tag:blogger.com,1999:blog-56498871041052163422024-03-12T15:03:54.673-07:00Patrick Barron, an Austrian EconomistAn Austrian Economic View of the WorldPatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.comBlogger781125tag:blogger.com,1999:blog-5649887104105216342.post-77371400391327093732023-10-20T12:21:00.002-07:002023-10-20T12:21:51.500-07:00Notes from an American Roadtrip<p> </p><p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;">My wife and I recently drove just shy of three thousand miles to see
friends and family in the American Midwest. We started just outside
Philadelphia, located in the southeast corner of Pennsylvania on America’s east
coast. Our furthest point west was Iowa City, Iowa, about a hundred miles west
of the Mississippi River. Our furthest point north was Madison, Wisconsin,
about sixty miles north of the Illinois/Wisconsin border. Our furthest point
south was Owensville, Missouri, about a hundred miles southwest of St Louis.<o:p></o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;"><o:p> </o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;">The following notes are merely our observations along the way. But what
better way to gauge the state of the nation than seeing it for oneself?<o:p></o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;"><o:p> </o:p></span></p>
<p class="MsoTitle">Electric Vehicles and Charging Stations</p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;"><o:p> </o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;">In our entire trip I did not see one EV charging station. My wife
“thinks” she might have seen one somewhere. We drove mostly on interstate
highways and stayed mostly at typical chain motels; i.e., Marriotts, Hiltons,
and Wyndhams. We did not see any EV charging stations at any of them, although
in fairness we were not seeking them out. They may have been in some remote
corner or around back. Motel chains off interstate highways are the logical
places for EV charging stations. The motel guests would be able to recharge
their EV vehicles overnight. I asked the hotel manager at a Wyndham motel in
New Stanton, PA, just off the PA Turnpike in western PA, if the motel had an EV
charging station. She told me that it did not have one, but that a gas station
a few blocks from the motel had one. Not very convenient for motel guests or
anyone else for that matter! We did not see any EV charging stations at the
rest areas on the interstates. Many of these rest areas were beautiful. Clean
restrooms. Lots of eating options, etc.. Very nice. But no EV charging
stations.<o:p></o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;"><o:p> </o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;">We saw very few EV cars on the road. Of course, one does not have to be
traveling overnight to use the interstate highway system, so one can assume
that the few EV cars we saw probably were driving within the charging radius of
their owners’ home base. Our friends here in PA who own EV cars also have a
second gasoline or hybrid vehicle for overnight trips.<o:p></o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;"><o:p> </o:p></span></p>
<p class="MsoTitle">Deindustrialization</p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;"><o:p> </o:p></span></p>
<p align="left" class="MsoTitle" style="tab-stops: 321.5pt; text-align: left;"><span style="font-weight: normal;">Whether America is de-industrializing or not is a
controversial subject among economists. For example, Café Hayek author Don
Boudreau of George Mason University claims that it isn’t true; i.e. that
America is near the peak of its historical industrialization. Be that as it
may, here is what we saw, or more accurately, what we did not see. We saw no
smokestack industries anywhere. Our route took us past Gary, Indiana, which
used to be a huge steel producing town. One did not have to see the steel mills
to know that they were there. One could smell them. A quick Google search shows
that several still operate there. OK. But what about employment? My wife used Waze
to reroute us around a big backup on I-80 near Gary, Indiana. It worked, but it
also took us through deteriorating neighborhoods. One could tell that these had
been thriving at one time. The homes were well-built; many were of all brick
construction. They’d probably sell for a million dollars in California. But
about every fifth home was uninhabitable. We saw two closed and deteriorating
schools. We saw virtually no one on the streets. No kids playing outside or
homeowners mowing the grass. Deserted. We made sure our car doors were locked,
and we were happy to be back on the interstate in about twenty minutes.<o:p></o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;"><o:p> </o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;">We visited our home towns of Peoria and Decatur, Illinois. When we left
in 1985, both were bustling factory towns. Peoria had been the international
headquarters of Caterpillar Tractor Company for decades with six plants and a
research facility. The research facility and one plant still operate there, but
the headquarters was moved out of Peoria many years ago. No wonder. I imagine
it would be hard to attract top management talent to live in Peoria these days.
Peoria had other factories, plus a Pabst brewery and a Hiram Walker distillery,
supposedly the largest distillery in America. The Pabst brewery is long gone
and the Hiram Walker distillery now processes ethanol. The downtown area, once
bustling with white collar workers, was deserted at one o’clock in the
afternoon when we passed through. The streets told the story. Not only did we
see almost no one outside, the quality of the streets was atrocious. One can
only assume that road repair is the lowest priority for city government. Like
Gary, Indiana, the quality of the homes was very poor. I grew up in a solid
working class neighborhood. Nothing fancy, but the modest homes were well-kept.
Not so today. My old grade school, a short six block walk from my boyhood home,
had been closed for some time. Reportedly one of the high schools was closed.
At one time there were six high schools within the city limits. <o:p></o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;"><o:p> </o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;">If anything, my wife’s home town of Decatur, about an hour and a half
drive from Peoria, was worse. Its industrial base of Caterpillar, Firestone,
and other factories was gone. Soybean processing giant ADM has its North
American headquarters there, and there is a big Norfolk Southern Railroad
operation, too. Nevertheless, like Peoria, the city is a shadow of its former
self. No one was on the streets of downtown Decatur in the middle of the day.<o:p></o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;"><o:p> </o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;">The good news is that rural America looks very prosperous. We saw lots
of beautifully maintained farmsteads. But a Google search reveals that less
than two percent of the US population lives on farms and only nineteen percent
in rural areas. The more prosperous small towns have been able to keep their
Walmart Stores. Dollar Stores are ubiquitous. Mexican restaurants are popping
up everywhere and often are the only restaurant in town other than fast food. Decently
sized grocery stores are scarce. We drove a few hundred miles off interstates
and found the quality of small towns to be spotty. Some looked prosperous, but
others looked downtrodden and hollowed-out. Generally county seats looked
better than others, especially those with an old-fashioned town square. Towns
with a courthouse and/or a hospital seemed to be most prosperous.<o:p></o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;"><o:p> </o:p></span></p>
<p align="left" class="MsoTitle" style="text-align: left;"><span style="font-weight: normal;">Our journey was unique, of course. Our judgment was greatly influenced
by knowledge of what had been there before. Perhaps Peoria’s and Decatur’s blue
collar factory workers are now employed in different industries elsewhere. My
biggest “take away” is that America is not ready for EV vehicles traveling long
distances, especially overnight away from home and that swathes of the
Heartland have become a wasteland.<o:p></o:p></span></p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-48041156274447349792023-10-20T12:20:00.002-07:002023-10-20T12:20:10.358-07:00The Dangers of a Cashless Society<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Before delving into the dangers of eliminating cash and mandating that
all transactions be conducted by digital means, let us briefly discuss the
legal aspects of money. In the United States, as in all economies that have
legal tender laws, only cash is recognized as money. Some may think that the
balance of their bank accounts is money too, but that is not quite the case. Your
bank balance is one step removed from legal money. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">All banks must maintain minimum balances of reserves, either in cash
held in their vaults or in their “reserve accounts” with their local Federal
Reserve Bank branch (There are twelve of them). These reserve account balances
may be converted to real money – i.e., cash – at your bank’s discretion. Bank
reserve balances plus cash held in bank vaults—a very small amount – are
reserves for the banking system but the total cash in our economy also includes
cash held outside the banking system, such as the money in your wallet, cookie
jar, or personal safe deposit vault. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The total of bank reserves plus cash held outside the banking system is
known as the monetary base. The monetary base is not the same as the money
supply. The vast majority of the money supply is composed of bank credit not
backed by reserves. When banks make loans, they credit your account, which
becomes bank credit money. Yes, this money was created by the bank out of thin
air. Notice that the banks did not create reserves, only credit money, which is
not the same thing. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">As of July 2023, the <a href="https://fred.stlouisfed.org/series/BOGMBASE/">monetary base</a> in the
United States was $5.5 trillion, whereas <a href="https://fred.stlouisfed.org/series/MABMM301USM189S">M3</a>, total bank
credit money, was $20.9 trillion! So, if everyone demanded real money (cash),
the banks would be able to honor only about one fourth of the requests. The
possibility of your bank failing is real. Over nine thousand US banks <a href="https://www.ssa.gov/history/bank.html#:~:text=In%20all%2C%209%2C000%20banks%20failed,simply%20left%20without%20a%20penny.">failed</a>
during the Great Depression of the 1930’s. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><b style="mso-bidi-font-weight: normal;">Risks of Electronic Payments<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Your ability to hold real cash, and not just bank balances accessible
by check or electronic means, protects you from the inevitable infrastructure
problems associated with any electronic system but also from instantaneous
seizure of at least some of your money. Cash is anonymous, whereas a bank
account is not. You will still be able to function to the limit of the cash you
happen to have on hand.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Now let’s say that cash has been eliminated by some legal means and you
have angered the powers-that-be for some reason, probably for opposing them and
asking others to oppose them, too. All the banks have to do is freeze your bank
account or eliminate it entirely. We have two examples of this very thing
happening in the recent past. First, the government of Canada froze the bank
accounts of all those participating in the Canadian truckers’ general strike
plus those who helped them. Secondly, British politician Nigel Farage had all
his accounts closed for political reasons and found that no other British bank
would serve him. Without the means to use money, Farage came very close to
emigrating. Just think about that for a moment. You could not fuel your car,
buy groceries, pay your rent, or a hundred other things without access to a
bank account.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><b style="mso-bidi-font-weight: normal;">Risks of Central Bank Digital
Currency<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">All the world’s major central banks are drawing up plans to institute
digital currencies that they themselves control. This is very dangerous for our
civil liberties. Now the government would not have to seek the cooperation of
the banks to freeze your accounts or “de-bank” you entirely, as the British
banking system did to Nigel Farage. At the stroke of a keypad, you would not
have access to your accounts. No fuel for your car, food for your family, heat
for your home, etc. No one should be allowed to hold such enormous power, which
really is a life-and-death issue. Naturally it is being promoted as efficient
and modern. It is no such thing. It is civil liberties issue and needs to be
stopped.</p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-50433849457801666152023-08-31T06:04:00.002-07:002023-08-31T06:04:59.373-07:00Gold Will Destroy Keynesian Fallasies<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">Leaders of the Western democracies are unprepared
to deal with forces that will end the fiat dollar’s dominance as the preferred
medium of international trade settlement, in place since the end of the Bretton
Woods Agreement in 1971.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">The </span><a href="https://www.thepresidency.gov.za/press-statements/south-africa-finalises-15th-brics-summit-format"><span style="color: windowtext; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">BRICS summit</span></a>, currently taking place<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"> in Johannesburg, South Africa, is expected to include an agreement on
a first step toward establishing an alternative international trade settlement
system based on commodities, which would certainly include gold. Dozens of
non-Western and even some Western affiliated nations are attending with great
interest. Six new members have been invited to join Brazil, Russia, India,
China, and South Africa—Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the
United Arab Emirates. <o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">Although the coming change may be characterized
as one between the Western democracies and the BRICS nations, the real battle
is one of ideas between Keynesian economic theory and gold. The winner will be
gold.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">As Murray N. Rothbard explained in </span><a href="https://mises.org/library/what-has-government-done-our-money"><span style="color: windowtext; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">What Has Government Done to Our Money?</span></a><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">, gold was never proven to be inferior to fiat money. The gold
