Gold is Good Money
Last year the Chairman of the Federal Reserve told me that gold is not money, a position which central banks, governments and mainstream economists have claimed is the consensus for decades. But lately there have been some high-profile defections from that consensus. As Forbes recently reported, the president of the Bundesbank (Germany's central bank) and two highly-respected analysts at Deutsche Bank have praised gold as good money.
Why is gold good money? Because it possesses all the monetary properties that the market demands: it is divisible, portable, recognizable and, most importantly, scarce − making it a stable store of value. It is all things the market needs good money to be and has been recognized as such throughout history. Gold rose to nearly $1800 an ounce after the Fed's most recent round of quantitative easing because the people know that gold is money when fiat money fails.
Central bankers recognize this, too, even if they officially deny it. Some analysts have speculated that the International Monetary Fund's real clout is due to its large holdings of gold. And central banks around the world have increased their gold holdings over the last year, especially in emerging market economies trying to protect themselves from the collapse of Western fiat currencies.
Fiat money is not good money because it can be issued without limit and therefore cannot act as a stable store of value. A fiat monetary system gives complete discretion to those who run the printing press, allowing governments to spend money without having to suffer the political consequences of raising taxes. Fiat money benefits those who create it and receive it first, enriching government and its cronies. And the negative effects of fiat money are disguised so that people do not realize that money the Fed creates today is the reason for the busts, rising prices and unemployment, and diminished standard of living tomorrow.
This is why it is so important to allow people the freedom to choose stable money. Earlier this Congress I introduced the Free Competition in Currency Act (H.R. 1098) to permit people to use gold as money again. By eliminating taxes on gold and other precious metals and repealing legal tender laws, people are given the option between using good money or fiat money. If the government persists in debasing the dollar − as money monopolists have always done − then the people would be able to protect themselves by using alternatives such as gold that are both sound and stable.
As the fiat money pyramid crumbles, gold retains its luster. Rather than being the barbarous relic Keynesians have tried to lead us to believe it is, gold is, as the Bundesbank president put it, "a timeless classic." The defamation of gold wrought by central banks and governments is because gold exposes the devaluation of fiat currencies and the flawed policies of government. Governments hate gold because the people cannot be fooled by it.
Posted by Bischoff on 10/13/12 12:59 AM
CLARK: "Jean Baptiste Say discovered that 'products are paid for with products' not merely with money. (He meant that you needed to produce things to buy things…you could not just produce money.) It is today called 'Say's Law.'"
BISCHOFF: Maybe, there is a chance here for me to get a point across.
Say's Law was not really discovered by Say. Say was the one that popularized the "supply and demand" idea of market operations which both the Keynesian and the Austrians use as a basis for their arguments. While specific markets may work according to the "supply and demand" idea, it is NOT how consumer markets work. Let's examine this comment.
"Products are paid for with products"... !!! What does that mean... ??? Where did the products come from... ??? The products (WEALTH) were produced by people (LABOR) expending energy (work) on or to LAND (natural resource), mainly with the help of CAPITAL (wealth used in the production of more wealth). This is classical economics, which leads to the conclusion that the production of wealth is requisite for the compensation of services.
"Products are paid for with products". I suppose this quote refers to the distribution (return) to each of the three factors involved in the production of the "products", commensurate with the contribution each of them made.
Forget for a moment the return to LAND (rent) and the return to CAPITAL (interest), which leaves the return to LABOR which are termed WAGES. The return to LABOR, or labor's income can be paid "in kind", or it can be paid in MONEY.
If exchanges are transacted by paying "in kind", you are engaging in "barter". Barter transactions are limited as to space and time, because the "use value" of a product is translated into an "exchange value" by direct transaction. The use of an intermediate commodity or MONEY in exchange transactions does away with the limitation of space and time.
What is "good money"... ??? IOW, what commodity is best suited to function as money. Since products have a wide range of perishability ranging from bread, milk and butter across a million of other products to gold bullion, it should be of little surprise that people 2,500 years ago already decided that they preferred the most stable and nonperishable product, which is gold bullion, to function as MONEY in exchange transactions.
According to Say, Keynes and von Mises, the exchange transactions take place in markets "driven" by "Supply and Demand". Prices are said to be subject to supply and demand. According to their idea of MONEY, which is based on the QTM, gold is just another commodity which competes in this "Supply and Demand" scenario for a price. However, for a price of what... ???
When the "exchange value" is determined by supply and demand of a product, the exchange value is considered the "price" of the product. THIS IS BARTER.
The "Value" of a product and the "Price" of a product in a "Free Market" distribution system are not the same thing.
