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Ron Paul 2012!!! Your thoughts on who we should pick for our "Cause"?
- Thread starter SacredBreh
- Start date
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Somebody needs to fire Lew Rockwell. He's still in clandestine mode where his message was often disparaged as fear and loathing tactics. Lew removed the fear and loathing and substituted "freedom".
Problem is, Paul supporters appear to still have to translate some of this oversimplified messaging and we get mixed messages.
As evidence, dag emphasizes "audit" the fed (arguably dissing the idea of "end the fed" as oversimplification) while itisme emphasizes ending the fed as the ultimate goal.
One might imagine these folks exercising a bit of their own hope - a hope they know what Paul's talking about.
Looks like we're back to ending the fed.
Funny you bring up war. Ron Paul says we shouldn't have fought the Nazis. Is he aware Germany declared war on the United States?
BTW, you know our fed wasn't implemented until 1913? That's 20th century.
From : The mystery of banking
Murray N Rothbard.
2. HOW MONEY BEGINS
Before examining what money is, we must deal with the
importance of money, and, before we can do that, we have to
understand how money arose. As Ludwig von Mises conclusively
demonstrated in 1912, money does not and cannot originate by
order of the State or by some sort of social contract agreed upon
by all citizens; it must always originate in the processes of the free
market.
Before coinage, there was barter. Goods were produced by
those who were good at it, and their surpluses were exchanged
for the products of others. Every product had its barter price in
terms of all other products, and every person gained by exchanging
something he needed less for a product he needed more. The
voluntary market economy became a latticework of mutually beneficial
exchanges.
In barter, there were severe limitations on the scope of
exchange and therefore on production. In the first place, in order
to buy something he wanted, each person had to find a seller who
wanted precisely what he had available in exchange. In short, if
an egg dealer wanted to buy a pair of shoes, he had to find a shoemaker
who wanted, at that very moment, to buy eggs. Yet suppose
that the shoemaker was sated with eggs. How was the egg dealer
going to buy a pair of shoes? How could he be sure that he could
find a shoemaker who liked eggs?
Or, to put the question in its starkest terms, I make a living as
a professor of economics. If I wanted to buy a newspaper in a
world of barter, I would have to wander around and find a newsdealer
who wanted to hear, say, a 10-minute economics lecture
from me in exchange. Knowing economists, how likely would I
be to find an interested newsdealer?
This crucial element in barter is what is called the double
coincidence of wants. A second problem is one of indivisibilities.
We can see clearly how exchangers could adjust their supplies and
sales of butter, or eggs, or fish, fairly precisely. But suppose that
Jones owns a house, and would like to sell it and instead, purchase
a car, a washing machine, or some horses? How could he
do so? He could not chop his house into 20 different segments
and exchange each one for other products. Clearly, since houses
are indivisible and lose all of their value if they get chopped up,
we face an insoluble problem. The same would be true of tractors,
machines, and other large-sized products. If houses could not easily
be bartered, not many would be produced in the first place.
Another problem with the barter system is what would happen
to business calculation. Business firms must be able to calculate
whether they are making or losing income or wealth in each
of their transactions. Yet, in the barter system, profit or loss calculation
would be a hopeless task.
Barter, therefore, could not possibly manage an advanced or
modern industrial economy. Barter could not succeed beyond the
needs of a primitive village.
But man is ingenious. He managed to find a way to overcome
these obstacles and transcend the limiting system of barter. Trying
to overcome the limitations of barter, he arrived, step by step, at
one of man’s most ingenious, important and productive inventions:
money.
Take, for example, the egg dealer who is trying desperately to
buy a pair of shoes. He thinks to himself: if the shoemaker is
allergic to eggs and doesn’t want to buy them, what does he want
to buy? Necessity is the mother of invention, and so the egg man
is impelled to try to find out what the shoemaker would like to
obtain. Suppose he finds out that it’s fish. And so the egg dealer
goes out and buys fish, not because he wants to eat the fish himself
(he might be allergic to fish), but because he wants it in order
to resell it to the shoemaker. In the world of barter, everyone’s
purchases were purely for himself or for his family’s direct use.
But now, for the first time, a new element of demand has entered:
The egg man is buying fish not for its own sake, but instead to use
it as an indispensable way of obtaining shoes. Fish is now being
used as a medium of exchange, as an instrument of indirect
exchange, as well as being purchased directly for its own sake.
Once a commodity begins to be used as a medium of
exchange, when the word gets out it generates even further use of
the commodity as a medium. In short, when the word gets around
that commodity X is being used as a medium in a certain village,
more people living in or trading with that village will purchase
that commodity, since they know that it is being used there as a
medium of exchange. In this way, a commodity used as a medium
feeds upon itself, and its use spirals upward, until before long the
commodity is in general use throughout the society or country as
a medium of exchange. But when a commodity is used as a
medium for most or all exchanges, that commodity is defined as
being a money.
In this way money enters the free market, as market participants
begin to select suitable commodities for use as the medium of
exchange, with that use rapidly escalating until a general medium
of exchange, or money, becomes established in the market.
