Gold won't work as a Solution for Monetary Reform

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Gold won't work as a Solution for Monetary Reform

Facts: 

  • The U.S. currently holds, at most, 8,100 metric tonnes of gold  (it may be less than 3,100 tonnes - see my earlier post "U.S. Gold, Going or Completely Gone?"
  • 8,100 metric tonnes of gold is worth around $312 billion at $1,200/oz
  • The U.S. money supply (M3) is almost $15 trillion  - Shadow Stats
  • Q - How do you back up $15 trillion with 312 billion?  A - You don't!

Prophetic quote from 1998:

Be aware of calls to return to a gold standard.  Why?

Simple, because never before has so much gold been so concentrated outside of American hands.  And never before has so much gold been in the hands of international governmental bodies such as the World Bank, and the International Monetary Fund.

In fact the IMF now holds more gold than any central bank.  A gold backed currency usually brings despair to a nation.  And to return to it, would certainly be a false solution in our case.  Remember we had a gold backed currency in 1929 and during the first four years of the Great Depression.  Likewise, be aware of any plans advance for a regional or world currency, this is the international bankers Trojan Horse.  - Bill Still "Money Masters"

Links from video:

Ellen Brown "Web of Debt"

Byron Dale "Modern Money Secrets"

Thomas Hedin "Wealth Money"

Dr. Farid Khavari "Towards a Zero Cost Economy"

Cleon Skousen "The 5000 Year Leap"

Bill Still "The Secret of Oz"

Larry

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Re: Gold won't work as a Solution for Monetary Reform

I suppose a debt free issued note would be the way to go but there is no way the bankers will allow that to happen. So what are the choices? You could back it with all forms of PM's (gold, silver, platinum, etc.) or even throw in some industrial metals but the fiat currency is just too easy to manipulate.

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Re: Gold won't work as a Solution for Monetary Reform

Thanks Dr....great idea to point this idea.  This video points to some very important points, which are very well explained in the referenced book Web of Debt (highly recommended).  During the days after Lincoln, the gold standard was heavily manipulated and leveraged just like banks leverage deposits and create money out of thin air now.  There really would be little different between going to PMs compared to fiat currency.  The idea that the government should print money and not incur debt in the process is brilliant and bypasses many of the glaring issues going to a PM standard has.

 

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Re: Gold won't work as a Solution for Monetary Reform

I agree. 

Gold is an financial asset (an investment)....not money itself.

When oil was closing in on $150/barrel, people invested in it because of Peak Oil fears. Now we know that was bull market propaganda. In the same way, people invest in gold today because of macro-economic fears. Someday, these fears will be considered bull market propaganda as well.

Is there anyone who invests in gold that doesn't think that it should be the next monetary standard and/or believe the whole financial system will come crashing down? 

I invest in gold because its the only intact bull market left. Can't we just be grateful for that fact and not overlay macro-economics and/or personal identity onto the act of investing? When this bull market in gold comes to an end, the goldbugs are going to make the dumb money look like geniuses (my apologies if you consider yourself a goldbug and this statement offended you).

(edit:sp)

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Re: Gold won't work as a Solution for Monetary Reform

 

How should we reconcile the notion that a return to the gold standard won't work with fact that it is the only currency authorized by the Constitution.

This statement from JAG also seems to conflict with the original intent of the Founding Fathers, the Constitution and with Congressman Ron Paul:

Gold is an financial asset (an investment)....not money itself.

This from Ron Pauls website:http://www.ronpaulforums.com/showthread.php?t=109560

  
 
 
The Gold Standard and the Original Intent of the Constitution

"The only substances ever declared as money within the U.S. were gold and silver, in coin form, with copper/nickel serving in token capacity only. See: 12 USCA 152 re. "lawful money" and Coinage Act of April 2, 1792, at Sections 11, 16, & 20; re. copper/nickel tokens, see Sec. 9, and 31 USCA 460."

Original U.S. Constitution

Art. I Sec. 8 Cl. 5
[Congress shall have Power ...] To coin Money, regulate the Value thereof, and of foreign Coin, ...;
Art. I Sec. 10 Cl. 1
[No State shall ...] make any Thing but gold and silver Coin a Tender in Payment of Debts; ...

