Federal Reserve’s hegemony over money ended.

Article I, Section 10, the U.S. Constitution states simply that

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Oklahoma is the next state to Affirm gold and silver as Legal Tender

1907 Double Eagle, Liberty Head, Obverse

1907 Double Eagle, Liberty Head, Obverse (Photo credit: Wikipedia)

On Wednesday, June 4, Oklahoma joined Utah, Texas and Louisiana in affirming that gold and silver coins are (as they always have been under the Constitution) legal tender in the payment of debts in the state. On the surface this seems almost silly: affirming a right that already exists in Article I, Section 10 of the U.S. Constitution. But it is much more than that.

 

Senate Bill 862 which Oklahoma Governor Mary Fallin signed into law this week says:

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Gold Standard Arguments Being Promoted Again

Two years ago Steve Forbes, two-time candidate for nomination for president by the Republican Party and Editor of Forbes magazine, predicted “a return to the gold standard by the United States within five years … [because it would] help the nation solve a variety of economic, fiscal and monetary ills.” It’s now two years into his prediction and articles explaining how such a return would work, and why, are beginning

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Proposed Changes to US Currency Symptom of Much Larger Disease

US Currency in UV, visible and IR light

US Currency in UV, visible and IR light (Photo credit: xxv)

Within days of each other, two announcements concerning the future of the US currency appeared in the popular press, and each avoided any mention whatsoever of the primary driver of the changes.

First was the announcement on November 26th from Secretary of the Treasury Timothy Geithner that the U.S. Mint will begin removing pennies and nickels from circulation starting the first of the year, allegedly that they’re too expensive to make. It costs the mint nearly 5 cents to make each penny while it costs more than 16 cents to make a nickel. This is costing the mint a lot of money, an estimated $187 million last year alone.

Two days later CNN reported that the Government Accountability Office (GAO) has called on the Congress to stop printing one-dollar bills and switch instead to one-dollar coins. The GAO claimed that such a move could actually make the government some money:

A $1 coin typically costs about 30 cents for the U.S. Mint to produce, but then the government can sell them to Americans for a dollar each. That financial gain is called seigniorage, and over a period of 30 years, it could [make] the U.S. government about $4.4 billion, the GAO said.

Avoiding the real issue, the GAO said that although the coins cost more to make, they would last longer, thus turning a profit to the government:

We continue to believe that replacing the note with a coin is likely to provide a financial benefit to the government if the note is eliminated and negative public reaction is effectively managed through stakeholder outreach and public education.

Unfortunately there is little likelihood that any of that “outreach” and “education” will include any attempt at explaining why the change is necessary.

The real issue is the declining purchasing power of the currency. And that goes back to the year 1913 when the Federal Reserve System was

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Thomas Sowell’s Musings

A FRAUD THROUGH AND THROUGH

(Photo credit: SS&SS)

When someone as bright, articulate and profound as Thomas Sowell offers his musings “on the passing scene,” I sit up and take notice. There’s bound to be something in there worth reading.

And so there is:

How are children supposed to learn to act like adults, when so much of what they see on television shows adults acting like children?

Example? Joe Biden:

The know-it-all smirks and condescending laughs of Vice President Joe Biden, when Congressman Paul Ryan was speaking during their debate, were a little much from an administration presiding over economic woes at home and disasters overseas — and being caught in lies about both. Like Barack Obama, Joe Biden has all the clever tricks of a politician and none of the wisdom of a statesman.

And this:

Whenever you hear people talking about “a living Constitution,” almost invariably they are people who are in the process of slowly killing it by “interpreting” its restrictions on government out of existence.

And this:

The question to be asked of people in the media, and that they should ask themselves, should be: “Is your first loyalty to your audience or to your ideology?” The same question should be asked of educators, especially those who see themselves as “agents of social change,” even though that is not the job description under which they have been hired and paid.

He saves the best for last:

If there is ever a Hall of Fame for confidence men, Charles Ponzi and Bernie Madoff will have to take a back seat to Barack Obama. Obama is the gold standard — or, perhaps more appropriately, the brass standard.

I was taught years ago a marketing principle that is finally causing Obama to crater: overexposure. The more you advertise a bad product, the faster it disappears from the shelf. Happily that’s not something Obama can fix. He has been exposed for what he is. I like to think I’ve helped a little in that exposure.