Money was a leap forward in the history of civilization and in
man’s economic progress. Money—as an element in every
exchange—permits man to overcome all the immense difficulties
of barter. The egg dealer doesn’t have to seek a shoemaker who
enjoys eggs; and I don’t have to find a newsdealer or a grocer who
wants to hear some economics lectures. All we need do is
exchange our goods or services for money, for the money commodity.
We can do so in the confidence that we can take this universally
desired commodity and exchange it for any goods that we
need. Similarly, indivisibilities are overcome; a homeowner can
sell his house for money, and then exchange that money for the
various goods and services that he wishes to buy.
Similarly, business firms can now calculate, can figure out
when they are making, or losing, money. Their income and their
expenditures for all transactions can be expressed in terms of
money. The firm took in, say, $10,000 last month, and spent
$9,000; clearly, there was a net profit of $1,000 for the month.
No longer does a firm have to try to add or subtract in commensurable
objects. A steel manufacturing firm does not have to pay
its workers in steel bars useless to them or in myriad other physical
commodities; it can pay them in money, and the workers can
then use money to buy other desired products.
Furthermore, to know a good’s “price,” one no longer has to
look at a virtually infinite array of relative quantities: the fish
price of eggs, the beef price of string, the shoe price of flour, and
so forth. Every commodity is priced in only one commodity:
money, and so it becomes easy to compare these single money
prices of eggs, shoes, beef, or whatever.
3. THE PROPER QUALITIES OF MONEY
Which commodities are picked as money on the market?
Which commodities will be subject to a spiral of use as a medium?
Clearly, it will be those commodities most useful as money in any
given society. Through the centuries, many commodities have
been selected as money on the market. Fish on the Atlantic seacoast
of colonial North America, beaver in the Old Northwest,
and tobacco in the Southern colonies were chosen as money. In
other cultures, salt, sugar, cattle, iron hoes, tea, cowrie shells, and
many other commodities have been chosen on the market. Many
banks display money museums which exhibit various forms of
money over the centuries.
Amid this variety of moneys, it is possible to analyze the qualities
which led the market to choose that particular commodity as
money. In the first place, individuals do not pick the medium of
exchange out of thin air. They will overcome the double coincidence
of wants of barter by picking a commodity which is
already in widespread use for its own sake. In short, they will
pick a commodity in heavy demand, which shoemakers and others
will be likely to accept in exchange from the very start of the
money-choosing process. Second, they will pick a commodity
which is highly divisible, so that small chunks of other goods can
be bought, and size of purchases can be flexible. For this they
need a commodity which technologically does not lose its quotal
value when divided into small pieces. For that reason a house or
a tractor, being highly indivisible, is not likely to be chosen as
money, whereas butter, for example, is highly divisible and at least
scores heavily as a money for this particular quality.
Demand and divisibility are not the only criteria. It is also
important for people to be able to carry the money commodity
around in order to facilitate purchases. To be easily portable,
then, a commodity must have high value per unit weight. To have
high value per unit weight, however, requires a good which is not
only in great demand but also relatively scarce, since an intense
demand combined with a relatively scarce supply will yield a high
price, or high value per unit weight.
Finally, the money commodity should be highly durable, so
that it can serve as a store of value for a long time. The holder of
money should not only be assured of being able to purchase other
products right now, but also indefinitely into the future. Therefore,
butter, fish, eggs, and so on fail on the question of durability.
A fascinating example of an unexpected development of a
money commodity in modern times occurred in German POW
camps during World War II. In these camps, supply of various
goods was fixed by external conditions: CARE packages, rations,
etc. But after receiving the rations, the prisoners began exchanging
what they didn’t want for what they particularly needed, until
soon there was an elaborate price system for every product, each
in terms of what had evolved as the money commodity: cigarettes.
Prices in terms of cigarettes fluctuated in accordance with
changing supply and demand.
Cigarettes were clearly the most “moneylike” products available
in the camps. They were in high demand for their own sake,
they were divisible, portable, and in high value per unit weight.
They were not very durable, since they crumpled easily, but they
could make do in the few years of the camps’ existence.
In all countries and all civilizations, two commodities have
been dominant whenever they were available to compete as moneys
with other commodities: gold and silver.
At first, gold and silver were highly prized only for their luster
and ornamental value. They were always in great demand.
Second, they were always relatively scarce, and hence valuable
per unit of weight. And for that reason they were portable as well.
They were also divisible, and could be sliced into thin segments
without losing their pro rata value. Finally, silver or gold were
blended with small amounts of alloy to harden them, and since
they did not corrode, they would last almost forever.
Thus, because gold and silver are supremely “moneylike”
commodities, they are selected by markets as money if they are
available. Proponents of the gold standard do not suffer from a
mysterious “gold fetish.” They simply recognize that gold has
always been selected by the market as money throughout history.
Generally, gold and silver have both been moneys, side-byside.
Since gold has always been far scarcer and also in greater
demand than silver, it has always commanded a higher price, and
tends to be money in larger transactions, while silver has been
used in smaller exchanges. Because of its higher price, gold has
often been selected as the unit of account, although this has not
always been true. The difficulties of mining gold, which makes its
production limited, make its long-term value relatively more stable
than silver.
4. THE MONEY UNIT
We referred to prices without explaining what a price really is.