standard was not replaced by a better monetary system. It was suppressed in
stages to satisfy the state’s insatiable need for money--first to make war and
then to corrupt the people via welfare. The result, of course, has been
never-ending wars, creeping expansion of the welfare state, unsustainable
public deficits, and accelerating debasement of the currency.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">The challenge to the fiat dollar began with its
debasement, which lowered its purchasing power to gold by 98% since 1971, and
accelerated with introduction of the so-called “Russian Sanctions” of freezing Russian
owned assets in the West and denying Russia access to the international dollar
trade settlement messaging system known as SWIFT. Russian monetary expert </span><a href="https://mronline.org/2023/03/15/sergey-glazyev-the-road-to-financial-multipolarity-will-be-long-and-rocky/"><span style="color: windowtext; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">Sergey Glazyev</span></a><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"> has led
the movement toward an alternative system. <o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">Putting “Paid” to Keynesian Fallacies<o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">Introducing gold into the trading system will
expose the main fallacy of Keynesian economics; i.e., the elevation of
aggregate demand to prominence in a nation’s economy rather than production.
Keynes shunned </span><a href="https://www.investopedia.com/terms/s/says-law.asp"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">Say’s Law of Markets</span></a><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"> in his </span><a href="https://en.wikipedia.org/wiki/The_General_Theory_of_Employment,_Interest_and_Money"><span style="color: windowtext; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">General Theory of Employment, Interest and Money</span></a>
in<span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"> order to hide his theory’s internal
contradictions. As put succinctly by </span><a href="https://www.emilewoolfwrites.co.uk/"><span style="color: windowtext; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">Emile
Woolf</span></a><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">, “Keynes endows the concept of
‘aggregate demand’ with god-like status while disregarding ‘production’-the
only means of satisfying it.” Jean-Baptiste Say shows that production is
required in order to enjoy the benefits of consumption.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">On the face of it, it is hard to believe that
anyone would believe that production either isn’t required for consumption or
that it magically appears. Yet, this rather upside down theory appealed to
politicians for obvious reasons; i.e., it gave them carte blanche to spend, all
with money created out of thin air by the central bank. Rather than economize and
prioritize spending that was absolutely necessary for the benefit of the entire
nation, politicians were told by Keynes that it was their duty to spend if only
to pay people to dig holes and others to fill them up.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; tab-stops: 13.5pt; text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">Basics of a Gold Settlement System<o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; tab-stops: 13.5pt;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; tab-stops: 13.5pt;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">The new international trade settlement
system will require settlement in gold. A possible mechanism has been outlined
by </span><a href="https://www.goldmoney.com/research"><span style="color: windowtext; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">Alasdair
Macleod of Goldmoney.com</span></a><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">, which I have
included at the end of this article. The benefits of the new system will become
obvious to every nation, not just the current BRICS members. The political
benefits are that no one nation can control or manipulate the system for its
unearned benefit. The economic benefits are that government spending will be
minimized so that resources can be allocated to production rather than state
aggrandizement. A member can expand imports only by expanding exports. This
puts market pressure on member governments to reform their internal economies
in order to increase production. <o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; tab-stops: 13.5pt;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">To artificially increasing demand, per Keynesian
orthodoxy, would be counterproductive, because gold would drain from the
nation’s gold settlement account and imports would be suspended. Therefore, the
system encourages sound economic practices within its members’ individual
economies. Printing money, excessive and unnecessary regulations, excessive
taxation, and excessive government spending do nothing to aid a member’s
ability to engage in trade. Nations like the US who have huge welfare
obligations and who have politically connected industries that do not add to
the nation’s capital base will struggle. Having lots of nuclear weapons will be
irrelevant and having bases around the world will be liabilities rather than assets.
<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; tab-stops: 13.5pt;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">An important point made by Macleod is
that over time the gold settlement system for international trade will expand
into members’ internal monetary systems. In other words fiat currencies, which
can be inflated/debased by governments, will be thrown on the ash heap of
history. They will become “</span><a href="https://www.adamsmith.org/blog/when-the-barbarous-relic-hit-1000#:~:text=John%20Maynard%20Keynes%20said%20in,is%20already%20a%20barbarous%20relic.%E2%80%9D"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">barbarous relics</span></a><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;">” instead of gold,
as Keynes predicted in 1924.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p align="center" class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center; vertical-align: baseline;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="border: none windowtext 1.0pt; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;">Possible
Gold Settlement System by Alasdair Macleod<o:p></o:p></span></i></b></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; vertical-align: baseline;"><span lang="EN-GB" style="border: none windowtext 1.0pt; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="border: none windowtext 1.0pt; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;">Credit must
take its value from something else. We assume that commercial bank credit takes
it value from bank notes, which is a central bank’s credit. Equally, if you and
I agree an exchange for future settlement, we will value the settlement in
credit, either in cash notes or bank credit. Each form or pool of credit is
quite distinct, with all credit taking its value from another pool of
credit.This is why gold almost never circulates in settlement of transactions.
But for the whole system of credit to be stable in its value it must be
attached to legal money, which for all currencies is gold, despite governments
not permitting central bank credit to be redeemable in gold today.</span></i><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><o:p></o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="border: none windowtext 1.0pt; mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;"> </span></i><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><o:p></o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;">My plan draws on the fact that in a gold-backed currency, gold is almost
never used in settlement, settlement being in bank notes or more commonly
commercial bank credit, both of which derive their value from gold. The
objective, therefore, must be to devise a system of credit firmly tied to gold,
without gold actually <span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;">having to change</span> hands.
The result is a plan drawing upon elements of the Bretton Woods system, whereby
exchanges of the gold currency for physical gold can only happen between
central banks withdrawing or adding bullion from or to the New Issuer.<o:p></o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;">Accordingly, I suggest the following:<o:p></o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"> <o:p></o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;">1. A New Issuer is established
for the sole purpose of taking in gold, which is earmarked in designated
vaults, against which it issues credit denominated in gold by weight (i.e. a
gold gram) in the ratio of 1 unit to 2.5 units of currency (credit). This is designed
to ensure Sir Isaac Newton’s ratio of gold to currency is maintained at 40%
backing, while boosting the reserves of a participating central bank
reallocating some or all of its gold reserves to the New Issuer. These gold
currency reserves are recorded as an asset on the balance sheets of
participating central banks, enabling them to issue credit denominated in the
gold currency to commercial banks which have an account with them, and for the
purpose of extending credit into the settlement system. This credit extension
is recorded as a liability on the central bank’s balance sheet, and an asset on
that of the commercial bank.</span></i><i style="mso-bidi-font-style: normal;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"> <span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;">It ties in the pool of central bank credit initially created by
the New Issuer, into the pool of commercial bank credit used to finance
cross-border trade, including the acquisition and sale of commodities.</span></span></i><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><o:p></o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;"><o:p> </o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;">2.</span></i><i style="mso-bidi-font-style: normal;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"> <span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;">A central bank can only submit
gold currency units for redemption to the New Issuer to the extent that it has
previously deposited bullion with it in the 1:2.5 ratio.<o:p></o:p></span></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;">3. T<span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;">he credit denominated in gold is not</span> <span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;">initially</span> <span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;">intended for general
circulation. Commercial bank credit denominated in the new currency will be
created in the normal way</span> <span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;">for trade finance and
cross-border sales and purchases of commodities.</span> <span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;">In any event, the whole system of credit linked to gold depends on
genuine demand for it, unlike fiat currency which is debased by governments.<o:p></o:p></span></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;"><o:p> </o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;">4. Commercial banks issuing
this credit must be members of a clearing facility, which will also include
central banks as members. Note that the New Issuer is not involved in any
clearing activity: it simply runs a ledger recording the initial credit created
in favour of a depositing central bank, and of any subsequent amendments based
on additions and withdrawals of bullion by individual central banks.<o:p></o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;"><o:p> </o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;">5. Importers and exporters
obtain trade finance denominated in the trade settlement currency from
commercial bank members of the clearing facility, created in the normal way.<o:p></o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;"><o:p> </o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;">6. Since commercial bank credit
ends up circulating locally, a government will have to decide whether to
introduce exchange controls limiting its circulation to importers and exporters
to “protect” its own fiat currency. Practicalities suggest that fiat currencies
will be eventually displaced by the new gold currency units because of the
stability of its value.<o:p></o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; text-indent: -.25in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri; padding: 0in;">7. Only central banks
registered with the New Issuer have the right to demand gold in exchange for
the gold currency from the New Issuer. This ensures that the value of the new
gold currency remains firmly tied to gold and is the sound basis for the value
of credit issued by commercial banks for the purpose of trade finance.”</span></i><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><o:p></o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"> <o:p></o:p></span></i></p>
<p class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in; vertical-align: baseline;"><i style="mso-bidi-font-style: normal;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;">Of course, Glazyev may have other ideas.<o:p></o:p></span></i></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in;"><span style="mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p> </o:p></span></p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-36752619375270827812023-08-31T06:02:00.001-07:002023-08-31T06:02:39.004-07:00Dollar Hegemony Ending Due to Geopolitical Change<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Since the <a href="https://www.bing.com/search?q=investopia+bretton+woods+agreement&qs=n&form=QBRE&sp=-1&lq=0&pq=investopia+bretton+woods+agreement&sc=3-34&sk=&cvid=3780D0493BFC43548631948D8E8A9FF5&ghsh=0&ghacc=0&ghpl=">Bretton
Woods Agreement</a> in 1944 the dollar has been the world’s preferred reserve
currency; i.e., the major trading nations of the world were willing to hold
dollars in vast amounts to satisfy their need for a readily accepted worldwide
payment medium. Even when in 1971 the US had violated its solemn promise to
redeem its dollars for gold at thirty-five dollars per ounce, nations still
were willing to hold dollars.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Germany
Shies Away from Monetary Leadership<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">In the mid-2010’s I was certain that Germany would abandon the Euro and
reinstate the Deutsche Mark. It was clear, especially to some German central
bankers, that Germany was being cheated by the European Central Bank (ECB).
