scratch-mark

Doug Casey on the Looming Global Economic Meltdown and an Introduction to Monetary Policy

I’m really not an alarmist, and I see a different problem with fractional reserve banking than most others do (it’s the government’s fiat monopoly on money creation and centralized policy, dummy—not that loans, per se, create new money based upon fractions and multipliers).

In very brief, fractional reserve banking can and has been carried out in a completely private manner, and money can, in a manner of speaking, be “printed in the back room” in order to make loans (create new money) based solely upon any bank’s own standard of risk, and the faith or trust of its depositors (customers). The catch is, there’s no central authority (nor ought there be) to force policy upon the bank or its customers; nor is there anyone (nor ought there be) to bail out the bank if they get it wrong and fail.

If the bank comes into hard times, then they first increase their self-imposed reserve requirement—all the way up to 100% if necessary—necessitating that they have to make their money by charging customers the true cost of banking, and not by means of earning interest on loans backed by debt risk (money creation, again). If that’s not enough, then the bank might have to sell assets, lay off workers, reduce overhead, or, borrow from another private bank (presumably, at commensurate high interest rates).

Occasional bank failures would be good and healthy. People would learn not to keep all their money in a single bank, just like they don’t keep their investment portfolios in a single stock. And, rather than an FDIC, people could purchase their own insurance (new business opportunity), at a price that bears the full cost of the risk plus a profit to the insurer.

This is economics, banking, and sound business practices 101 in a Free Market—which is why it doesn’t exist in The Land of the Free, nor about anywhere else. …Because, we live in lands dominated by thieves, run by parliaments of whores.

But what about a Gold Standard (or any commodity, or bundle of commodities)? In principle, it’s the same as with any national monetary system: force-backed authority trumps market forces. Duh. This has been my eternal quibble with “libertarians” for over two decades. It’s. State. Force. Stupid. Don’t forget that the gold standard was in play during the great depression. In fact, business and monetary shocks are amplified in a gold standard. Why? Not because of the idea that currency is backed by some commodity (fine, knock yourself out), but because it’s just a different set of “rules” the state uses to manage its imposed monopoly on money. In essence, it’s a tradeoff between inflation (little under a gold standard, lots under fiat) and central bank flexibility to manipulate markets (little under a gold standard, lots under fiat). It’s just a different rule book is all, with associated pluses and minuses for each given the landscape of a monopoly State—but completely the same in principle: force-backed monopoly currency. Also, don’t forget that inflation originated with both governments and individuals clipping coins minted in precious metals, like gold and silver.

Coin debasement is the act of decreasing the amount of precious metal in a coin, while continuing to circulate it at face value. This was frequently done by governments in order to inflate the amount of currency in circulation; typically, some of the precious metal was replaced by a cheaper metal when the coin was minted. But when done by an individual, precious metal was physically removed from the coin, which could then be passed on at the original face value, leaving the debaser with a profit. Coin debasement was effected by several methods, including clipping (shaving metal from the coin’s circumference) and sweating (shaking the coins in a bag and collecting the dust worn off).

In a free market (including money and currency), you’d be welcome to do business with any “money warehouse” or bank that you wish. Contrary to so much ignorance that prevails, a 100% reserve is not really a bank. It’s just a warehouse and your tradeable “notes of currency” are just receipts for your gold (or whatever) in storage, and you have to pay them to keep your money in safe keeping—just like you have to pay the local U-Stor-It place for years to keep all the junk you haven’t needed for years. Banking implies a fractional reserve. But, in a free market you don’t have to. You can cut your risk to nothing and just pay for storage services.

If you ask me how it could work if we had dozens or even hundreds of different currencies in the U.S., all issued by different private banks, I’ll answer with a question: how does it work on planet earth at large? You have currency exchanges, businesses that make their money on the buy/sell spread. And, you also have currency trading such as FOREX, where arbitrage is possible.

…It’s often claimed that new money created by means of loans made in a fractional reserve system isn’t backed by anything, contrasted with gold as a reserve. I disagree and have always disagreed. In meta-terms, new money is backed by humanity itself, it’s generally good nature, creativity, productivity, and good will. Principal elements include:

  1. Fixed assets owned by people and businesses taking out loans (houses, cars, boats, airplanes, land, capital equipment, commercial buildings, etc., etc., etc.)
  2. Reputations
  3. Track records of success
  4. Ideas and well-laid plans
  5. FUTURE LABOR (in the simplest sense, taking out a personal loan is to sell your future labor and productivity now, at a discount that equals the service you pay on the loan)
  6. A PROMISE TO REPAY (in general, humans are pretty good on their word and by far and away, most loans get paid back according to the terms of the contract)

You could go on and on, if you thought about it. Or, think of it this way: unless most humans that have ever existed were net economic values to themselves and society over the full course of their lives, we could not exist and for damn certain, not at the levels of population and opulence so many now enjoy—with increasing numbers getting on that train all over the world every day in developing countries.