Note that there is no such prohibition against Congress, or any delegated power to make anything legal tender. This is primarily because Congress was originally understood to have no power to make anything legal tender outside of federal territories, under Art. I Sec. 8 Cl. 17 and Art. IV Sec. 3 Cl. 2, but in 1868 a Supreme Court packed by Pres. Ulysses S. Grant, in the Legal Tender Cases, allowed Congress to make paper currency issued by the U.S. Treasury, backed by gold, legal tender on state territory, a precedent that remains controversial to this day, when courts allow paper currency not backed by anything to be considered "legal tender".

http://www.constitution.org/cs_money.htm

For all the details of Grant's court packing scheme and their unconstitutional ruling see here - this is a MUST READ.

More info:

"The founding fathers were concerned about the unrestrained control of the money supply. One thing they all agreed upon was the limitation on the issuance of money,

Thomas Jefferson warned of the damage that would be caused if the people assigned control of the money supply to the banking sector, "I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. This issuing power should be taken from the banks and restored to the people to whom it properly belongs. If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered. I hope we shall crush in its birth the aristocracy of the moneyed corporations which already dare to challenge our Government to a trial of strength and bid defiance to the laws of our country" Thomas Jefferson, 1791

Many of the founding fathers experienced the damage caused by fiat currency. Most of the revolutionary war was financed by worthless currency called "Continentals".

# The Continental Currency ("Not worth a Continental") that American colonists issued for the Continental Congress to finance the Revolutionary War was replaced by the US Dollar in 1785 when The Continental Congress adopted the dollar as the unit for national currency. At that time, private bank-note companies printed a variety of notes. After adoption of the Constitution in 1789, Congress chartered the First Bank of the United States and authorized it to issue paper bank notes to eliminate confusion and simplify trade. The U.S. Constitution (Section 10) forbids any state from making anything but gold or silver a legal tender. The Federal Monetary System was established in 1792 with the creation of the U.S. Mint in Philadelphia. The first American coins were struck in 1793. The U.S. Coinage Act of 1792, consistent with the Constitution, provided for a U.S. Mint, which stamped silver and gold coins. The importance of this Act cannot be stressed enough. One dollar was defined by statute as a specific weight of gold.

# The Act also invoked the death penalty for anyone found to be debasing money.

# President George Washington mentions the importance of the national currency backed by gold and silver throughout his initial term of office and he contributed his own silver for the initial coins minted.

# The purchase of The US Mint in Philadelphia, was the first money appropriated by Congress for a building to be used for a public purpose. It was purchased for a total of $4,266.67 on July 18, 1792.

Link

Here's the Coinage Act so everyone can read the truth for themselves:

"SEC. 19. And be it further enacted, That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of fine gold or fine silver therein contained, or shall be of less weight or value than the same ought to be pursuant to the directions of this act, through the default or with the connivance of any of the officers or persons who shall be employed at the said mint, for the purpose of profit or gain, or otherwise with a fraudulent intent, and if any of the said officers or persons shall embezzle any of the metals which shall at any time be committed to their charge for the purpose of being coined, or any of the coins which shall be struck or coined at the said mint, every such officer or person who shall commit any or either of the said offences, shall be deemed guilty of felony, and shall suffer death."

Truth-Bringer is offline  

It would seem to me, in my admittedly elementary understanding of economics, that the gold standard would be the best way out of our mess. Apparently I'm in good company.

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Re: Gold won't work as a Solution for Monetary Reform

Facts: 

  • The U.S. currently holds, at most, 8,100 metric tonnes of gold  (it may be less than 3,100 tonnes - see my earlier post "U.S. Gold, Going or Completely Gone?"
  • 8,100 metric tonnes of gold is worth around $312 billion at $1,200/oz
  • The U.S. money supply (M3) is almost $15 trillion  - Shadow Stats
  • Q - How do you back up $15 trillion with 312 billion?  A - You don't!

This is quite easy.  15,000,000,000,000 / 260,421,047 troy ounces (8,100 metric tonnes) .  So a troy ounce is $57,599.  Ideally you would  probably do a 1 for 100 or 1 for 1000 change out of currency to get us back down to reasonably sized numbers.  Then we start over with a gold backed currency and do not ever allow a central bank to be in power again.

 

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Re: Gold won't work as a Solution for Monetary Reform

The constitutional issue of money is largely ignored today.  I don't think that's proper and I would hope that when we get serious about monetary reform that we make this more clear through admendements if needed.