Germany’s <a href="https://www.yardeni.com/pub/target2.pdf">TARGET2</a> surplus
represented a vast excess of German exports to other European Union members who
were pledging near worthless government and corporate bonds in exchange for
newly printed Euros from the ECB. These bonds would never be redeemed for
anything of real value; therefore, it was simple rational self-interest for
Germany to quit the charade. I predicted that such an action would cause the
Euro zone to collapse and make Germany’s DM the preferred unit of trade in
Europe and possibly threaten the dollar for worldwide reserve dominance.
Obviously, this never happened. Why?</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Germany knew and feared that alarm bells would sound all over the world
that, once again, Germany was rising and would dominate Europe. The French,
especially, would panic for at least two reasons. One, the collapse of the Euro
would force France to make a stark choice. Either adopt the DM, as I expected
most northern tier European countries to do, or try to revert to the French
Franc, knowing that almost no other nation would be willing to hold Francs.
France would be cut off from international trade unless it reformed its
unsustainable welfare system. But every time in the past when France tried to
institute any modicum of welfare reform, the population rioted. Two, France
benefited immensely from internal EU transfer payments, most importantly farm
subsidies. French farmers would be forced to reform or go bankrupt, ending a
cushy lifestyle that seemed to be synonymous with France itself. The stark fact
was that France had nuclear weapons and Germany did not. It was unthinkable
that either Germany or Japan, along with Italy the losing Axis powers of WWII,
would ever get nuclear weapons. Independent control of one’s own nuclear
arsenal was the minimum stake for playing the reserve currency game.
Thereafter, the game belonged only to nations with large economies that
produced a variety of export goods and services desired throughout the world.
That left only America in the game.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The great question is why Germany, even though it eschewed nuclear weapons
under its own control, would ascent to giving up the DM and adopt the Euro in
the first place. There are two answers. One, Germany wanted to reunite East and
West Germany. The French, who legally held <a href="https://www.britannica.com/topic/German-reunification">veto power over
such a move</a>, made adopting the Euro a condition for reunification. But why
couldn’t Germany just ignore this now irrelevant agreement? Answer number two
is just a theory but probably pertains to some extent, large or small to all
major European nations. Germany had suffered between six and seven million <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">military</i></b>
losses during the two great wars. (<a href="https://en.wikipedia.org/wiki/World_War_I_casualties">World War I losses</a>)
(<a href="https://en.wikipedia.org/wiki/World_War_II_casualties">World War II
losses</a>) Germany’s best and brightest, its future leadership, was lost for
all time. These were wars in which the elite of all belligerents fought. Such
leadership can never be replaced. The loss of future leadership was equally
harsh on the other major European combatants. In the two world wars Russia/USSR
suffered between nine and thirteen million military dead. France suffered a
million and a half dead, the vast majority in the 1914 Great War. The United
Kingdom suffered slightly over one million (this number excludes India, Canada,
Australia, New Zealand, and South Africa.) As former member of the European
Parliament Godfrey Bloom has stated: </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;">“The 1914-18 war killed the best of the British Empire. The 1939-45 war
killed what remained. Then the welfare state danced on their graves.”<o:p></o:p></i></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">The
Event that Changed Everything<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Then a great geopolitical event occurred--Deng Xiaoping rose to power
in China following the death of Mao Zedong. Deng instituted sweeping, capitalistic
economic reforms, and China rose to become a rival to America in terms of
economic power. China had obtained nuclear weapons under Mao. Despite the fact
that China was and remains a one-party dictatorship, it now had the two
ingredients to challenge the US dollar—a large economy and nuclear weapons.
China was blackmail proof. Like China, Russia had thrown off the worst of its
Soviet economic policies under Yeltsin and Putin, but its small population and
relatively backward economy was not in the same league with America and China.
Nevertheless, after the US, NATO, and the European Union spurned Russia’s
attempt to rejoin the old <a href="https://en.wikipedia.org/wiki/Concert_of_Europe">Concert of Europe</a>
(after all, Russia had been a great ally in WWII and had every reason to
believe that, now that it had thrown off communism, it could become a vital
part of Europe once again), it gradually saw its future as aligned with China.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">So, what does all this have to do with the end of dollar hegemony? The
answer is that the new Asian nexus saw a way to break the US use of dollar
hegemony as a political tool. The Achilles Heel of the dollar is that it is a
fiat currency. This suits the US political establishment very well, since it
allows the US to inflate the dollar at will to pay for welfare and warfare. It
also allows the US to impose sanctions on its perceived enemies, such as Russia
and Iran, by cutting them out of the SWIFT international trade messaging
system. It is similar to what happened to Brexit advocate <a href="https://apnews.com/article/natwest-nigel-farage-account-closed-9c9d7ef19a4ef805efbafc6784f88748">Nigel
Farage</a> in the UK. For strictly political reasons his bank closed his
accounts, and Farage was unable to find another that would accept his money for
deposit. No bank account, no way to exist in a modern economy. Farage feared
that he might be forced to leave his own country. The US-imposed Russian
sanctions froze billions of Russian owned assets. But rather than cause Russia
to back down in Ukraine, it seems to have sped up the process, started by
Russia, to develop a new world reserve currency backed in some measure by gold.
