Endgame: Return to the Gold Standard? … Central bankers may be planning to reintroduce the gold standard in lieu of a single world currency. One of the more persistent memes circulating on the internet is the idea that central bankers, or the "Powers that Be," hate Gold. The idea is often repeated, but it is a strange notion. After all, we lived under a Gold Standard up to 1971, when Nixon ended Bretton Woods. The Money Power has ruled through Gold for a very long time. So why would they hate it? No, the Bankers love Gold and in fact, there is reason to believe they are planning to reinstate it as the monopoly currency of their choice. In fact, this may be the fundamental factor driving Gold prices up. It's not just a hedge against inflation: if Gold becomes the standard again, it will become very, very expensive. And more and more of the smart money is betting on this. – HenryMakow.com
Dominant Social Theme: Central bankers hate gold … or maybe not.
Free-Market Analysis: Anthony Migchels lately has been kind enough to honor our modest pages with economic commentary via feedback and now he has used one of our recent articles as a jumping-off point to blast gold as a money metal at Hentry Makow's popular conspiracy website. You can see an excerpt of his article above.
The bio of Mr. Migchels at the Makow site reads: "Anthony Migchels is an Interest-Free Currency activist and founder of the Gelre, the first Regional Currency in the Netherlands. You can read all of his articles on his blog Real Currencies."
From what we can tell, Mr. Migchels is something of what might have once been called a "greenbacker" – in US parlance. What that means, near as we can tell (regarding Migchels), is that he wants money to be publicly issued without interest. This is the argument of the eloquent Ellen Brown; and we long ago (years ago) identified her as a fundamental (if misguided) proponent of what must inevitably be a persuasive monetary meme. It is proving so, as we predicted.
We should also point out that Ms. Brown has changed her arguments from time to time and we are not sure if she even approves of a public central bank anymore. Apparently, the idea is to administer public money at a state level – and to let private banks distribute it. But inevitably, the actually VOLUME of money will be printed by humans and will be the result of human decisions not the "free market."
Nonetheless, we admire Mr. Migchels's imagination and courage in setting up an alternative monetary system that is actually gaining traction in the Netherlands. We simply and profoundly disagree with the concept.
We are not alone in this, of course. Mr. Migchels argues against the prescriptions of free-marketeer Dr. Gary North (you can see him at LewRockwell.com) who has been a fierce adversary of Ms. Brown's. Mr. Migchels is generally dismissive of Austrian free-market economics as a result. Here's a bit more from the Makow post (in ital) along with our counter-arguments.
1. Here are a few more of the reasons why Bankers want their Gold Standard back: 1. Gold is the de facto World Currency. If Gold as currency is used everywhere, the central bankers basically have what they want. It would be much easier to control us with their gold, than to impose a single world fiat currency. Alternately, they could do that by backing it with their gold.
If Mr. Migchels were to address this point directly to us, we would point out that here at the Daily Bell we've been careful, on the whole, to argue for competing currencies. We've also stated that a bimetallic money of gold and silver probably would win out in the long term as it has throughout history. We would also point out that the libertarian argument is often not for a state-mandated "gold standard" but for a free-market one in which the market itself pits gold and silver against other currencies and "monies" in order to let the most fungible and utile win out.
Mr. Migchels has also made the argument that in a free-market environment purely paper-based (fiat) currencies would win out over commodity money – or so we understand him to argue. We simply don't understand this argument as it would seem to be contradicted by a good deal of history.
2. With Gold, interest is easier to justify. When you lend Gold you can say: I need interest. I can't use the Gold myself while you use it. When you just print money, interest is harder to justify. The money didn't exist when it was lent out, and will cease to exist after it has been repaid.
Mr. Migchels is anti-interest – a bugaboo that is reflected throughout history. But as monetary libertarians, we have a problem with this prejudice no matter how ancient. We think people should be able to charge interest for money – if they wish and if the market will bear it. (Theoretically, anyway.)
No one compels people to take loans, and thus no one ought to force lenders not to lend. The alternative is indeed force – incarceration and even murder. Yet money is no different than any other commodity, is it? Why shouldn't people be allowed to charge – if there is a market for their ware?
