The document is a newsletter from the Gold Standard Institute that discusses various topics related to gold and monetary policy. It includes an editorial criticizing a US congressional committee for not recognizing the serious problems with the current monetary system. It also includes news briefs on gold-related topics from around the world and articles analyzing the disconnect between gold's dollar price and underlying monetary conditions. The newsletter aims to promote restoring the gold standard and a sound monetary system.
The document is a newsletter from the Gold Standard Institute that discusses various topics related to gold and monetary policy. It includes an editorial criticizing a US congressional committee for not recognizing the serious problems with the current monetary system. It also includes news briefs on gold-related topics from around the world and articles analyzing the disconnect between gold's dollar price and underlying monetary conditions. The newsletter aims to promote restoring the gold standard and a sound monetary system.
The document is a newsletter from the Gold Standard Institute that discusses various topics related to gold and monetary policy. It includes an editorial criticizing a US congressional committee for not recognizing the serious problems with the current monetary system. It also includes news briefs on gold-related topics from around the world and articles analyzing the disconnect between gold's dollar price and underlying monetary conditions. The newsletter aims to promote restoring the gold standard and a sound monetary system.
The Gold Standard The journal of The Gold Standard Institute
Editor Philip Barton Regular contributors Rudy Fritsch Keith Weiner Occasional contributors Ronald Stoeferle Sebastian Younan Publius
The Gold Standard Institute
The purpose of the Institute is to promote an unadulterated Gold Standard
www.goldstandardinstitute.net
President Philip Barton President Europe Thomas Bachheimer President USA Keith Weiner President Australia Sebastian Younan Editor-in-Chief Rudy Fritsch Webmaster Jason Keys
Membership Levels
Annual Member US$100 per year Lifetime Member US$3,500 Gold Member US$15,000 Gold Knight US$350,000 Annual Corporate Member US$2,000 Contents Editorial ........................................................................... 1 News ................................................................................. 2 Goldbugs* In Agony ..................................................... 2 Monetary policy disasters and the new honesty .... 4 Theory of Interest and Prices in Paper Currency Part II (Mechanics) ................................................................. 5 Gold Standard, ey? So, whats in it for ME? ............. 8 The American Corner: Arizona Governor Vetoes Gold and Silver Bill ........................................................ 9 Nibbling at the Edges .................................................. 10
Editorial In April came news that Rep. Kevin Brady (R-TX), the Chairman of Congress Joint Economic Committee had established a committee "to examine the United States monetary policy, evaluate alternative monetary regimes, and recommend a course for monetary policy going forward." In May the committee was named the Centennial Monetary Commission. This is its chairmans first public pronouncement: This isnt an End the Fed gambit just the opposite. We want a very thoughtful, very constructive analysis of the last 100 years. When the house isnt on fire we want a discussion of what role the fire department should play. If Congressman Brady cannot see that the house is already on fire, then it becomes unrealistic to expect that his Commission will be anything other than the normal talkfest. The disconnect between Wall Street and the real economy may go some way to explaining the gap in reality between Congress and the hardships of real people. Politicians (and their advisors) in Europe and the US (and elsewhere) are still clutching at straws. They are fervently hoping that the existing modus operandi can continue; that with a bit of tinkering here and there it can be fixed. It cannot. The economy is contracting and will continue to do so. How bad do things have to become until reality is faced? Sadly, it seems as though anger will have to manifest at the street level before politicians take note. For as long as the streets are quiet then, for that same period, our politicians will continue to dither and potter around the legislative edges of the current malformed MacMoney system. The Fed, along with every other central bank, will end. The Feds continued pronouncements that the economy is recovering will be one day used against them like a sledgehammer. Memo to the Centennial Monetary Commission: the whole world is burning and it is the Fed that started and maintains the blaze. Philip Barton The Gold Standard The Gold Standard Institute Issue #29 15 May 2013 2 News Schiff Radio: Peter Schiff interviews Keith Weiner on Arizona law to make gold and silver legal tender
Hartgeld.at: Speech by the President in Vienna
Reuters: The governor buckles: with the backing of groups including the Tea Party movement, American Principles Project and the Gold Standard Institute.
