Bankers against Gold; Willem Buiter of Citi throws up on Gold (and Bitcoin)

Jim H
By Jim H on Sun, Nov 30, 2014 - 1:01am

Fiat currency is subject to the laws of supply and demand just like any other good.... and the monetary elite are having to work harder than ever to market their banker money to the sheeple in the face of twisted monetary road wrecks like Japan, and people power monetary initiatives like the upcoming Swiss Gold vote.  Even though it has the exceptional advantage of being the only means acceptable for payment of taxes, and is furthermore the only good that government dictates must be accepted as payment for any debt, (the very definition of fiat currency by the way), free market competitors like Gold, Silver, and Bitcoin are starting to grab mind share, to the detriment of demand for debt-based fiat. 

What's a banker to do?  Well, If you are Willem Buiter of Citi, you attack the competition.  While the Buiter piece has been commented on at length by the PM advocate community (see a few references below) I can't help but take a few potshots myself at the tortured logic Willem brings to bear.

Please realize, and I especially direct this comment to those of you who would deny that the price of Gold itself is manipulated as the ultimate form of propaganda, that the Buiter piece is just a small part of a much, much larger propaganda effort aimed as pushing back the tide of PM investment in general, and the Swiss vote specifically... the truth comes through in the following comment that follows the piece above posted on David Stockman's site;

hours ago

You  should see how our Swiss newspapers fight enormously with populist arguments and US banker quotes against voting yes.  And a huge amount of money has been spent so that you see everywere  posters against voting yes. You would think  the fate of Switzerland to be in danger, if you would vote yes. The Swiss are very experienced voters. They go voting several times each year (about their own taxes, about all kind of laws, about immigration, against military items like new fighters and very often against the opinion of government and all parties. The Swiss majority is conservative,  but  it will be difficult to achieve a yes in the face of such propaganda.  By the way: The Swiss National Bank increased  its holding of EUR  fiat money since 2008 10 fold to 10 x the issued Swiss Francs and this with the giro money of the Swiss banks (or indirectly with the deposit money of the Swiss bank customers). Unfortunatly this wasn't made a big argument by the yes supporters

My problem with the Buiter piece is that it contains a few outright lies... whoppers in fact.  I want to deal with three of them in particular;

1)  That Gold and Bitcoin are, "fiat" currencies.

2)  That, "paper currency" is not the liability of someone else. 

3)  That Gold and Bitcoin have no intrinsic value. 

Willem is so much the authority that he goes about redefining the very meaning of fiat currency in his piece;

  Since gold is a fiat commodity currency, its value will be determined largely by its attractiveness relative to other fiat currencies – the fiat paper currencies issued by central banks. Gold should not be analyzed as one of a set of intrinsically valuable commodities (silver, iron, lead, zinc, platinum, aluminum, titanium etc. etc.) but as part of a set of intrinsically useless and valueless fiat currencies – the US dollar, the yen, the Yuan, the euro, sterling, the rupee, the rouble, Bitcoin etc. etc.). It is therefore in times that market participants are nervous about the future value of most other fiat currencies that gold will be most attractive.

But that's not fair.  The meaning of fiat is that Government dictates it's use by law, and that is a huge advantage.  I am not saying that fiat currency is evil by nature... it's served me well for most of my life.... but the end is in sight for this particular version, as it has been for so many versions before it.  Gold has one property that makes it NOT intrinsically useless... and that is scarcity integrity.. a term coined by Vincent LoCascio in his book, "The Monetary Elite vs. Gold's Honest Discipline".  That Gold cannot be printed is it's greatest asset.  

Neither should Bitcoin EVER be termed a fiat currency.  It is a pure manifestation of the free market.. of no government.  

Let's now talk about another comment that Buiter makes, where he tries to associate debt-based fiat currency with Gold's no counter party risk halo;

  Like paper currency and Bitcoin, Gold is ‘irredeemable’. It is an ‘outside’ asset – an asset of the holder that is not a liability of anyone else.

Really now?  Paper currency is like Bitcoin and Gold?  Really?  I agree that it can be anonymous, but not a liability of anyone else?  I'm sorry.. but fiat currency is made by the Federal Reserve, and it can be devalued or made illegal just as easily;

   Millions of Koreans have been given until next Monday to exchange their savings for the new won following Monday's decree, which has caused "great confusion" and anger, says South Korea's Chosun Ilbo newspaper.

I know, I know.. it could never happen here... right?

Finally, let's talk about intrinsic worth.  Buiter does not try to suggest that debt-based fiat currency has intrinsic worth (note that he never uses the word debt at all throughout the piece), rather he argues that Gold and Bitcoin are equally, instrinsically, valueless.  I have made the case that Gold's value, aside from all of it's nice properties like being resistant to corrosion, highly divisible, etc., is that it cannot be made by man.  It is the necessary, universal reflector of all value.  This piece by Buiter is simply one more brick upon the wall whose job is to obfuscate Gold's role, and keep you from seeing it clearly. 

Bitcoin is like Gold, but different.  It is like Gold because it is scarce and and cannot be printed, meaning that it will, if adopted more widely, be a deflationary currency.  It's buying power will increase as the limited stock gets used for commerce.  But Bitcoin is unlike Gold in that it is software... and this is where it shines.

No banker or Corp. executive would ever say that Oracle software has no intrisic value.. nor that SAP software does not have instrinsic value.  Well, Bitcoin is software that is money.. but it also happens to solve an accounting problem that has never been solved before it came into being;  triple entry bookkeeping.

It is on the topic of Bitcoin that Buiter shows most clearly he knows not what he speaks of.  He never mentions  that our current fiat money system is based on debt.. but it is.  Paperbug apologetics can be so lame.  

Here is the Buiter piece in it's entirety;



Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
Latest news: Swiss Gold initiative will not pass based on vote

22% voted yes... The majority of the Canton's tipped to No, so the initiative is dead. 

The final vote count did not go our way. With 22% voting YES that means that 22% of the Swiss people are awake and aware!! This is the good news. Markus and I discuss the next steps in the journey. - See more at:
HughK's picture
Status: Platinum Member (Offline)
Joined: Mar 6 2012
Posts: 764
Thanks and another link on Swiss gold rejection

Thanks, Jim, for that link.  Here's one more and a pic:

Voters soundly reject Swiss gold initiative

This image is also from  It seems that Zurich results are not in, but other than that, there are no cantons where a majority supported the initiative, and it's unlikely that the canton of Zurich will support the initiative, as that's the banking center of the country.

thc0655's picture
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1744

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