A price is simply the ratio of the two quantities exchanged in any
transaction. It should be no surprise that every monetary unit we
are now familiar with—the dollar, pound, mark, franc, et al.—
began on the market simply as names for different units of weight
of gold or silver. Thus the “pound sterling” in Britain, was exactly
that—one pound of silver.2
The “dollar” originated as the name generally applied to a
one-ounce silver coin minted by a Bohemian count named
Schlick, in the sixteenth century. Count Schlick lived in Joachimsthal
(Joachim’s Valley). His coins, which enjoyed a great reputation
for uniformity and fineness, were called Joachimsthalers and
finally, just thalers. The word dollar emerged from the pronunciation
of thaler.
Since gold or silver exchanges by weight, the various national
currency units, all defined as particular weights of a precious
metal, will be automatically fixed in terms of each other. Thus,
suppose that the dollar is defined as 1/20 of a gold ounce (as it
was in the nineteenth century in the United States), while the
pound sterling is defined as 1/4 of a gold ounce, and the French
franc is established at 1/100 of a gold ounce.3 But in that case,
the exchange rates between the various currencies are automatically
fixed by their respective quantities of gold. If a dollar is 1/20
of a gold ounce, and the pound is 1/4 of a gold ounce, then the
pound will automatically exchange for 5 dollars. And, in our
example, the pound will exchange for 25 francs and the dollar for
5 francs. The definitions of weight automatically set the exchange
rates between them.
Free market gold standard advocates have often been taunted
with the charge: “You are against the government fixing the price
of goods and services; why then do you make an exception for
gold? Why do you call for the government fixing the price of gold
and setting the exchange rates between the various currencies?”
The answer to this common complaint is that the question
assumes the dollar to be an independent entity, a thing or commodity
which should be allowed to fluctuate freely in relation to
gold. But the rebuttal of the pro-gold forces points out that the
dollar is not an independent entity, that it was originally simply a
name for a certain weight of gold; the dollar, as well as the other
currencies, is a unit of weight. But in that case, the pound, franc,
dollar, and so on, are not exchanging as independent entities;
they, too, are simply relative weights of gold. If 1/4 ounce of gold
exchanges for 1/20 ounce of gold, how else would we expect
them to trade than at 1:5?4
If the monetary unit is simply a unit of weight, then government’s
role in the area of money could well be confined to a simple
Bureau of Weights and Measures, certifying this as well as
other units of weight, length, or mass.5 The problem is that
governments have systematically betrayed their trust as guardians
of the precisely defined weight of the money commodity.
If government sets itself up as the guardian of the international
meter or the standard yard or pound, there is no economic
incentive for it to betray its trust and change the definition. For
the Bureau of Standards to announce suddenly that 1 pound is
now equal to 14 instead of 16 ounces would make no sense whatever.
There is, however, all too much of an economic incentive
for governments to change, especially to lighten, the definition of
the currency unit; say, to change the definition of the pound sterling
from 16 to 14 ounces of silver. This profitable process of the
government’s repeatedly lightening the number of ounces or
grams in the same monetary unit is called debasement.
How debasement profits the State can be seen from a hypothetical
case: Say the rur, the currency of the mythical kingdom
of Ruritania, is worth 20 grams of gold. A new king now ascends
the throne, and, being chronically short of money, decides to take
the debasement route to the acquisition of wealth. He announces
a mammoth call-in of all the old gold coins of the realm, each
now dirty with wear and with the picture of the previous king
stamped on its face. In return he will supply brand new coins with
his face stamped on them, and will return the same number of
rurs paid in. Someone presenting 100 rurs in old coins will receive
100 rurs in the new.
Seemingly a bargain! Except for a slight hitch: During the
course of this recoinage, the king changes the definition of the rur
from 20 to 16 grams. He then pockets the extra 20 percent of
gold, minting the gold for his own use and pouring the coins into
circulation for his own expenses. In short, the number of grams
of gold in the society remains the same, but since people are now
accustomed to use the name rather than the weight in their money
accounts and prices, the number of rurs will have increased by 20
percent. The money supply in rurs, therefore, has gone up by 20
percent, and, as we shall see later on, this will drive up prices in
the economy in terms of rurs. Debasement, then, is the arbitrary
redefining and lightening of the currency so as to add to the coffers
of the State.6
The pound sterling has diminished from 16 ounces of silver
to its present fractional state because of repeated debasements, or
changes in definition, by the kings of England. Similarly, rapid
and extensive debasement was a striking feature of the Middle
Ages, in almost every country in Europe. Thus, in 1200, the
French livre tournois was defined as 98 grams of fine silver; by
1600 it equaled only 11 grams.