BBC: 12 x 10 kilo bars of gold confiscated at Italy/Swiss border
BBC: German national caught smuggling gold out of Greece
France 24: Gold rush in Turkeys Grand Bazaar
Daily News Egypt: Dollar speculation creates market for gold in Egypt
Zerohedge: China, Japan and Australia Scramble for Physical
Mineweb: Booming gold sales in China and India
NY Times: A grim portrait of Italy today. 1000 businesses a week going bankrupt.
Youtube: A bit different
24hGold: A proposal for Italy to waste its gold in order to keep the paper chain intact a little while longer.
Goldchat: Bringing forward demand
Business Standard: $70 billion of bullion traded through Dubai in 2012. That is over 1200 tonnes, which puts the Cypriot 10 tonnes in perspective. Goldbugs* In Agony Goldbug An individual obsessed with the fiat price of gold; one who views gold as an investment. For those Goldbugs out there preoccupied with the price of gold, the price consolidation over the last 18 months must have left many feeling isolated, alone, desperate and one may even suggest on the cusp of insanity. Over this period of time gold has underperformed the Dow, the SP500, the Nasdaq as well as most of the European markets. Even the recent bastard child of investments, the US real estate market, has left gold red in the face. The euphoria which had dominated the Goldbugs mindset has now dissipated. Many now find themselves in the wilderness of lost economic dreams. How did it ever end up like this? they question. After all this is supposed to be one of the most gold-friendly environments in decades. Since the nominal high was established in US dollars in August 2011, governments around the world have dived head first into an ocean of stimulus packages. Sovereign deficits have ballooned making the pre- GFC environment appear fiscally responsible. Even Australia which is regarded as the Western worlds model economy, with a Government high praised for its successful economic management, is not immune to the seduction of increasing deficits. Throughout Europe, Asia and the United States, central banks have ramped up the printing presses. The markets have been flooded with a tidal wave of counterfeit credit, borrowed into existence, so much that most no longer keep track of the monetary expansion. All this fiscal and monetary insanity have left Goldbugs dumbfounded as the gold price has The Gold Standard The Gold Standard Institute Issue #29 15 May 2013 3 crashed when using the dollar as the yardstick. And that is where the problem rests. The current crisis plaguing the world economy is chiefly centred on the concept and definition of money, being gold, and its various derivatives; currencies. The irredeemable currencies vibrate hysterically relative to one another since the ultimate extinguisher of debt, being gold, has been banished from the system, though its absence is tragically felt. The average Goldbug does not understand the nature of this crisis. They find themselves troubled by the lacklustre performance of gold. To the extent that one is disappointed by golds dollar decline (or equally enthused by any dollar gain) illustrates the extent to which one understands what gold is, the nature of this crisis and what the price volatility means for society as a whole. To be fair, the description Goldbug isnt particularly telling since most are really Dollarbugs. Their interest in gold extends as far as the dollar price which entirely misses the philosophical, practical and moral case for gold which many readers of this publication are all too aware of. Besides misunderstanding what gold is, the Goldbug has fallen victim to the Linear Quantity Theory of Money (LQTM) which explains the root cause of their despair and disappointment. That is where the heartbreak begins. The LQTM is an economic theory of money based upon four false economic premises which distort ones understanding of causality. The first premise utilised in the LQTM is the embrace of linear relationships as the foundation of the theory. Utilising a linear relationship is problematic when introduced into a social science such as economics. The study of economics is ultimately a study of mankind and his nature. It is the study of interaction and the psychology associated with it. A linear theory cannot be applied to man since he is not a linear entity. In fact the economy as a whole is highly non-linear. For the Goldbug examining the expansion of counterfeit credit, the assumption that more printing means higher gold prices reflects ones linear understanding of relationships. It is a false assumption which the Goldbug clings to. Contrary to the assumption and even the irrational wishes of the Goldbug, price inflation is not currently being witnessed but rather deflation is occurring. The counterfeit credit is flowing to the bond market despite the intent and wishes of the central planners. To the dismay of the Goldbug hyperinflation has not eventuated, yet. The second premise undermining the LQTM is its static assumption of the economy as a whole. The assumption views the relationships within the economy as static and unchanging. The LQTM ignores the ever changing and dynamic nature of the economic environment. As time progresses the psychology of the actors change as well. This means that previous assumptions become as relevant as the previous days weather. This false premise gives rise to the third premise which views the economy as a stateless entity. The assumption that the economic actors behave in a stateless manner defies human nature. Man is a stateful entity. Specific interferences made in the economy, whether it is fiscal or monetary in nature, alter the manner in which the economic actors behave. It is an economic impossibility for an economy to remain stateless. Previous interferences into the economy by governments are remembered. Information is assiduously addressed and considered with