The Most Important Election Since…When?

We are told that the presidential election in 2012 is the most important presidential election since [fill in the blank]. This statement is so utterly preposterous that it boggles my mind. The fact that anyone who knows anything of American politics over the last 50 years could say such a thing is indicative of the complete political ignorance of that person. That Republicans could possibly believe this today indicates a lack of political sophistication that is really beyond belief.

Presidential Election 2012 Vector Sticker

Presidential Election 2012 Vector Sticker (Photo credit: Vectorportal)

You’ll notice that this link is to Gary North’s members only website. If you click on it you won’t be able to access the article, but will be invited instead to subscribe. I pay $9.95 a month for his service, and I’m glad to do so.

This single article is worth the entire monthly subscription fee. I want to honor his copyright. I also want to explore briefly why he thinks anyone who says the upcoming election is the most important election since…whenever…is a fool.

North writes:

In 1964, Lyndon Johnson ran against Barry Goldwater. If Goldwater had been elected, the following pieces of legislation would not have been passed:

Medicare, the voting rights act of 1965 and the immigration act of 1965

There would not have been the Federal Reserve inflation to pay for both the Vietnam War and the war on poverty. There would have been no War on Poverty. This means that the bubble that the Federal Reserve created which popped just as Nixon came into office in 1970 would not have taken place.

Furthermore, the outflow of gold that began in 1965 because of the demands by de Gaulle, as well as the two-tier gold system of 1968, would not have been likely. The dollar would have been maintained in terms of gold, and Nixon would not have abolished the last remaining traces of the gold standard in 1971.

He concludes:

So, don’t worry too much about the outcome of this presidential election. The disasters that are likely to take place over the next four years are simply extensions of the outcome of the election that took place 48 years ago.

I invite you to subscribe to his newsletter. It’s worth the $9.95 a month.

Recent Histories of Hyperinflation

Inflation & Gold

Inflation & Gold (Photo credit: Paolo Camera)

I decided to look into episodes of hyperinflation in recent history, based on the work of Steve Hanke (as mentioned in a previous post about the possibility of hyperinflation in the US). Thanks to Hanke and his associate, Nicholas Krus, their just-published study reveals a lot about what hyperinflation looks like.

It does not, however, provide any insight whatsoever into that most elusive point: the “trigger” that unleashes the hyperinflation. What is it that causes people suddenly, sometimes overnight it seems, to decide that their money is worthless and that they need to get rid of it as quickly as possible before it loses any more value?

But the study, and the table of the 56 episodes (some very recent and nearby), is instructive.

First, their work may be considered to be more reliable than some other more readily available sources, like Wikipedia:

Without a complete list of hyperinflation episodes in the scholarly literature, many people simply rely on Wikipedia and the unreliable information contained therein (e.g. Fischer 2010). To fill the void in the academic literature, we set out to construct a new, comprehensive table of the world’s hyperinflation episodes.

Second, they had considerably difficulty in obtaining reliable data. How, for example, do you measure inflation when prices in grocery stores are

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Another Uninformed Attack on the Gold Standard

Charles Lane: The Failing Case for Gold

As history abundantly demonstrates, the gold standard would not immunize the economy from financial crises. Imposing it would, however, render the central bank powerless to respond to them, as it could not readily expand credit or act as lender of last resort to solvent institutions.

Gold Key, weighing one kilogram is used to acc...

(Photo credit: Wikipedia)

Here is another perfect example of an uninformed individual given a bully pulpit to promote his ignorance courtesy of the Washington Post.

He refers to a part of the Republican Party’s platform (which means nothing anyway) which calls for a commission to study “possible ways to set a fixed value for the dollar.” This is an allusion to the study done back in 1980 by the Gold Commission which recommended against the concept, but was dissented to by one of its members, Ron Paul, in his “The Case for Gold.”

And this frightens author Lane:

We can only hope that this iteration of Republican pandering to the gold bugs bears no more fruit than the last one. Touted as a cure for the chronic financial instability that central banking purportedly breeds, tying the nation’s money supply to the supply of gold would be worse than the disease.

We know where he stands: “pandering to the gold bugs” is a giveaway to a polemic, not a rational discussion.

