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Gold Standard Advocate

by Trace Mayer, J.D. on November 14, 2008 · 4 comments

Reading time: 6 – 9 minutes

I came across an interesting article.  I would like to briefly deconstruct and attack the arguments made.

Myth: The gold standard is a better monetary system.

Fact: The gold standard causes deflation and depressions.

Summary

The far right advocates the gold standard because it gets government out of the business of controlling the money supply. They fear that printing money creates inflation, and retracting money causes recessions. But the opposite is also true: printing money cures recessions, and retracting it cures inflation. Governments in the last 60 years have used these policies with tremendous success. There has not been a single depression or bank panic in any nation anywhere in the world using Keynesian monetary policies. But during the Gilded Age of the late 19th and early 20th centuries, depressions and bank panics were common. The historical record is so strong that mainstream economists reject the gold standard almost universally.

    The Rebuttal

    The assertion of the fact confuses causation with effect.  Inflation encourages risk-taking and increases the appetite for debt.  After a surplus of risk has been taken with debt borrowed and extended eventually the risk averseness returns.  This risk averseness results in the debt appetite diminishing with the resultant deflation and depression.  Borrowers cannot increase their debt load perpetually and therefore the corrective measures of economic law must be asserted sometime.

Just like a ball thrown into the air reaches a zenith so likewise during a credit expansion the inflation and debt appetite increases.  However, eventually a zenith is reached and then like gravity a credit contraction and deflation happens.

The gold standard prevents the vast amounts of inflation.  By analogy it assets a stronger pull on the ball when it is thrown into the air so therefore it does not fly as far which means the descent is not as long.  The net effect is that the entrepreneurs are able to perform more accurate value calculations and the inefficiency from excessive risk-taking is minimized.  This leads to a more sustainable economy and more productive use of capital and allocation of resources.
Therefore, the gold standard is not the cause of the deflation and depression.  The cause is economic law.
The gold standard results in wise obedience to that economic law.  By analogy the fall suffered under a gold standard might be 8 feet while a fully fiat worldwide monetary system, like the US$ system that has entered a credit contraction, might be 800 feet.  Which fall will cause more damage?

Central economic planning backed by the barrel of a gun will always lead to less efficient allocations of resources than a free market.  If it could ever result in more efficient allocations then the gun would be unnecessary.  For example, if there was a Central Egg Commission that controlled the supply and price of eggs throughout the entire United States how efficient do you think the egg market would function?

So likewise the Federal Reserve System centrally controls the supply and price of currency with the aid of unconstitutional and immoral Legal Tender Laws.  How efficient do you think the currency market is?  The United States Constitution intended the currency market to be a free market using voluntary transactions not a violently forced centrally planned market.

    Government has abused the currency market for the last 100 years.  What has been the result?  One of the bloodiest periods of history with hundreds of millions individuals have been killed by their governments.  The Time Men of the Year Stalin (1942), Rooselvelt (1933) and Hitler (1938) along with many others used confiscation through inflation to abuse currency and fund their wars.  Only through abuse of currency were they allowed to engage in genocide on a worldwide scale.
    This is in addition to their other horribly mismanaged enterprises such as the socialized roads in the United States that result in about 40,000 deaths per year when private enterprise would perform cheaper, more efficiently and have an estimated 10,000 deaths per year.  Aided by their control over currency and following Keynesian dogma governments have had ‘tremendous success’ doing what they do best; lying, robbing and murdering.

    Mises wrote, “It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.”
    Lastly, there is a good reason why most ‘mainstream economists’ eschew the gold standard.  The gold standard is the advocate of voluntary transactions.  Fiat currency is the advocate of coercion and force through the instrumentality of government.  Most ‘mainstream economists’ are professors at universities that receive funding from governments.
Will the ‘mainstream economists’ bite the hand that feeds them? If they truly added value to society then they could or would earn their living through a voluntary transaction instead of relying on the fruits of ill-gotten gains.  They derive their income from governments who stole it using force or the threat of force against innocents.  Of course most ‘mainstream economists’ will weave sophistries to rationalize their immoral behavior.  But why believe them?
They are merely court economists who derive an income by aiding and abetting governments and leaders like Stalin, Roosevelt and Hitler in their lying, robbing and murdering.

Governments have so abused the currency that now the political machinations are ruining the stability of nations.

The people are distrusting money.  By extension people are distrusting governments.  This is evidenced as all major fiat currencies are breaking down against gold.  In this Kondratieff Winter economic law is being asserted. GoldMoney is a new type of gold standard.
In conclusion, like a criminal defense advocate attorney the gold currency advocate is in favor of peace and voluntary transactions.  On the other hand, the fiat currency advocate is in favor of fraud, theft and genocide.
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4 comments

ABOUT THE AUTHOR: Trace Mayer, J.D., author of The Great Credit Contraction holds a degree in Accounting, a law degree from California Western School of Law and studies the Austrian school of economics. He works as an entrepreneur, investor, journalist and monetary scientist. He is a strong advocate of the freedom of speech, a member of the Society of Professional Journalists and the San Diego County Bar Association. He has appeared on ABC, NBC, BNN, radio shows and presented at many investment conferences throughout the world. This is merely one article of 240 by .
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{ 1 comment… read it below or add one }

1 John Risser March 4, 2011 at 11:56 am

I think the key to solving thses problems is work. Everyone wants an easier life and easy money to purcahse what they “think” they want. Borrowing money is easy money and many borrowers and lenders make great livings doing so. But do these processes create Goods and Services in exchange. And this is the true calamity. The system that is in use often does not which causes loss, hardship ,theft, murder and break down of honesty, compassion and love.
The bottom line is the nation needs to rebuild itself based on conservation and high technology for this purpose. The necessity and preservation of these basic life systems is land, water, energy ‘not carbon”, work, education or knowledge ,efficent planning , etc. For the production of mankinds food stuff, housing, transportation ,clothing ,education and entertainment and so forth. The entire system needs to be replanned based on the prinicples of work for pay and conservation. Just look at how the nation is and it dosen’t take a master mind to see things are not too well for the average. I guess for the people that are content with little will not be producers and /but some have high abilities to help the truely poor and needy with God given assests. I understand your premise that Gold and Silver is the leeser of all evils for production and exchange of goods and services. Not the solution of all the problems the HUMANA FAMILY IS FACING .

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