each activity one embarks upon. Too often the Goldbug becomes a victim here as he or she no longer assimilates the ever changing environment which the LQTM ignores. The final premise which the theory rests upon is a scaler understanding of information. The perception that a particular piece of economic data, such as GDP or unemployment or CPI et cetera has supreme importance is misleading. Too often Goldbugs and economic academia become infatuated with particular economic indicators (such as GDP figures which cannot possibly measure the size of an economy) whilst ignoring the multivariable nature of the economic environment. Quantitative measurements should not be regarded with the saintly reverence overwhelmingly directed towards them. One should note their significance yet contextualise them in the context of a multivariable environment. By utilising the LQTM to analyse markets and to try to predict the fiat price of gold, Goldbugs employ an antiquated and failing theory which explains their The Gold Standard The Gold Standard Institute Issue #29 15 May 2013 4 heartbreak and euphoria accompanying the gold price fluctuation. The professional, the one who recognises gold as the ultimate asset, as money, generally approaches the fluctuations with caution. The extreme volatility in gold only illuminates the extreme volatility of the dollar. Like the tail wagging the dog, the dollar price is indicative of the destabilisation and destruction of the irredeemable fiat monetary system. As the disintegration of the system accelerates and intensifies, the volatility will no doubt worsen. Most Goldbugs will not survive the extreme movements as they bail out of gold for a fiat master. Sebastian Arthur Younan President Australia Monetary policy disasters and the new honesty Once again, one monetary event is chasing the other in Europe accompanied by a marked change in the political players language and deeds. EU representatives as well as national politicians have switched to a form of new honesty. People are gently being prepared for the day when their savings will be slowly but steadily taken away from them for the sake of Europe. The onslaught on the private property of the citizenry has begun in Cyprus where the savings customers of several banks have been asked to chip in practically overnight. Contrary to such events in the past though, politicians have not minced their words about what happened: daylight robbery perpetrated by Europes elites on their people. Certainly the honesty (not the misappropriation) is to be welcomed, but it still sends shivers down the spine of the seasoned observer. This honesty was definitely not for the benefit of the people, there must be much more to it. I believe that this honesty is supposed to win back some part of the trust that has been squandered over the last few years. One should not forget that European politicians have forfeited national interests and changed national laws for the greater European good without once asking or informing their electorate. They even went so far as to change the constitution as if it were mere house rules again without asking the sovereign at one fell swoop. One prominent example of these forced antidemocratic measures is the ESM (European Stability Mechanism). And what is the purpose of all this? To prop up the vision of a centrally managed currency that for the first time in human history has been forced upon half a continent comprising countries with different cultures and on different levels of economic development. Politicians are fighting to regain their credibility Naturally these deflecting measures could not hold back the powerful forces of nature and the entire artificial currency system seems close to collapse. Therefore, the elites are preparing not only themselves but also the people for something new. After the total breakdown of the euro complete with rescue actions that were doomed to failure from the onset, the credibility necessary for a fresh start will have been lost. That is the reason why politicians employ the new honesty to try and win back the trust of the people in order to be able to convince them of the monetary system to be. Naturally, this will be another artificial system that is to serve exclusively the political elites and their allies the banks. The population is being and will go on being exploited. The only purpose of the surprisingly honest new tone is therefore to prepare the people for more of the same. Against the backdrop of a Europe where supranational agencies attempt to totally usurp the power via monetary mechanisms, a rapid advance of the gold standard is desperately needed before it is too late. As mentioned earlier, the experiment has failed already, Europeans have paid for this with substantial parts of their savings and our children will still be paying off the debts caused by this bogus peace idea. On time before the complete collapse the elites are getting ready to install the next pseudo currency. At this stage, the TGSI must take responsibility and resist this development with all vehemence. Thomas Bachheimer President The Gold Standard Institute Europe. The Gold Standard The Gold Standard Institute Issue #29 15 May 2013 5 Theory of Interest and Prices in Paper Currency Part II (Mechanics) In Part I, we looked at the concepts of nonlinearity, dynamics, multivariate, state, and contiguity. We showed that whatever the relationship may be between prices and the money supply in irredeemable paper currency, it is not a simple matter of rising money supply rising prices. Here is a fitting footnote for Part I. I just bought a pair of Levis jeans at Macys for $45. I remember buying a pair of Levis Jeans in Macys in 1983 for $50. In 30 years, the price of Levis Jeans has fallen by 10%. By any conventional theory based on the money supply, the price should have risen by several hundreds of dollars. In this