To be fair to the Austrians, Carl Menger did put forth the "marginal utility theory" of discovering prices which comes much closer to describing the actual "price discovery" in "free markets".
So, what is the difference between "barter" and "money" transactions?
It is the method by which the "exchange value" of a product is determined. A product takes on "use value" as work is expended to produce it. The "use value" is translated into an "exchange value" through the use of MONEY. The value of a certain amount of MONEY is set as a standard with which to measure the value of every other product. The PRICE of a product is the ratio of the value of the product compared to the value of MONEY (the commodity which serves as money). The price of a product is expressed in aliquot parts of the money commodity. Therefore, MONEY has no PRICE.
While the idea of "Supply and Demand" might work for markets to give a signal to price unfinished or semi-finished goods, such an idea applied to the operation of consumer markets simply defies reality. The price discovery in consumer markets based on supply and demand is much too sluggish and uncertain to make for dynamic and competitive exchange decisions.
In reality, consumer markets determine prices through arbitrage ("Ask" and "Bid"). MONEY as the measure of value makes arbitrage across markets and within markets possible. Arbitrage to arrive at a "price" is most efficient by using a "means of exchange" which acts as a clearing instrument. This is possible when products are "cleared" in arbitrage transactions through the use of a "netting" currency redeemable in MONEY. "Netting" currency is the creation of RBD banking. It clears the products in a "Free Market" distribution system.
People spend their incomes mostly on consumption, before they set aside a small portion for savings. "Clearing" is the term used for all the "buying" and "selling" of products in the markets. Clearing uses MONEY only to reconcile the difference the buying and the selling, the difference being savings.
If the "netting" currency is redeemable in MONEY, then the distribution system is said to be on a hard MONEY STANDARD. Since people for 2,500 years have accepted GOLD to be MONEY, the MONEY STANDARD can rightly be called the GOLD STANDARD. This means that the value of a product (work invested to create it) is measured against the standard of value which is the value gold derives when work is invested to mine and refine it. Based on the physical and chemical characterisrics of gold, is it any wonder that people quite independently and voluntarily put their long term savings into gold, instead of bread, milk or butter, if they want to preserve value, meaning work or energy expended.
So much for Money, Say's Law and "Supply and Demand" markets.
CLARK: "Bischoff says the US Constitution may have merit as a governing document. It *may* have, but for our overlords it does not.
BISCHOFF: There are no "overlords" under the original Constitution. If there are "overlords", as there have been since the ratification of the 16th and 17th Amendments, their existence is the fault of your fellow citizens. Take it up with them, but don't blame the original document.
CLARK: Bischoff says, "Money is the commodity with constant marginal utility". There are no absolutes.
BISCHOFF: I don't understand what "constant" or "nearly constant" marginal utility has to do with "absolutes". For a commodity to have constant or nearly constant marginal utility means that, if any amount of a commodity was offered to you for free, the one commodity of which you accept additional quantities without any refusal, that commodity is termed "MONEY". The only commodity which fits that description for the last 2,500 years is GOLD.
Posted by clark on 10/12/12 02:56 AM
Jean Baptiste Say discovered that 'products are paid for with products' not merely with money. (He meant that you needed to produce things to buy things…you could not just produce money.) It is today called 'Say's Law.'
Click to view link
BISCHOFF: the US Constitution may have merit as a governing document.
It *may* have, but for our overlords it does not.
BISCHOFF:I let you know that I read links a lot of times.
Um, no, you said you refuse to read them, period.
How would you know they are opinion pieces if you don't bother to read them? Hmm?
BISCHOFF: "Money is the commodity with constant marginal utility".
There are no absolutes.
Also, you earned that Bullwinkle title, it's not like it was drawn from thin air.
Posted by Bischoff on 10/09/12 10:36 PM
CLARK: "It's your attitude that trips you up - your snarky responses - that and your lack of supporting facts. ... Not too mention your refusal to read links."
BISCHOFF: My attitude... ??? My snarky responses... ??? You mean like your comment, "Ha! And thus proclaims Bullwinkle, a.k.a. Mr. Know-it-all Bischoff. I don't think so." Is that what you mean... ??? As to my refusal to read links, I let you know that I read links a lot of times. However, I refuse to accept a link with someone else's opinion as response to an argument put forth by me. Your tendency to do this shows an inability to think for yourself. Instead, you try to pawn off someone else's opinion as your response to my argument. That's why I say that if you want to argue, you ought to adopt the motto: "Sapere aude... ."
CLARK: "You claim I have no definition of money. Psft, WTF? Are you not reading the articles in the Daily Bell? Money is whatever People want money to be."