A more rational discussion of the gold standard starts with what it would do: rein in the uncontrollable urge by the Fed to bail out the big banks. The Fed, remember, is a cartel whose mission is to protect the big banks from the consequences of their bad behaviors, using taxpayer monies (or digital money created out of nothing which derives its value from depreciating the value of taxpayer monies).

As Steven Horwitz, an Austrian school economist from St. Lawrence University, notes accurately:

If we had a commodity-based free banking system, we would not have had the boom and bust of the 2000s in the first place. The powers that enable the Fed to create liquidity ex nihilo in a crisis are the very same powers that enabled it to drive the real Federal Funds rate below zero for two years and fuel the housing bubble, which gave us the financial crisis and recession.

Just because the Washington Post has a louder voice doesn’t make it any more credible. A wrong-headed opinion about the gold standard is still wrong, no matter who promotes it, don’t you think?

Halting Steps Towards a Gold-Backed Currency

Chris Poindexter: Slow Week For Gold

The world is crying out for some of type of encrypted token or bearer receipt that can be traded for physical gold.  Where the physical inventory matches the encrypted tokens at a rate of 100 percent and can be redeemed at a fixed margin for physical gold or cash on demand in various cities around the world. Some countries might consider that a competing currency, but as long as receipts are denominated in fixed amounts of gold and not currency values, that should avoid most complications; it’s really just a new way to trade commodities.

English: Currencies exchange logo Français : L...

English: Currencies exchange logo Français : Logo symbolisant le change de devises (Photo credit: Wikipedia)

While Poindexter is writing for his “gold bug” customers about the price of gold and silver and how the ratio between the two—a very high 59—bodes well for silver purchasers, he makes an excellent side comment about how the free market will eventually revert back to real money, a gold-backed currency.

Ben Bernanke doesn’t recognize silver or gold as real money, which is about as good an indicator you can find that it is! If he’s for it, it’s wise to be against it, and vice versa. It saves a lot of thinking because the man has been so consistently wrong for so long. His response to Ron Paul’s question about whether silver and gold is real money is instructive: “No.”

There are barter currencies in existence now and I’ve written about them. There are local and regional currencies backed by, in some places, maple syrup! No, I’m not making this up! I’m not that clever!

But that’s how we moved from a direct exchange economy—goods for goods—to an indirect exchange economy—goods for money for goods—which helped the world’s GDP to grow by an astonishing 2 percent per year ever since about 1800.

And as the dollar continues to lose value, people will find that other options are going to work better—much better—than paper money that doesn’t maintain its value. I’m not afraid of hyperinflation, mind you. The Fed would never allow that to happen because it would threaten its very existence. But what it will allow is “some” inflation—Gary North thinks in the range of 20 to 30 percent annually—which will serve nicely to generate increasing demands for money that retains its value.

I’m encouraged by Poindexter’s comments. He sees further than I do on this issue. And I welcome that.

Ron Paul Has the Final Say

WASHINGTON, DC - FEBRUARY 29:  Republican pres...

In his last public opportunity to quiz Federal Reserve Chairman Ben Bernanke, who appeared before the House Financial Services Committee on July 18, Texas Congressman and Republican presidential candidate Ron Paul took the time to put things into perspective:

For the past few years the Federal Reserve System has received criticism from all sides of the political spectrum, and rightly so, for its unprecedented intervention into the economy and its bailouts of large Wall Street banks and foreign central banks.

This has been Paul’s theme ever since he entered Congress following a special election in April 1976. In a position paper that his staff prepared in June of 1976, Paul attacked a pending bill in Congress to fund the International Monetary Fund following the breakdown of the Bretton Woods agreement when President Nixon took the dollar off the gold standard in 1971.

The staffer primarily responsible for that paper, Gary North, remembers starting work on Friday, June 11, 1976, and being given the task of preparing the paper in time for the Monday deadline. He worked all weekend on it, and when it was published, it made such an impression on Senator William Proxmire, then chairman of the Senate Banking Committee, that he invited Paul to testify before his committee. Says North: “At the time, I had never heard of a House member testifying to a Senate Committee. I have never heard of it since.”

But that testimony launched a three-decades-long campaign by that lone congressman to question the existing monetary system, especially the centerpiece of that system, the Federal Reserve.