part, we look at some mechanics, the understanding of which is a prerequisite to the theory of interest and prices. To truly understand anything, you have to know what happens in reality step by step. This is even more important in an abstract field like monetary science. We discuss stocks vs. flows, how prices are formed in a market, a broad concept of arbitrage, spreads, and how money comes into and goes out of existence. Lets drill down into a point I made in passing in Part I. It is worth noting that money does not go out of existence when one person pays another. The recipient of money in one trade could use it to pay someone else in another. Proponents of the linear QTM 1 would have to explain why prices would rise only if the money supply increases. This is not a trivial question. Prices rise whenever a buyer takes the offer, so no particular quantity of money is necessary for a given price (or all prices) to rise to any particular level. It is seductive to respond by way of the common analogy of too much money, chasing too few goods. But, is that an accurate picture of how markets work? Money supply is a quantity of stocks. One could theoretically add up all of the gold in human inventories, or all of the dollars in the financial
1 Quantity Theory of Money system, and come up with a scalar number of ounces or dollars. How about goods supply? This is a different meaning of the word supply. Unlike in money, the supply of goods means the flows of goods. To discuss copper or wheat, one must measure how much is mined or grown every year. This would be pounds or bushels per year. Flows of goods cannot be compared in any meaningful way to the stocks of money; pounds per year cannot be compared to ounces. Just like in physics, length cannot be compared to velocity; one cannot compare meters to meters per second. That is not a proper approach to sciencephysical or monetary. This brings us to an important fact. The stock of money is not consumed after a transaction. However, in the normal case, goods are. Other than the monetary commodities of gold and silver, only small inventories are normally kept as a buffer in all other goods. To state this in everyday terms, if Joe buys a loaf of bread from Sally for $1, he will eat the bread (or it will go bad) but Sally has the money until she spends it. If Acme Pipe buys 1000 pounds of copper, it will manufacture it into plumbing and sell the plumbing. Now lets move on to the mechanism of price discovery. In Part I, I stated: In any market, buyers and sellers meet, and the end result is the formation of the bid price and ask price. There is not just one monolithic price, but two prices: the bid, and the ask (also called the offer). If you come to market and you must buy, then you have to pay the offer. For example, you own an apartment building and your lease obligates you to provide heat for your tenants. So you go to the heating oil market. If heating oil is bid $99 and offered $101, you must pay $101. Note what happens next. The seller of that oil - assuming you just bought all of his oil - leaves. He has exchanged his oil for your dollars and he goes home. The next seller may ask $102. Now the market is bid $99 and offered $102. The Gold Standard The Gold Standard Institute Issue #29 15 May 2013 6 Next, a heating oil distributor comes to market with the days production. He must sell, because tomorrow he will produce more. What price does he get? Did your purchase push up the price? You did not push up the bid price, and so the new heating oil vendor must take the bid of $99. Now this consumer is sated, he has the oil he wants. The next best bid could be $97. There is a counterintuitive process here. The bid is formed by the competition of producers who keep selling until the marginal seller does not accept the bid. The ask is formed by the competition of consumers who keep buying until the marginal buyer does not accept the ask. This is a critical idea in Austrian School analysis, so I encourage readers to stop and think this through. Buyers keep coming to market and taking the offer (thus lifting it) until a point is reached where the next would-be buyer balks. This buyer, the marginal buyer, may make his own bid, above the best bid but below the best offer. At the same time, sellers keep coming to market and taking the bid, until the marginal seller balks. This seller may set his own offer, below the best offer but above the best bid. There is one other actor, the market maker. The market maker will act to keep a consistent bid-ask spread. If the ask is pushed up, then the market maker will raise his bid. If the bid is pressed down, then he will lower his ask. The market maker is the only one who can buy at the bid and sell at the offer. His profits come from the bid-ask spread, the wider the spread the more his profits. Of course, the next market maker will enter and force the spread to narrow, and so on until the margin al market maker balks and the spread does not narrow any further. From the mechanics described here, we begin to build a picture of how prices are set where the rubber meets the road in the market. If there are more market participants who buy at the offer then the end result is that prices move upwards. If there are more who sell at the bid, then prices move downwards. This may seem tautological. It is prerequisite material. We return to my rhetorical question. Why would prices not keep rising in the case of a fixed quantity of money? After all, when Joe buys the loaf of bread from Sally for $1 there is no reason why Sue could not buy it from him for $2 and John couldnt buy it from Sue for $3 and so on. The observant reader may object on grounds that prices can only go up until people cannot afford the good. Bread cannot be $300 per loaf if no one has $300. This is comparing stocks to flows once again. What matters is not whether the consumer has $300 in