  • Article I, Section 10, Clause 1: No State shall...coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

I take this to mean that states may not issue coins and "Bills of Credit" unless they are gold and silver.  I don't know the last time a state made payments in gold or silver but I suspect it's been many years.  I think it is safe to say that we ignore this clause.

  • Article I, Section 8, Clause 5: The Congress shall have Power...To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

I think that the framers intended that only government should have the power to issue money and to fix the standards.  Ellen Brown makes the following argument:

 

 

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Re: Gold won't work as a Solution for Monetary Reform

I love the way you guys leave out the rest of the world.....!  SO Amerikan!

I once read that if you divide ALL the gold in captivity right now by the total wealth of the global economy (remember we're here too!) then gold would be worth $220,000 an ounce; and that was at least 12 months ago, maybe 18.....

Mike

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Re: Gold won't work as a Solution for Monetary Reform
Damnthematrix wrote:

I love the way you guys leave out the rest of the world.....!  SO Amerikan!

Mike

 

You mean that there is some place besides America????Undecided Well I am shocked. You learn something everyday.

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Re: Gold won't work as a Solution for Monetary Reform

The constitutional issue of money is largely ignored today.  I don't think that's proper and I would hope that when we get serious about monetary reform that we make this more clear through amendments if needed.

  • Article I, Section 10, Clause 1: No State shall...coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

I take this to mean that states may not issue coins and "Bills of Credit" unless they are gold and silver.  I don't know the last time a state made payments in gold or silver but I suspect it's been many years.  I think it is safe to say that we ignore this clause.

  • Article I, Section 8, Clause 5: The Congress shall have Power...To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

I think that the framers intended that only government should have the power to issue money and to fix the standards, not private banks.  Ellen Brown (an attorney) makes the following argument:

Congress has been given the power to coin money, but minting coins is not the same thing as issuing paper money, checkbook money, accounting-entry money, or electronic money – the forms of money used most often today. Arguably, "to coin" money was an archaic way of saying "to create" money, but then what is to be made of the clause stating, "No state shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debt"? "Coin" here clearly means precious metal coins, period.

(10th admendment)  X - Rights of the States under Constitution: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Creating checkbook money is not specifically delegated to the United States, so it must be delegated to the States, unless it is specifically prohibited to them. What about the provision that "No State shall . . . emit Bills of Credit"? According to "the 'Lectric Law Library," "bills of credit are declared to mean promissory notes . . . . Bills of credit may be defined to be paper issued and intended to circulate through the community for its ordinary purposes as money redeemable at a future day." Bills of credit are promises to pay later rather than what is being discussed here: checkbook money issued as "legal tender" – the sort of dollars banks issue every day when they make commercial loans. The Constitution does not say who is authorized to issue this sort of money – whether in paper, electronic or accounting-entry form – so under the Tenth Amendment, this right is reserved to the States and to the People.

One important distinction that I think needs to be made is that credit and debt are two distinctly different things.  Federal Reserve Notes are "debt" certificates issued by private banks and as such are not money by constitutional terms.  On the other hand, Lincoln's Greenbacks were not debt certificates, they were sovereign credits issued by the Federal Government. 

rhare wrote:

This is quite easy. 15,000,000,000,000 / 260,421,047 troy ounces (8,100 metric tonnes) . So a troy ounce is $57,599. Ideally you would probably do a 1 for 100 or 1 for 1000 change out of currency to get us back down to reasonably sized numbers. Then we start over with a gold backed currency and do not ever allow a central bank to be in power again.

But if you artificially decree that a troy ounce is worth $57,559 dollars; aren't you creating the fiat money that you object to?

Theoretically, our current money supply, around $14.7 trillion dollars, could buy just over 381,000 tonnes of gold ($1,200/oz).  I say theoretically because that is magnitudes more gold than has been mined from this planet.  You would essentially be devaluing our money by 97%.

Our current public + private debt is around $57 trillion - how do you repay the total outstanding debt (not including interest) with so little gold money?

There are three other problems that may be created as an unintended consequence:

  1. The interest on the national debt would drain our gold reserves inside of a year.
  2. Our trade imbalance would drain the 8,100 tonnes of gold in the treasury in just over a year if redeeemed.
  3. The economy would be restrained by the amount of gold held by the treasury instead of by the productive power of the people - how would you grow the economy without going into debt to add gold reserves?

