Apple juice, cars and computers are cheaper than ever (when adjusted for inflation). So are holidays. As are books and clothes. Market capitalism is a raging success by any assessment, especially a standard of living measured a mere half century ago. So if real inflation isn’t coming from consumer products, how does it arise in today’s markets? A major increase in the price of oil can do it as you can see currently. More commonly though, it comes from the growth of the state, and especially its monetary policies, i.e, currency wars. This is what The Federal Reserve Bank in America does when it gives some institutions 800 billion dollars: it prints up the authorized bills, puts them in bags and delivers them in trucks to banking institutions. You’re saying to yourself, “Shut the hell up! No way.” The sad truth is, that’s the meat and bones of the operation. They print, pack and present it–the end. Well, not quite. It’s circulated by the banking institutions of course, it becomes what's commonly called a money multiplier: and that’s how currency gets watered down. (Furthermore, one dollar deposited in a bank in the USA for instance, allows that bank to lend out 90 cents; so, 10 billion gets you 90 billion, see the first chapter of The Big Reset: The War on Gold and the Fanancial Endgame. Imagine if they did that to your favorite beer, and then had the nerve to serve it warm. You’d taste the scam at once and switch to another brand.
"Ask yourself sometime who benefits from inflation. The people in debt benefit, society’s losers. The government benefits because it collects more in taxes without raising the rates. Who doesn’t benefit? The man with money in his pocket, the man who paid his bills." John Updike, Rabbit is Rich. "If I say that the return to the gold standard is necessary it is because it makes inflation impossible. Under the gold standard the amount of money depends on geological factors that cannot be controlled by the government. It is not an unreasonable standard because it is the only alternative to making money completely dependent on the government." Mises, Marxism Unmasked. Many people don’t know that the Roman Empire diluted their gold coins with base metals, and this in part led to their downfall. They caused inflation by surreptitiously watering down their gold which allowed the unchecked growth of the state on a sort of credit expansion. The Empire artificially expanded, (almost always on Imperial military adventures), and further thinned out its gold and eventually faced runaway inflation. “With the exception only of the 200-year period of the gold standard [1714 to 1914 in Britain], practically all governments of history have used their exclusive power to issue money in order to defraud and plunder the people.” Hayek, Choice in Currency
The Gold Standard of the past was a monetary system in which a nation’s currency – paper notes – were freely convertible into pre-set, fixed quantities of gold. The gold standard isn’t currently used by any government in the world. It has been replaced by fiat money, most commonly based on GNP. It was in 1971 when it was eliminated completely by Richard Nixon. For instance, Canada’s annual Gross National Product is the total income that residents of the country earn within the year.
The amount of gold reserves in the world is around 170,thousand tons. The gold standard limits the power of governments to inflate prices through excessive issuance of paper currency. It creates certainty in international trade by providing a fixed pattern of exchange rates. Under the classical international gold standard, disturbances in price levels in one country would be offset by an automatic balance-of-payment adjustment mechanism, (the unnecessary price specie flow mechanism).
The stability insured by a gold standard is both its greatest asset and one of its liabilities. Exchange rates do not sometimes respond fast enough to altering circumstances around the globe. A gold standard limits the policies that an agency like the Federal Reserve can use to adjust to an economic crises. Countries with gold standards tended to have severe economic shocks if the government tinkered with the fundamentals of their market place. The gold standard's main downside is that it stymies the size of the state even if the electorate or the administrators call for monetary expansion for short term relief in a time of recession. For a new gold standard to work, its peg in currency would have to be in the tens of thousands of dollars to work; say 40 to 50,000 an ounce: The New Case for Gold, as well, returning to hard currency should be done with great caution, that is unless a crisis has already begun: Broken Markets.
If the economy and the state were ever constitutionally separated, like the church and the state is, then we’d see a perfect opportunity for a universal gold or precious metal standard.
However, no matter what its vulnerabilities, on the other side of this issue is always inflation. It is the cancer, unseen, creeping and always expanding. Since 1970, the dollar bill in relative terms to the consumer price index has declined approximately a staggering 75 percent at a rate well above four percent a year: Other People's Money.
Paper money and fiat currency based on GDP has brought the free world to a crash on several occasions. Many of the governments which are printing money and inflating their economies are diametrically opposed to the economic freedom of individuals in a market economy. Their motivation is clear. What about in capitalistic democratic America? Here, the state’s motive isn’t so clear. A lack of political fortitude certainly exists. Politicians can promise their way into power spending on labor, health-care, war or even moral platforms, then once in power, they can covertly inflate their economies or go into debt delivering that promise, for instance the Bush Regime's illegal War in Iraq or the ridiculous Obama-care. In hard times it becomes impossible not to either inflate the money or to go into debt.
Politicians as well as serving the public are also invariably interested in re-election. They are of the unanimous opinion that we can’t get along without them. Perhaps in the long-run, we would be better off without large governments at all.
Our happiness isn’t such a mystery as Republicans and Democrats indicate. We plan our lives according to available information, from the poorest in society to the richest. A movement toward a conversion of a worldwide gold standard could make coin and currency the one constant among the many caprices of life. An individual’s economic plans could be counted on, at least with this one large variable being relatively constant. The happiness of the people happens to be a stable currency. All of this is to say, gold and other hard commodities like silver (or which ever other ones like wheat, oil or steal for instance), don't give and can't ever have perfect stability; we mean it in a way metaphorically in the sense that even gold may be inflated for whatever reasons because of supply and demand; however, in comparison to fiat money and state-generated inflation over time, there seems to be no competition. Gold (and other commodities) are far superior if they are peg correctly to the currency in question.
If you’re poor at 18 years of age, produce and save for 50 years with no or little inflation to have to hedge against, guess what? You and your hard-working family are going to have amassed real wealth over five decades. What about if there is inflation year after year though? Depending on the rates of it over the 50 year period, you’re probably going to be in the same tight spot as when you started, or if not, not so far along as a whole life of hard work should have accomplished for you. Inflation kills your buying power and savings as you can see in 2024 and years now sometime into the future. It makes your economic decisions unpredictable. It destroys lives! Its sole ally is the debt-ridden bloated modern state. Inflation, watered down currency and economic chaos are ultimately one and the same thing. Over time, a gold standard will put muscle into your labor and keep obese governments on a treadmill. You wouldn’t let them do it to your beer, stop allowing them to do it to your currency.
© 2024 - E. A. St. Amant