BISCHOFF: I read the articles in the Daily Bell. Are you saying that the Daily Bell has featured a usable, logical definition of "Money"... ??? Taking the chance of being snarky, to claim, as you do or the "school of Thought" you follow, that each and every person can have his own definition of "Money" is down right imbecilic.
CLARK: "I understand what the purpose of a standard is, the question is, do you understand what the difference is between an imposed standard and a voluntarily arrived at standard?"
BISCHOFF: Imposed standard... ??? Iron fist... ??? What are you talking about... ??? Gold being the "standard to measure value" is due to the fact that gold has constant marginal utility. As to picking the "standard for price", who cares whether government or a private entity picks the standard, as long as the standard doesn't vary. However, I fear that you do not understand the difference between "Value" and "Price". Therefore, I leave you holding on to the crazy idea that the "gold standard" is something which is imposed by force. FYI, the "gold standard" exists now, evenso it is not "forced" to be part of the worldwide "irredeemable" currency system. The standard for price is nominally expressed in the fixed denominations of irredeemable currency, be it the USD, EURO, POUND, etc., but who cares whether the government comes up with the denomination or a private entity... ???
CLARK: "You say, "Grocery stores may accept gold and silver in a "barter transaction", but such transaction is not a "money transaction".WTF? A rose is not a rose by any other name? Ok. Whatever."
BISCHOFF: Boy, you are a heavy weight when it comes to engaging in arguments. I should really reconsider going on to respond to such nonsense, but you responded to me, so I'll respond to you.
CLARK: "You write, "I suggest you study up on the Coinage Act of 1982 and the "legal tender" protection afforded the Federal Reserve Note." I could care LESS what that crap says. They can write whatever they want, it has no meaning in the real world these days, if it ever did.
BISCHOFF: Gee, how could I have forgotten. You are one of those brainless anarchists. I apologize, to have suggested that you tax your brain to consider that the US Constitution may have merit as a governing document. My error. I know that "Anarchists" are not the "sharpest knife in the drawer", and I shouldn't have brought up a reasonable solution which is in conpliance with constitutional procedures.
CLARK: "A guy trades a bag of silver for a car. You call it barter, others call the silver, m-o-n-e-y."
BISCHOFF: Ok, some call silver money, others call it an industrial commodity. So, now what... ??? I've already stated that it is imbecilic for each and every person to come up with his own definition of "Money". "Money is the commodity with constant marginal utility". Silver does not have constant marginal utility. Period.
I am sorry, but I don't care to respond to the rest of your comments. It's mostly diatribe, and anyone following this thread would get bored, if I responded to just pure diatribe.
Posted by clark on 10/09/12 04:57 AM
As if it matters,
No, I'm not threatened by what you say or write, or your strong opinions or convictions.
It's your attitude that trips you up - your snarky responses - that and your lack of supporting facts. ... Not too mention your refusal to read links.
You claim I have no definition of money. Psft, WTF? Are you not reading the articles in the Daily Bell? Money is whatever People want money to be.
I understand what the purpose of a standard is, the question is, do you understand what the difference is between an imposed standard and a voluntarily arrived at standard?
Is an iron fist the same as choice to you?
You say, "Grocery stores may accept gold and silver in a "barter transaction", but such transaction is not a "money transaction"."
WTF? A rose is not a rose by any other name? Ok. Whatever.
You write, "I suggest you study up on the Coinage Act of 1982 and the "legal tender" protection afforded the Federal Reserve Note."
I could care LESS what that crap says. They can write whatever they want, it has no meaning in the real world these days, if it ever did.
You write, "You might also look into the fate of the Liberty Dollar currency created by Hans VonNothaus, Cour d'Alene, Idaho."
That story is nothing more than a story about a bunch of thugs bullying their way over an individual. How about you try this story:
A guy trades a bag of silver for a car. You call it barter, others call the silver, m-o-n-e-y.
It's funny how you try to sideline things, you say something is universally recognized, yet when I point out I know People who don't recognize it you wind up talking about minerals and gold miners. Ok, whatever?
You say that because there's 80 years of gold supply this proves it has the highest value. Hmm, I say it proves nothing. What does 80 years supply mean? Heck, there's an 80 year supply of corn in the world and there's more corn than gold, does that mean corn is worth more than gold? You might reply there's not an 80 year supply of corn in the world. Well, it depends on how you limit it, now doesn't it?
Bishoff says no one mines and refines platinum to put it into vaults and keep accumulating it.
I'm like, whoa, are you drunk? Lots of People do that.
Bishoff wrote, "It maybe scarce when judged against finds of other metals in the ground"
And that there is the key.
