|Paper money eventually returns to its intrinsic value Zero, - Voltaire 1729|
|The price of gold is
really the gold price of money. - Patrick
In Say's language, "products are paid
for with products" (1803: p. 153) or "a glut can take place only when
there are too many means of production applied to one kind of product and
not enough to another" (1803: p. 178-9). Explaining his point at
length, he wrote that:
It is worthwhile to remark that
a product is no sooner created than it, from that instant, affords a
market for other products to the full extent of its own value. When the
producer has put the finishing hand to his product, he is most anxious
to sell it immediately, lest its value should diminish in his hands. Nor
is he less anxious to dispose of the money he may get for it; for the
value of money is also perishable. But the only way of getting rid of
money is in the purchase of some product or other. Thus the mere
circumstance of creation of one product immediately opens a vent for
other products. (J. B. Say, 1803:
He also wrote, that it is not the
abundance of money but the abundance of other products in general that
Money performs but a momentary
function in this double exchange; and when the transaction is finally
closed, it will always be found, that one kind of commodity has been
exchanged for another.
Hans Hoppe and others have warned that a regime of easy
credit will lead to changes in human behavior that are destructive, as people
begin to forsake planning for the future and replace it with a
Ludwig Von Mises was correct
decades ago when he said "There is no means of avoiding the final
collapse of a boom brought about by credit expansion. The alternative is only
whether the crisis should come sooner as a result of a voluntary abandonment
of further credit expansion, or later as a final and total catastrophe of the
currency system involved."
Germany in 1944 could buy materials during the war only
with gold. Fiat money in extremis is accepted by nobody...- Alan Greenspan,
then-Fed chairman, May 1999
Message Board Post by Baecorine
Re: China getting nervous about US recklessness...
11-Feb-09 12:01 am
I listened to the Bernanke testimony today and it became
painfully obvious that Congress has no clue what
this "crisis" is all about. No one wants to actually spell it out, everyone acts as if it were a complete mystery.
This crisis is about trying to monetize credit losses. The actual credit
losses themselves are not the core of the problem ,
it was the leveraging of credit that got us here. No one can absorb these
losses because they far exceed the savings or assets in the private sector.
Leverage not only wiped out principal, it wiped out money that never existed
in the first place.
By trying to finance these losses at the expense of the taxpayer, we are only
making matters worse. This era of financial engineering in credit was
destined to destroy the global monetary system. If you do not have any
savings, you can't absorb losses, all you can do is refinance your debt or go
deeper in debt.
The entire planet is sitting on IOU's and bankers call them
"assets". Wall Street treats a dollar of savings the same as a
dollar of debt. Please tell me how that is possible? If I have a dollar saved
and you have an IOU for a dollar, how can anyone say that we both have a
dollar in assets? I never have to wonder about my savings but you have to
wonder if you will ever see that dollar you loaned out. For your troubles,
you charge a risk premium, interest. That is all fine a dandy as long as the
person you loaned the money to can generate enough income to pay you interest
and return your principal. If your debt goes bad,
your dollar is gone, I will still have my dollar because it is and always was
The fact is that there is so much credit out there that it can never be
repaid. I like to think of it as "Peak Credit". Once we crossed
that line, the entire system fell apart. How can we monetize credit in a few
years that was supposed to be monetized over a period of 30 years? Banks were
creating money out of thin air on the assumption that the debt instruments
they were creating would all be made good on. What collateral do you have
against consumer credit? You can't even foreclose on the the
We haven't been dealing with real money for decades, only debt. Debt is
no money, it never was. No wonder China is nervous, they know that the
debt will never be paid back from money earned or saved, it can only be
rolled over with more debt.
The private banking system is a failure, because there were no limits set on credit.
I would rather see the US government charter a new bank, put 500 billion of
capital in it and let the existing banks fail. Whoever has losses will have
to eat them, too bad. At least we will have a bank that can lend rather than
trying to make good on all this bad debt that is out there. Since the
taxpayer is on the hook anyway, why throw good money after bad? Let C, BAC
and others fail, wipe the slate clean and use taxpayer money to capitalize a
new bank, use the 10:1 model and that bank will have 5 trillion to lend. Set
a strict set of standards for lending and we will be well on our way t o
recovery. Set rates at 5% and be done with it. We don't need the Fed or the
banks, let the government be our bank. Our tax dollars should not pay for
past mistakes made by greedy bankers. Screw the Fed too, we don't need the
Once the banks came to the taxpayer to cover their losses, they lost their
rights to be in business in my opinion. If I'm going to fund banks with my
tax dollars then I want the government to own the bank.
It sure looks like gold may very well be the only real money left standing by
the time this is all over.
To clarify most clouds of confusion, it is best to refer
to "Falling Asset Prices" instead of "Deflation" in
almost all cases.
Falling asset prices will force even more monetary
inflation in response in the form of rescue or stimulus.
-- Jim Willie
What gold bugs do not understand is that money is based on
contract law. The IOU behind the paper measures its worth.
The U.S. dollar is still king unless reckless abandon to nullify
contracts or mortgages is made. You cannot arbitrarily modify a contract
after its signed.
The more debt that is issued the stronger deflation takes hold. Inflation is
debt that is not backed by contract.
Do as adversaries do in law,
Strive mightily, but eat and drink as friends.
William Shakespeare, The Taming
of the Shrew
Gold is a currency, not a commodity.
Message Board Post
went out of circulation because the monetary value of silver coins was
engraved upon them. When the market price of silver rose, and the value
engraved upon the coins was left behind and below the value of the
silver in the coins, the coins became more valuable as bullion than as
coins. The coins were melted down. The silver coinage disappeared.
Hugo Salinas Price
The US needs inflation to erode the economic value of its debt,
a weaker USD to help exports and reduce the trade deficit.
Message Board Post
1913 - income tax law was passed
in the U.S.
1913 - President Wilson creates the Federal Reserve System, which is the
central banking system. The Federal Reserve authorizes fractional
reserve banking to private banks. This allows banks to artificially
inflate the money supply.
1933 - After a month-long run on American banks ,
Franklin Delano Roosevelt proclaimed a Bank Holiday, beginning March 6, 1933, that shut down the banking system. The banks
reopened on March 13.
1933 - Gold standard for U.S. citizens ended
Executive Order 6102 is an Executive Order signed on April 5, 1933 by U.S.
President Franklin D. Roosevelt "forbidding the Hoarding of Gold Coin, Gold
Bullion, and Gold Certificates" by U.S. citizens. The Order required
U.S. citizens to deliver on or before May 1, 1933.
1944 - Germany could buy materials during World War II
only with gold.
Coin Debasement of Kennedy Half Dollar
90% Silver content: 11.25 g
(0.3617 troy oz)
40% Silver content: 4.60 g
(0.1479 troy oz)
1971 - present
No Silver content. - (copper
1964 to 1968
In March 1964, Secretary of the Treasury C. Douglas Dillon halted redemption of Silver
Certificates for Silver Dollars. In the 1970s, large numbers of the remaining
silver dollars in the mint vaults were sold to the collecting public for
collector value. All redemption in silver ceased on June 24, 1968.
1971 - U.S. ended gold
standard for foreign central banks.
withdrew the U.S. from the Bretton Woods system on
August 15, 1971. This made the dollar inconvertible to gold directly,
except on the open market. This removed any external pressure on the FED's expansion of money.
1975 - U.S. citizens were again allowed to own more than
$100 worth of gold through the passing of a bill signed by President Gerald
Ford legalizing private ownership of gold coins, bars and certificates
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