3. They own it all. And the little they sold us they will regain quickly when compound interest mops up the rest, after which their monopoly will be completely restored. The fact is, nobody knows where most of the Gold is. This is a clear sign the central bankers may reintroduce the gold standard. In the meantime, while Gold appreciates, so do their reserves.
This is an old argument. But we are not sure it is so. There is plenty of gold around and no one knows where it all is – but a good amount is worn by Indians and hoarded by average Chinese and Asians generally.
The point is that if bankers try to withhold gold from circulation, the price will go up considerably – causing MORE stores of gold to come on the market in a vicious cycle that bodes ill for those who wish to "control" the monetary system. Alternatively, bankers may try to flood the market with gold, but this would considerably decrease the price of gold and the worth of their OWN gold stores. It would not however have much of an impact on the gold that average people own and wear.
In a FREE MARKET gold is very hard to control. In fact, in a free market, monopoly rent is likely impossible to sustain. This is a big delusion of those who believe in government power. Government types generally like to use the argument of monopoly power as a reason to create government agencies. But in a free market people are not constrained to utilize a specific product or service unless they choose to.
4. They prefer deflation over inflation. Interestingly, under Gold, deflation is the norm while under paper inflation is the norm. Both see the boom/bust cycle, but each with its own 'natural' condition. Paper sees continuous 'mild' inflation alternated by deflationary busts. Gold sees structural deflation, alternated by asset bubbles. Bankers prefer deflation. It makes their Gold and the interest they rake in worth more. It hinders economic growth, keeping the middle classes small.
We are not sure bankers prefer deflation to inflation. History seems to show us otherwise. Anyway, we would argue that Mr. Migchels is somewhat misled on this point. We believe the world is headed toward global governance as a result of a conspiracy of a few immensely powerful families worth trillions that control most of the central banks in the world.
"Bankers" have nothing much to do with this organized conspiracy – at least as banking has been known traditionally. These central banking families revel in inflation as it bankrupts middle classes. Additionally, fiat money is almost inevitably inflationary and there is considerable evidence that the Depression was far less deflationary than common wisdom suggests.
5. But surely, they suppress Gold, don't they? Of course they do. They have their mouthpieces explaining it's just 'a barbarous relic'. They have their banks suppress it's price. By doing so, over the years they have convinced many to surrender whatever stash they had, greatly enhancing their grip on it. To them, it is just another dialectic: paper versus gold. When the time comes to release the valves, Gold will appreciate further and further.
As a paper whose main goal is the elucidation of the dominant social themes (fear-based promotions) we try to stay on top of elitist propaganda. To us, the "gold is a barbarous relic" meme is fairly straightforward. The powers-that-be DO want to suppress gold ownership – but we are not convinced that this has been part of a century-old switcheroo.
The power elite has every reason to want to ensure that the average person uses their fiat money. Ultimately, they can do whatever they want with fiat. It is immensely fungible and in the process of inflating away the value of fiat, power elites inflate away the wealth of middle classes.
A final point is to be made in all of this. Unless the market itself issues money, there is simply NO WAY that people issuing fiat can figure how much money is too much. Only the market can decide!
And so we would ask, in closing this article, what does the issue of interest matter if one is determined as Mr. Migchels and Ms. Brown are to put the issuance of money in human hands? It is not interest that will prove the ultimate problem but the VOLUME and VALUE of money itself.
The good, gray men printing pure fiat will NEVER know how much money is enough. That is why free market bi-metallic commodity standards have proven so popular in the past. The market itself prompts people to hoard or unhoard (or dig more gold or silver) dependent on the value that gold and silver demands in the marketplace.
There is simply no way of getting around the implacable logic of free-market issuance of money. NOTHING ELSE provides surety of avoiding monetary and price inflation in the long term. Nothing. The volume issue, by the way, is simply a red herring. There is plenty of gold and silver to go around within the context of digital money and paper-money printing.
As believers in free banking – the free-market issuance of any kind of money at all including pure fiat – we have every confidence that some kind of gold and silver backed money would find at least some preference in a free-market money environment as it has in the past.