A particularly striking case is the dinar, the coin of the Saracens
in Spain. The dinar, when first coined at the end of the seventh
century, consisted of 65 gold grains. The Saracens, notably
sound in monetary matters, kept the dinar’s weight relatively constant,
and as late as the middle of the twelfth century, it still
equaled 60 grains. At that point, the Christian kings conquered
Spain, and by the early thirteenth century, the dinar (now called
maravedi) had been reduced to 14 grains of gold. Soon the gold
coin was too lightweight to circulate, and it was converted into a
silver coin weighing 26 grains of silver. But this, too, was debased
further, and by the mid-fifteenth century, the maravedi consisted
of only 1½ silver grains, and was again too small to circulate.7
Where is the total money supply—that crucial concept—in all
this? First, before debasement, when the regional or national currency
unit simply stands for a certain unit of weight of gold, the
total money supply is the aggregate of all the monetary gold in
existence in that society, that is, all the gold ready to be used in
exchange. In practice, this means the total stock of gold coin and
gold bullion available. Since all property and therefore all money
is owned by someone, this means that the total money stock in the
society at any given time is the aggregate, the sum total, of all
existing cash balances, or money stock, owned by each individual
or group. Thus, if there is a village of 10 people, A, B, C, etc., the
total money stock in the village will equal the sum of all cash balances
held by each of the 10 citizens. If we wish to put this in
mathematical terms, we can say that
M = Σ m
where M is the total stock or supply of money in any given area
or in society as a whole, m is the individual stock or cash balance
owned by each individual, and Σ means the sum or aggregate of
each of the ms.
After debasement, since the money unit is the name (dinar)
rather than the actual weight (specific number of gold grams), the
number of dinars or pounds or maravedis will increase, and thus
increase the supply of money. M will be the sum of the individual
dinars held by each person, and will increase by the extent of the
debasement. As we will see later, this increased money supply will
tend to raise prices throughout the economy.
Murray N Rothbard.
2. HOW MONEY BEGINS
Before examining what money is, we must deal with the
importance of money, and, before we can do that, we have to
understand how money arose. As Ludwig von Mises conclusively
demonstrated in 1912, money does not and cannot originate by
order of the State or by some sort of social contract agreed upon
by all citizens; it must always originate in the processes of the free
market.
Before coinage, there was barter. Goods were produced by
those who were good at it, and their surpluses were exchanged
for the products of others. Every product had its barter price in
terms of all other products, and every person gained by exchanging
something he needed less for a product he needed more. The
voluntary market economy became a latticework of mutually beneficial
exchanges.
In barter, there were severe limitations on the scope of
exchange and therefore on production. In the first place, in order
to buy something he wanted, each person had to find a seller who
wanted precisely what he had available in exchange. In short, if
an egg dealer wanted to buy a pair of shoes, he had to find a shoemaker
who wanted, at that very moment, to buy eggs. Yet suppose
that the shoemaker was sated with eggs. How was the egg dealer
going to buy a pair of shoes? How could he be sure that he could
find a shoemaker who liked eggs?
Or, to put the question in its starkest terms, I make a living as
a professor of economics. If I wanted to buy a newspaper in a
world of barter, I would have to wander around and find a newsdealer
who wanted to hear, say, a 10-minute economics lecture
from me in exchange. Knowing economists, how likely would I
be to find an interested newsdealer?
This crucial element in barter is what is called the double
coincidence of wants. A second problem is one of indivisibilities.
We can see clearly how exchangers could adjust their supplies and
sales of butter, or eggs, or fish, fairly precisely. But suppose that
Jones owns a house, and would like to sell it and instead, purchase
a car, a washing machine, or some horses? How could he
do so? He could not chop his house into 20 different segments
and exchange each one for other products. Clearly, since houses
are indivisible and lose all of their value if they get chopped up,
we face an insoluble problem. The same would be true of tractors,
machines, and other large-sized products. If houses could not easily
be bartered, not many would be produced in the first place.
Another problem with the barter system is what would happen
to business calculation. Business firms must be able to calculate
whether they are making or losing income or wealth in each
of their transactions. Yet, in the barter system, profit or loss calculation
would be a hopeless task.
Barter, therefore, could not possibly manage an advanced or
modern industrial economy. Barter could not succeed beyond the
needs of a primitive village.
But man is ingenious. He managed to find a way to overcome
these obstacles and transcend the limiting system of barter. Trying
to overcome the limitations of barter, he arrived, step by step, at
one of man’s most ingenious, important and productive inventions:
money.
Take, for example, the egg dealer who is trying desperately to
buy a pair of shoes. He thinks to himself: if the shoemaker is
allergic to eggs and doesn’t want to buy them, what does he want
to buy? Necessity is the mother of invention, and so the egg man
is impelled to try to find out what the shoemaker would like to
obtain. Suppose he finds out that it’s fish. And so the egg dealer
goes out and buys fish, not because he wants to eat the fish himself
(he might be allergic to fish), but because he wants it in order
to resell it to the shoemaker. In the world of barter, everyone’s
purchases were purely for himself or for his family’s direct use.
But now, for the first time, a new element of demand has entered:
The egg man is buying fish not for its own sake, but instead to use
it as an indispensable way of obtaining shoes. Fish is now being
used as a medium of exchange, as an instrument of indirect
exchange, as well as being purchased directly for its own sake.
Once a commodity begins to be used as a medium of
exchange, when the word gets out it generates even further use of
the commodity as a medium. In short, when the word gets around
that commodity X is being used as a medium in a certain village,
more people living in or trading with that village will purchase
that commodity, since they know that it is being used there as a
medium of exchange. In this way, a commodity used as a medium
feeds upon itself, and its use spirals upward, until before long the
commodity is in general use throughout the society or country as
a medium of exchange. But when a commodity is used as a
medium for most or all exchanges, that commodity is defined as
being a money.