The “BRICS” nations—Brazil, Russia, India, China, and South Africa—have been
joined by dozens of others who are determined to break away from the fiat
dollar hegemony and use an honest, gold-backed trading settlement system. This
new BRICS+ group claims that it will announce a first step in pursuing this
goal at its meeting in Johannesburg at the end of August.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">The
US Will Be Forced to Embrace Gold…or Become Isolated<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">There are many who dismiss this development. After all, the US and the
US dollar have been supreme worldwide for eighty years. These critics fail to
understand real economics, real monetary theory, and real international
statesmanship. The US has been enthralled by three destructive concepts. The
first is Lord Keynes’ economics, which ignores <a href="https://www.investopedia.com/terms/s/says-law.asp">Say’s Law of Markets</a>,
effectively endowing the Keynesian concept of ‘aggregate demand’ with god-like
status while disregarding ‘production’-the only means of satisfying it. The
second is the so-called <a href="https://www.investopedia.com/modern-monetary-theory-mmt-4588060">Modern
Monetary Theory</a>, which posits that sovereign states can never go bankrupt
due to their ability to print all the money they need. And the third is out-and-out
arrogance since the end of WWII, which deigns to cancel entire nations. All
this will come to an end when gold returns as the focal point of the BRICS’
monetary reform project. At that point the US will start losing friends until
it, too, reluctantly regains its senses and returns to gold and honest dealing
and honest, respectful statesmanship. America will need new leaders for this
task. They are there, waiting to be called by the people. The US and the world
will be a much better place as a result.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-12570057941603775922023-06-22T05:44:00.001-07:002023-06-22T05:44:47.220-07:00Do Not Mourn the Fiat Dollar's Demise as a Reserve Currency<p> </p><p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">The
Promise and Betrayal of Bretton Woods<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The US dollar has been the world’s premier reserve currency since the <a href="https://www.investopedia.com/terms/b/brettonwoodsagreement.asp">Bretton
Woods Agreement</a> of 1944. Until 1971 it was redeemable by foreign central
banks in gold at $35 per ounce. As long as the US did not print more dollars
than it could redeem in gold <b style="mso-bidi-font-weight: normal;"><span style="font-size: 14.0pt;">at that price</span></b>, all was well. But, <a href="https://mises.org/library/bretton-woods-world-inflation-study-causes-and-consequences">as
Henry Hazlitt predicted</a>, the US did print more dollars and was forced
either to abandon gold redeemability or to devalue the dollar to gold at some
higher exchange rate. In 1971 President Nixon chose to abandon gold
redeemability. This nefarious act opened the floodgates to US spending.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">The
Destructive Siren Song of a Pure Fiat Dollar<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Despite the fact that it could not be redeemed for gold, the dollar
continued to be used as a reserve currency by most of the world. American
politicians could not have been happier. The stockpiling of dollars in foreign
central banks dampened higher prices in the US and allowed politicians to spend
on war and welfare. There seemed no need for spending discipline; in fact the
Keynesian economists in government, the financial press, and academia place
spending as more important than savings. Spending was supposed to stimulate the
economy. Therefore savings was bad; i.e., the so-called <a href="https://en.wikipedia.org/wiki/Paradox_of_thrift">paradox of thrift</a>. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">But the US dollar’s end as the world’s premier reserve currency is
nigh. Printing money in unbelievable amounts has led to the dollar’s loss of
purchasing power by over 98% to gold ($35/$2,000) Weaponization of the dollar
in international trade has accelerated that process. Foreign owned dollar
accounts in American banks have been frozen or confiscated, plus the US has cut
off some foreign governments, such as Russia and Iran, from the international
financial messaging system known as SWIFT. Led by Russia, the BRICS+ nations
will abandon the dollar for international trade settlement and reintroduce gold
in some form. No nation has a legal or practical monopoly on gold. Furthermore,
gold cannot be debased--it has no counterparty. Therefore, we should expect the
entire world to embrace gold for international trade settlement in the coming
years.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Americans should welcome the end of the fiat dollar. The fiat dollar
has been a tool for government to rob not only the rest of the world but the
American people, too. Monetary debasement destroys capital. We see irrefutable
evidence of this in the fact that America spends as much on defense as <a href="https://www.pgpf.org/chart-archive/0053_defense-comparison">the next<span style="mso-spacerun: yes;"> </span>ten nations combined</a>. Defense spending is
non-productive. It may be necessary, of course, but excessive defense spending
represents real resources withheld from meeting the needs of the American
people. American industry has been starved of the capital it needs. The
inevitable rise in consumer prices represents a real transfer of wealth to the
early receivers of the newly printed dollars from the rest of society,
especially retirees attempting to live on a lifetime of savings. Their savings diminishs
in purchasing power every day.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Fiat
Money Corrupts Society<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">But there is more, much more. Fiat money produced at the click of a
computer at the Fed corrupts the people. Rather than becoming self-reliant, the
people become dependent upon government to provide them with the basics of
modern life—schooling, healthcare, employment, housing, you-name-it. Why
prepare oneself for a lifetime of toil when the government has unlimited money
to take care of your every need? This is a prescription not only for class
warfare and social unrest but for preventing the nation from meeting its
productive potential due to the lack of production from millions who are
perfectly capable of contributing something to society. I daresay that in
addition to government the people themselves rationalize their dependency as
merely taking one of the many “entitlements” due to them as being fortunate
enough to have been born into a fairly prosperous country. But whence comes
this so-called entitlement? Who provides it? Not government, although
government may be the legal transfer agent. Entitlements come from the toil of
one’s fellow citizens. It can come from nowhere else.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">The
Nations of the World Are Moving On, With or Without the US<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Led by China and later by Russia, some nations of the world, not wholly
within the US orbit, have been building the necessary infrastructure and rules
for conflict resolution and increasing trade and investment. Countries
representing the vast majority of the world’s population, and also most of the
world’s proven commodities, are intent upon industrializing as did the West.
The basis for world economic development is sound money, which means gold. Only
sound money can provide the irreplaceable information about the true costs and
benefits of economic development. Only sound money can reassure investors--whether
they are individuals, corporations, or governments—that their investments are
secure and that payments will be made in non-depreciating money. This is only
fair, and the US and its allies should join this project rather than ignore or
fight it.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-18751035081622071932023-06-22T05:41:00.002-07:002023-06-22T05:41:38.682-07:00Sound Money Is Required for Real Budget Discipline<p> </p><h2 class="page-title" style="background-color: white; box-sizing: border-box; color: #38709e; font-family: crimson_text, Georgia, "Times New Roman", Times, serif; font-size: 25px; line-height: 1.1; margin: 0px 0px 16px; vertical-align: top;">Sound Money Is Required for Real Budget Discipline</h2><div class="group-image-wrapper field-group-html-element pull-left" id="slideshow" style="background-color: white; box-sizing: border-box; color: #494e54; float: left !important; font-family: myriad-pro, "Helvetica Neue", Helvetica, Arial, sans-serif; font-size: 15px; margin-bottom: 6px; margin-right: 20px; width: 240px;"><div class="image border-secondary" style="border-top: 8px solid rgb(56, 112, 158); box-sizing: border-box;"><div class="flexslider optionset-node-slideshow flexslider-processed" id="flexslider-1" style="background: transparent; border-radius: 4px; border: 0px; box-shadow: none; box-sizing: border-box; margin: 0px; padding: 0px; position: relative; zoom: 1;"><div class="flex-viewport" style="box-sizing: border-box; max-height: 2000px; overflow: hidden; position: relative; transition: all 1s ease 0s;"><ul class="slides" style="box-sizing: border-box; list-style: none; margin: 0px; padding: 0px; transform: translate3d(0px, 0px, 0px); transition-duration: 0s; width: 480px; zoom: 1;"><li style="backface-visibility: hidden; box-sizing: border-box; display: block; float: left; width: 240px;"><div class="media media--image" style="box-sizing: border-box; clear: both; margin-top: 0px; overflow: hidden; position: relative; zoom: 1;"><img alt="gold bars" class="media__element b-lazy b-loaded" draggable="false" loading="lazy" src="https://cdn.mises.org/styles/slideshow/s3/static-page/img/gold-w_0.jpg?itok=JNMsQOOn" style="border: 0px; box-sizing: border-box; display: block; height: auto; max-width: 100%; min-height: 1px; opacity: 1; transition: opacity 500ms ease-in-out 0s; vertical-align: middle; width: 240px;" title="" typeof="foaf:Image" /></div></li></ul></div></div></div></div><p class="tags" style="background-color: white; box-sizing: border-box; color: #51585c; font-family: myriad-pro, "Helvetica Neue", Helvetica, Arial, sans-serif; font-size: 11px; margin: 0px 0px 12.5px;"><span class="tag-label bold" style="box-sizing: border-box; font-weight: 600; padding-right: 5px; text-transform: uppercase;">TAGS</span> <span style="box-sizing: border-box;"><a href="https://mises.org/topics/big-government" style="background: transparent; box-sizing: border-box; color: #51585c; text-decoration-line: none;">Big Government</a></span><span style="box-sizing: border-box;"><a href="https://mises.org/topics/fed" style="background: transparent; box-sizing: border-box; color: #51585c; text-decoration-line: none;">The Fed</a></span><span style="box-sizing: border-box;"><a href="https://mises.org/topics/inflation" style="background: transparent; box-sizing: border-box; color: #51585c; text-decoration-line: none;">Inflation</a></span><span style="box-sizing: border-box;"><a href="https://mises.org/topics/money-and-banks" style="background: transparent; box-sizing: border-box; color: #51585c; text-decoration-line: none;">Money and Banks</a></span><span style="box-sizing: border-box;"><a href="https://mises.org/topics/politics" style="background: transparent; box-sizing: border-box; color: #51585c; text-decoration-line: none;">Politics</a></span></p><ul class="article-languages" style="background-color: white; box-sizing: border-box; clear: both; color: #494e54; float: left; font-family: myriad-pro, "Helvetica Neue", Helvetica, Arial, sans-serif; font-size: 11px; font-weight: bold; line-height: 11px; list-style-type: none; margin-bottom: 12.5px; margin-top: 10px; padding: 0px; text-transform: uppercase; width: 693.328px;"><li class="first last" style="box-sizing: border-box;"><a class="language-es" href="https://mises.org/es/wire/el-dinero-solido-es-requerido-para-una-verdadera-disciplina-presupuestaria" style="background: transparent; box-sizing: border-box; color: #38709e; text-decoration-line: none;">LEE ESTO EN ESPAÑOL</a></li></ul><p style="background-color: white; box-sizing: border-box; color: #494e54; font-family: myriad-pro, "Helvetica Neue", Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 12.5px;"></p><div class="required-fields group-date-author field-group-html-element" style="background-color: white; box-sizing: border-box; color: #494e54; font-family: myriad-pro, "Helvetica Neue", Helvetica, Arial, sans-serif; font-size: 15px; margin-bottom: 6px;"><span class="date" style="box-sizing: border-box; color: #00426b; font-weight: 600; text-transform: uppercase;">06/15/2023</span><span class="author" style="box-sizing: border-box;"><a href="https://mises.org/profile/patrick-barron" rel="author" style="background: transparent; box-sizing: border-box; color: #00426b; text-decoration-line: none;">Patrick Barron</a></span><div class="listen-mises" style="box-sizing: border-box; color: rgb(114, 153, 73) !important; font-weight: bold;">Listen to <a href="https://mises.org/node/63547" style="background: transparent; box-sizing: border-box; color: #38709e; text-decoration-line: none;" title="Sound Money Is Required for Real Budget Discipline">the <em style="box-sizing: border-box;">Audio Mises Wire</em> version</a> of this article.