Saturday, November 26, 2011

This too will be a brutal passage

"Is everything gonna be all right"?

This is the question Ron Holland raises in a recent article, and of course the only answer is, no one really knows.  "My advice is to legally diversify much of your wealth outside your home country, currency and the political leeches running everything and then live your life."  What else can we do?  We can pay close attention to the big banks and the governments they fund. 

1.  "As a contrarian I believe if the PIIGS return to their national currencies, this could actually benefit both them and those northern European nations remaining in the euro. While a win/win situation for individual nations this would be catastrophic for the banking elites and they seldom lose and why I believe the banks and EU politicians will do their best to keep every nation in the EU."

2.  "If you want to know what will happen in the US, just watch the mega-bank bailouts in Europe and the forced austerity measures on the already bankrupt PIIGS and their citizens, this is our future. Forget what the politicians promise, the financial experts say or the establishment news propaganda as the tide of wealth confiscation will also sweep the United States. The Federal Reserve and central bank cartels have created too much fiat money and the politicians have borrowed too much sovereign debt to buy votes and they will steal your wealth to prop up the governments, banking elites and political establish."

3.  The Super Committee, as expected, has turned out to be a Super Farce.  "Basically nothing will happen in reducing the budget and our debt will be continually downgraded."

4.  Could a Middle East war jack oil prices up to $200 a barrel?  If Israel gets its way, there will be war against Iran.  Oil prices could soar.  A revolution in Egypt could cause further havoc in the Middle East.

5.  Governments will crack down hard on dissenters, as witnessed in Egypt and the United States. Police are no longer "peace officers."  They are fast becoming militarized - even in the schools.  Law and order will be reduced to obey or else. 

6.  "If the firewall around the sovereign debt of Italy fails then the entire continent will likely be thrown into a prolonged recession and debt crisis as rising interest rates and falling bond prices jump the Atlantic to the final western redoubt of stable government bonds, the United States. This is what everyone fears most, no place of safety in the West."

7.  Was the MF Global Collapse "a deliberate attack against those making money speculating against the dollar and favoring gold?"  As Lawrence Lepard wrote recently,
Personally, I have $90,000 at MF Global and I would like to have my honestly earned money returned. Unfortunately, the odds of that happening any time soon seem slim. In part because when MF Global entered bankruptcy the judge appointed a Trustee whose law firm has done substantial work for JP Morgan, a deeply interested party. We will probably never find out what happened here. . . . 
I, for one, do not accept that Jon Corzine is stupid enough to lever up MF Global 40:1 and use the proceeds and customer money to bet on European sovereign debt. This was a hit, pure and simple. That is why there is no resolution to the problem.
And why a "hit"?  Simple: To punish commodities speculators for betting against government debt and fiat money.

So, how in the world can we wake up feeling optimistic about the future?  We can't.  That's asking too much.  The government parasite is too big and powerful.  And the government is imploding, financially.

Holland: "My answer is to quit worrying, take sound preparations and then get on with your life. Every generation and nation have had their trials and tribulations, success and failures and although today looks eerily like the 1930’s, this too will pass."

True.  But it will be a brutal passage for many.

Tuesday, November 15, 2011

Commodity money takes care of itself

In his 1982 article, “Monetary Policy: Theory and Practice,” Nobel laureate Milton Friedman said that "if a domestic money consists of a commodity, a pure gold standard or cowrie bead standard, the principles of monetary policy are very simple. There aren’t any. The commodity money takes care of itself."  [emphasis added]

It takes care of itself. Consider that thought for a moment, then ask yourself why we've had politically-appointed bureaucrats running the money and banking system since 1913. The "official" reason was to maintain the stability of the dollar and avoid the kind of panics that plagued the 19th century economy. But the dollar has all but dried up in value, and the crises today are threatening to bring the whole planet to its knees.

Does this mean Friedman was right, even if he was never gold's champion?  Did commodity money keep economies in balance, both within and between nations?

Clearly, the views not only of central bankers but of their Keynesian supporters in the economics profession is, No, it didn't.  Precious metal coins can't be printed, and accelerated printing - make that wildly accelerated printing - is needed at times to get banks and governments out of trouble.

Trying to run a fractional reserve banking system with gold as the medium is a real pain for politicians and bankers because of the handcuffs it imposes.  To those at the top, gold's great flaw is its scarcity and lack of a "high elasticity of production," as Keynes informed us, meaning it can't be wished into existence.  Since bankers fund governments in times of war, clearly gold is more than a mere inhibitor of profits; it represents a potential threat to national security.  Anything that limits government action is regarded as a threat to its existence, and anything that threatens the existence of our masters threatens us, the argument goes. 