In this way money enters the free market, as market participants
begin to select suitable commodities for use as the medium of
exchange, with that use rapidly escalating until a general medium
of exchange, or money, becomes established in the market.
Money was a leap forward in the history of civilization and in
man’s economic progress. Money—as an element in every
exchange—permits man to overcome all the immense difficulties
of barter. The egg dealer doesn’t have to seek a shoemaker who
enjoys eggs; and I don’t have to find a newsdealer or a grocer who
wants to hear some economics lectures. All we need do is
exchange our goods or services for money, for the money commodity.
We can do so in the confidence that we can take this universally
desired commodity and exchange it for any goods that we
need. Similarly, indivisibilities are overcome; a homeowner can
sell his house for money, and then exchange that money for the
various goods and services that he wishes to buy.
Similarly, business firms can now calculate, can figure out
when they are making, or losing, money. Their income and their
expenditures for all transactions can be expressed in terms of
money. The firm took in, say, $10,000 last month, and spent
$9,000; clearly, there was a net profit of $1,000 for the month.
No longer does a firm have to try to add or subtract in commensurable
objects. A steel manufacturing firm does not have to pay
its workers in steel bars useless to them or in myriad other physical
commodities; it can pay them in money, and the workers can
then use money to buy other desired products.
Furthermore, to know a good’s “price,” one no longer has to
look at a virtually infinite array of relative quantities: the fish
price of eggs, the beef price of string, the shoe price of flour, and
so forth. Every commodity is priced in only one commodity:
money, and so it becomes easy to compare these single money
prices of eggs, shoes, beef, or whatever.
3. THE PROPER QUALITIES OF MONEY
Which commodities are picked as money on the market?
Which commodities will be subject to a spiral of use as a medium?
Clearly, it will be those commodities most useful as money in any
given society. Through the centuries, many commodities have
been selected as money on the market. Fish on the Atlantic seacoast
of colonial North America, beaver in the Old Northwest,
and tobacco in the Southern colonies were chosen as money. In
other cultures, salt, sugar, cattle, iron hoes, tea, cowrie shells, and
many other commodities have been chosen on the market. Many
banks display money museums which exhibit various forms of
money over the centuries.
Amid this variety of moneys, it is possible to analyze the qualities
which led the market to choose that particular commodity as
money. In the first place, individuals do not pick the medium of
exchange out of thin air. They will overcome the double coincidence
of wants of barter by picking a commodity which is
already in widespread use for its own sake. In short, they will
pick a commodity in heavy demand, which shoemakers and others
will be likely to accept in exchange from the very start of the
money-choosing process. Second, they will pick a commodity
which is highly divisible, so that small chunks of other goods can
be bought, and size of purchases can be flexible. For this they
need a commodity which technologically does not lose its quotal
value when divided into small pieces. For that reason a house or
a tractor, being highly indivisible, is not likely to be chosen as
money, whereas butter, for example, is highly divisible and at least
scores heavily as a money for this particular quality.
Demand and divisibility are not the only criteria. It is also
important for people to be able to carry the money commodity
around in order to facilitate purchases. To be easily portable,
then, a commodity must have high value per unit weight. To have
high value per unit weight, however, requires a good which is not
only in great demand but also relatively scarce, since an intense
demand combined with a relatively scarce supply will yield a high
price, or high value per unit weight.
Finally, the money commodity should be highly durable, so
that it can serve as a store of value for a long time. The holder of
money should not only be assured of being able to purchase other
products right now, but also indefinitely into the future. Therefore,
butter, fish, eggs, and so on fail on the question of durability.
A fascinating example of an unexpected development of a
money commodity in modern times occurred in German POW
camps during World War II. In these camps, supply of various
goods was fixed by external conditions: CARE packages, rations,
etc. But after receiving the rations, the prisoners began exchanging
what they didn’t want for what they particularly needed, until
soon there was an elaborate price system for every product, each
in terms of what had evolved as the money commodity: cigarettes.
Prices in terms of cigarettes fluctuated in accordance with
changing supply and demand.
Cigarettes were clearly the most “moneylike” products available
in the camps. They were in high demand for their own sake,
they were divisible, portable, and in high value per unit weight.
They were not very durable, since they crumpled easily, but they
could make do in the few years of the camps’ existence.
In all countries and all civilizations, two commodities have
been dominant whenever they were available to compete as moneys
with other commodities: gold and silver.
At first, gold and silver were highly prized only for their luster
and ornamental value. They were always in great demand.
Second, they were always relatively scarce, and hence valuable
per unit of weight. And for that reason they were portable as well.
They were also divisible, and could be sliced into thin segments
without losing their pro rata value. Finally, silver or gold were
blended with small amounts of alloy to harden them, and since
they did not corrode, they would last almost forever.
Thus, because gold and silver are supremely “moneylike”
commodities, they are selected by markets as money if they are
available. Proponents of the gold standard do not suffer from a
mysterious “gold fetish.” They simply recognize that gold has
always been selected by the market as money throughout history.
