|Fiat Currency vs Asset backed Currency|
What are the solutions for America and the world?
Over the weekend I have been reviewing a video and related information about fiat money, and the history of money called "The Secret of Oz". This is a very interesting history lesson by Bill Still that promotes the idea that money does not necessarily need to be tied to precious metals in order to be "honest money". There are great differences of opinion on this subject as the following letter describes.
I tend to believe that the absolute masters of the gold market would in some ways like to go back to the gold standard because if the dollar were to be covered by gold at this point, gold would have to be worth many thousands of dollars per ounce, and that would once again give the foreign banksters uncountable wealth and control of our money system. In fact if that happened there would probably be a move to confiscate gold.
I am trying to get Bill to cut a deal on duplicating his video. In the mean time you can get one at:
http://www.secretofoz.com/ 110 minutes
Please read the following as a preface to the video. I believe that fractional money could work as a function of honest money, which at this point I have to believe should be silver, not gold, like the silver certificates of recent history.
I also believe that the States need to declare individual soverignty and start up their own state owned banks like the bank of North Dakota EXCEPT that they should NEVER get nvolved with the IMF or any other international currency besides the dollar. The video "Secret of Oz" also talks about state owned banks.
There are honest solutions available for the mess the banksters have created, but it's going to take education on a massive scale and simple solution oriented discussions to bring about that change needed.
I put restoring sound and honest currency right up there as an issue to be discussed, second only too restoring moral compass and Christian principles in our land.
Please give me some feedback and let's start a discussion of these issues so central to freedom and the future of our country.
I will be blogging about this subject at http://www.paulstramer.net soon.
A bit long but informative. Mostly excerpted from "The Daily Bell"
Fiat money is the opposite of honest money. Fiat money is money that is declared to have value even if it does not. Honest money has value regardless of what people say. Gold and silver are often referred to as honest money and since they have been dug out of the ground at considerable expense, they do have value regardless. People will pay variable sums for them.
Fiat money is also known as paper money, or electronic money. Since there is nothing behind paper money but the obligation of a state to redeem it in more paper or electronic money, fiat money's ultimate worth is questionable at best. In fact, there is a history of states walking away from the face value of the fiat money that has been printed (created). But if one has it in one's possession, it is impossible to walk away from the value of gold and silver – and contrary to fiat money, they have an inherent quality.
Mainly an outgrowth of central banking, in the modern age, fiat money probably would not be attractive without state support. That's because fiat money, unlike fractional reserve money, has no inherent value. Fractional reserve banking, in fact, is a private market phenomenon in which private banks provide paper notes the face value of which adds up to more than the reserves held by the bank. There is a history of successful fractional reserve banking efforts within the private marketplace, however fiat money ALWAYS collapses, as it is impossible to issue a substance of value year after year and generation after generation that HAS no value.
In the United States, the world's largest and most dominant economy, the greenback became a fiat currency when President Richard Nixon broke the final link between gold and the dollar in 1971. He did this because the French were apparently threatening to redeem their dollars in gold – and either the US central bank and/or Treasury did not have enough gold to redeem French greenbacks or chose not to.
In any event, Nixon severed the dollar's relationship to gold and ever since then the world has embarked on a "bold experiment" in which the global, anchor currency has no specific relationship to an underlying asset. Predictably, this has meant that the United States has continually created more and more fiat dollars, thus inflating the overall stock of dollars and making them worth less and less.
China, one of the world's most ancient civilizations, is said to have had no less than eight separate interregnums of fiat currency – each collapsing and then being replaced by another. In the 1800s, fiat money was even banned by the Chinese. Today, however, the Chinese government is once again a user of fiat money along with the rest of the world. Fiat money has never been so prevalent perhaps as in the modern age. But that doesn't make it any healthier or less prone to failure. Those who ignore history are doomed to repeat it.
Honest money is a euphemism for gold and silver. It may be used within the context of fiat money – as an element that serves as its opposite. Fiat money is money generated without the backing of gold and silver or any other commodity or resource. Fiat money in this day and age is also associated with state produced money, as that it the normal kind of issuance offered today.