I capitalized points 5 and 6, above, for this very reason: the quite remarkable value of human beings to themselves and others, per se, over the course of a lifetime. Unfortunately, we live in a world where a minuscule less-than-1/100th of a percent of “elected” rulers take credit for every good and lay blame elsewhere for every wrong.

I’ve been paying attention to Doug Casey, on & off, for over 20 years. I encourage you to take 45-minutes to watch these two videos; the first, a 15-minute interview about the documentary, then the documentary.

‘America Has Ceased to Exist’: Investment Guru Doug Casey on the Coming Economic Meltdown

Meltdown America Documentary

You’ll have to provide an email to watch the 30-minute documentary for free. You don’t even have to subscribe to the ongoing email/newsletter list, and they vow to not sell or divulge your email. I did this yesterday and have yet to receive any email from them.

If you’re still not convinced, they have three 1-2 min clips of the documentary on their YouTube Channel.

Pay particular attention to Casey’s admonitions to not waste your time trying to “fix the system.” It’s unfixable. Rather, learn to profit from it as is. So, that implies sound, diversified investing. But he also admonishes you to “diversify politically.” Pay attention. That’s my primary personal objective, currently.

Richard Nikoley

I'm Richard Nikoley. Free The Animal began in 2003 and as of 2021, contains 5,000 posts. I blog what I wish...from health, diet, and food to travel and lifestyle; to politics, social antagonism, expat-living location and time independent—while you sleep—income. I celebrate the audacity and hubris to live by your own exclusive authority and take your own chances. Read More

57 Comments

  1. Itchy Wmd on June 28, 2014 at 12:32

    Like Doug Casey, I’m pretty certain that the world is heading towards replacing the US dollar as a reserve currency. I also believe that the transition will be extremely violent in every sense of the word.

    Whether the new reserve currency will be the yuan, the ruble, the Euro, or SDR’s doesn’t make a difference, as they are all unjust, centrally controlled copies of each other. The only difference is who gets to control the purse strings.

    Hopefully cryptocurrencies will be disruptive enough to make the a difference.

    • Richard Nikoley on June 28, 2014 at 13:18

      Exactly right, a point I tried to make in the post. It doesn’t matter which rule book is being used, with any one or other being better or worse depending on application. The point is that they are all centrally controlled quasi-fiat at minimum, all subject to political motivations and pressures.

      It’s the monopoly.



    • Anand Srivastava on June 30, 2014 at 03:56

      There will be no new RESERVE currency. There is no point in giving any country the Exorbitant Privilege ever again.

      Look at how the world is developing. More and more countries are having Currency Swap agreements. These allow trading without the need for a Reserve Currency. The world is moving towards a world where currencies will not be held as Reserve. There will be only one item (Gold) which will be held as a reserve. Note that most CBs now have Gold as a Reserve Asset, and they regularly Mark it to Market price.



    • Anand Srivastava on June 30, 2014 at 06:02

      The reason why a country should have foreign currency is to be able to import whatever it needs for a few months. It doesn’t need to store more. The rest it would sell to buy gold to hold as reserve. Of course a few currencies will be preferable to hold, they may change over time. Euro and Yuan are probably the best at present.

      Same is for the public, you don’t need to hold more currency that what you may need in the next few months. Save the rest, in gold, not in banks. Banks are for holding the currency for the next few months.



  2. Nathan on June 28, 2014 at 13:45

    Exactly right, Richard. The problem is government’s control and manipulation of the money supply for their own interests. Free the marketplace of money and it will take care of itself.

    If you want to take extra risks with your money and get free banking services, then you can entrust it to a bank engaging in fractional reserve banking. If not, then great, you can make that choice. Of course this assumes full disclosure and understanding of contract.

    All the talk of gold standards and such just confuses the issue, and libertarians ought to know better (those that don’t just haven’t explored it enough or opened up their minds sufficiently).

  3. Richard Nikoley on June 28, 2014 at 15:15

    From a Facebook comment from Samuel Handley:

    To advocate for the Devil, governments of older civilizations, like the Roman Empire, began debasing their coins (in the Western sector) in order to maintain the army and ‘bribes’ to the civilian population in order to fight off the “barbarians” (who made up the bulk of the army) and keep the people peaceful so the stealing of wealth had a “noble” intent.