In his July 18 testimony, Paul recalled his primary problem with the IMF—the same problem he has with the Fed—is that it is a central bank that was deliberately designed to

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The Robin Hood Tax Scam Is Back

robinhood_june19_DSC_1766

In a burst of uninformed enthusiasm, William La Jeunesse, writing for Fox News, announced that the bill offered by Senator Tom Harkin (D-Iowa) and Representative Peter DeFazio (D-Ore.)—the “Wall Street Trading and Speculators Tax Act”—was the Robin Hood tax.

If he knew better, La Jeunesse would have called it by its correct name: the Tobin Tax, first offered 40 years ago by a Keynesian economist, following the collapse of the Bretton Woods agreement when President Nixon took the United States off the gold standard. That bit of information would no doubt have helped to curb his enthusiasm.

La Jeunesse wrote:

The measure would impose a tiny three-hundredths-of-a-penny tax on financial trades. Supporters say the bill would cost the average investor just $1 per year, but could raise up to $35 billion annually.

This painless way of extracting funds from its owners would then allow further spending to stimulate the economy, according to DeFazio:

It’s .03 percent. But it will still generate about $35 billion a year in income—income that could be used to rebuild the real economy, infrastructure [and make] other investments.

Any proposal to increase taxes, direct or indirect (the Tobin tax qualifies as an indirect tax), can be examined at least three ways. Who is proposing it and what is his agenda? Who has analyzed its impact impartially and has the intestinal fortitude to tell the truth about the bill? And are taxes in general moral, and indirect taxes specifically? 

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Speech: Bernanke Fails at Transparency, Rails at Gold Standard

M6 - Money

When Federal Reserve Chairman Ben Bernanke donned his professorial cap and addressed 30 undergraduate students at George Washington University on Tuesday, he claimed it was all in the interest of transparency. According to the New York Times, “The Fed is concerned that it is neither loved nor understood by many Americans, and that public anger could lead to constraints on its powers.”

A close look at his actual presentation, augmented by slides, confirms his attempt to direct the students’ attention away from the Fed’s obvious dangers, faults, and failures and instead concentrate on its alleged virtues.

For example, his attack on the gold standard was filled with falsehoods and half-truths that failed to convince, only to confuse:

The gold standard as an alternative to a central bank: The gold standard sets the money supply and [the] price level generally with limited central bank intervention.

What the professor fails to state is that there is the gold standard and there is a paper standard that can only be enforced when a central bank is given a monopoly over what citizens may use as money. He fails to make clear that it’s the quantity of gold that “sets the money supply” and from that is derived the value of each piece, which is reflected in its purchasing power in the marketplace. It’s the citizen, freely accepting, using and exchanging gold for goods and services in the marketplace, who sets the price level. Buried in the comment “with limited central bank intervention” is the core of the problem: Bernanke doesn’t want people making those choices and decisions for themselves. Those decisions must be left to experts like

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The Best Way Back to a Gold Standard

Dollar versus DOW

In his Forbes magazine article published Thursday, Nathan Lewis makes it sound easy to get back to a gold standard. After all, it has been accomplished numerous times in history around the world, including in America following the Civil War.

The first way is a “return to prior parity,” which would mean making a dollar redeemable in gold at $35 an ounce. Lewis points out that this would be impossible as it would entail a huge shrinkage in the money supply and a consequent depression. So option one is out.

The second way is to make a dollar redeemable in gold at a figure close to gold’s current price at between $1,500 and $1,700 an ounce. Lewis notes that this would also require a major restructuring—“a long price adjustment”—in his words, and “would probably cause a recession.” Not such a good option.

Lewis says there is a third option:

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Keynesian Hacks Slander Republican Candidates

Caricatures: GOP Presidential Debate Participants

CNN’s article by Charles Riley quoted several of the Republican candidates for President out of context and then asked several unknown Keynesian economists—Keynesians believe in growing and empowering the government to stimulate the economy—to comment on those quotes. The result was a one-sided dismissal of anything the candidates had to say about the economy and how they might fix it.