</div></div><div class="body-content clearfix" style="background-color: white; box-sizing: border-box; color: #494e54; font-family: myriad-pro, "Helvetica Neue", Helvetica, Arial, sans-serif; font-size: 15px; padding-bottom: 0px;"><p style="box-sizing: border-box; margin: 0px 0px 12.5px;">News here in the USA has been full of the latest farce known as raising or not raising the debt ceiling. After the usual dog-and-pony show, a <a href="https://www.politico.com/news/2023/06/01/senate-leaders-reach-agreement-to-quickly-vote-on-debt-deal-00099820" rel="noopener noreferrer" style="background: transparent; box-sizing: border-box; color: #38709e; text-decoration-line: none;" target="_blank">budget deal</a> was reached. But was it progress? It was a foregone conclusion that the debt ceiling would be raised, yet again, for the simple mathematical reason that unless the budget is cut, via spending cuts or increases in taxes, it can do nothing else.</p><p style="box-sizing: border-box; margin: 0px 0px 12.5px;">With the budget deficit projected to be (hold on to your hat!) $1.5 TRILLION, that is a political impossibility. Notice that I used the adjective “political.” Of course, technically it isn’t impossible to balance the budget or even run a surplus. But under the current monetary regime of fiat money that can be produced in any amount at the click of a computer at the Fed, there is no support either in Congress or among the electorate to do so.</p><p style="box-sizing: border-box; margin: 0px 0px 12.5px;">All of us are <a href="https://www.semanticscholar.org/paper/Fiat-Money-and-Collective-Corruption-Polleit/8e34127b9abf3056d337a410a65c516ba9f70078" rel="noopener noreferrer" style="background: transparent; box-sizing: border-box; color: #38709e; text-decoration-line: none;" target="_blank">corrupted collectively</a>, as described by German economist Thorsten Polleit. Since the sky will not fall, yet, by printing more fiat money, no one can be expected to support real budget cuts—not the military, retirees, Medicare and Medicaid recipients . . . the list goes on and on. The Fed will continue to print money to support the rising government debt, in nominal terms only, until the dollar’s purchasing power is destroyed.</p><p style="box-sizing: border-box; margin: 0px 0px 12.5px;">The only way to prevent this catastrophe is to return to sound money; i.e., linking the money stock to a commodity, almost certainly gold. By “linking” I mean that what the people call “money,” whether in the form of paper certificates, bank accounts, or some other form such as digital currency, is backed 100 percent by the commodity. The commodity is money. Nothing else. Certificates, bank accounts, or other forms are merely convenient ways to transfer ownership of claims upon the money stock.</p><p style="box-sizing: border-box; margin: 0px 0px 12.5px;">Yes, this is the only way. Forget about electing or appointing the “right” people to Congress or the Fed. As long as any person or entity CAN print fiat money, it WILL print fiat money. It is illogical to support a monetary regime in which printing fiat money is permissible and expect that anyone exists who will refrain from doing so. Therefore, turn off your TV. Stop reading the business press. The US federal debt will grow and grow, and nothing can stop it under the current monetary regime.</p><h4 style="box-sizing: border-box; color: #38709e; font-family: inherit; line-height: 1.1; margin-bottom: 12.5px; margin-top: 12.5px; vertical-align: top;">The Return of Gold as Money</h4><p style="box-sizing: border-box; margin: 0px 0px 12.5px;">So, is that it? We are doomed? NO! Gold will return! Why? For the simple and rational reason that gold and only gold works. For five thousand years gold was money and money was gold. Gold allows complete strangers to engage in productive exchange. Not only complete strangers but even enemies can engage in productive exchange. You don’t like the Russians? OK, but you don’t have to like them in order to buy their natural gas. Cooperative exchange means, per se, that both parties expect to benefit.</p><p style="box-sizing: border-box; margin: 0px 0px 12.5px;">For all I know my local hardware store owner may be an Atlanta Braves fan, about as low as it gets for a Philadelphia Phillies fan like me. Nevertheless, I appreciate the convenience and quality of his store’s products and services, and I’m sure he appreciates my patronage. This is not a frivolous matter. Gold allows everyone to benefit from a worldwide division of labor that requires no vetting of personal or political views or affiliations. In other words, gold leads us to a world of peace and prosperity.</p><h4 style="box-sizing: border-box; color: #38709e; font-family: inherit; line-height: 1.1; margin-bottom: 12.5px; margin-top: 12.5px; vertical-align: top;">The “East” Will Lead the Way, and Eventually the “West” Will Follow</h4><p style="box-sizing: border-box; margin: 0px 0px 12.5px;">The era of fiat money and dollar hegemony is coming to an end. Russia, China, India, the Arab nations, South Africa, Brazil, and others—let us call them the “East”—soon will settle their international trade in gold. It will work. Then the Western fiat money nations, led by the United States, will watch as, one by one, former allies start jumping ship. This does not mean that they are willing to be dominated by Russia or China, for example, only that real prosperity is dependent upon honest money; i.e., gold. The dollar will be thrown on the ash heap of history just like the French assignat, the Confederate dollar, the German papiermark, and more recently the Zimbabwean dollar. Of course, real statesmen, especially American, would understand this and start preparing their nations for this immense change in which military power is irrelevant.</p><h4 style="box-sizing: border-box; color: #38709e; font-family: inherit; line-height: 1.1; margin-bottom: 12.5px; margin-top: 12.5px; vertical-align: top;">Time for Humility</h4><p style="box-sizing: border-box; margin: 0px 0px 12.5px;">It never hurts to remind ourselves that the world is a very big place and America is just one small part of it. We must learn to be good citizens of the world, honest in our commercial affairs, friendly and respectful toward all, and meddle in the internal affairs of no one. For a nation that has arrogantly assumed that it is special, this will be a very hard pill to swallow. American military power and the dollar as the world’s premier reserve currency created a hubris that is evident in many areas.</p><p style="box-sizing: border-box; margin: 0px;">Preposterously we claim the power and authority to change the weather and the earth’s temperature, to control the health outcomes for billions of people through international vaccine mandates, the ability and maybe authority to change a person’s biological sex . . . the list goes on and on. It is time for a return to humility, honesty, and above all freedom of the individual to live his life as he, and only he, sees fit.</p></div>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-44743885699289211152023-04-03T07:19:00.004-07:002023-04-03T07:19:51.631-07:00Simplicity and Honesty in New Central Bank Golden Currency System<p> </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">For many months now Alasdair Macleod of <a href="https://www.goldmoney.com/">Goldmoney.com</a> has been writing about the
efforts of a group of non-Western nations, led by Russian economist Sergey
Glazyez, to establish a new settlement system for international trade. For many
months I have been carefully following Mr. Macleod’s explanations of this
initiative and have been privileged to correspond with him to gain a better
understanding of what may well be the most momentous and consequential economic
and financial initiative in decades. Therefore, much of what you read here has
been vetted by Mr. Macleod, although I take full responsibility for any errors
that may have arisen due to my lesser understanding.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The impetus for the creation of a new currency for international trade
settlement stems from two sources. The first was the continued debasement of
the current medium of international trade settlement—the US dollar, since 1944
the world’s premier reserve currency. For many years the dollar’s value has
been steadily weakened, so that today it is worth only two cents of its value
in relation to gold in 1971, the year that President Nixon closed the US gold
window. Since the Bretton Woods Agreement in 1944 until the autumn of 1971, the
US had pledged to redeem dollars for gold at $35 per ounce. The world trusted
that the US would not expand its money supply without first accumulating more
gold to back the new dollars at the agreed upon exchange value. Of course, the
US cheated almost from day one, but especially after the end of President
Eisenhower’s administration in 1960 and the expansion of the US welfare/warfare
state under Presidents Kennedy and Johnson. It didn’t take long for astute
economists in Europe, initially in France, to figure out what was happening.
The predictable run on the US gold supply ensued, forcing Nixon’s hand. To his
everlasting discredit he took the short-term, easy way out. His alternative would
have been to devalue the dollar to gold and pledge to end dollar debasement.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The second impetus came from the sanctions directed at Russia and a few
others, which froze Russia’s dollar assets in Western banks (some would call
this theft) and cut Russia out of the SWIFT international messaging system used
for settling trade. Iran, for example, had been the cut out of SWIFT previous
to the Russian invasion of Ukraine and has signaled its intention to join this
new system. The West has infuriated many non-Western nations by using financial
and economic sanctions as punishment over non-trade issues. Commentators call
this “weaponization of the dollar”. But the non-Western nations are building a
better system to using the dollar as the reserve currency and SWIFT as the
messaging system. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Establishing
a Gold Currency for Trade Settlement<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">In his recent (February 23, 2023) weekly essay, Alasdair Macleod moves
from the theoretical to the practical steps that are required to establish this
new settlement system. He titles his essay “<a href="https://www.goldmoney.com/research/cbd-cs-the-good-the-bad-the-ugly">CBDCs—The
good, the bad, the ugly</a>”. The term “CBCDs” refers to Central Bank Digital
Currencies. Mr. Macleod quickly explains that there is no need for CBCDs to
establish the new trade settlement system. Ordinary accounting systems and
clearing house mechanisms are perfectly capable of dealing with international
trade accounts; therefore, any foray by central banks into establishing their
own digital currencies is for other, possibly nefarious, purposes. Thus, the
“bad” and “ugly” role of CBDCs to which Mr. Macleod alludes.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The key insight for the establishment of a new trade settlement system
is to create a new gold backed currency. Macleod’s eight bullet points lead the
reader through the process. Once understood, one sees its simplicity and
inherent stability and honesty. A “New Central Bank” (NCB) will be established
in which each member nation’s central bank has a gold currency account. The
size of the account depends upon how much gold the member houses in one of the
system’s approved vaults. The size and stability of each member’s internal
currency becomes less relevant. What is important is the size of its gold
holding.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">So, immediately we see that a third party ensures that payment in
specie cannot be abrogated, as the US did in 1971, because the gold used for
trade settlement will be housed outside any single member’s control. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Net
Settlement Will Not Require Vast Amounts of Gold<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The system of net settlement is the same, in a mechanical sense, to that
of ordinary intra-national check settlements. Commercial bank customers accept
checks drawn on many banks during their business day and deposit them at their
local bank. The local bank sends these checks to a branch of its central bank
for credit to its central bank account, called a “reserve account” in the US.