I just don't see how a gold based system is desirable or doable.  Look forward to other comments,

Larry

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Re: Gold won't work as a Solution for Monetary Reform

Note: Sorry 'bout my Post #6, it was an accident to publish before it was done - go to Post #9 to see the real deal Surprised

Larry

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Re: Gold won't work as a Solution for Monetary Reform

I think one thing to be clear, you can have a gold based system and still have paper money and not be fiat.  As long as at anytime you can take the paper money and exchange it for the backing amount of PM.  At that time the paper is removed from circulation until someone turns in PM in exchange for paper money.  Same issue with plastic, checks, etc.  They are just convient representations of PM money.

But if you artificially decree that a troy ounce is worth $57,559 dollars; aren't you creating the fiat money that you object to?

No, saying this amount of dollars = a set amount of PM is not creating a fiat currency.  It's actually changing an existing currency into non-fiat.  Of course this then implies no fractional reserve banking from that point forward, as that is how you create credit based money.  It also means no more money can be issued without more gold/silver being mined.  Money will go up in value andd prices of goods will drop if you have growth.

Our current public + private debt is around $57 trillion - how do you repay the total outstanding debt (not including interest) with so little gold money?

You don't.  You default!  Some will get paid back but much of the debt outstanding will be a loss to those who lent it stupidly, just as it should be.  At least this way the default is clear and appropriate people get punished (ie. take losses) versus the continuing the fiat money and spreading the loss to everyone through inflation.

The whole idea of gold is to remove the ability to manipulate the money supply.

 I like the idea of competing currencies.  If you don't like gold you can select a fiat currency if you wish.  You can select a currency that bases it's supply on other goods like oil, energy, water, etc.  It's up to the individual to decide and do research into what is a good choice.  I suspect after a short time a few would emerge and the primary currencies.  Businesses of course would be free to select currencies they would accept and if you choose a currency then you have to convert it at the going rate, just like is done with international currencies today.

Of course you may choose gold and silver coin.  Perhaps the thing to do is government can only do gold/silver coin, but you allow free use of any other currencies choosen by the people.

 

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Re: Gold won't work as a Solution for Monetary Reform

Oops, didn't finish before posting.

The interest on the national debt would drain our gold reserves inside of a year.

How do you get this?  National debt 13T (or so).  Interest at 5% or so, does not = $15T in new gold based money?  Also, I suspect we would default on much of the debt.

Our trade imbalance would drain the 8,100 tonnes of gold in the treasury in just over a year if redeeemed.

No, we would be paying actual prices for goods and services.  Our trade deficit is only 400B or so.  We would be forced to decide if we wanted to buy goods, or work on producing them at home.  It would force trade back into balance, but would be painful in the short term.

The economy would be restrained by the amount of gold held by the treasury instead of by the productive power of the people - how would you grow the economy without going into debt to add gold reserves?

Why?  Amount of gold has nothing to do with labor.  All a PM standard does is stop the money from being debased.  If we produce more, then prices on goods fall in relation to the money.  That how it should be.  We are so trained that prices go up, salaries go up because of fiat money inflation.  In a non-fiat system, prices will fall, labor rates may go down overtime because the unit of money gains in value as oppposed to loosing value in a fiat system.

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Re: Gold won't work as a Solution for Monetary Reform

I love the way you guys leave out the rest of the world.....!  SO Amerikan!

Hey, Austrailia is your problem.  If you don't like a fiat money system then fix your own system.  It is not Americas responsiblity to fix the world and it's about time we stopped trying both economically, politically, and militarily. 

As I see it the rest of the world choose to support our folly, thank you, I have had a good time spending everyone elses wealth. Laughing

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Re: Gold won't work as a Solution for Monetary Reform

Lot's of comments, but here is one in the original posting quote.

Remember we had a gold backed currency in 1929 and during the first four years of the Great Depression.

This is not true.  The Fed was formed in 1913 and immediately began to debase the currency.  Gold was very stable until 1913 at $18.93 (1833-1913), then from 1913 to 1930 gold rose to $20.65,  and then by 1934 it was $34.  This was all due to manipulation of the currency, easy money from the Federal reserve fueling the roaring 20s with currency debasement which resulted in the crash (recession), of course the government stepped in to save the day, and created the great depression.

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Re: Gold won't work as a Solution for Monetary Reform

Article 1 Section 10 says that only gold and silver coin should be legal tender at the State level. 