For instance, Riley quoted Jonathan Lanning, an assistant professor at Bryn Mawr, as saying that “there are so many economic ‘misstatements’ being made, and it isn’t confined to any one candidate.” He went on to contend that if any of the Republican candidates were in his introductory economics class, Econ 101, they certainly wouldn’t

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Top Economists Tell How to Grow Jobs

GROWTH

Image by SamuelBenoit (.wordpress.com) via Flickr

Now that the Senate has officially and resoundingly defeated President Obama’s jobs bill (The American Jobs Act), the question remains: just how do real jobs grow?

Matt Welch, writing in the November issue of Reason magazine, reminds his readers of what doesn’t work: government promotion of ideology. The Solyndra debacle is the most recent but not the only example. In May 2010 the President gushed over the positive impact Solyndra was having in growing jobs in the “green” sector:

We invested…in clean energy because not only would this spur hiring by businesses but it creates jobs in sectors with incredible potential to propel our economy for years, for decades to come. And we can see the positive impacts right here at Solyndra…

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Closing the Gold Window: Remembering the Nixon Lie 40 Years Ago

President Richard M. Nixon speaks on the telep...

Image via Wikipedia

Against the backdrop of price inflation reaching six percent, the unemployment rate touching five percent, the increasingly large holdings by foreign governments of dollars (that at the time were convertible into gold upon demand) and his desperate need to get reelected, in August, 1971 President Nixon conferred with his economic advisers about how to solve the inflation problem without taking any blame for it.

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Why is Gold Over $1700 an Ounce?

A London Good Delivery bar, the standard for t...

Image via Wikipedia

With gold bouncing up from $1,668 an ounce on Friday, August 5 to $1,778 on Tuesday, August 9, it was the biggest three-day rally since the start of the great recession in 2008. At the same time, the equities markets were falling precipitously, losing over 600 points on the Dow on Monday alone. What is the connection?

The easy answer is fear, loss of confidence, and

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Gold at $1,500 an Ounce and Moving Higher

gold cast bar

Image by hto2008 via Flickr

The price of one ounce of gold exceeded $1,500 yesterday, and immediately the media was filled with explanations. Jan Harvey, writing for Reuters, said gold was benefiting from “the threat of a downgrade to the United States’ triple-A credit rating this week and fresh worries over euro zone debt [that] fueled fears over the outlook for both the dollar and the euro.”

The possible termination of the Federal Reserve’s program of buying U.S. Treasuries (called Quantitative Easing, or QE2) in June adds uncertainty to the markets, and “There is still going to be a lot of uncertainty over the strength of growth in the United States,” according to Macquarie analyst Hayden Atkins. Simon Weeks, head of precious metals at the Bank of Nova Scotia, added:

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The Panic of 1893: Boosting Bankers’ Money and Power

Caption said: "MR. J. PIERPONT MORGAN, WH...

Image via Wikipedia

Junius Morgan was, at best, a third-tier English banker in the 1850s, who was fortunate to have had a hand in a number of lucrative financings, mostly for industries seeking seasonal financing. His conservative nature was partly a cause of his lack of distinction. He’d inherited a substantial sum when his father died and was exceedingly careful when risking any part of it. One of the maxims Junius instilled into his son, John Pierpont Morgan, was, “Never under any circumstances do an action which could be called into question if known to the world.”

The two first-tier international banking families were the Baring Brothers and the Rothschilds. Barings financed the Louisiana Purchase and the French indemnity payment after Napoleon’s loss to the Duke of Wellington at Waterloo. So influential was Barings that the Duke of Richelieu commented:

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Are Living Standards Improving?

CD, DVD and SACD player.

Image via Wikipedia

 

Five years ago Donald Boudreaux, Economics Professor at George Mason University and author of the website Café Hayek, bought a used 1975 Sears catalog on Amazon, and started comparing prices to those current in 2006. His results, at the time, were quite remarkable, and generated much traffic and conversation on the matter. For instance, the lowest-priced electronic calculator in 1975 was $13.88, and with six digits, it allowed one to add, subtract, multiply and divide. When updated for inflation through the Bureau of Labor Statistics (BLS) website, that would be $56.21 in today’s money. Of course, it’s hard to draw any sort of hard conclusion from a single example. First of all, that calculator is no longer available. Those available today are vastly more powerful and versatile and sell now for just a few dollars.

Here are some others that he found, with updated 2011 prices from Sears.com:

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.
Copyright © 2018 Bob Adelmann