All other banks do the same. Some banks deposit more money drawn on other banks
than other banks deposit drawn on them. And the roles change every day; i.e., a
bank deposits more some days than is presented against it and vice versa the
next. So the net settlement is seldom very large, one way or the other. The
same mechanism pertains to international settlement with gold backed money units.
</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">A key point to note is that the financing of trade is not settled by
the new currency itself, but in commercial bank credit denominated in it.
Whether an individual trade transaction is financed and on what terms is always
a commercial banking decision and should not be a matter for government
policies. Each nation need deposit only enough gold at the New Central Bank to
give its regulated commercial banks the credibility to issue bank credit based
upon the new currency. If a nation runs consistent settlement deficits, its
credibility for trade financing purposes may start to dwindle and the cost of
obtaining credit in the new currency will rise. This is a market signal to
reform ones internal economy in order to participate in the wider world economy,
for imports are funded by exports. The member running consistent deficits can
always send more gold to one of the member-approved vaults in order to continue
to import. <span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">It is the market rating of a commercial bank’s creditworthiness which
sets its ability to discharge its obligations to depositors in the new
currency, not access to the new currency itself. That remains available to
participating central banks only, available to swap with other member central
banks if needed in a crisis. <span style="background: white; color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">A commercial bank
that extends too much credit too quickly in the new currency unit and loses the
market’s confidence is a problem only for the bank and its customers. The
currency is unaffected. The market is the disciplinarian. <o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="background: white; color: black; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Export prices will be established in the export market, denominated in
gold money prices. For example, a barrel of Saudi oil may be priced in gold
money of two to three units, which is completely independent of the dollar,
yuan, rupee, etc. price in internal markets. What matters most is that the
importing country has sufficient credibility among its peers to settle its
daily trade account in the trade currency. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The New Central Bank will adopt a forty percent ratio of gold to gold
money, a ratio that was adopted by Sir Isaac Newton when he was master of the
(British) Royal Mint which has stood the test of time. This will enhance the
value of gold reserves otherwise maintained by a central bank by two and a half
times. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><i style="mso-bidi-font-style: normal;">(Please see the appendix at the
end of this article in which Mr. Macleod explains the relationship between the
New Central Bank, the participating national central banks, and the members’
commercial banks themselves.)<o:p></o:p></i></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Keep
Trade from Being Used as a Geopolitical Tool<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Many in the West may not think about the falling purchasing power of
the dollar and its effect on international trade settlement as a big problem in
their everyday lives. Also, they may agree with the Russian sanctions, high
handed and possibly illegal though they may be, as giving Russian despots their
just desserts. But I think that Macleod sees a much bigger problem with such
short term thinking. Let me offer this scenario. Would you rather live in a
world in which a criminal gang controls money production and can print as much
as it desires for itself and its friends, not taking into account the damage
done to the larger society in which you live, or would you rather live in a
world in which no one can produce money ex nihilo for his own benefit? Would
you rather live in a world in which a criminal gang can freeze your bank
accounts, denying you the ability to buy food, fuel, shelter, etc. or would you
rather live in a world where the rule of law protects your civil liberties and
your property? I think I know the answer that most freedom loving people will
give. Therefore, it should not be a surprise that many nations of the world
agree with you on these issues as applied to world commerce. The steady
depreciation of the dollar and the high-handed sanctions are turning into the
Achilles Heel of the Western controlled international trade system. The rest of
the world has decided that it has had enough and is taking matters into its own
hands, difficult though that process may be.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The new system, owned by all the members and controlled by no one
member, should not veer from its specified purpose of settling international
trade accounts. Nor can the medium of exchange (gold) be debased. It is an
honest, strictly limited in scope trade settlement system only. Geopolitical
issues will be settled in more appropriate forums where each side can present
its grievances. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">One can hope that continuing trade with a country with which one has a
temporary geopolitical issue may actually result in a quicker and more
harmonious resolution. In any event, we must remember that people trade with
other people and that nations do not trade with other nations. Using the trade
of ordinary people as geopolitical tools should be reduced somewhat, forcing
diplomats and statesmen to do their duty and find diplomatic and statesmen-like
solutions. Well, one can only hope.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><i style="mso-bidi-font-style: normal;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Appendix by Alasdair Macleod:<o:p></o:p></span></i></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><i style="mso-bidi-font-style: normal;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><o:p> </o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;">In this detailed explanation, the New Central Bank is the NCB and
a participating central bank is the PCB.</span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "inherit","serif"; font-size: 11.0pt; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; padding: 0in;"> </span><span style="color: #242424; font-family: "Calibri","sans-serif";"><o:p></o:p></span></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;">Commercial banks can access credits representing the new currency
in the form of deposits, conventionally labeled reserves, through their account
at a PCB. This can be funded simply by depositing the PCB’s national currency,
or any other currency which can be sold on the foreign exchanges, in exchange
for a credit representing the new currency in favour of the commercial bank.</span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;"> </span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;">The only accounts maintained at the NCB are with participating
national central banks. In return for a gold deposit, the NCB credits the
participating central bank with the new currency 2.5:1 — in other words a 40%
reserve. This is an obligation of the NCB in favour of the PCB, and in effect
creates the currency in accordance with a strict formula.</span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;"> </span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;">The PCB records the new currency on its balance sheet as an asset.
In other words, it is an obligation of the NCB in favour of the PCB.</span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;"> </span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;">The book entries are as follows: the PCB records its credit
obligation in its favour from the NCB in the new currency as an asset. If a
commercial bank wants credit access to the new currency, it sells domestic or
other acceptable currency to the PCB in return for a deposit, which is a credit
obligation between the PCB and the commercial bank. And if the PCB wishes to
operate a minimum reserve policy in the new currency, it is free to do so. That
is a matter between it and its own commercial bank network, and does not
involve the NCB.</span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;"> </span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;">Alternatively, if through circumstances the PCB agrees to make a
loan to a commercial bank in the new currency, it will be free to do so by the
normal process of credit creation, whereby the loan denominated in the new
currency is created in favour of the commercial bank (recorded as an asset on
the PCB’s balance sheet), with a matching liability recorded as a deposit (on
the liability side of the PCB’s balance sheet) upon which the commercial bank
can draw. This is how a discount window currently operates, and similarly will
be seen as last resort funding by commercial banks. Furthermore, it allows the
PCB to participate in the commercial banking clearing system.</span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;"> </span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;">Banks based in jurisdictions which are excluded from participation
at NCB level, or choosing not to join can still participate by setting up
branches or subsidiaries in participating jurisdictions, if the relevant PCB is
prepared to authorise an account.</span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;"> </span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;">Note that in this structure, no extra currency is created by the
NCB. In fact, only the NCB can create new currency. In effect, the new currency
is ring fenced, and only expanded if a PCB deposits more gold with the NCB.
Therefore, all credit based on it becomes firmly tied to the new currency, the
only variation in value being in the discount rates (interest) which reflect
individual counterparty risks and time preference, if appropriate.</span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;"> </span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p style="background: white; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="border: none windowtext 1.0pt; color: #242424; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-border-alt: none windowtext 0in; mso-hansi-theme-font: minor-latin; padding: 0in;">The expansion of credit based on the new currency is not an
inflationary concern, because the new currency is used to facilitate production
from commodity acquisition to final product, and not for financing consumption.
Furthermore, the mechanical tie to gold bullion is the ultimate guarantee of
the currency’s value and that of all credit based upon it.</span></i><i style="mso-bidi-font-style: normal;"><span style="color: #242424; font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></i></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: -.3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><o:p> </o:p></span></i></p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-61432713696990195712023-04-03T07:15:00.003-07:002023-04-03T07:15:36.298-07:00Role Reversal<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Starting around 1989 the Soviet empire started to crumble. The time
period between the forming of NATO in the late 1940’s and the retreat of Russia
from Eastern Europe and the eventual collapse of communism in Russian is known
as the Cold War. There was a great power confrontation in Europe that did not
result in war. Essentially, US-led NATO stood its ground to prevent further
Soviet expansion from the territory it occupied at the end of World War II and
waited for the inevitable collapse. Now, perhaps not everyone saw the collapse
of the Soviet empire as inevitable. But all one had to do was view the Soviet
empire for oneself, up close and personal, which is what I did in the early
1970’s as a young Air Force officer. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">The
State of the Communist Economy<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The Russian economy at that time is painful to describe. Moscow and
Leningrad (St. Petersburg), the so-called “jewels of the Soviet Union” were
depressing of the spirit. Everything was shoddily built. There were very few
cars on the streets. There were no retail shops deserving of the name. Lines
formed in the middle of the night awaiting the opening of the few bakeries. I
saw this for myself from my hotel window on the Nevsky Prospekt in Leningrad.
GUM, the “world’s largest department store” near Moscow’s Red Square sold
nothing that was equal to what could be found in any garage sale in the West.