Generally, gold and silver have both been moneys, side-byside.
Since gold has always been far scarcer and also in greater
demand than silver, it has always commanded a higher price, and
tends to be money in larger transactions, while silver has been
used in smaller exchanges. Because of its higher price, gold has
often been selected as the unit of account, although this has not
always been true. The difficulties of mining gold, which makes its
production limited, make its long-term value relatively more stable
than silver.
4. THE MONEY UNIT
We referred to prices without explaining what a price really is.
A price is simply the ratio of the two quantities exchanged in any
transaction. It should be no surprise that every monetary unit we
are now familiar with—the dollar, pound, mark, franc, et al.—
began on the market simply as names for different units of weight
of gold or silver. Thus the “pound sterling” in Britain, was exactly
that—one pound of silver.2
The “dollar” originated as the name generally applied to a
one-ounce silver coin minted by a Bohemian count named
Schlick, in the sixteenth century. Count Schlick lived in Joachimsthal
(Joachim’s Valley). His coins, which enjoyed a great reputation
for uniformity and fineness, were called Joachimsthalers and
finally, just thalers. The word dollar emerged from the pronunciation
of thaler.
Since gold or silver exchanges by weight, the various national
currency units, all defined as particular weights of a precious
metal, will be automatically fixed in terms of each other. Thus,
suppose that the dollar is defined as 1/20 of a gold ounce (as it
was in the nineteenth century in the United States), while the
pound sterling is defined as 1/4 of a gold ounce, and the French
franc is established at 1/100 of a gold ounce.3 But in that case,
the exchange rates between the various currencies are automatically
fixed by their respective quantities of gold. If a dollar is 1/20
of a gold ounce, and the pound is 1/4 of a gold ounce, then the
pound will automatically exchange for 5 dollars. And, in our
example, the pound will exchange for 25 francs and the dollar for
5 francs. The definitions of weight automatically set the exchange
rates between them.
Free market gold standard advocates have often been taunted
with the charge: “You are against the government fixing the price
of goods and services; why then do you make an exception for
gold? Why do you call for the government fixing the price of gold
and setting the exchange rates between the various currencies?”
The answer to this common complaint is that the question
assumes the dollar to be an independent entity, a thing or commodity
which should be allowed to fluctuate freely in relation to
gold. But the rebuttal of the pro-gold forces points out that the
dollar is not an independent entity, that it was originally simply a
name for a certain weight of gold; the dollar, as well as the other
currencies, is a unit of weight. But in that case, the pound, franc,
dollar, and so on, are not exchanging as independent entities;
they, too, are simply relative weights of gold. If 1/4 ounce of gold
exchanges for 1/20 ounce of gold, how else would we expect
them to trade than at 1:5?4
If the monetary unit is simply a unit of weight, then government’s
role in the area of money could well be confined to a simple
Bureau of Weights and Measures, certifying this as well as
other units of weight, length, or mass.5 The problem is that
governments have systematically betrayed their trust as guardians
of the precisely defined weight of the money commodity.
If government sets itself up as the guardian of the international
meter or the standard yard or pound, there is no economic
incentive for it to betray its trust and change the definition. For
the Bureau of Standards to announce suddenly that 1 pound is
now equal to 14 instead of 16 ounces would make no sense whatever.
There is, however, all too much of an economic incentive
for governments to change, especially to lighten, the definition of
the currency unit; say, to change the definition of the pound sterling
from 16 to 14 ounces of silver. This profitable process of the
government’s repeatedly lightening the number of ounces or
grams in the same monetary unit is called debasement.
How debasement profits the State can be seen from a hypothetical
case: Say the rur, the currency of the mythical kingdom
of Ruritania, is worth 20 grams of gold. A new king now ascends
the throne, and, being chronically short of money, decides to take
the debasement route to the acquisition of wealth. He announces
a mammoth call-in of all the old gold coins of the realm, each
now dirty with wear and with the picture of the previous king
stamped on its face. In return he will supply brand new coins with
his face stamped on them, and will return the same number of
rurs paid in. Someone presenting 100 rurs in old coins will receive
100 rurs in the new.
Seemingly a bargain! Except for a slight hitch: During the
course of this recoinage, the king changes the definition of the rur
from 20 to 16 grams. He then pockets the extra 20 percent of
gold, minting the gold for his own use and pouring the coins into
circulation for his own expenses. In short, the number of grams
of gold in the society remains the same, but since people are now
accustomed to use the name rather than the weight in their money
accounts and prices, the number of rurs will have increased by 20
percent. The money supply in rurs, therefore, has gone up by 20
percent, and, as we shall see later on, this will drive up prices in
the economy in terms of rurs. Debasement, then, is the arbitrary
redefining and lightening of the currency so as to add to the coffers
of the State.6
The pound sterling has diminished from 16 ounces of silver
to its present fractional state because of repeated debasements, or
changes in definition, by the kings of England. Similarly, rapid
and extensive debasement was a striking feature of the Middle
Ages, in almost every country in Europe. Thus, in 1200, the
French livre tournois was defined as 98 grams of fine silver; by
1600 it equaled only 11 grams.