Fiat money is also known as paper money, or electronic money, whereas gold and silver are known as honest money because they are dug honestly out of the ground using physical labor and the sweat of one's brow. Gold and silver are also honest money because they're value actually exists.
Since there is nothing behind paper money but the obligation of a state to redeem it, paper money's ultimate worth may be questionable. There is a history of states walking away from the face value of the money that has been printed. But if one has it in one's possession, it is impossible to walk away from the value of gold and silver – and they are an inherent quality.
Gold and silver are honest – and valuable – because they are beautiful, malleable and transportable metals. That makes them money metals in fact. Bits of gold and silver are divisible and yet they can be put back together with a little heat. There is no doubt that gold and silver are attractive and have been used in certain forms as adornments throughout human history. Gold and silver are transportable because their value greatly exceeds their mass.
Lately, there have come to the fore certain arguments that money is a state construct and that gold and silver are not the original or honest money. This argument, which we have labeled Brownian for reference purposes, maintains that money is defined by the state and may be any sort of fiat so long as the state stands behind it.
But the Brownian argument flies in the face of historical fact when it comes to almost any other commodity or invention. Inevitably progress – human advances – appear in the private sector and are then adopted by the public one. To argue that money alone was first an invention of the state is a questionable concept at best and one that most free-market thinkers would have to reject.
The obvious conclusion for those who are interested in these concepts is that gold and silver were adopted privately as a stuff of value – and only later became seen as money by statist entities. Even today, states the world over reject honest money in favor of their own fiat-generated currency.
Ironically, behind governments stand powerful private interests, including central banks. These central banks – and large banks in general – are apt to deal in gold and silver with each other and to value it privately far more than they do in public utterances. Honest money is still accepted the world over, though the rhetoric might make it seem otherwise.
Brownian(s) is a term coined by the Daily Bell to describe a growing movement triggered by the publication of the book Web of Debt by Ellen Brown. The theme as postulated, which we also refer to as Brownianism, reflects Ms. Brown's desire to bring back a credit-based sovereign fiat-money.
In her book, Ms. Brown argues for public "credit based" fiat-money that is created transparently and apparently available to individuals on a loan basis. Here is a summary of her thought (based on much work done in the past by others with somewhat similar views):
Before World War I, two opposing systems of political economy competed for dominance in the United States. One operated out of Wall Street, the New York financial district that came to be the symbol of American finance. Its most important address was 23 Wall Street, known as the "House of Morgan." J. P. Morgan was an agent of powerful British banking interests. The Wizards of Wall Street and the Old World bankers pulling their strings sought to establish a national currency that was based on the "gold standard," one created privately by the financial elite who controlled the gold. The other system dated back to Benjamin Franklin and operated out of Philadelphia, the country's first capital, where the Constitutional Convention was held and Franklin's "Society for Political Inquiries" planned the industrialization and public works that would free the new republic from economic slavery to England. The Philadelphia faction favored a bank on the model established in provincial Pennsylvania, where a state loan office issued and lent money, collected the interest, and returned it to the provincial government to be used in place of taxes. President Abraham Lincoln returned to the colonial system of government-issued money during the Civil War; but he was assassinated, and the bankers reclaimed control of the money machine. The silent coup of the Wall Street faction culminated with the passage of the Federal Reserve Act in 1913, something they achieved by misleading Bryan and other wary Congressmen into thinking the Federal Reserve was actually federal.