Actually that should not be a surprise, since at one time all those garage sale
goods were marketable. <span style="mso-spacerun: yes;"> </span>I did not visit
Berlin, but those who did say that crossing the Brandenburg Gate from West Berlin
to East Berlin was shocking. The very idea that the Soviet economy and
lifestyle was in any way superior was ludicrous. It took brutal police powers
and the infamous Berlin Wall to prevent mass exodus to the West.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">The
Peaceful Collapse of the Soviet Empire<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">I’m sure that life only got worse in the years between my visit to the
Soviet Union in the early 1970’s until its final collapse. And the collapse
occurred without a shot being fired between the Great Powers. The collapse came
very quickly and without warning. Author <a href="https://en.wikipedia.org/wiki/Amity_Shlaes">Amity Shlaes</a> was a reporter
for the Wall Street Journal Europe at the time. Returning to New York from
Berlin she called her boss between planes in London and was told to return to
Berlin. Something was happening. She told her boss that she had just left
Berlin and that nothing was happening. Her boss told her to go back for a few
days anyway. She did as ordered and witnessed the German people tearing down
that despicable insult to humanity.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">How
the US Enforces the American Empire<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The American empire is not enforced by walls with armed guards to
prevent its citizens from escaping but, instead, by the almighty dollar. Since the
enthronement of the dollar as a reserve currency in 1944 at the Breton Woods
conference and then the establishment of the Petrodollar in the early 1970’s,
almost all international trade has been conducted in dollars. Thusly, dollars
are held by every country’s central bank to settle international trade flows. Alasdair
Macleod of <a href="https://www.goldmoney.com/">Goldmoney.com</a> calculates
that foreigners hold around $31.8 trillion in US liabilities, of which $5.8 trillion
is held by “official” institutions. (Refer to US Treasury TIC figures <a href="https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/slt2d.txt">here</a>
and <a href="https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/bltype.txt">here</a>.)
But the US has abused this “special privilege” by printing dollars out of thin
air. It has funded its empire of hundreds of bases worldwide with excess
dollars. Furthermore, it has enforced compliance with its expansionist foreign
policy by freezing dollar accounts held by foreign central banks, foreign
businesses, and foreign individuals whom it dislikes. By cutting them out of
the international financial messaging system known as SWIFT it has created great
hardship on nations held to be offensive to the US.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Today
the Roles Are Reversed</b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">But these nations have discovered America’s Achilles Heel and are doing
something about it. The almighty dollar rests on a base of sand known as fiat money,
which is not redeemable in a desirable commodity such as gold or silver. This
characteristic has led to inflation of the dollar over the past fifty years at
an ever accelerating rate. Such inflation causes the exchange value of the
dollar to shrink. Since President Nixon took the US off the gold standard in
the fall of 1971, the dollar’s value against gold has shrunk by ninety-eight
percent. No one believes that this debasement will end or even slow down. In
fact the US seems determined to accelerate the dollar’s depreciation to pay for
its military adventures and expanding welfare programs. Combining the
debasement of the dollar with the trade sanctions has created an intolerable
situation for those currently in America’s bad graces. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">But these nations are countering American hegemony by deploying their
own arsenal—not nuclear weapons but gold. Like America and NATO during the Cold
War, these nations are standing their ground and arming themselves with an
alternative and better reserve currency; i.e., a currency backed by gold and to
be used at least initially for settling international trade. Russia has been
working on the framework of a new trade settlement currency for quite some time
and now China and others, such as Iran, India, Brazil, and South Africa are
joining the project. There is nothing nefarious per se about establishing an
alternative trade settlement system. One may call it rational self interest. It
is a peaceful project but its results may be devastating for countries that
depend upon a stable dollar. Those who join the new system will no longer need
to hold dollars. This fall in the demand to hold dollars will lead to an
inevitable fall in its purchasing power, perhaps even to its total collapse.
This could happen literally over night and without warning, just like the fall
of the Berlin Wall.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Blinded
by Fallacious Ideologies<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Of course, no one in a position of power in the US understands anything
about real money and real finance. They are blinded by the promise of Keynesian
economics and Modern Monetary Theory that posits that creating aggregate demand
(Keynesianism) funded by massive money printing (Modern Monetary Theory) is the
sure path to economic progress. They fail to acknowledge that the steady fall
in the purchasing power of the dollar and the rise of an alternative trade
settlement system are the inevitable consequences of their blindness. I see nothing
that can stop the continued debasement of the dollar, now coupled with arrogant
and harmful financial sanctions, that will prevent the peaceful establishment of
an alternative international reserve currency and all the consequences that it
will bring to an unprepared US dominated world.</p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-67812124033622958872023-02-25T08:17:00.000-08:002023-02-25T08:17:28.409-08:00My letter to the Cato Institute<p><span style="background-color: white; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt;">Re: Cato's Letter, Winter 2023, Volume 21, Number 1..."Liberty, Optimism, and Superabundance" by Lawrence Summers</span></p><div class="x_elementToProof" style="background-color: white; border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><br aria-hidden="true" /></div><div class="x_elementToProof x_ContentPasted0" style="background-color: white; border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">"I was skeptical about Larry Summers writing in your latest Cato's Journal about "Liberty, Optimism, and Superabundance". Turns out I was right. After endorsing the "incredible outcomes" that "markets and science produce", he claimed that this "is not to say that those outcomes cannot be made better through collective and planned action." Really? Such as building a better ball point pen, an example Summers used to highlight market success? How about the collective and planned programs of Social Security and Medicare, which CATO admits must be reformed. But wait! Ms. Romina Boccia is going to tell us how to fix these disasters. How? By the turning them into nothing more than welfare programs; i.e., taxing the successful and handing out benefits to "those who most require taxpayers' support." What a novel idea. Whatever happened to independence and self-reliance?"</div><div class="x_elementToProof x_ContentPasted0" style="background-color: white; border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><br aria-hidden="true" /></div><div class="x_elementToProof x_ContentPasted0" style="background-color: white; border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Patrick Barron</div>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-55170752914713537462023-01-29T07:45:00.000-08:002023-01-29T07:45:45.731-08:00My letter to the NY Times re: A tale of two healthcare systems<p> <b style="font-family: Calibri, sans-serif; font-size: 11pt; font-variant-caps: inherit; font-variant-ligatures: inherit;">From:</b><span style="border: 0px; font-family: Calibri, sans-serif; font-size: 11pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> Patrick Barron</span></p><div dir="ltr" style="background-color: white; border: 0px; font-family: "Segoe UI", "Segoe UI Web (West European)", "Segoe UI", -apple-system, BlinkMacSystemFont, Roboto, "Helvetica Neue", sans-serif; font-size: 15px; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><div dir="ltr" style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><div dir="ltr" style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="color: black; font-family: Calibri,sans-serif; font-size: 11pt;"><b>Sent:</b> Sunday, January 29, 2023 9:54 AM<br aria-hidden="true" /><b>To:</b> NY Times <letters@nytimes.com><br aria-hidden="true" /><b>Subject:</b> A tale of two healthcare systems</span><div aria-hidden="true" style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> </div></div><div dir="ltr" style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><div style="border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Dear Sirs:</div><div style="border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Your January 29, 2023 New York Times Magazine contains two articles about healthcare. The first article was written by David Wallace-Wells and uses the failures of Britain's healthcare system as evidence that "austerity" doesn't work. (Five hundred patients per week are dying because of E.R. waits. Ambulances are taking an hour and a half to respond to stroke and heart-attack calls. Ten times as many patients spent more than four hours waiting in emergency rooms than in 2011. Waiting lists for scheduled treatment passed seven million—more than ten percent of the country—prompting nurses to strike.) There follows in the same magazine a report by Helen Ouyang about how America's healthcare system is moving toward more "hospital at home" care. Such a market-based response to changes in how healthcare is provided seem almost impossible in Britain's National Health System. The difference is that between socialism and capitalism. Britain's system is more socialistic and almost impervious to change. America's is more capitalistic and, therefore, more adept at meeting the changing needs of patients.</div><div style="border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><br aria-hidden="true" /></div><div style="border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Patrick Barron</div><div style="border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">20 McMullan Farm Lane</div><div style="border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">West Chester, PA 19382</div><div style="border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">610-793-3605</div></div></div></div>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-37259380070806408922023-01-25T11:50:00.004-08:002023-01-25T11:50:54.106-08:00My letter to the NY Times re: How the U.S. Amassed Debt of $31 trillion<p><span style="background-color: white; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt;">Re: Mr. Jim Tankersley's front page, above-the-fold, article of "How the U.S. Amassed Debt of $31 trillion, published on Sunday, January 22, 2023.</span></p><div style="background-color: white; border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><br aria-hidden="true" /></div><div style="background-color: white; border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="border: 0px; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">I was disappointed that Mr. Tankersley never did answer his own question. Reporting that both Republicans and Democrats spent more and more year after year does answer how that can happen. So, let me enlighten Mr. Tankersley and the Times' readers. The Fed's monetary base, composed of bank reserves and cash, grew from $.910 trillion on September 2008 to $5.419 trillion on November 2022. M3, the most inclusive metric of the nation's money supply, grew from $7.840 trillion on September 2008 to $21.352 trillion on November 2022. (These numbers can be found on the website maintained by the Federal Reserve Bank of St. Louis.) Since the government and everyone else expects the annual federal budget deficit to exceed one trillion dollars per year until the cows come home, we can expect these monetary metrics to keep growing. But that doesn't quite answer the question, does it? The real answer is that taxes and the bond market cannot absorb a trillion dollars per year in increased debt; therefore, as in the past, the Fed will monetize the debt; i.e., it will print money out of thin air. Raising interest rates will not help, although the Fed should get out of the business of trying to control interest rates. The only relief will come from drastic—and I mean DRASTIC—cuts to federal spending.</span></div><div style="background-color: white; border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="border: 0px; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><br aria-hidden="true" /></span></div><div style="background-color: white; border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="border: 0px; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">There...now Mr. Tankersly and the readers of the Times know "How the U.S. Amassed Debt of $31 trillion.</span></div><div style="background-color: white; border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="border: 0px; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><br aria-hidden="true" /></span></div><div style="background-color: white; border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="border: 0px; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Patrick Barron</span></div>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-25657274886692986502023-01-25T11:49:00.002-08:002023-01-25T11:49:12.817-08:00Policies to Restore US AND Britain's Reputations in 2023<p> </p><p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 12.0pt;">The Imperative for Change<o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;">The purpose of this essay is not to
convince the reader of the necessity for change. It is to present some common
sense policy changes to prevent or perhaps mitigate the economic harm that has
been done to Western economies, especially to the US and the UK, since the end
of World War II. Please watch Godfrey Bloom and Alasdair Macleod </span><a href="https://godfreybloom.uk/blogs/"><span style="font-size: 12.0pt;">interviewed</span></a><span style="font-size: 12.0pt;"> recently by Sonia Poulton. The twenty-two minute
video describes the current financial and reputational weakness of the West.
