A specter
haunts executive mansions, chambers of legislatures, and halls
of universities: the ghost of the gold standard. Governments and
academia have utterly failed in discharging their sacred duty to
provide a serene environment for the search for and
dissemination of truth regarding economics in general and
monetary science in particular.
This failure
has to do, first and foremost, with the incestuous financing of
scientific research ever since the Federal Reserve System was
launched in the United States in 1913. The formula for
distributing the profits and undivided surpluses of the Federal
Reserve banks has made it possible for the United States
Treasury to grab the lion’s share (in spite of explicit
prohibition of Treasury participation in the earnings of these
banks by the Federal Reserve Act as amended), with far-reaching
consequences. As a result the bond market has been reduced to a
gambling casino where shills, in order to whip up gambling
frenzy, conspicuously make obscene gains at the gaming tables.
But unknown to
the public, at the end of the day the shills (the Federal
Reserve banks) are obliged to hand over their gains to the
casino owner (the United States Treasury). There is nothing open
about what is euphemistically called “open market
operations” of the Federal Reserve. It is in fact a covert
conspiratorial operation. It has come about through unlawful
delegation of power without imposing countervailing
responsibilities. It was never authorized by the Federal Reserve
Act of 1913. It defies the principle of checks and balances. It
is immoral. It is the most lucrative business second only to
highway robbery. It is a formula to corrupt and ultimately to
destroy the republic.
Even though
later amendments to the Federal Reserve Act retroactively
authorized it, the constitutionality of open market operation
has never been put to the test. It is clear that such an
examination would not be in the interest of the conspirators,
and they would use every means at their disposal to prevent it.
The folksy name for open market operations is check-kiting,
whereby two conspiring parties issue obligations that neither
one has the intention or the means to honor but, when they come
up for payment, the phantom obligation of one party is covered
with that of the other.
The side effect
that concerns us here most is the fact that the junior partner
in the conspiracy, the Federal Reserve, can only increase its
share of the loot beyond the mandated limit of 6 percent per
annum of subscribed capital if it increases its power in a way
not measurable in dollars. It can readily do so by beefing up
its “support” of research, namely, by spending
pre-distribution dollars in making grants to anybody pretending
to be able to write awe-inspiring, mathematically convoluted,
nonetheless vacuous, papers on macroeconomics, or anything else
of which the fraudulence and charlatanism is hard to detect.
As a result of
this immoral way of financing research a veritable deluge of
worthless papers has glutted the technical literature on money
which has one common earmark: they all attempt to defend the
indefensible. They try to defend the issuance of irredeemable
promises to pay: the bonds issued by the Treasury and the
Federal Reserve notes issued by the Federal Reserve banks. Thus,
then, the basis for money creation is the flimsy check-kiting
scheme whereby the Federal Reserve banks buy the bonds with the
notes while the Treasury uses the notes to pay the bondholders
at maturity. The bond is supposed to have value because it is
‘redeemable’ in the note which, in turn, is supposed to have
value because it is ‘backed’ by the bond. In effect both
instruments are irredeemable and both lack backing in the form
of any verifiable wealth. At the heart of the money-creating
process, however explained, analyzed or defended, is the
stubborn fact that both the Treasury and the Federal Reserve
banks are privileged to issue obligations that they have neither
the intention nor the means to honor. For any other would-be
check-kiters the running of such a scheme would constitute a
crime dealt with by the Criminal Code.
This double
standard of justice has, of course, an immensely demoralizing
effect. But what concerns us here is that the grant departments
of the Federal Reserve banks have effectively put themselves in
charge of deciding what should and what should not be researched
on the subject of money. While they control research on money directly,
they control the appointment of heads of economics department
and directors of research institutions and other think-tanks indirectly.
This incest in
financing research stands without precedent in the entire
history of science to the eternal shame of our “enlightened”
age, regardless what yardstick we may choose to measure it, of
which the dollar amounts of grant money is only the most
conspicuous, but we should not ignore the more subtle yet more
persuasive methods of arm-twisting: bribe and blackmail.