A particularly striking case is the dinar, the coin of the Saracens
in Spain. The dinar, when first coined at the end of the seventh
century, consisted of 65 gold grains. The Saracens, notably
sound in monetary matters, kept the dinar’s weight relatively constant,
and as late as the middle of the twelfth century, it still
equaled 60 grains. At that point, the Christian kings conquered
Spain, and by the early thirteenth century, the dinar (now called
maravedi) had been reduced to 14 grains of gold. Soon the gold
coin was too lightweight to circulate, and it was converted into a
silver coin weighing 26 grains of silver. But this, too, was debased
further, and by the mid-fifteenth century, the maravedi consisted
of only 1½ silver grains, and was again too small to circulate.7
Where is the total money supply—that crucial concept—in all
this? First, before debasement, when the regional or national currency
unit simply stands for a certain unit of weight of gold, the
total money supply is the aggregate of all the monetary gold in
existence in that society, that is, all the gold ready to be used in
exchange. In practice, this means the total stock of gold coin and
gold bullion available. Since all property and therefore all money
is owned by someone, this means that the total money stock in the
society at any given time is the aggregate, the sum total, of all
existing cash balances, or money stock, owned by each individual
or group. Thus, if there is a village of 10 people, A, B, C, etc., the
total money stock in the village will equal the sum of all cash balances
held by each of the 10 citizens. If we wish to put this in
mathematical terms, we can say that
M = Σ m
where M is the total stock or supply of money in any given area
or in society as a whole, m is the individual stock or cash balance
owned by each individual, and Σ means the sum or aggregate of
each of the ms.
After debasement, since the money unit is the name (dinar)
rather than the actual weight (specific number of gold grams), the
number of dinars or pounds or maravedis will increase, and thus
increase the supply of money. M will be the sum of the individual
dinars held by each person, and will increase by the extent of the
debasement. As we will see later, this increased money supply will
tend to raise prices throughout the economy.
The Federal Reserve was created in 1913, which is in the 20th century.
Please explain how it was able to fuck the world financial system in the century before it was created. Did it have a hot tub time machine?
That's a slogan, it doesn't describe policy.
You say "audit" and itisme says "end". I've heard both myself. Next question I have is do we audit first and then end or do we audit what we previously ended?
A national bank was nothing more than a charter (a contract) with a private bank for a specified period of time. Are you guys aware whether the respective charters granted congressional oversight? If the national bank was subject to congressional scrutiny, how well did non-bankers do their jobs? Maybe a case of removing the hand from the hat that didn't perform well?
New deal reforms like Glass Stegall didn't seek to understand the complexities of banking nor the obfuscations of bankers. Lawmakers divided the landscape and told investment bankers where they could not go. That way we didn't over meddle in micro management that non-bankers don't understand.
http://www.youtube.com/watch?v=JXt1cayx0hs
its name doesnt matter its been controlling the money supply for a long time.
theres four basic choices im aware of for schools of thought in economics. of these this movie sides more with the american school.
i like the flexibility of the austrian school. i beleive that DR.paul has the same opinion.
Option 1: Independent Central Bank (The Fed) Keynesian School
The best way to conduct monetary policy is through an independent central bank issuing fiat currency that is free from government interference. Elected officials only want to win the next election and will use monetary policy for short-term gains rather than long-term stability. Economists and bankers educated in monetary policy should be entrusted to make decisions that keep the economy growing at a steady rate by controlling the business cycle and preventing bank runs by stabilizing financial markets with injections of liquidity into the banking system.
Option 2: National Bank (Greenbacks) The American School
The best way to conduct monetary policy is for the people’s representatives to issue debt-free fiat currency. Monetary policy is a power given to Congress and as the people’s representatives they have a duty to make sure that the country has a stable currency. Money should be issued when the government spends money through infrastructure projects and should be destroyed when collected through taxes. Banks may apply for emergency funding from the U.S. Treasury in the case of a bank run but will not be offered a constant line of credit.
Option 3: The Gold Standard The Classical School
The best way to conduct monetary policy is through a government mandated gold standard. Gold has historically been the finest commodity for trade and saving therefore the government should mandate that gold is the official currency of the United States. Neither government officials nor central bankers can be trusted to control the money supply therefore monetary policy should be set by gold, man’s most nature form of money. Only gold shall be used to pay taxes and debts within the United States and all gold shall be mint from government facilities.
Option 4: Competing Currencies The Austrian School
The best way to conduct monetary policy is by allowing money to be chosen like all other commodities, in a free market. Historically gold and silver have been chosen by man as the most preferred forms of money but that should not stop people for trading in other commodities. If there are shortages of gold and silver a strict gold standard will cause crippling deflation. Instead of an official gold standard people should be free to trade and save in anything including gold, silver, platinum, copper, nickel, coal, tobacco etc. that will hold its value and others will accept.
you're right so was "ill close gitmo"
stop the presses!!!!
2 different people supporting the same candidate said different things!?!?!?
wholly shit what are they thinking?
which do you prefer?
my father always said"there are no stupid questions. just stupid people asking questions"
you can't audit what is ended.