    But that intent was corrupt from its beginning. Although the Emperors may have seen this as a way to maintain the status quo (secure the borders of the Empire, take care of the needs of the people) what they were really doing was preserving the old and calcified imperial system (and their exalted position) against necessary change.

    A system of governing of a society thrives from the voluntary support of the people who accept it, who choose to be governed in that way. When the governmental system no longer adequately serves the legitimate needs of most of the people they stop supporting it with their saved wealth, their labor and their bodies (taxes, work and physical service). This withdrawal of support should cause the government to fall or at least to change.

    What happened under the Roman Emperors was forced confiscation of wealth that was then “redistributed” to monopolistic supporters (some received the privilege of remaining in business in exchange for support of the Empire while others were forced out of business, into slavery or killed) and to mercenaries who fought for gold in service to the Emperor in place of Citizens who would volunteer to fight for the Empire.

    Western Rome fell because it ran out of internal support; it ran out of ‘real’ money and it lost the support of those it purported to govern. It was replaced by a fractured, feudal, society whose petty rulers have ever since dreamed of how they can revive (under their control) the “glory of Rome”.

    After two thousand years (five hundred, or so, for Eastern Rome) the heirs of that system devised a reasonable revival, not of the Empire, but of the Republic where government was fractured and divided in its authority and limited in scope anyway and dependent on limited resources drawn from exclusively gold or silver coinage and without the means to effect an army, leaving defense in the hands of the people and offense out of lawful bounds.

    That experiment lasted fifty years.

    It seems the enemies of peaceful people learned how to destroy far better than the latter learned how to keep their erstwhile masters in bondage. It was far easier to destroy Rome through debasement (on many sorts) than it was to build it and the same has proven true for the present day.

  4. Christian on June 28, 2014 at 17:41

    6.5 billion people don’t have access to banks now and how would a gold standard help them? In the next 3 years 4 billion people will come online with a supercomputer in their pocket. Crypto-currency will be the world reserve currency in the years to come. It won’t really matter what you price it in. Right now there are digital exchanges that you can buy and, sell and trade these currencies. Anyone can start their own token system and create an asset that can be bought and sold. It’s incredible and we are at the edge of this becoming commonplace. Have you looked into counterwallet.co yet? Or cryptsy.com ?

    • Richard Nikoley on June 29, 2014 at 07:12

      Christian

      Have not looked into those yet. Have some BTC but in the large I tend to agree with you. Interesting times.



  5. Richard on June 28, 2014 at 17:42

    I am laughing and rolling on the floor. You should stick to food issues. You are so stupid when you go outside that boundary. Fuck you in response to your anticipated response.

    • Richard Nikoley on June 29, 2014 at 08:26

      Oooh. Not just laughing. Not just rolling on the floor. Laughing AND rolling on the floor.

      Wow. Well I guess you got me, there. Not even a triple-dog-dare trumps that.



  6. Christian on June 28, 2014 at 19:11

    I wanted to also point out in response to a Facebook comment that the true value of gold will rise to about 5k USD. I think that I’m 5 years bitcoin will be priced at about 5x the price of one oz of gold, and in 10 years will be priced at 20x the price of one oz of gold. Call me crazy but in 5 yes you can look up this comment.

    • Anand Srivastava on June 30, 2014 at 04:09

      I am very bullish about BTC, but to think it will displace Gold is a pipe dream.

      BTCs are great. But they are not inter generational. Gold is. The reason why you should buy gold is not for yourself, but for your future generations or when you are in deep financial trouble. The banks and their interest (and the fact that gold lost value over 20years of CB price management) have confused the Western world, about the true purpose of gold.

      Why you buy and hold BTC is very different. You hold it because you think it will go up. It would probably go up, quite wildly in my opinion, but the purpose is entirely speculative. The reason why BTC will go up is because it will be a very important transactional currency. But that growth will stop at some point. Then the speculator will get out of it, or (if I am right) maybe not. I am not into BTC because of the speculators though.

      BTW that 5K/toz gold price is peanuts. It doesn’t even scratch the price that it needs to have to balance the World’s Balance of Payments, which is what it needs to do, after USD collapses.



  7. Michael44 on June 28, 2014 at 22:38

    Thank you very much Richard for spending the time to do this post. You are one of the people on the internet who’s opinion I place a high value on, and it is very much appreciated.

    I will mull all this over.

    • Richard Nikoley on June 29, 2014 at 07:21

      I used to debate this stuff all the time, but got tired as everybody only argues about which rule book is better and I’m not interested in one set of rules imposed by a monopoly power.