stocks, but whether the consumer has $300 in flows. If the velocity of money (flows) rises, then the consumer could have $300 of daily income with which to pay the price of his daily bread. As we see from the above discussion of price formation, neither the buyer nor the seller has an intrinsic advantage. Both come to market and must accept the market price (ask or bid, respectively). Size does not add any power to the seller. If anything, the seller has a disadvantage in trying to get a price he prefers, compared to the buyer. He has capital tied up in his productive enterprise, and certain fixed costs like payroll that must go on whether he sells or does not sell. Holding inventory does not normally do him any good. With the exceptions of food and energy, buyers can afford to be pickier. They do not face the same problem as sellers; if they go home at the end of the day with money as opposed to goods, this is not always a problem. Without delving too deeply into this topic, I want to paint with a broad brush stroke. There is no force that guarantees a constant price even if the money supply is fixed. There are many reasons why buyers could lift the offer or sellers could press down the bid. Not only can prices rise with the same stocks of money, but they could also rise with the same flows of goods. Next, lets introduce the concept of arbitrage. People often use this term in a very narrow sense, to mean buying and selling the same good in different markets to shave off a small spread. For example, IBM stock is offered at $99.99 in London and bid at $100.00 in New York, so the arbitrager could simultaneously buy and sell to pocket a penny. Or, in the gold market, which I write about frequently, one The Gold Standard The Gold Standard Institute Issue #29 15 May 2013 7 could buy spot gold and sell December gold for a 0.3% annualized spread. In this paper, I use the word arbitrage to refer to a much broader concept. I wont fully explore it herein, but we need to discuss one relevant aspect. 2
Lets go back to our example of the landlord. What is he doing? He is seeking to make a profit by renting out apartments to tenants. The rent is his gross revenue. How is the rent set? If he needs to rent a unit, he must take the bid. What are his costs? Broadly, he must buy land, construction materials, construction labor, maintenance labor, heating oil, etc. We will address later that he must pay the rate of interest on the capital. The landlord must buy these things at the offer. We can look at him as doing an arbitrage between his inputsbought at the offerand his output productsold on the bid. The landlords spread is Rent(bid) Inputs(ask). In this light, what should he be the limit of what he is willing to pay for his inputs? A bit less than the rent he receives, at most. I give this example to make it clear why we should not think the primary driver of markets is the consumer with a bank account balance as his budget. One might think of a consumer who has a total of $10. Lets suppose he would want to pay $0.01 for a loaf of bread. But if he had $100 total, he would pay $0.10, and so on. This is the siren song of QTM luring one to think that increased stocks of money must lead to higher prices. It is often stated, if everyones bank account grew by 10X, then prices will be 10X higher. Will a middle class consumer buy more food if he has more money? At any rate, instead of the consumer, we should think of the entrepreneur. He is an arbitrager who will not normally buy inputs unless the bid on his output affords him an acceptable margin above the offer on his inputs. What will cause consumers to
2 Those interested can read more about arbitrage in Disequilibrium Analysis of Price Formation by Antal Fekete, January 1, 1999 raise their bid on his outputs? This is a non-trivial question that will be addressed in a later part of this paper. Up until now, we have been using the term money without regard to the distinction between gold and promises to pay, i.e. between money and credit. It is now necessary to make this distinction to continue the discussion. In the current monetary regime, money (gold) has no official role to play at all, though it assuredly plays a role. My permanent gold backwardation thesis 3 can be summarized as follows: the withdrawal of the gold bid on the dollar will bring about the collapse of the dollar because dollar holders will drive prices up exponentially by using commodities to get gold. Money (gold), of course, can only come into existence via a slow and inelastic process of mining. Money does not go out of existence (though gold coins can be melted down to produce non-monetary objects). Both of these processes are themselves driven by arbitrage. When the inputs required to mine one ounce of gold cost less than one ounce, the gold miners spring into operation. When the inputs rise above one ounce, they shut down. When jewelry sells for more than the cost of its inputs (principally gold, labor, and perhaps gem stones) then jewelers spring into action. When monetary gold is worth more than jewelry, then it is melted down and returned to monetary form by arbitragers known as Cash For Gold. Credit is an entirely different animal. In Part III, we will discuss credit including an examination of the borrower, the borrowers opportunities, and the borrowers considerations. Dr. Keith Weiner Dr. Keith Weiner is the president of the Gold Standard Institute USA, and CEO of Monetary Metals where he write on the basis and related topics. Keith is a leading authority in the areas of gold, money, and credit and has made important contributions to the development of trading techniques founded upon the analysis of bid-ask spreads. Keith is a sought after speaker and regularly writes on economics. He is an Objectivist, and has his PhD from the New Austrian School of Economics. He lives with his wife near Phoenix, Arizona.