Bishoff wrote, "You simply do not understand the definition of "value"" - now THAT's funny. Value is subjective, maybe you have trouble with that notion?
Bishoff wrote, "We already established that you do not understand the definition of "standard to measure value". " - No, "we" have not.
Bishoff wrote, "Now we also know that you do not understand a "means to store value"." - HA! and "we" have already been down this path. I showed you how Gary North demonstrated there's lots of People who lost a sh ton in the period 1980 - 1999 and you failed to click the link and see his argument about how it's not exactly a store of value, but ok, whatever?
Bishoff wrote, "When Spain underwent inflation after the import of gold and silver from the New World, ... from 1750 until 1933. "
Ok, nice way to avoid answering the fooking question.
At any rate, you do acknowledge gold has been used as a "means of exchange", a.k.a. m-o-n-e-y. Therefore, it can be used that way today.
Bishoff wrote, "It is evident that you are uncomfortable with controversy." - HA! you are a funny man. No, I'm not uncomfortable at all with controversy. You sure do have high esteem for J.P. Morgan and you sure do place a lot of weight on what that ONE Person thinks.
Bishoff wrote, "To have liberty, you have to have government, but government is also the greatest threat to liberty." - HA! That is like the most twisted & contorted expression I've ever read.
Bishoff wrote, "Trying to get the balance right is where it is at... " - uh-huh, and hows that working for ya? When did it EVER work?
- insert image of bully thug standing on the head of an individual while trying to get the right balance -
Seems like you know exactly what I'm talking about. Go ahead and Love your controlled system and your "checks and balances" that don't. See where that leads and then get back to me. Ciao.
Posted by Bischoff on 10/04/12 11:53 PM
ILPATINO: "If you believe that you need to be governed to refrain from invading someone else's liberty, well, let's just say you wouldn't live long in a free society. (that should be enough encouragement in itself to refrain you from tresspassing, see the logic?)"
BISCHOFF: I will leave a detailed discussion about your statement for some other time, as it involves dealing with human nature and natural law.
Let me just say that "instinct" as a motivating force trumps that of habituation anytime. Peaceful existence for humans in the terrestrial environment is not possible without habituation. The best place in which to habituate the human infant is within the family setting. Failure to do it there, requires a larger setting, "government".
From the language you use, I determined that you are an advocate of the Libertarian "Anarcho-No Government" School of Thought with which I disagree.
Posted by Bischoff on 10/04/12 11:41 PM
I sense in you an earnestness to use clear and commonly understood terms when discussing political economy, including the subject of money and banking.
I completely understand why many of my comments meet with objection and disagreement. It is the inability to lay out concepts having to use words which are not uniformly accepted for their precise meaning.
I know all that, and I am fully aware that unless the reader and I agree on the definiton of words/terms, an agreement about a subject is nigh impossible. Maybe, I should offer a glossary of terms, before I make a comment. Let me deal with the terms you bring up.
ILPATINO: "To me the etymological distinction between the words "money" and "currency" is unclear. So; Gold is wealth, dollars/euro's/wooden sticks
BISCHOFF: First, basic classical economic terms:
WEALTH is the product of human exertion or LABOR applied on or to LAND (Natural Resource). Except for the most primitive economic activity, the production of wealth employs the use of CAPITAL.
CAPITAL is that kind of wealth which is not consumed, but used in the production of further wealth.
Wealth was exchanged for other wealth initially in a barter transaction. Exchanges of wealth involve the transformation of "use value" to "exchange value" through arbitrage. Barter is a two party direct transaction which ties the "discovery" of the "exchange value" to a place and a time. This limitation was solved with the development of MONEY.
MONEY is a physical commodity which is used as a standard by which to measure human exertion (work) expended in the production of wealth. The amount of "quantified" work to mine and refine a certain amount of a physical commodity is set as the STANDARD. Here, a STANDARD is a reference used to measure VALUE.
VALUE accrues to wealth as WORK (human exertion) is expended in its production. In the case of the GOLD STANDARD, the expenditure of "quantified" work to mine and refine a certain amount of gold is used as the STANDARD to measure VALUE. In exchange transactions, the "use value" of wealth (good or commodity) is transformed into an "exchange value" by expressing it as a ratio in terms of aliquot parts of gold. The aliquot parts of gold are the STANDARD for PRICE.
PRICE is simply the ratio of value between a good or commodity and that of a certain amount of gold. While the value of gold can change with the application of capital in its mining and refining, the price expressed in aliquot parts of gold doesn't change. That's why gold has no price. The value of a good or commodity is expressed in terms of the value of aliquot parts of gold or the "PRICE". The introduction of MONEY removed the time and place limitation for exchange transaction that were present with "barter". The use of money greatly increased the division of labor.