  8. James on June 29, 2014 at 04:34

    Richard, after doing some googling on the strains in AOR-3, clostridium is the only one with research saying it is positive, and many reputable sites say S. faecalis is pathogenic, this is what AOR lists the strain as on the bottle, when in fact the bacteria has been realized not to belong to the aforemention classification but is actually enterococcus faecalis. This is what all the sites say is pathonogenic, and they are the same thing, s. faecalis is simply an outdated name for the strain. Very few sources found benefits, and they were often small. https://microbewiki.kenyon.edu/index.php/Enterococcus_faecalis
    there is one source among many, just google it.
    this is the main bacteria in Aor3 ………

    • Richard Nikoley on June 29, 2014 at 07:22

      James, could you maybe post this on the RS primer post, or the probiotics post it links to?



    • natty on June 30, 2014 at 14:07

      Richard-
      Can you please move this & comment from James to an appropriate thread? I searched around and did not see that he had reposted.

      I recently came across a discussion regarding dog/cat food, and Enterococcus or Streptococcus Faecium being included in nearly all because it’s very heat stable.

      It’s possible James was the person who started that discussion as well, but as he linked, this strain appears to be extremely pathogenic.

      Long story, short, my pup is working through lymphoma diagnosis. We gut tested her through American Gut Project(waiting results), and am also in touch with UCLA doc who ran study with mice and lymphoma
      http://newsroom.ucla.edu/releases/ucla-researchers-find-link-between-245945

      He is producing the strain for commercial use-and we will give it a shot with her.
      Lactobacillus johnsonii
      https://microbewiki.kenyon.edu/index.php/Lactobacillus_johnsonii



    • Richard Nikoley on June 30, 2014 at 17:17

      “Richard-
      Can you please move this & comment from James to an appropriate thread? ”

      No. I do enough already. I don’t move comments. Anyone is welcome to copy and paste as they please, wherever they want.



  9. Janet on June 29, 2014 at 06:15

    A good book on this is “The Crash of 2016″ by Thom Hartmann. Time line of how we ended up with this economic situation by being manipulated by the ‘powers that be” from way back, so we have been in the bag, so to speak, since that way back and the manipulators are now pulling the final strings to shut the bag tight with us in it. Tie the bag up with big fat knots. No surprise, but a scary read on how it has been done and the natural death spiral outcome of this kind of “capitalism”.

  10. KC on June 29, 2014 at 13:45

    A couple of good resources for your followers to check out if they haven’t. These will help to understand the Ponzi scheme that we currently have, how we got it, how it works, and the out come. This is stuff that everyone should know, unfortunately very few do. Although the Freetheanimal audience seems to be pretty well informed.

    Oh and Richard is a Douche Nozzle, NOT Richard N.

    What is it, how we got it
    G Edward Griffin
    https://www.youtube.com/watch?v=Dba9OY0QatU

    How it works
    Mike Maloney
    https://www.youtube.com/watch?v=iFDe5kUUyT0

    Current State
    Chris Martenson
    Exponential Growth
    https://www.youtube.com/watch?v=W2rTQpdyCFQ
    Inflation
    https://www.youtube.com/watch?v=FzEDkFDeJ_A
    Debt
    https://www.youtube.com/watch?v=bcc-TqvCXqU

    • Anand Srivastava on June 30, 2014 at 04:17

      To really understand the connection between oil(SA)/gold/USD/Euro you have to go to fofoa.blogspot.com.



  11. Resurgent on June 29, 2014 at 15:06

    Richard,

    I agree with your opinion and analysis completely.. and I have a good knowledge of Doug Casey’s views, which I respect.

    The 6 points that you made can be roughly summed as ‘confidence’ – It does not matter if the currency is backed by some commodity etc. or not, if people have confidence in a currency, they will stick by it.

    I have lived and invested in several countries, and seen their political system closely. All, and I really mean ALL currencies used in the world today are completely fucked up if I use your above article as a yard stick… Except that the US dollar, is the least fucked up amongst them.
    Don’t be surprised – I say that because, if the measure is confidence, it still enjoys a lot in comparison to all others. And let the naysayers know, all the talk of various country pairs trading in Yuan or Yen or Rouble or Dinars have only been able to take away 2% of the total world trade. i.e. 98% of all world trade today, still takes place in US Dollars.

    They will all go down – yes they will, but I would not hazard a guess on ‘when’. The ‘perpetrators’ of these currency rackets will not go down in flames easily. And the LAST of them to go down will be the US Dollar.