3 http://keithweinereconomics.com/2012/03/15/when-gold- backwardation-becomes-permanent/ The Gold Standard The Gold Standard Institute Issue #29 15 May 2013 8 Gold Standard, ey? So, whats in it for ME? Really, Im serious. TGSI has published a lot of heavy articles dealing with important issues regarding Gold and the Unadulterated Gold Standard; articles about the big picture, about the mechanisms of the Gold Standard, about the history of Gold, about the economic impact of Gold circulation, etc. etc but no articles about the effects of an actual Gold Standard on an actual, average person. Well, this series of articles tackles this very issue. Why indeed should the average Joe or Jane, someone in the middle of the earnings range; the wage earner, the retiree, the new graduate starting their economic life why should they be interested in Gold or a Gold Standard? After all, Gold is for the rich, right? And isnt Gold in the Central Bankers vaults just a tradition? Isnt Gold a Barbarous Relic? And surely, there is not nearly enough Gold in the world to replace the trillions of Fiat paper currency in circulation? And, if there was a Gold Standard, how would that affect ME? The average ME in the world has very little if any Gold so introducing a Gold standard would not be fair to ME would it? Any time I start musing about the Gold Standard, I see a powerful, emotionally charged (for me) image. It is an image of my long departed father. Whenever my father recalled his youth, telling me about his adventures, and misadventures, as a young man in Hungary, he would inevitably end up reminiscing about the peaceable days and every time he did, his eyes would take on a soft, far away glow; his features would become gentle, relaxed, indeed he looked like he was reminiscing about the Garden of Eden. Well, as a young boy I was not sure what he meant, but the emotional impact stayed with me understand that my father was not generally soft or relaxed. Even so, I eventually came to understand that by peaceable times he meant the times before the madness of The Great War, WWI. Much later, after I studied Austrian economics and met Professor Fekete and attended his Gold Standard University Live, I came to understand even more; namely WHY pre WWI days were of such a magical quality, a magical quality never to be seen again I learned that it was because before WWI the world economy ran on the Classical Gold Standard. Imagine a world where your wages are paid in real, actual Gold and Silver coins not scraps of paper subject to bankster and Gman whims ( Gman is American slang for all government including corrupt, power seeking politicos, entrenched, uncaring bureaucrats, torturing secret service apparatchikall of them ); but solid, real stuff that cannot be printed at some crooked politicians whim, real stuff that actually gains purchasing power over the years. Imagine that if you simply stash some of your wages in a pillow, and do nothing else you will become richer every year. Because that is what happens under a system of honest money; as the economy grows, as more productive technologies are created, the cost of producing, transporting, and retailing falls so the price of everything slowly, gradually falls as well and your wages and savings are worth more every year without the need for a raise or a promotion and without the need for some risky investment. Imagine a world where you get to actually keep your hard earned money instead of having it confiscated by Gman, by bankster interest charges, and most insidiously by so called inflation more precisely, by monetary debasement. Because that is our world under Fiat paper; prices of everything rise instead of falling, wages never keep up with price increases, and any savings you may be able to scrape up will be destroyed by the evil of inflation but Mr. Bankster says some inflation is good for us yeah, good for him and his bankster buddies certainly not for the rest of us. He has a printing press we dont. Imagine a world where war is very rare, because no Gman can afford a major war under Gold. Indeed, as the war clouds gathered before WWI, the pundits predicted that no major war could last more than a few months, because the combatants would run out of money run out of Gold, that is. War is extremely expensive, both in wealth and in blood. The Gold Standard The Gold Standard Institute Issue #29 15 May 2013 9 The Gold Standard was sabotaged so the Gman could print endless paper currency to pay for the evil slaughter of WWI. Because that is our world under Fiat paper; the Gman can afford war so he thinks because their bedfellows the banksters will simply print up some more paper currency and lend it to the Gman and of course hit ME and you for the interest payments. Indeed, if you look around, you see insane spending on the military, and wars on everything, everywhere. Our world is about as far from peaceable times as you can possibly get. Destruction of humanity is but a button push away and a psychopath has his finger on