We would note that Ms. Brown's point of view when it comes to money does not include the perspective taken by the Daily Bell which may constitute a third alternative to the dialectic she sets forth above. That perspective is one of "free banking" in which the marketplace itself decides on the kind of money and quantity in circulation. This model may include fractional reserve banking as well, so long as those involved in the distribution of fractional reserve notes make it clear that said notes are fractional. Ms. Brown makes a number of startling and interesting points in her book tracing back credit-based money through many eons, and making much of the tally-based system that she claims brought Britain over 700 years of prosperity. Public, transparent credit-money is not only feasible, she writes, but necessary if citizens are ever going to be able to take their economy back from the "banksters" who have hijacked it. Not everyone agrees with Ms. Brown, obviously. Financial historian Ed Griffin (a Bell contributor) wrote the following about Ms. Brown's theories:
"The solution to fiat money is not MORE fiat money. It is REAL money based on tangible assets, and none has yet been discovered that serves as well as gold or silver. The assertion in the videos that wooden tally sticks were successfully used in England as money is grossly misleading. They were occasionally used like government-issued script that could be applied to the payment of taxes, but at no time in history were they ever used as a medium of exchange for substantial economic transactions. To propose that we now can live with fiat money based on that myth is a non-solution." - G. Edward Griffin (Analysis of documentaries Money Masters and Capital Crimes © 2006)
Free Market Thinking
Free market thinking deals with the social arrangements that arise in the absence of coercion by means of violence or the threat of violence. Because governments typically maintain a near-monopoly over such coercion, much free market analysis focuses on the role and effects of government activity.
The free market school of thought covers topics in ethics and topics in economic efficiency.
Ethics of the Free Market
The ethical touchstone of free market thinking is consent. Activities universally treated as crimes, such as robbery, burglary, embezzlement, assault, battery, rape and murder, are unethical because they are done without the consent of the target. Free market thinkers generally regard fraud as unethical because it operates by subverting the target's ability to consent. From the free-market point of view, it is the lack of consent, not the fact that such activities are prohibited by government, that renders them unethical.
Conversely, any transaction based on consent is presumably legitimate, even if governments have declared it illegal. Thus free-market thinking dismisses any ethical arguments for measures such as government-imposed price controls, rationing, mandatory professional licensing, securities market regulation and product standards enforced by penalties. Such measures are seen as morally obtuse because they involve a third party (government) intervening with a threat of force to prevent transactions to which buyer and seller consent.
Carried to its logical extreme, the ethical dimension of free market thinking leaves little room for modern government. If ethical transactions require the consent of the parties, no transaction that requires the coercive force of government can be ethical. The only exception allowed by this position is government action to protect the public from coercion – police activity to suppress violent crime and military activity to protect against coercion by other governments.
Some free market thinkers stop short of this extreme conclusion regarding the role of government by invoking the interests of persons considered incapable of giving consent, such as children, imbeciles and the deranged and unconscious.
The central economic conclusion of free market thinking is that markets unregulated by government will foster the efficient use of human wealth, and that regulation or other interference with free markets tends to impoverish society. This conclusion is reached by a variety of arguments.
Self-interest. No two or more parties will consent to a transaction unless it leaves every one of them better off. And no two or more parties will refuse a transaction that leaves all of them better off. Thus an unregulated free market will exhaust the possibilities for mutually beneficial transactions that are available at any moment, leaving nothing to be achieved by government regulation that doesn't leave someone less well off.
Opportunity. If there exists an opportunity for a mutually beneficial transaction that the parties have failed to recognize, a third party that identifies the opportunity can profit by exploiting the opportunity in the capacity of broker, deal-maker, market-maker or arbitrager. Thus there is no need for government to bring the parties together to prevent the opportunity from going to waste. Further, discovering such unexploited opportunities requires specialized skills; and there is no reason to expect participants in government to be exceptional in possessing such skills.
Government self-interest. Government action is never action by government per se but action by particular individuals exercising state power. Such individuals will normally act in their own interest. Even if the free market did neglect transactions that were mutually beneficial, it would be wishful to rely on individuals exercising state power to cure that neglect.
Social comparison. Societies in which government is small (as measured by the share of national income taken in taxes and by the portion of the population employed by government) tend to be wealthier than societies in which government is the dominant economic actor.
Historical comparison. Rates of economic growth tend to accelerate when a society's government changes from a regime of regulation to a regime of free markets.
Do all you agree to do.
Do not encroach on others
or their Property.