    So yes, sit back and watch the fireworks, from whichever country you decide to build your nest in – but invest well, be a contrarian, and remember not to write off the US Dollar early. There is still a lot of money to be made from it.. 🙂

    • Richard Nikoley on June 29, 2014 at 15:41

      Thank you Resurgent. Means a lot. I’ve always known you to be a rational, grounded commenter in these pages, particularly in matters such as these.

      And yep, you nailed it: confidence. And I also agree. It would be great if the US defaulted on all debt, also great if it ceased to become the world’s reserve currency. Not going to happen unless something comes along that people have MORE CONFIDENCE IN. The only thing I see with even a hint of that potential is cryptos, but that’s probably way off. If ever. Essentially, it’s a competition between central bank management and distributed management amongst “miners.”

      I often ask gold bugs: so, do you own gold then? Almost none do. They want a gold “standard.” OK, but we used to have one and it was done away with by a stroke of a pen.

      It’s just like the Shiffian tax protesters and that ilk. They endlessly quote IRS code, as though if ever they managed to win in court, the State would go “wow, you beat us and our hands are tied.”

      No, they’d just change the code so the courts uphold their legal “right” to keep stealing however they want.



    • Itchy Wmd on June 29, 2014 at 19:44

      I disagree. The recent large deals between China and Russia for oil priced in Yuan and Rubles are the beginning of the end for the dollar.

      The US dollar enjoys 98% of the world’s trade not because everyone wants to use it, but because that IS ITS DESIGN! (The very definition of reserve currency in fact).

      I used to work in Mexico for an Egyptian company and was paid in US dollars. The reason wasn’t that we all preferred the US dollar (I’m not American), it is because the SWIFT system and BIS only accepts US dollars, and the world only prices oil in American dollars.

      The US enjoys both of these advantages due to the threat of force, not because other fiat currencies are more fucked up.

      There simply hasn’t been a country that can project as much force as what the US can. But this is changing. China and Russia have decided to deal outside of the SWIFT and BIS system and also outside of the petrodollar system.

      The timing of these deals just happens to coincide with America’s weak and disorganized foreign policy.

      It takes force and the threat of force to maintain any fiat currency, it takes even more force to maintain a reserve currency. The United States is beginning to falter in projecting that force throughout the world.

      There will be an attempt to replace the US dollar with UN SDR’s, in my opinion. I’m banking on (no pun intended) the ability of the cryptocurrencies to make SDR’s obsolescent from the get go…

      On a side note, Richard you should post the QR code for your Bitcoin wallet somewhere that is easier to find.



    • Resurgent on June 30, 2014 at 01:26

      Thank you for your kind words, Richard. Your blog is one of the few on my must read list.. And the RS information has changed our lives in an immensely positive way. Looking forward to your book.

      you write – “…No, they’d just change the code so the courts uphold their legal “right” to keep stealing however they want.”

      Here is a great recent example – After the Indian “IRS” lost in their own supreme court, they went ahead and changed the law retrospectively from 1962.. Ha Ha..!!

      http://www.ft.com/intl/cms/s/0/d9d96cde-6f59-11e1-9c57-00144feab49a.html#axzz366nj4MlJ



    • Anand Srivastava on June 30, 2014 at 04:40

      I in general blame the public. This is where the whole chain of responsibility starts. The founders had not given center very much power. The states powers were eroded slowly.

      The current problems are because the center is too powerful. The public chose the wrong people. Why does FED print so much, because Congress needs the money to support the huge govt. Why does congress support the huge govt, because the people will not vote if they didn’t support it. There would be a lot of people that will lose their livelihood, if the govt became smaller.

      BTW it is no longer 2%, its already in double digits. And with the recent oil trade between Russia and China, it must go further up.

      Anyway it doesn’t matter, watch inflation. Japan is at 3.4%. US did a 2.9 negative growth last month. Expect Untaper. US is doing a very tight rope walk. If it does too much printing, inflation hits. If it does not print much, growth goes down the drain. The rubber is at near its breaking limit, and the pull is unrelenting. It is only a matter of time when the rubber band breaks. The first hint will be from inflation, and probably Japan will trigger the crisis. As a crisis in Japan will break the confidence.



    • Richard Nikoley on June 30, 2014 at 08:45

      “On a side note, Richard you should post the QR code for your Bitcoin wallet somewhere that is easier to find.”

      Now on the sidebar.

      And whoever shot me 2mBTC a couple of days ago, thank’s kindly.



  12. john on June 29, 2014 at 23:17

    Great primer videos on understanding the monetary system:

    http://www.zerohedge.com/news/2012-10-14/top-15-economic-truth-documentaries

    If the link is stripped, you can find on a site called ZEROHEDGE (the best financial news site on the net), searching for the terms

    top-15-economic-truth-documentaries

    The first 4 videos are the best, especially #3 & 4, the MONEY AS DEBT videos.