The extent of erosion of the purchasing power of the dollar since the creation of the Federal Reserve in 1913 exceeds 95%!

If we knew precisely how many US Dollars existed now and divided that by the amount of gold in Fort Knox that would yield the price of gold at which the paper dollar would be redeemable in gold. If the number were 10,000 or 100,000 doesn't really matter. It would be a measure of the egregiousness of those at the Federal Reserve who have engaged in paper currency creation. 

What needs to happen is for us to destroy the printing presses as was done during the inflation of the French Revolution on Bastille Day when the people dragged the printing presses out and literally beat them with sledge hammers. They had a better understanding of the cause of inflation than most people today.

www.campaignforliberty.com 225,991 

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Re: Gold won't work as a Solution for Monetary Reform
Damnthematrix wrote:

I love the way you guys leave out the rest of the world.....!  SO Amerikan!

Mike,

I don't know what happened when you lived in America ... if some American guy stole your girlfriend or kicked your butt or whatever ... but it's time to get over it.  I can personally do without the constant caustic anti-American comments on your part.  You're marginalizing yourself with this kind of blather. 

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Re: Gold won't work as a Solution for Monetary Reform

Damnthematrix wrote:

I love the way you guys leave out the rest of the world.....!  SO Amerikan!

 

Mike,

I don't know what happened when you lived in America ... if some American guy stole your girlfriend or kicked your butt or whatever ... but it's time to get over it.  I can personally do without the constant caustic anti-American comments on your part.  You're marginalizing yourself with this kind of blather. 

I second that. No need to be hatin'

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Re: Gold won't work as a Solution for Monetary Reform

Mike,

 Australia is looking awfully Amerikan too.

I do have to admit that Australia is home to the smartest economist on the planet, Steve Keen, however.

G'Day

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Re: Gold won't work as a Solution for Monetary Reform

I've been wondering why if the dollar is worth 95% less than it was in 1913, which would mean it is equivelent to five cents that we still use pennies, nickels, dimes, etc, why not just round everything to the nearest dollar? The IRS does on it's tax forms, think of the money saved not having to mint all those coins.

"I like the idea of competing currencies.  If you don't like gold you can select a fiat currency if you wish.  You can select a currency that bases it's supply on other goods like oil, energy, water, etc.  It's up to the individual to decide and do research into what is a good choice.  I suspect after a short time a few would emerge and the primary currencies.  Businesses of course would be free to select currencies they would accept and if you choose a currency then you have to convert it at the going rate, just like is done with international currencies today."

I agree with this

"Of course you may choose gold and silver coin.  Perhaps the thing to do is government can only do gold/silver coin, but you allow free use of any other currencies choosen by the people."

Get rid of the legal tender laws and I can think of no reason why the govt would need to be involved with gold/silver?

 

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Re: Gold won't work as a Solution for Monetary Reform

rhare wrote:

I think one thing to be clear, you can have a gold based system and still have paper money and not be fiat.  As long as at anytime you can take the paper money and exchange it for the backing amount of PM.

Hello rhare,

If you artificially value gold at $57,000 and make the paper notes redeemable, the money will be devalued.  For example, if you have $1,000 in our current system, you could buy almost an ounce of gold.  If you artificially value gold as you say, and then redeem $1,000 paper, you would receive around .01 oz of gold.

rhare wrote:

Of course this then implies no fractional reserve banking from that point forward, as that is how you create credit based money.

Our current system is NOT a credit based system, it is a debt based system.  There is a huge difference.  Credit and debt may be expressed as assets and liabilities depending on the flow of obligations.

rhare wrote:

You don't.  You default! [$57 trillion] Some will get paid back but much of the debt outstanding will be a loss to those who lent it stupidly, just as it should be.

You are suggesting that people default on their loans but if that happens then the collateral will be taken.  Every home, every car and savings would be taken as collateral on private loans.  Most people would be bankrupt and impoverished.  Businesses that carry debt would be greatly damaged or bankrupt.  As far as public default, do you think any gold would be left?  The Federal Reserve holds most if not all of our gold reserves as collateral. How do you have a gold based system when there is no gold and the population is broke?

And don't forget, much of the debt is held by honest hard working people who have T-Bills and other investments in their 401-k's, IRA's and personal savings.  You would wipe them out.

rhare wrote:

The whole idea of gold is to remove the ability to manipulate the money supply.