Historically, of course, no government has allowed itself to be at the mercy of metal when it comes to waging war, at least not since paper IOUs began circulating for gold and silver.  Belligerent governments in 1914 had little trouble going to war, putting gold on the sidelines as the slaughter mounted to settle the disagreements.  But after the war there was still the lingering thought that gold somehow should still be money, and so the house of cards was restructured into something called the gold-exchange standard from 1926-1931.  It took an ordinary recession amplified into a deep depression by government tampering to convince people that gold was unfit for societies run by a government - central bank alliance.

The hijacking of gold to serve special interests is one of the most consistent facts of human history.  It's also one of the most difficult to believe because of what it implies about the leaders we've been trained to respect.  Did Lincoln, Wilson, Roosevelt, Johnson, Bush, etc.. really lie us into war, then fund it with banker voodoo?  We certainly won't learn that in government schools.

Sixty-three years ago Garet Garret told his readers:
There is a long history of monetary experience. It tells us that government is at heart a counterfeiter and therefore cannot be trusted to control money, and that this is true of both autocratic and popular government. The record has been cumulative since the invention of money. Nevertheless it is not believed. [emphasis added]
After the election of Ronald Reagan in late 1980 a joke circulated that went like this: "What's flat, black, and smokes?"  Answer: Iran on Inauguration Day.  Given the rhetoric in the air and the belligerent history of the past decade, the joke could be tomorrow's headline.

But not if politicians were handcuffed monetarily.  Not if they couldn't get the Aladdin in charge of the Fed to fund their ambitions.  Not if people start to believe that government counterfeiting is real and a threat to their lives.

My new Kindle ebook, The Jolly Roger Dollar: An Introduction to Monetary Piracy, addresses in detail the relationship between central banking and war, as well as many other issues, providing numerous hyperlinks to web resources as references for further reading.

Tuesday, November 8, 2011

Preface to "The Jolly Roger Dollar"

The following is the preface to my forthcoming book, The Jolly Roger Dollar: An Introduction to Monetary Piracy, which will soon be available on Amazon.

Money and banking should be permanently divorced from the State.

Mankind should be divorced from the state but that’s going well beyond the scope of this little book.  For now, at least, our goal should be to kill central banking wherever it exists and open up the market to alternative moneys - alternatives to the fiat paper issued by central banks. Market participants should be free to choose what they wish to use for money without government interference.  Legal tender laws, since they constitute invasions of private property, should be repealed.  For the same reason, banking should lose the legal privileges that protect the practice of fractional reserve lending.  What is needed is freedom - freedom to conduct our monetary and banking affairs regulated only by private property rights and economic law.

The cover of this book was created to remind readers that the monetary and banking system we have is fundamentally an act of theft.  It is monetary piracy because the currencies we swap for real goods and property titles are hijacked versions of the real thing.  What constitutes the real thing, who did the hijacking, when, for what purpose, and the results it has brought are discussed in the remainder of this work.

The money we now carry in our pockets or checking accounts serves the purpose of providing a medium of exchange.  If it didn’t banks would be in the wallpaper business.  But it also serves to transfer wealth from those unconnected to the money creation process to those closely associated with it.  This is why monetary policy is more accurately thought of as monetary piracy.

In 2010, Federal Reserve officials celebrated the centennial founding of the Fed at Jekyll Island, Georgia.  The institution that was finally passed into law in 1913 was supposed to make financial crises and bad money virtual impossibilities.  It has instead made crises and bad money permanent conditions.  If freedom is not allowed to work its curative powers, the Fed and its currency-on-demand machine will continue to harm us.

Liberty is always on the defensive, having to bargain and plead with a state-backed ruling elite.  We should not have to justify human freedom.  The free market, centered as it is around consumer preferences, open competition, and private property rights, will keep us honest, to borrow an expression from my father’s era.  If there is to be a ruling elite, let them rise to their positions naturally, as entrepreneurs on a free market.  Only in such an environment will those on top be on permanent probation, forever subject to the market’s approval, because the customers who put them there always have the option of removing them when they fail to deliver.

For the most part this book is based on articles I wrote over the past decade.  I have redacted some of the material to clarify certain points or update sources.  If the same thoughts reappear now and again, I offer this explanation: the subject of money and banking is so corrupted with myth, misinformation, and half-truths that repetition is a necessary corrective.  It strikes me as incontestable that, as Goethe is said to have observed,
Truth has to be repeated constantly, because Error also is being preached all the time, and not just by a few, but by the multitude.

George Ford Smith
Lawrenceville, GA USA
November, 2011