    Zerohedge is the best source on the net for financial and monetary news, for those who are interested.

    Richard, your conclusion is spot on. LEARN TO PROFIT FROM IT.

    FYI, I’m a gold bug with gold.

    Cunt.

  13. leo delaplante on July 1, 2014 at 06:12

    government currency is but a promissory note issued on the expectation of taxes being collected,,,i have been following gold for quite a while and i have not seen Jim Sinclair’s name mentioned yet as he is in my opinion Mr. Gold with a lifetime of accrued knowledge on the subject http://www.jsmineset.com/

    • Richard Nikoley on July 1, 2014 at 08:11

      I have no issue with owning gold. Used to myself, plan to do so again. Buy and hold, don’t even look at the price.

      But if you buy gold, then buy gold. Not shares, not securities in a mining outfit. The physical thing.

      I just don’t think a “gold standard” in currency delivers anything and can be revoked anytime the State gets in a pinch where it needs to kick the printing presses into high gear.



    • leo delaplante on July 1, 2014 at 12:31

      the U.S. printing presses have run their course with the debt equaling more than 100% of GDP..Japan is at more than 200% ,,the difference being that Japan’s citizen’s own most of that debt,the U.S.’s debt is own by other countries ex. China,usually more than 100% debt/gdp sounds the alarm bells,,China and Russia have been acummilating tons of gold and are prepared to issue a new world currency backed by gold,they are holding the winning hand and will only show it when the time is right,



  14. McSack on July 1, 2014 at 14:58

    Richard, great take on a great subject. I think you’re right about the core of the problem being the state, and that gold is often an unnecessary diversion. Time and again it’s been proven that in the absence of a currency medium, people spontaneously create one (for fun sometime, look up the “mackerel currency standard” used in prison populations).

    The only slight adjustment I would make to your argument is recognizing the relationship between counterfeiting and inflation. I think you graze by the subject a bit, but for example the snippet you used about shaving coins is essentially counterfeiting which is basically a form of theft. I think that in the configuration with the state as currency producer and regulator, it’s one and the same. But the way I think you’re defining it is that in a free market, there is an effort to be more transparent so that there is a recognition that the notes being traded are not expected to be the precise value of what is printed on them.

    To me, even in anarchy, counterfeiting is still theft. But if banks are honest that the note may not actually represent it’s face value, I think it’s fair enough to say that the currency users are not being deceived. I’m at least open to people having the freedom to decide if it is or not.

    I think the central issue in most gold bugs’ arguments is that true currency is based on a commodity and gold happens to be one that has a lot of stable qualities to it. The highest priority for them is to gain the freedom to create such a currency which the government prevents us from doing now. The question of whether or not fractional reserve banking is sustainable in a free market is almost always a secondary issue.

    • Richard Nikoley on July 1, 2014 at 15:14

      McSack

      Great comment. Love comments from those who are not ignorant, which is less than a tenth of a percent of the world population. So kudos.

      I didn’t address counterfeit because, to me, it’s like addressing hacking at a tech convention. Yes, everyone knows it exists but the BEST focus is how to develop either un-hackable or hard-hackable apps.

      Counterfeit of paper currency is to me lafable and really illustrates the way State operates. If a business that was in charge of money, and counterfeit represents a cost not only in inflation, but in overhead trying to stop it, then we’d have had cryptocurrency variants back in the 90s.

      To the last paragraph, gold is not currency. If you want to have a hedge and hold gold, do so, physically. If you have no currency, you might starve holding lots of gold.

      You need both, and especially, get off all the ideology and conspiracy stupid shit that so many waste their lives on.



    • john on July 2, 2014 at 00:11

      You’re right, gold is not currency, it’s money. Perhaps the difference between currency and money deserves a post of it’s own?



    • Richard Nikoley on July 2, 2014 at 05:57

      I think that confuses people. Most use the terms interchangeably and that won’t change.

      More important is that they understand that something like gold is a store of value relative to other goods and services and that currency (or paper “money”) is easily inflated relative to other foods and services.



    • john on July 2, 2014 at 09:05

      Disagree. If you have black and white, calling them by one name creates confusion. Calling them the same is what got the whole problem started (i.e. currency is money, debt is wealth, the Fed is a public institution, etc.).

      People also used one word to describe fiber before you began the RS crusade, and you’re essentially changing the definition of paleo as I write this.