The value of gold has always been and still is manipulated. 

rhare wrote:

I like the idea of competing currencies.  If you don't like gold you can select a fiat currency if you wish.

We already have that.  You are free to buy all the gold and silver you want if you want to convert your money.  Why do you need the government to offer gold and silver money when you are free to buy and hold your own PM assets?

rhare wrote:

This is not true. [Remember we had a gold backed currency in 1929 and during the first four years of the Great Depression.]

It is true, look it up.  The U.S. was on the gold standard until it failed in 1933 and we defaulted on the domestic redemption window.  The gold standard was also the major cause of the 1871, 1893 and 1907depressions.  The gold standard failed through-out Europe, Great Britain and everywhere it was used and it was eliminated by 1931.  The U.S. went two years longer before it had to be abandoned here as well.

Interesting stuff,

Larry

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Re: Gold won't work as a Solution for Monetary Reform

Thanks for everyones educated opinions.  2 things to note:

Can we all agree that its moronic that the current system forces our government to pay interest on the money it creates to private banks? 

That said, it makes even more sense for the government to loan created money and not only not pay interest but earn interest from the private sector taking these loans.  From there, the govt would have to spend created money in an amount equal to the cummulative interest payments owed to them in order to avoid a shortage of money.  A way to keep the govt from loaning too much money is to require very high (say old fashioned) collateral on the loans.  Say, 20 or 30 equity on a home loan for example.  That way, the money supply grows in line with expanding economy - no more or less.  Further, the government goes from paying huge dollars to interest to actually making that money.  When that happens taxes can drop dramatically (if not entirely at some point) while social services can increase if thats the will of the people.  Last, this money creation could be backed by gold or not...but its utterly irrelevant.  Gold is in this conversation because it is in the constitution perhaps?

We cant be forced to be held to the consititution regarding how we set up the next financial system.  Its not like the current system follows the constitution anyway.  The way a private bank creates money from a loan is clearly a violation (breaks laws regarding consideration)  Gold is a relic, and has been abused to the same extent in the form of leveraging it just as much as fiat currency.  Fiat currency works way better if not in a fractal system and if proper restrictions are placed on it.  At some point, a leap of faith that leaders will follow a law are needed.  Gold doesnt change that (proven over and over again through history).  Fiat has been a disaster too.  So, we must put clear laws in place for a change, kill fractal banking, kill debt money creation, and then hold leaders accountable.  Unlikely?  sure, but so are all otehr options!

 

 

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Re: Gold won't work as a Solution for Monetary Reform

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Re: Gold won't work as a Solution for Monetary Reform

I suppose a debt free issued note would be the way to go but there is no way the bankers will allow that to happen.

May I suggest who cares what the bankers think?  They are the very ones stealing from us, and for the life of me I don't understand why people give any consideration to a group of criminals.  How about we start worrying about what is good for us instead of wondering what is good for the bankers?

 

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goes211
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Re: Gold won't work as a Solution for Monetary Reform
DrKrbyLuv wrote:

rhare wrote:

You don't.  You default! [$57 trillion] Some will get paid back but much of the debt outstanding will be a loss to those who lent it stupidly, just as it should be.

You are suggesting that people default on their loans but if that happens then the collateral will be taken.  Every home, every car and savings would be taken as collateral on private loans.  Most people would be bankrupt and impoverished.  Businesses that carry debt would be greatly damaged or bankrupt.  As far as public default, do you think any gold would be left?  The Federal Reserve holds most if not all of our gold reserves as collateral. How do you have a gold based system when there is no gold and the population is broke?

And don't forget, much of the debt is held by honest hard working people who have T-Bills and other investments in their 401-k's, IRA's and personal savings.  You would wipe them out.

Yes if needed.  Seems to me the world wide economy has taken a wrong term and I doubt that their is a way to make any sort of smooth transition to a new system.  Why should everyone have to honor debts (or possibly even all the assets) that were accured under false pretenses?

DrKrbyLuv wrote:

rhare wrote:

I like the idea of competing currencies.  If you don't like gold you can select a fiat currency if you wish.

We already have that.  You are free to buy all the gold and silver you want if you want to convert your money.  Why do you need the government to offer gold and silver money when you are free to buy and hold your own PM assets?