Soon, the scarcity of gold used as currency (means of exchange) soon became a problem. The solution was found in using legal paper notes as "netting" currency to be recomciled with gold.
A NETTING CURRENCY is a negotiable instrument which finances the production of wealth (goods and commodities) in urgent demand (consumption items). It can be discounted for cash immediately upon its creation and matures within 90 days. Gold is used to reconcile the netting currency (meaning to be redeemable).
This means that MONEY has to be a COMMODITY (Wealth), while a CURRENCY (Means of Exchange) can be anything (Gold, Silver, Bank Note, Counting Stick or Electronic Blip).
Posted by ilpatino on 10/04/12 05:40 PM
To use a more mundane expression, unfortunately, a bit too much dick-swinging going on here.
As with nearly all discussions about liberty, words are being used and mis-used.
What is money? What is currency? What is gold? etc.
One can make a clear distinction between a medium of exchange and a store of wealth. To me THAT is the basis of any discussion about money/currency/gold.
To refrain from using the words Money/Currency/Gold; That what I keep for later use, to which I attribute the best "ability to keep it's purchasing power" that is wealth. That what I use to conduct small and big economic transactions is currency.
To me the etymological distinction between the words "money" and "currency" is unclear. So; Gold is wealth, dollars/euro's/wooden sticks
I.e. a lot of currency does not make you wealthy.
To Mr. Bischoff; Liberty starts at "no government." People of strong will and good moral values do not need to governed. If you would place the protection of you and your beloved ones in the hands of some-one else, you have lost al liberty.
If you believe that you need to be governed to refrain from invading someone else's liberty, well, let's just say you wouldn't live long in a free society. (that should be enough encouragement in itself to refrain you from tresspassing, see the logic?)
Posted by Bischoff on 10/04/12 05:29 PM
@ Abu Aardvark
ABU: "May I suggest you adopt the motto "WES BROT ICH ESS, DES LIED ICH SING"
BISCHOFF: I don't adopt the motto you suggest. If you knew me, you'd know that I don't sing anybody's tune for personal gain.
My motto is: "Erwerbe Dein EIGNES BROT, ohne dass Du da fuer das LIED eines Anderen zu singen."
Posted by Abu Aardvark on 10/04/12 10:33 AM
Bischoff: "To have liberty, you have to have government, but government is also the greatest threat to liberty. Trying to get the balance right is where it is at"
Thesis, anti-thesis, synthesis. Whew! Groundbreaking technique, indeed.
May I suggest you adopt the motto "WES BROT ICH ESS, DES LIED ICH SING" ...
Click to view link
Posted by Bischoff on 10/04/12 12:10 AM
Bullwinkle here... .
It seems you are threatened by people who hold strong opinions or convictions.
Unlike you, I try to base my opinion on facts and logic, before I put forth my opinions in an admittedly forceful manner. Some people are threatened by this, particularly those who form their paradigm of the way the world works from a particular "School of Thought" or popular opinion. I am sorry, if my comments threaten your paradigm. Have you considered just skipping to read my comments?
However, since you did read them and responded, I will respond in turn.
CLARK: "Ha! And thus proclaims Bullwinkle, a.k.a. Mr. Know-it-all Bischoff. I don't think so.
BISCHOFF: You don't think so... ??? What... ??? That I am "Mr. Know-it-all" or that I proclaim... ..??? LOL
CLARK: "1) I see no proof there is - only MONEY - I only see an unsupported opinion."
BISCHOFF: The proof for which you ask depends entirely on the definition of MONEY. Since you do not have a definition for MONEY, as best as I can determine, you see my statement only as unsupported opinion. Therefore, I don't see that the problem lies with me. Instead, it lies with you for lack of being able to have a definition for MONEY.
CLARK: "2a) Implies there is only One standard. There is no proof of this, where are your supporting facts?"
BISCHOFF: This comment shows lack of rigor in thinking. The purpose of a "standard" is to serve as a fixed reference point to measure something. If there are "many" standards, i.e. different fixed reference points to measure the same thing variously, how can that work... ??? Your question deserves no answer, because it is illogical.
CLARK: "2b) Gold does serve as a currency, have you not seen the list of grocery stores which accept gold as payment? Big factor, small factor... depends on the individual to decide if it's big or small."
BISCHOFF: Grocery stores may accept gold and silver in a barter transaction. Again, you lack clear understanding of terms. True enough a currency is a "means of exchange", but it is not MONEY, unless it can be redeemed for MONEY. Grocery stores may accept gold and silver in a "barter transaction", but such transaction is not a "money transaction". I suggest you study up on the Coinage Act of 1982 and the "legal tender" protection afforded the Federal Reserve Note. You might also look into the fate of the Liberty Dollar currency created by Hans VonNothaus, Cour d'Alene, Idaho.