The hijacking
of the agenda for economic research has resulted in a distortion
of traditional values. The new values favor ephemeral knowledge,
short-horizon planning, consumerism, debt-creation without
seeing how it will be retired, instant gratification,
marginalization of savings, scientific charlatanism, spreading
half truths and even outright falsehoods, while discriminating
against durable knowledge, time-honored scientific values,
work-hard/save-hard ethics, long-horizon planning. It is no less
a crime of omission than it is a crime of commission, as
revealed by the following.
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Support for
research on the merit of metallic monetary standards as a
political arrangement of placing the power to create and to
extinguish money directly into the hands of the people,
rather than into the hands of elected representatives or
appointed agents, in conformity with the demands of the U.S.
Constitution, is nil.
-
Support for
research on the burning question of the “sudden death
syndrome” as it affects irredeemable currencies with a
deadly 100 percent efficiency, is zero.
-
Support for
research on the question of legality of the open market
operations by the Federal Reserve as it was surreptitiously
and illegally introduced and retroactively authorized, is
unavailable.
-
Support for
research on the scientific foundation of accounting and on
the necessity of taking great pains to make the sharpest
possible distinction between an asset and a liability,
capital and credit, debt owing and debt owning, is naught,
in contrast with generous support for research purporting to
justify the practice of shunting items in the balance sheet
of governments from the liability to the asset column.
-
Support for
research on the code of inspecting financial statements in
order to prevent overstating assets and understating
liabilities, even in the balance sheet of banks, is
non-existent.
-
Support for
the scientific examination of the curious tenet that it is
possible to increase the volume of unpaid and unpayable debt
in the world indefinitely, is denied.
-
Support for
the examination of the question whether the issuance of
promises to pay which the issuer has neither the intention
nor the means to honor can have any justification, is not
available.
The above short
list already makes it abundantly clear that something is
woefully amiss with the principle of granting unlimited power,
not subject to advice and consent, still less to control, review
or withdrawal by the public, empowering one particular agency
not only to issue purchasing media but also to direct, permit
or inhibit all scientific research pertaining to the question of
its own activity of issuing the purchasing media.
It is a sad
commentary on the corruption of the flow of funds in support of
research that neither a single court of justice, nor a single
accredited university in the entire world has found it possible
to place the justification for a world-wide regime of
irredeemable currency on its agenda, after thirty-five years of
unprecedented economic and financial devastation, including the
decimation of the purchasing power of all the currencies of the
world, and the even more vicious decimation of the market value
of all the bonds in the world, directly attributable to that
regime.
It was this
corruption of financing research that has disabled the immune
system of society, that has made economics and monetary science
open to the invasion of quackery and chicanery, ensuring that
the success of the final assault on sound money would be a
foregone conclusion. In the end the government of the United
States could inflict irredeemable currency not only on its own
subjects, but on the people of the rest of the world as well,
without meeting any significant resistance.
It speaks
volumes about its integrity that financial journalism has failed
to alert the public to the imminent danger of a credit collapse
arising out of the universal use of irredeemable currency which
the governments of the world have blithely embraced and foisted
upon their subjects, without bothering to examine the scientific
and juridical arguments against it. In previous instances of
experiments with this type of currency sane and self-respecting
governments have always resisted the temptation of siren song to
join others living in financial backwater. Whenever weak
governments came to their senses and wanted to return to the
path of monetary rectitude, there was no lack of countries
around on the gold standard to lend them a helping hand.
No such luck
this time. The world is a rudderless ship on uncharted waters,
and the storm is fast approaching. When it strikes, it will be
“everybody for himself”. No helping hand will assist
survivors. All defenses against this type of disaster have been
dismantled, and all life savers cast overboard, thanks to the
diligence of the grants departments of the Federal Reserve
banks.
Not only have
financial journalists failed to alert the people of the dangers
they are facing under the regime of irredeemable currency, they
keep adding insult to injury. They lionize the Wonderful Wizard
of US, King Alan who, unlike King Canute, has been able to order
the tide of inflation back. Maybe after disaster has struck, it
will be blamed on the ‘early’ retirement of the Wizard.
Gold
Standard University
In order to
soften the coming blow, a group of concerned citizens have
decided to establish, in the year 2006, Gold Standard
University, home for the study of monetary topics placed under
taboo by other institutions of higher learning. Here is a
partial list:
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The gold
standard is a mechanism whereby the people can exercise
their power of creating or extinguishing money while denying
monopoly power of money creation to would-be crooks.