the button. So, dear ME would you prefer a world where you can accumulate real wealth just by earning regular wages, and saving some or this Fiat world where you must run ever faster, work ever harder, ever longer just to keep up? Would you prefer a world where one wage earner can keep his family well fed, housed, clothed or this Fiat world, where both man and wife must work ever harder just to keep up while the children get indoctrinated in Gman youth gulag er public school? Would you prefer to live at peace with your neighbors, live and let live, while trading with them for mutual benefit; lets make a deal or would you prefer to keep our Fiat world, a world full of war, terrorism, tyranny, neighbor killing neighbor a world where you should kill your neighbor because if you dont they may kill you first? And vice versa? If any of this gets your attention, I am glad. People must wake up, must see the truth instead of believing all the Big Lies they are told and bring change to the world by living the change themselves. In the next few articles, we will look more closely at some of the Big Lies that have been spread about Gold. We will address the concerns you may have about how a Gold Standard would affect you and ME. Rudy J. Fritsch Editor in Chief The American Corner: Arizona Governor Vetoes Gold and Silver Bill For the past two months, I have written about a bill in the Arizona legislature that exempted gold and silver from taxes (e.g. capital gains). It also said that if one makes a profit in ounces, one pays the tax in ounces, which enables businesses to keep their books in gold or silver. Tax is an obstacle to using gold as money, so repealing all taxes on gold and silver is very important. One adversary struck just as the bill went before entire House. He amended it to remove the payment of taxes in specie. Nevertheless, the House voted to pass the amended bill. So did the Senate, which sent it to the governor, who should have quickly signed it into law. Arizona is majority Republican, with Democrats a minority. The bill was passed in both Houses of the legislature along strict party lines. All Republicans voted aye and all Democrats voted nay (except a few abstentions). Governor Brewer, a Republican, vetoed the bill. She wrote a letter explaining her veto, While I believe the concern over a devalued dollar as a result of an unsustainable federal deficit is justified She worries the bill might exempt collectible coins from tax, and result in lost revenue to the State She says the concern of dollar devaluation is justified, and yet does not seem to share it or know about the collapsing financial system. She stresses the problem of the federal deficit, and yet she is happy for Arizona to run the same kinds of programs that bankrupted Uncle Sam. Indeed, in a press release for her Medicaid program, Governor Brewer touches on all the socialist clichs, like help provide critical-necessary mental health services to tens of thousands She goes on, For many Arizonans in need Nowhere does she acknowledge the cost of her largesse. No amount of spending is ever enough. People always need, therefore taxpayers must pay. If the taxpayers cannot pay enough, then the government borrowsit runs a deficit. The Gold Standard The Gold Standard Institute Issue #29 15 May 2013 10 Her concern about losing the tax revenue on old coins is disingenuous. Her Medicaid program alone puts 1% of the state population onto the dole. Whatever it is that Governor Brewer cares about, it is not cost. The take-away is much bigger than simply Politician X in state Y vetoed a gold bill. It is not just that Governor Brewer is an unprincipled and economically ignorant welfare-statist who blocked a historic opportunity to move forward to honest money. We cannot count on politicians like her, not even if they position themselves as fiscal conservatives. Governor Brewer knows that many voters want the Medicaid program, and assumes that few want the gold standard. This may be a mistake in the state that once elected Barry Goldwater to the US senate for five terms. In any case, the key point to take home from the battle over this bill is that we must understand the goals of our adversaries. They dont care about economics. They want a free lunch and they think paper money will enable them to take it. Lets step back from this bill and look at the full context of which the gold movement is part. We are in a clash of two diametric worldviews. In one, each individual has a right to his own life, mind, property, and liberty. In the other, everyone is just a part of the collective, a cog who exists to serve the machine. Gold has no part in the latter, and the collectivists know it. Golds supporters had better know it too. Gold is the money of a free society. The free man is a trader who says, give me something of value and I will offer something in return. A trader does not deal in needs, whims, or demands. He does not beg, nor does he rob his customers at gunpoint. He does not give away his shirt