Hey, you are also free to buy assets with FRN's.  Why do you spend so much time complaining about the current monetary system?

Let's be a little serious.  The tax consequences of doing so would be significant.

DrKrbyLuv wrote:

rhare wrote:

This is not true. [Remember we had a gold backed currency in 1929 and during the first four years of the Great Depression.]

It is true, look it up.  The U.S. was on the gold standard until it failed in 1933 and we defaulted on the domestic redemption window.  The gold standard was also the major cause of the 1871, 1893 and 1907depressions.  The gold standard failed through-out Europe, Great Britain and everywhere it was used and it was eliminated by 1931.  The U.S. went two years longer before it had to be abandoned here as well.

Interesting stuff,

Larry

Come on Larry.  We have talked about this elsewhere.  Just because it was called a gold standard, does not make it one.  How can you have a proper gold standard and simultaneously have fractional reserve banking?  If the Federal Reserve put out a pamphlet describing the current system as credit based, would that invalidate your arguments?

If you want to have a conversation about this topic, don't act like a troll.  I am not even a gold purist but your line of argument is forcing me towards that side.

Larry, I know this is all going to segway into your government should just spend money into existence idea.  I for one don't see how that solution does anything but transfer one set of problems for another (possibly smaller) set of problems but I know you have given this more thought than I have so...

Let's hear it!

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Re: Gold won't work as a Solution for Monetary Reform

Just because it was called a gold standard, does not make it one.  How can you have a proper gold standard and simultaneously have fractional reserve banking?

Goes211 is correct. 

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Re: Gold won't work as a Solution for Monetary Reform
rickets wrote:

Thanks for everyones educated opinions.  2 things to note:

Can we all agree that its moronic that the current system forces our government to pay interest on the money it creates to private banks? 

That said, it makes even more sense for the government to loan created money and not only not pay interest but earn interest from the private sector taking these loans.  From there, the govt would have to spend created money in an amount equal to the cummulative interest payments owed to them in order to avoid a shortage of money.  A way to keep the govt from loaning too much money is to require very high (say old fashioned) collateral on the loans.  Say, 20 or 30 equity on a home loan for example.  That way, the money supply grows in line with expanding economy - no more or less.  Further, the government goes from paying huge dollars to interest to actually making that money.  When that happens taxes can drop dramatically (if not entirely at some point) while social services can increase if thats the will of the people.  Last, this money creation could be backed by gold or not...but its utterly irrelevant.  Gold is in this conversation because it is in the constitution perhaps?

We cant be forced to be held to the consititution regarding how we set up the next financial system.  Its not like the current system follows the constitution anyway.  The way a private bank creates money from a loan is clearly a violation (breaks laws regarding consideration)  Gold is a relic, and has been abused to the same extent in the form of leveraging it just as much as fiat currency.  Fiat currency works way better if not in a fractal system and if proper restrictions are placed on it.  At some point, a leap of faith that leaders will follow a law are needed.  Gold doesnt change that (proven over and over again through history).  Fiat has been a disaster too.  So, we must put clear laws in place for a change, kill fractal banking, kill debt money creation, and then hold leaders accountable.  Unlikely?  sure, but so are all otehr options!

 

 

Nice Post.

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Re: Gold won't work as a Solution for Monetary Reform

We already have that.  You are free to buy all the gold and silver you want if you want to convert your money.  Why do you need the government to offer gold and silver money when you are free to buy and hold your own PM assets?

We don't because of legal tender laws and the fact that when I convert from gold/silver to other currencies I pay stiff taxes on the conversion.  If we get rid of those items then we will have competing currencies. I don't want the government to offer gold/silver.  I want the goverment to only operate/use gold/silver and get out of the way for whatever the people choose to use.

The U.S. was on the gold standard until it failed in 1933...

Claiming to be on a gold standard and actually being on one are two different things.  We claimed to be on a gold standard yet were debasing the currency.  We weren't actually on a gold standard until 1933, that's just when we had to admit we weren't to the US citizens, then in 1971 we had to admit it to the rest of the world (they called our bluff).

The value of gold has always been and still is manipulated.

Yes, it can be, but only because you have fiat money to manipulate.  Very difficult if you don't have people using fiat money, after all you can't short gold without giving away actual value.  Soon I believe we will see all the shorts having to be covered and the manipulation exposed.