-
The
longevity of the regime of irredeemable currency can be
extended through machinations such as the artificial
suppression of the dollar price of gold, but only at the
expense of making the inevitable credit collapse a great
deal more painful and recovery ever more protracted.
-
The idea of
increasing the stock of money based on scientific principles
is chimerical. There is no scientific way of determining the
optimal rate of increase in the money supply any more than
there is a scientific way of predicting future. If the power
to increase the money supply is delegated to an agency
dressed in a scientific garb, then this agency represents
impostors hell-bent to usurp unlimited power under false
pretenses. Unlimited power inevitably means unlimited
corruption.
-
The regime
of irredeemable currency is a scheme whereby savers and
producers are disenfranchised. Savers are deprived of their
power of choosing the form in which they want to save. They
are forced to save in terms of a depreciating currency.
Producers are deprived of their right to sell to whomever
they wish to sell. They are forced to give the right of
first refusal to the issuer of irredeemable currency.
-
The chief
merit of the gold standard is not to be found in the
stabilization of prices which is neither possible nor
desirable, but in the stabilization of interest rates. Only
the gold standard can guarantee the lowest level for the
rate of interest that is still compatible with conditions in
a free economy. There is no bond speculation under a gold
standard. The resulting stable interest rate structure
benefits both the savers and the producers.
-
The
so-called open market operations of the Federal Reserve
banks is a fraudulent practice short-changing every segment
of society. It should have never been authorized. It is a
prescription to destabilize interest rates if not in the
short then certainly in the long run. Bond speculators move
in to preempt the Federal Reserve banks’ buying or selling
bonds. They want to act before the banks in order to pocket
riskless profits. Everybody rushes to the same side of
market and the herd action will generate a destabilizing
oscillation in bond prices and in the rate of interest.
-
Gold
hoarding under a gold standard is harmless. (This assumes
that saboteurs are not permitted or encouraged to spread
false rumors about the imminent suspension of gold payments
by the government or by the banks.) Gold hoarding is a
legitimate tool in the hand of the bondholder to withdraw
bank reserves thereby forcing banks to contract credit, thus
allowing the rate of interest to rise and find its proper
level. Gold hoarding is also a legitimate tool in the hands
of the electorate to force the government to fulfill its
election promises for greater economy in public spending.
-
By
contrast, hoarding other marketable commodities is harmful.
It is destabilizing as it contributes to oscillating
speculative money flows between the commodity market and the
bond market. It can only be prevented by removing all
obstacles in the way of gold hoarding, which is the proper
outlet for the propensity to hoard.
* * *
The Gold
Standard University appeals to individuals:
who
cherish freedom and the ideal of government of limited and
enumerated powers;
who
support the principle of checks and balances in public
affairs as well as the notion of delegating power only if
it is encumbered with countervailing responsibilities;
who
reject the formula to finance scientific research through
an incestuous combination of the monopoly to create money
and the monopoly to dictate the agenda for monetary
research;
who
reject the prostitution of mathematics to be used as a
smoke-screen with which to camouflage the enslavement of
the entire population of earth;
and it
calls upon them to step forward and support the cause in
exposing monetary deceit and mischief, to fight
pseudo-monetary-science and the obfuscation of eternal
monetary truths.
The
world-wide regime of irredeemable currency has reduced the
people of the world to bondage. Monetary servitude is no
better than other forms long since discarded by history,
such as slavery and serfdom. It may well be worse if for
no other reason than being covert, whereas previous forms
of bondage have been overt.
Disenfranchised
scum of the earth, rise! Put an end to the usurpation of
power by the clique of impostors pretending to be monetary
experts! Chase the money-mongers out of the temple! Cast
your jail-keepers into the sixth circle of the seven in
Hell, to which Dante confined all counterfeiters of money,
perpetrators of false pretenses, and other tormentors of
widows and orphans! Scientific truth is on your side! It is
you, not your slave-drivers, who command the high moral
ground! You can win a world free of yokes! The only thing
you may lose is your shackles!
People
of the world, unite!