Dr. Paul has introduced legislation to audit the fed.
that's the beautiful thing about the good doc. we have an actual record of what he has done or tried to do.
we don't have to wonder. just look to what he has done.
i realize that's odd for someone who supports the Jr. senator from presentville
it was worthess because the west went off of the silver standard. The west fucked their system, and they just changed the system
We have done the same since Nixon Shock, we are winning, and you want to blow it up (which will fuck YOU).
http://www.nationaljournal.com/2012...ndidates-decline-20120216?mrefid=freehplead_4
How convenient. Im 90% sure Dr Paul pulled out first giving Romney an excuse to do the same.
God forbid you have to look for the in depth answers because they won't fit in the five second msm sound bites
sadly yes many Americans are to lazy to spend an hour doing research on their presidential canidates
Learn your history son.
Lol this coming from the guy who gets all his talking points from Lawrence odonnel and rush.
They certainly are preselecting the info you receive.
You proven yourself nothing more than a poorly informed troll.
have fun debating with yourself you certainly are a master
I'd say they're hoping for change and the thinking part diverges.
I guess I prefer ignoring oversimplifications that appear to have canyons of misunderstanding between supporters.
I'll leave your dad out of it.
Ron Paul couldn't audit a 4 man newsletter office.
I think it's important to point out that the guy says both end and audit. Are we supposed to pick the one that sounds good?
we don't have to wonder. just look to what he has done.
i realize that's odd for someone who supports the Jr. senator from presentville
You mean, you won't have to wonder, as in after-the-fact? You appear to be projecting yet looking back on it, as if guaranteed.
Great post Whodare.
I'm watching. I know somebody said the samething long ago. It does concern me.
One of the things I saw said the "Elite" I'll call them represent a clear third party candidate. I worship God, not Ron Paul. He has a history of telling the truth though so I'll see how he plays it out.
Ron Paul Bashes the New World Order at Rally in Nashville TN
http://www.youtube.com/watch?v=HDXHbgpoI80
1961 speech Eisenhower Warns us of New World Order
http://www.youtube.com/watch?feature=fvwp&v=rd8wwMFmCeE&NR=1
I'm watching. I know somebody said the samething long ago. It does concern me.
One of the things I saw said the "Elite" I'll call them represent a clear third party candidate. I worship God, not Ron Paul. He has a history of telling the truth though so I'll see how he plays it out.
Ron Paul Bashes the New World Order at Rally in Nashville TN
http://www.youtube.com/watch?v=HDXHbgpoI80
1961 speech Eisenhower Warns us of New World Order
http://www.youtube.com/watch?feature=fvwp&v=rd8wwMFmCeE&NR=1
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With the exception of one or two matters you've settled, I've probably demonstrated more than 5 seconds worth of apparently disparate messages from Ron Paul and apparent disparate conceptions with supporters.
You couldn't do it in weeks, it's not out there. Ron Paul is here, on the ground. He has no message that even approaches practical application of his slogans. During Obama's campaign, we got an image of what health care reform would look like, enough to get cries of "death panels" from the opposition.
Ron Paul holds up a picture frame and smiles through it.
Learning is something you need to consider. Your article doesn't even mention treasury bond sales. We generate revenue two ways - taxes and US Treasury Bonds.
Ron doesn't like the monetary system so he doesn't like t bonds enough to even tell you what's going on. Then Ron sounds like some kind of guru. When we find out what Ron doesn't say and or morphs, depending on the audience and appears obtuse, maybe surreptitious.
Compared to Lew Rockwell, Rush Limbaugh is Walter Cronkite. Sorry, Walter.Lol this coming from the guy who gets all his talking points from Lawrence odonnel and rush.
They certainly are preselecting the info you receive.
You proven yourself nothing more than a poorly informed troll.
have fun debating with yourself you certainly are a master
FED has been Gangsta.
NIXON jokes about LBJ killing JFK
http://www.youtube.com/watch?NR=1&v=OJIb73SPzkE&feature=endscreen
"The rich will strive to establish their dominion and enslave the rest. They always did...they always will. They will have the same effect here as elsewhere, if we do not, by the power of government, keep them in their proper spheres."
Gouverneur Morris
NIXON jokes about LBJ killing JFK
http://www.youtube.com/watch?NR=1&v=OJIb73SPzkE&feature=endscreen
"The rich will strive to establish their dominion and enslave the rest. They always did...they always will. They will have the same effect here as elsewhere, if we do not, by the power of government, keep them in their proper spheres."
Gouverneur Morris
You isolated a split hair. Where was Johnson's hyper inflation? It didn't happen and you're idea we printed out of thin air is a less than basic understanding of the monetary system.
Lew gives Ron the equivalent of two left hands. A mix of government conspiracy and global doom exercises the base and generates donations. When bizarro-world meets major media scrutiny such as Jake Tapper's truther inquiry, Paul angrily manipulates context toward something he supposedly didn't do. The implication is that Tapper's out of line.
The truth is, Paul personally acknowledges a gub coverup of events. When Tapper inquires, Ron Paul adds George Bush into the formula, then angrily denies he ever implied George Bush was involved. Nobody brought up George Bush and Paul evades what he actually acknowledges on video tape, playing on youtube every day.
I wouldn't allow my kid to justify actions on manipulated information. I damn sure wouldn't allow then to deny culpability of x by saying y never happened.
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