You seem to assume that 1) Gold is properly valued today ($1000+/- oz).  2) That we are not going to default anyway through inflation.  Gold versus the US dollar is I believe too low, the value of the dollar is too high.  Much of the crash course is devoted to the fact that we have been living well beyond our means for a long time.  The way that manifests itself is in actificially low costs of goods (including gold) and artificially high asset values.   So I think we have 2 choices:

1) Go back to a commodity based money and correct things quickly so that the game we have been playing is revealed quickly (rip off the band-aid).

2) We continue the game and keep inflating the dollar until it becomes worthless.

Both of these end in the same result.

And don't forget, much of the debt is held by honest hard working people who have T-Bills and other investments in their 401-k's, IRA's and personal savings.  You would wipe them out.

Either way most people are going to be wiped out.  I believe the choice is would you rather know you are screwed now or later?  I don't see anyway we are going to "save" most people. Those that are unaware of the game are toast.  People who do not produce useful work are toast.  Most businesses are toast.

Yes this scares the hell out of me.  It's these conditions that I worry will lead to mass civil unrest, poverty, hunger.

Do you see another way this plays out?  I believe we will keep inflating (choice #2) until we have currency crisis, at which point we will essentially be doing (choice #1).  I think the only thing we can probably do is to help those around us to understand this is happening and save ourselves and the people we care about.

Do you see any other way this will play out?  The big worry is this only really addresses the economic issue, not the other 2 Es.  Which will only make things much worse.

Perhaps I'm just in the Fear stage. I'd be grateful if someone could show another way this can play out.  Perhaps we can play game #2, buy up assets with inflated dollars for a while and push the issue out to the rest of the world -  (you know - like to Mike in Australia).Wink

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Thomas Hedin
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Re: Gold won't work as a Solution for Monetary Reform

Can we all agree that its moronic that the current system forces our government to pay interest on the money it creates to private banks?

The government creates no money.....though it should.

 

From there, the govt would have to spend created money in an amount equal to the cummulative interest payments owed to them in order to avoid a shortage of money.

Wouldn't it just be easier for the government to create money and just spend it without any debt anywhere in the system?

 

How can we ever have liberty if we are permanantly indebted to someone else who didn't have anything to begin with?

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Re: Gold won't work as a Solution for Monetary Reform

That said, it makes even more sense for the government to loan created money and not only not pay interest but earn interest from the private sector taking these loans.

It makes more sense for the goverment not to be involved in the loan business at all!

A way to keep the govt from loaning too much money is to require very high (say old fashioned) collateral on the loans.  Say, 20 or 30 equity on a home loan for example.  That way, the money supply grows in line with expanding economy - no more or less.

...

Gold is in this conversation because it is in the constitution perhaps?

The whole reason for the gold standard is to avoid the mess we are currently in.  Money supplies don't have to grow.  If money becomes too valuable you create smaller denominations.  Why does everyone assume you have to add more money to the system?  The gold standard (or any other commodity standard) is to keep people honest at least as far as money is concerned.  You can't easily create more gold/silver.  All these other systems say things like "hold leaders accountable".  With a hard currency they are held accountable by the laws of physics and scarcity of resources - no people involved.

Its not like the current system follows the constitution anyway.

Exactly, and look where we are!

Gold is a relic, and has been abused to the same extent in the form of leveraging it just as much as fiat currency.  Fiat currency works way better if not in a fractal system and if proper restrictions are placed on it.

One example please?  Fiat has always failed.  Also it's fractional not fractal. Smile

We cant be forced to be held to the consititution regarding how we set up the next financial system.

If we are not willing to abide by our own laws and throw out this part of the constitution, then why obey any of it?  I find this statement very disturbing.  I agree that the constitution is not ideal, if we at least returned to using it we would be better off than we are now.

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Re: Gold won't work as a Solution for Monetary Reform

Hi Thomas,

I think we are on the same page re your first comment.   The government creates no money - right...I meant it creates money indirectly by issuing debt - - and paying the interest on that is moronic.  If they just create money, or loan money directly, they will not pay interest and if loaning will make interest.

Re your second comment - who would give people loans then when they want to leverage their assets (buy a home, start a business)?  If its the banks, then they need the money from somewhere, so the government could loan them the money and stay out of personal banking.  Or, are you suggesting that growth is bad given resource scarcity so a debt free society is an option to both stop growth and as a way for the government to stop paying interest?

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