CLARK: "2c) "Gold is recognized as money universally" Uh-huh, right. And where is this information at? I know some People who wouldn't recognize gold from dirt. So much for "universally".
BISCHOFF: Where is the logic here... ??? What does recognizing gold from another mineral have to do with GOLD being MONEY, unless you are a gold miner... ???
CLARK: "That there exists 80 years worth of annual gold production in above ground inventory does Not prove Gold is recognized as money universally."
BISCHOFF: It doesn't... ??? Please tell me why people all over the world acquire it and lock it up in vaults. What is the purpose... ??? Have you ever thought about that... ??? People expend "work" to dig up and refine gold, and then have it sit around in vaults no purpose, and you don't wonder why... ??? Think, man... .think... !!!
CLARK: "The supply of other elements above ground has no relation to the question of recognition of what gold is."
BISCHOFF: Quite to the contrary. Platinum has practically identical physical and chemical characteristics, yet no one mines and refines platinum to put it into vaults and keep accumulating it. The 2 year annual production of inventory of platinum serves for its application and use in catalytic converters, meaning as an industrial commodity. This holds true similarly for all other metals, including copper and silver. Therefore, that gold is no different than any other metal when judged by worldwide inventory amassed, is a "knee-jerk" statement at best.
CLARK: "2d) Scarcity seems pretty important. 2d didn't make sense, most of it seems at odds with the last sentence."
BISCHOFF: Scarcity "seems" pretty important. You conjecture. My question to you, "Is scarcity important or is it not... ??? Then tell me why. If you want to argue with me, ARGUE... . Don't give me this "seems to" business... As to being at odds with having 80 years of annual production in above ground inventory, that is exactly the point I made. Based on the number of tons of annual proction in above ground inventory, GOLD is the MOST prolific commodity on earth. It maybe scarce when judged against finds of other metals in the ground, but as on hand inventory it beats any commodity in relation to annual production.
CLARK: "2e) "It isn't scarcity which makes gold a good store of value." ? What? I suppose you mean Only when gold is not used as a currency? Somehow the experience Spain had with importing all that gold from the New World didn't affect the value of the gold already in Spain?"
BISCHOFF: You simply do not understand the definition of "value" and why gold is a particularly good store of value. We already established that you do not understand the definition of "standard to measure value". Now we also know that you do not understand a "means to store value". When Spain underwent inflation after the import of gold and silver from the New World, both of these metals were commonly used as "means of exchange" or currency subject to the Quantity Theory of Money. In a modern economy, gold as currency is unworkable. For that reason, "netting currencies", using gold to reconcile balances, started to develop in the early Middle Ages. "Netting" currencies very successfully existed in North America, and in the United States from 1750 until 1933.
CLARK: "J.P. Morgan thinks gold is money and nothing else, but it doesn't mean anybody else has to think so too. I see no facts - or links to facts - which prove otherwise."
BISCHOFF: It is evident that you are uncomfortable with contraversy. J. P. Morgan, without a doubt was one of the most astute bankers, not only in this country, but throughout the world. He understood MONEY, he understood the GOLD STANDARD, and he understood FIAT CURRENCY. As acknowledged leader, he kept the banking community in line as best he could. I believe that any serious student of J. P. Morgan's life and work will agree with me, that Morgan understood the role of GOLD as MONEY.
CLARK: "Also, as displayed on other threads, I find your faith in controlled systems to be disturbing."
BISCHOFF: I don't know what the hell you are talking about. "Controlled" systems... ??? I get this comment mostly from those I consider "groupies" of the promoters of Rothbard's "anarcho-capitalism". That I am a slave to "controlled system" is just a stupid statement trying to justify this anarcho crap. To have liberty, you have to have government, but government is also the greatest threat to liberty. Trying to get the balance right is where it is at... The Constitution is the best blue print I know, before it was bastardized by the 16th, 17th, 18th and some might say the 19th Amendments (I don't say that). It disturbs me, that there are people like you with an utter inability to think for oneself.
May I suggest you adopt the motto "SAPERE AUDE"... ... ..
Posted by expatriot on 10/03/12 03:38 PM
Yes Ron... I agree with what you say... (but more so with Lipatino's comment below) but argue with what you have left out... which as you clearly say here... . central banks have increased their holdings... but what The Daily Bell rings upon is the growth of some 150 private central banks during the past century... which means that those gold holding which belong to the banks, belong to the OWNers of those banks... not to the peoples of the countries those private central banks have taken over... Europe most recently in fact.