nor tolerate robbery. Gold will not fix all of our problems, but the gold standard limits the power of the government to get away with chronic deficits. A welfare state impoverishes any country that imposes it. So governments have responded by inducing capital consumption, via falling interest rates. Like methamphetamine, it gives the body economic a temporary shot of energy but at a terrible cost to ones health. This trick is not possible under gold, which demands honesty in accounting. These are precisely the reasons why the Brewers of the world oppose gold. What they are really against is rugged individualism: the proud, stubborn selfishness of the free man who says, I earned it, its mine. The GSI must focus on gold and economics; it is not our mission to directly try to change the culture of collectivism and its demand to sacrifice the successful individual to the needs of the ever- expanding welfare dole. Our mission is focused on monetary policy. However, I must vehemently state that we are right morally as well as economically. To succeed, we need to know it. Dr. Keith Weiner President of the Gold Standard Institute USA Nibbling at the Edges The best gold advocates (better than goldbugs, which implies emotional irrationality) have a moral element to their work, specifically that there is something wrong with the way society works, and a focus on making it better. It takes the form of a belief that fiat currencies, which lack any limits, are detrimental to society. A key feature of a gold standard is the power that physical gold money gives the consumer, the average person, over the monetary system. Without the ability to redeem gold, without the ability to hoard gold, there can be no control on power. As Professor Antal Fekete says, when a currency is redeemable in standard gold coins, any individual disturbed by the behaviour of the government or banks can attempt to protect himself by presenting for redemption such paper currency as he may command. It is this power of individuals that holds, or tends to hold, banks and government in check. Lewis Mumfords The Myth of the Machine: The Pentagon of Power (1970) deals with the dehumanisation of modern technological society and the aggregation of power. In it he has some interesting observations about the dehumanising aspects of modern money and control over the exercise of power. Mumford notes ... the increasing translation of both political and economic power into purely abstract quantitative terms: mainly, terms of money. Physical power, applied to coerce other human beings, reaches natural limits at an early The Gold Standard The Gold Standard Institute Issue #29 15 May 2013 11 stage: if one applies too much, the victim dies. ... But when human functions are converted into abstract, uniform units, ultimately units of energy or money, there are no limits to the amount of power that can be seized, converted, and stored. The peculiarity of money is that it knows no biological limits or ecological restrictions. In this analysis, then, if there is no control over abstract money, then there is no control over power accumulation. Mumford goes on to conclude that the power complexs ... final goal is quantitative abstraction money or its etherialized and potentially limitless equivalent, credit. The latter, like the faith of the Musical Banks in Erewhon, is at bottom only a pious belief that the system will continue indefinitely to work. Professor Feketes insistence on the use of physical gold in the monetary system removes the abstraction and provides the quantitative limit. But how to turn the theory into practice? The problem is more than one of mechanics, is it one of politics, of public perception. Also, considering the entrenched position of those who benefit from the existing system, how does one effect change in the face of inevitable resistance? Mumford has something interesting to say on this: ... there is so little prospect of overcoming the defects of the power system by any attack that employs mass organization and mass efforts at persuasion; for these mass methods support the very system they attack. The changes that have so far been effective, and that give promise of further success, are those that have been initiated by animated individual minds, small groups, and local communities nibbling at the edges of the power structure by breaking routines and defying regulations. Such an attack seeks, not to capture the citadel of power, but to withdraw from it and quietly paralyse it. Once such initiatives become widespread, as they at last show signs of becoming, it will restore power and confident authority to its proper source: the human personality and the small face-to-face community. I cannot think of a better description than animated individual minds ... nibbling at the edges of the power structure for what gold advocates are all about. Bron Suchecki The work above reflects Brons personal views and not those of his employer. Brons personal blog is http://www.goldchat.blogspot.com/