    • McSack on July 2, 2014 at 09:57

      Thanks for the compliments Richard. That actually means a lot to me. 🙂 But just a clarification on my last point. I was referring to the competing currency idea often touted by people like Ron Paul. I believe the idea is that people would be free to trade in currency notes backed by a commodity like gold or directly with gold itself in the form of coinage (or Peter Schiff’s gold “chocolate bar”). I’m not sure if that blurs the line between currency and money or not.



    • Richard Nikoley on July 2, 2014 at 10:21

      Debt isn’t wealth, but it is an asset (ask any business with accounts receivable).

      At any rate, my goals are quite different on this topic than in the RS deal. It’s mostly to create general awareness but I’m not interested in being any kind of authority on it, and I certainly don’t want to start getting emails asking for advice in financial matters. 🙂

      So, things like those distinctions are best handled in comments while any posts I do more big-picture practical.



    • OC Sure on July 5, 2014 at 06:50

      Hey john, please see my post on what the difference is btwn Money, or Counterfeit. By using the definition of money as Aristotle did then it is determined that gold is not money in and of itself. It is only money if it is mediating an exchange of something for something; viz. the value of someone’s productive efforts exchanged for the value of someone elses productive efforts and that the exchange is by demand (voluntary). Gold is used as the mediator precisely because of its difficulty to counterfeit.

      The importance of this seemingly semantic unimportance is that by saying gold is money then the true defintion of money is not discussed; if the definition of money is not discussed then tyranny can maintain their smokescreen definition that money is “only a medium of exchange.” For them to maintain that lie, then hides the fact that counterfeit mediates an exchange also, which is an exchange of nothing for something. It just may be that when the discussion is shifted away from what the mediator of exchange is to what both sides of the exchange actually are, then money, as represented by gold, can supplant counterfeit sooner then otherwise.

      I’m new here and don’t mean to come off the wrong way. I totally agree with you that gold is the best choice to use as money.



    • john on July 5, 2014 at 12:56

      No worries, I’m a new commenter here to. I didn’t see the post you referred to.

      Semantics are important, which is why I brought up money and currency, not counterfeit.

      The key practical difference is money is a store of value, currency is not. You’re right, money is a broader category than gold. The reason gold is used in this context is it has been used for thousands of years as money, and the fall of civilizations can be traced to gold (and lesser precious metal) coin debasement.

      Over time money retains value, currency does not. Dollars are worth about 3% of what they were worth 100 years ago, when the Federal Reserve was created. Gold will still buy you the same amount of bread.

      Mike Mahoney does a great job explaining this:

      http://goldsilver.com/getting-started-guide/chapter-one/



    • OC Sure on July 5, 2014 at 14:05

      Thanks. I read the link.

      Maloney is missing a very key point. He is describing characteristics of money but he never defined it. I have clearly defined what money is here based on Aristotle’s Nicomachean Ethics (Book V, part 5): http://ocsure.blogspot.com/2014/05/money.html .

      You see, currency can be money just as easily as gold can be counterfeited. So, the fact that gold is gold does not make it money any more than the fact that currency is currency makes it not-money. Money was invented as a measure in order to equalize the exchange of products which are the result of disproportionate work. Money is the representational unit by which one’s productive work is measured.

      So, to use Maloney’s example, when the goldsmith begins to loan out IOUs beyond the wealth that was generated by his productive work of making coins and jewlery that is precisely when he is counterfeiting. This is because the IOUs no longer represent the measure of his productive work. Instead, it represents the impersonation of productive work. The currency, the IOUs, that were loaned out against his productive work up to the full amount of his wealth created were indeed money.

      Pls see my post as I am finding my reasoning uncontested. This reclamation of the definition of money is unique, but nevertheless the correct definition of money. Defining our terms so as not to contradict the perceptions from which they were conceived brings clarity to the evaluation of gold and currency. The tyranny of modern economics has intentionally suppressed the correct definition of money to hide clearly identifying their theft.



    • Richard Nikoley on July 5, 2014 at 14:43

      Modern economies include myriad financial debt instruments whereby one can sell FUTURE labor or productivity at a discount.

      What do you think bond markets are, in the large.

      Sorry, having been a derivatives trader, I don’t find ancient understandings of money and currency that compelling. People kinda know what they are, which is why both are still in use, for largely different purposes.



    • OC Sure on July 5, 2014 at 15:19

      I see.

      Does it matter if the bond is facilitated, both on the buyers side and the sellers side with currency that is earned as opposed to currency that is conjured?



    • Richard Nikoley on July 5, 2014 at 15:29

      Not really, since bond prices move in response to things like interest rate, money supply, inflation, etc.

      To understand the markets in a meta sense, one must see them as an enormous discounting mechanisms.