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
Well indeed that's what is and has been happening... now indeed, a gold/silver standard would be and should be a very good idea... except that an elite class of robber barons have been for generations hoarding the vast majority of these valuables (moreso gold than silver most likely)... and frankly if you Ron, can explain just how to get that gold out of the secretive and private greedy hands of those elite cabals of elite private central bank owners which have hoards of it... into the public domain for use as ready money... Well then for the rest of what you say, I absolutely agree...
The problem is a real one... even the Vatican has huge hoards of gold... but besides that rather tiny rich country (which uses god as an excuse to build it's enormous wealth, power and influence, and not surprisingly has left a trail of blood via inquisitions, conquestitors, witch burnings, wars and even the signed a pact to permit Hitler to invade Poland... ) which houses a religion (and indeed the people who abide by that faith are not the guilty ones as their credo is to believe, not to think... in short few of them have any clue about the untold wealth ) ...
Why have you not insisted that not only should the Fed be audited, but it should also reveal exactly who it's private owners are and what shares they OWN !
Big Ben B is just the acting poster boy CEO, he does not own the Fed... and if what is perceived as his actions infuriate the people... he will be replaced by some other appointed puppet... which is at least more honest than the way Presidents are set into office and the money spent by our owning classes to insert a willing puppet... suckering the people out of the left or right wing... but always working for the owners (to quietly hide their actions), not the people : although indeed making lots of noise to the latter effect.
As indeed the whole established system of corporations seems simply a way to hide the real individuals behind a "legal person" which is not human and thus can often get away with... you name it! Various crimes including oil spills, pollution, spiking the food chain with genetically dubiously modified monocultures, and so on... right up though war and murder when needed.
Indeed when general Smedley Butler blew the whistle on several American industrialists who tried to hire him to pull off a military coup and who had been along with many others supporting and supplying Hitler plus pushed to get the USA into that nice big profitable war (this consisted of some of the biggest names in both banking and industry) : the thing was hushed up. Rather than hang 20 of the richest americans for treason, FDR let it slide (maybe his hands were not so very clean either?)...
In short, the super rich can always do as they please no matter to what extent their crimes... and this is not about to change, nor is anybody screaming to jump over the petty legal statute of limitations to go back and look how these fortunes are linked to bankrupt morality, crimes and in some cases wholesale genocide - as indeed central bank control incurred such things as the depression in which some 3 million people starved to death right in the USA... a little known, rarely mentioned fact.
So yes... gold is money... but how exactly are you to get it out of the hands that have most of it into public use... most of us have very little gold... so the first advantage would seemingly be vast poverty of most people unless indeed there is some sort of international cooperation to shut down all private central banks and somehow depossess the elites who have it... thus bring it into public domain and or national democratically run central banks rather than private ones... you don't imagine that the holding corporation are going to make a donation?!
In short explain the nuts and bolts of how this can be done! What moral being can oust the psychopaths who crave and indeed have power when people are taught to admire people who have money and success above all else? Yo! God save the Queen...
Indeed the gold standard premiss is fine... but to effect that premise without yet further piling short sighted imbalances on the people seems rather dubious if somehow those bloodline psychopaths who OWN and want a NWO are not somehow put visibly into the equasion.
Posted by Danny B on 10/03/12 11:07 AM
The U.S. can't very well let gold circulate because the U.S. GOV doesn't have any.
Every year that goes by, more and more investors buy gold. Every year, a couple thousand tons change ownership. Every year, nobody seems to know where the  tons comes from.
Click to view link
A few years ago, Prison Planet had a link to the U.S. Treasury site. It showed that 3700 tons of gold in New York had been reclassified from "currency backing" to "deep storage". 2 1/2 years later the remaining 3700 tons had also been reclassified. Rumor has it that the Germans "own" it.
Click to view link
Rumor also has it that they want it back and can't get it.
Click to view link
Posted by clark on 10/03/12 09:38 AM
And thus proclaims Bullwinkle, a.k.a. Mr. Know-it-all Bischoff. I don't think so.
1) I see no proof there is - only MONEY - I only see an unsupported opinion.
2a) Implies there is only One standard. There is no proof of this, where are your supporting facts?
2b) Gold does serve as a currency, have you not seen the list of grocery stores which accept gold as payment? Big factor, small factor... depends on the individual to decide if it's big or small.
2c) "Gold is recognized as money universally" Uh-huh, right. And where is this information at? I know some People who wouldn't recognize gold from dirt. So much for "universally".