      Most people see them as securities or investments. True professionals see them as potential deals to be had.



    • OC Sure on July 5, 2014 at 15:40

      I’d say it does matter.

      If the currency that is being used is earned then it represents productive work that is accretive to the economy and thus the purchasing power of the currency increases. If the currency is conjured then it represents theft from others who did productive work; it is dilutive to the economy and thus lowers the purchasing power of the currency.

      The point of identifying if the currency is earned or conjured is to identify the theft.



    • Richard Nikoley on July 5, 2014 at 16:18

      Sorry.

      Gobbledygook to me.

      And all the while, 7 billion people on Earth have a medium of exchange and the vast majority of them, stable enough to plan short term to medium term. For a small minority, make money on Arbritrage, including clever dirt scratchers in the third world who make money on Arbritrage on small scales every day.

      That there is no one world currency is a good anarchistic thing.

      Consider this. Suppose you could make money on a fraudulent fiat currency vs a gold backed currency where speculation has created extreme volatility. Would you do it?

      My point is, I am not interested in what anyone thinks is the best way to run a currency. I’m interested in as many currencies as there can be, like cars, BBQs, TVs or whatever, and currencies compete.

      Actually, it has been that way for a long time.

      Funny thing is, people get panties in a bunch when the US Dollar is weak, when in fact, it’s getting what it justly deserves.



    • OC Sure on July 5, 2014 at 16:44

      So then it is not bothersome that those who introduce new currency into the economy as the means of obtaining something for nothing are stealing from those who actually do productive work?

      I see the point of wanting lots of competing currencies since it provides the ability to “vote-with-your-trade” by getting into or out of a particular currency, and the dollar “vote” now is no-confidence. I agree that makes sense and is good to have.



    • Richard Nikoley on July 5, 2014 at 18:37

      “So then it is not bothersome that those who introduce new currency into the economy as the means of obtaining something for nothing are stealing from those who actually do productive work?”

      Well, first, it’s difficult to imagine such a scenario in the modern world, evidence skyscrapers, millions of businesses, shipping p, global transport of goods, factories producing them and the list goes on.

      Not bad for a total fraud, eh?

      But no, in mother’s basement theory, no more bothersome than someone sells snake oil.

      You still seem to operate fro a premise of initiating force. If someone is a fraud, then the defrauded will deal with them, and if they do it unjustly, they’ll answer to others.

      I’m a DIY law and order kinda guy.



    • OC Sure on July 5, 2014 at 18:59

      I see. Good job. Ty for the discourse and learning.



  15. leo delaplante on July 4, 2014 at 05:07

    if you were offered 1000 dollars in gold or a 1000 dollar U.S. bill which would you take

    • Richard Nikoley on July 4, 2014 at 08:18

      It depends.



    • Christian on July 4, 2014 at 08:38

      I would take the $1000 US bill.



  16. OC Sure on July 4, 2014 at 06:58

    Another way to work toward outlawing fractional reserve “banking,” and all of the other means by which “currency” is conjured such as QE is to clearly define what money, is as Aristotle did, and then from that clearly define what counterfeit is. I have done that here if anyone is interested:
    http://ocsure.blogspot.com/2014/05/money.html

    I like this site. Just found it today while researching for a post.

    • Richard Nikoley on July 4, 2014 at 08:26

      I’m not interested in working to outlaw anything. That’s what creates problems in the first place.



    • OC Sure on July 5, 2014 at 05:27

      I understand. Thanks to the sunlight concentrating through the magnifying glass of your comment on the back of my hand I am editing my writings on the tyranny of modern economics to remove the insinuation that the use of initiatory force is a means of a resolution.



  17. Howie on July 4, 2014 at 07:12

    What do you think happens to gold/silver during deflation and/or after an overnight devaluation (50-70%) of a currency? The so called experts can’t agree on how gold is priced against a devalued currency and in a deflationary environment.

    • john on July 4, 2014 at 07:35

      And what central bank that can create currency at will, like the US FEDRES, will allow deflation to happen? Answer, none. It’s not in the elite’s interest.

      Have you ever seen an exponential chart? The USD is way off to the right hand side already. The question isn’t if, it’s when. Understand the scam.

      The reason gold has not been properly priced against this is 90+ percent of the gold market isn’t gold, it’s paper (like GLD stock), with a claim on rehypothicated gold (i.e. nothing) backing it.

      The Chinese + Russians are buying gold like there’s no tomorrow, as are the US elites.

      Not sure if this was directed at me, but to answer the question about $1k in PHYSICAL gold or dollars, that depends on what I was going to do with it. If I needed to spend it in the short term, dollars. If not, gold.



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