That there exists 80 years worth of annual gold production in above ground inventory does Not prove Gold is recognized as money universally.
The supply of other elements above ground has no relation to the question of recognition of what gold is.
2d) Scarcity seems pretty important. 2d didn't make sense, most of it seems at odds with the last sentence.
2e) "It isn't scarcity which makes gold a good store of value." ? What?
I suppose you mean Only when gold is not used as a currency? Somehow the experience Spain had with importing all that gold from the New World didn't affect the value of the gold already in Spain?
J.P. Morgan thinks gold is money and nothing else, but it doesn't mean anybody else has to think so too. I see no facts - or links to facts - which prove otherwise.
Also, as displayed on other threads, I find your faith in controlled systems to be disturbing.
Posted by Bischoff on 10/03/12 01:21 AM
Ron Paul says: "Why is gold good money? Because it possesses all the monetary properties that the market demands: it is divisible, portable, recognizable and, most importantly, scarce - making it a stable store of value. It is all things the market needs good money to be and has been recognized as such throughout history."
1) Gold is Money, and nothing else. There is no GOOD MONEY, or BAD MONEY. There is only MONEY, and GOLD is it.
2) Let's examine the monetary properties that gold possesses which are said to be demanded by the market.
a) Divisibility. That is true. It is important that a denominated amount of gold can be divided into aliquot parts. This allows gold to be a standard for "price".
b) Portability. Gold serves as a standard to measure value, and it is a means to store value. Gold does not serve as currency. Therefore, portability is while a factor, is not a big factor.
c) Recognition. Gold is recognized as money universally by the fact that there exists 80 years worth of annual gold production in above ground inventory. In comparison, the above ground inventory for platinum is 2 years of annual production, and that for copper is 1/4 year of annual production. What the number is for silver, no one knows for sure.
d) Scarcity. This is cited as the MOST important factor. In essence, it is the LEAST important factor, unless of course Gold was employed as currency. As long as gold serves as a measure of value to support the circulation of a "netting" currency, and to help clear consumption items in urgent demand, the question of scarcity doesn't arise. The question of scarcity arises only under the Quantity Theory of Money.
e) Store of Value. It isn't scarcity which makes gold a good store of value. It is the physical and chemical characteristic of gold which render it an ideal store of value. Gold can rest in a barrel of acid deposited on the buttom of the ocean for a thousand years, and when recovered will not have lost value. Try that with any other commodity, even silver.
The last sentence in Ron Paul's statement shows that he really doesn't understand why "Gold is Money, and nothing else" (J. P. Morgan).
Posted by dave jr on 10/02/12 10:09 PM
"The fiat crap is the most efficient way to transact commerce, so as a medium of exchange it works; However, It should come with a warning label WARNING: Do not hold on to this "dollar" too long as it is constantly being devalued by the FED / Gov't."
HaHa, why don't the do gooders require the label warnings like they do on a pack of cigarettes?
OH! and like I said, the only reason why the fiat is efficient is beacause of cronyism. Not government mandated trade, but trade mandated government.
I don't mind business getting bigger, or the rich getting richer. Just keep it as business and stop pretending government is not owned.
Our lords are pushing it as far as it will go. They will learn, and we will learn the natural limits to a balanced life. They believe they have the technology, the drones. Their downfall will be because they will no longer be able to support the weebs who deliver, operate and maintain "their" technology.
Posted by laceja on 10/02/12 09:39 PM
Gold has no price. It's the fiat currency that has a price, which is reflected in the amount of gold you can acquire with it. Gold and silver are real money. Use gold as non-depreciating store of value and silver to transact everyday business (i.e., buy groceries).
Posted by obsvr_1 on 10/02/12 02:00 PM
another good article from Dr. Paul ... . We the People, should always have the option to use Gold as a store of value. As today, we can purchase and own gold (best to store in a safe place, not in the bank or some ETF) and use it as a store of value.
The fiat crap is the most efficient way to transact commerce, so as a medium of exchange it works; However, It should come with a warning label WARNING: Do not hold on to this "dollar" too long as it is constantly being devalued by the FED / Gov't .
Posted by ilpatino on 10/02/12 03:05 AM
Mhh, the distinction between money and wealth is too important to try to explain in a few sentences. The best education one can get is at fofoa.blogspot.
Gold is not the best medium of exchange, but it is the best store of value. Once one lets the market decide the true "price of gold" (i.e. "freegold") this distinction becomes much clearer.
You could buy an egg for a miniscule flake of gold, but that would be impractical. A free-floating currency (against gold)would be more practical. But as always these days, the market doesn't decide anything, certainly not the "price" of gold. (or the "price" of currency for that matter.)