The interview is the first one under the heading of “Videos” on Godfrey Bloom’s
website. For a more in-depth analysis of the financial threat to the West,
please go to </span><a href="https://www.goldmoney.com/research"><span style="font-size: 12.0pt;">Goldmoney.com/research</span></a><span style="font-size: 12.0pt;"> and read any of Alasdair Macleod’s weekly essays from
the past few months.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;">In the Poulton interview Alasdair
Macleod ably describes the financial implications of currency debasement and
the West’s deindustrialization policies. Godfrey Bloom describes the
reputational damage stemming from the West’s “sanctions” against Russia plus the
consequences of deindustrialization due to the foolish pursuit of a Green New
Deal. In this essay I do not wish to convince the reader of the seriousness of
the current situation, which these gentlemen do so well, but rather to present
policies that must be changed to stop destruction of the West’s economies and
reverse the harm to their reputations. Reputation means more than others
thinking highly of us. A good reputation for honesty, fair dealing, and
adherence to the rule of law is absolutely essential in order to participate
fully in the entire international community both for trade and comity.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;">There is no need to point out that none
of the policy changes listed below will be enacted by either of the two main
political parties in America or the UK, <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">as currently led</i></b>. Either one of the
two leading parties in each country must change leadership or a third party
must emerge. There is precedence in both America and Britain for the emergence
of a new party. In the mid 1850’s the American Whig Party was thrown on the
scrap heap of history when it was supplanted by the anti-slavery Republican
Party. In the first half of the twentieth century Britain’s Labour Party
supplanted the Liberals. It has happened before and it can happen again.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;">The following “policy imperatives”
assume that such internal change has occurred and now the new ruling party must
mitigate and eventually reverse the damage done by its predecessors over so
many years. The task will not be easy, nor will it be painless, but it must be
done.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 12.0pt;">Policy Imperatives<o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p class="MsoListParagraphCxSpFirst"><!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">1.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]-->Drastically
cut government spending. The dollar and the pound’s purchasing power are
steadily weakened by the need of the Treasury to borrow more money than internal
taxes and the bond markets will absorb. Currently the central banks “buy” the excess
debt with money created out of thin air. This leads inevitably to more money
chasing fewer goods, which results in higher prices and the boom/bust credit
cycle, among other economic damages.</p>
<p class="MsoListParagraphCxSpMiddle"><!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">2.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]-->Abolish the so-called “Green New Deal”, which is
based upon the schlock science surrounding “climate change”. The Western
economies not only must end the destruction of their industrial economies, but
they must revive the entrepreneurial spirit in individuals by eliminating
regulations on business activity that does not directly cause real harm to
people. For example, the West must end such practices as elevating the sanctity
of other living organisms through mandating costly and time consuming
environmental impact studies. The US should abolish the Occupational Safety and
Health Administration (OSHA), and the UK should abolish its Health and Safety Executive
(HSE). Both countries have well established common law precedents to protect
and compensate workers from on–the-job injuries.</p>
<p class="MsoListParagraphCxSpMiddle"><!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">3.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]-->Reinstitute the gold standard. The currency must
be seen as a proxy for real money; i.e., gold. This means that the currency
cannot be expanded unless the central bank has more gold with which to back it.
There is a long list of economic benefits to be derived from a stable currency,
but perhaps the most important benefit is spending discipline. The government’s
myriad spending orgies will face the real-time discipline from the taxpayers
and the markets. </p>
<p class="MsoListParagraphCxSpMiddle"><!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">4.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]-->House the nation’s gold, which is used to back
its currency, in a neutral and internationally supervised place—for example,
Switzerland—that will redeem the nations’ currency for gold upon demand. The
governments must not be allowed a means by which to suspend currency-for-gold
redemption. Remember, gold is money and all else is credit. If a nation’s
credit is questioned—i.e., the market fears that there is insufficient gold to
redeem its currency or that the government may suspend redemption--then demand
to hold it for settlement purposes will drop or even evaporate completely.</p>
<p class="MsoListParagraphCxSpMiddle"><!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">5.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]-->Return stolen property to its rightful owners.
Theft is a violation of law at every level. The Western powers confiscated
Russian property as part of the so-called “sanctions” following Russia’s
invasion of Ukraine. This insult to justice must end. Neither country has
declared war on Russia, yet the sanctions are well-known tools of war. Ending
sanctions is both a moral and an economic issue. If the world believes that its
property can be seized for some act for which a country’s government disapproves,
international trade of all varieties will fall drastically for such country and
become difficult to recover. Who in the world can trust such a country again?</p>
<p class="MsoListParagraphCxSpLast"><!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">6.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]-->Adopt
a non-interventionist foreign policy. The world is full of controversies that
often lead nations to war. Unless their interests are directly threatened, the
US/UK must not intervene in foreign disputes but remain neutral, even if these
disputes lead friendly foreign nations to war with one another. There is no way
that the Western powers can honestly adjudicate these never-ending disputes.
The best way to support warring parties is to provide honest peace brokers,
such as the Church, a safe place to parley. Otherwise, keep out.</p>
<p class="MsoNormal"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 12.0pt; line-height: 115%;">Conclusion<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 115%;">The Western
world has violated international norms of fair dealing so that their
reputations are close to long-term destruction. Their currencies are poised to
fall in value due to unprecedented money printing over several decades. They
foolishly believe that there is nothing that the rest of the world can do. They
believe that the rest of the world must kowtow to whatever international norms
the US/UK dictates. But they are horribly wrong. The rest of the world is
moving beyond dollar hegemony and beyond the reach of US/UK sanctions. It is
building a new reserve currency for settlement of international trade. This
non-Western world is much larger than the West in terms of population and
commodities. More importantly, it is willing to exploit its commodities for the
benefit of its citizens, whereas the West has placed its commodities off limits
due to its belief and commitment to schlock environmental science of impending
environmental doom. The process can be reversed, but such a reversal requires
new leadership. Nothing else can be done unless new leaders can change policy.
The West does not need to “rule the world” in order to be peaceful and
prosperous.<o:p></o:p></span></p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-86276880059990441692022-12-03T08:56:00.002-08:002022-12-03T08:56:20.100-08:00Who Has Better Ethics, the Social Security System or Bernie Madoff?<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">According to Wikipedia, Bernie Madoff ran the world’s largest Ponzi
scheme, with losses estimated to be as high as $65 billion. Madoff promised to
invest his customers’ money in productive enterprises and pay them generous
returns, when in fact he spent the money and manufactured fake statements. His
generous returns to his customers were made with money from new customers.
Eventually the scheme collapsed when money from new entrants slowed down. There
were no productive investments to pay off his customers.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Like Madoff’s scam, Social Security is a vast Ponzi scheme. Although it
claims to have “assets” of close to $3.0 trillion, these “assets” are not
productive assets, such as factories, farms, or valuable commodities. They are
book entries only and differ little from what Bernie Madoff was reporting to
his customers. The government has spent the accumulated taxes of eighty years
and now pays out what it receives in monthly taxes on retirees. According to
some fiduciaries, soon monthly taxes will not cover retiree benefits. This
could spell big trouble for Social Security.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Voluntary
vs. Coercion<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The main difference between Bernie Madoff’s scam and Social Security is
that all of Madoff’s victims gave him their money voluntarily. They were
victims, of course, but no one forced them to give Madoff their money. Many may
have been gullible, avaricious, or both. But they entered into Madoff’s plan
with their eyes wide open and were not coerced into doing so. They now receive
nothing, and their initial investments are gone, probably never to be recovered
or, if so, only fractionally after many years of legal machinations.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Compare Madoff’s scam with Social Security. All who earn incomes,
whether wages or personal profits, are required by law to pay into the Social
Security System. Failure to do so will result in fines and possibly jail. Like
Madoff’s plan, all participants receive periodic statements explaining how much
they and their employers have contributed and their current anticipated monthly
payout upon retirement.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The main difference between the Madoff scam and Social Security is NOT
that Social Security has accumulated real, productive assets and Madoff did not.
Neither owned productive assets. The main difference is that Madoff did NOT
force his customers to join his scam under the threat of violence; whereas,
that is exactly what the Social Security System does. Therefore, if either
system can be considered more ethical, or perhaps less unethical, it is the Madoff
scam. Madoff was a confidence man, but he did not force anyone to join his
scam. Targeted investors could join or not. But that definitely is NOT the case
with Social Security. Yet Madoff is a modern pariah and Social Security is
lauded by many as the savior of the impoverished elderly.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Current
Victims Demand that Others Continue to Be Victimized<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">If both systems are Ponzi schemes, why was Madoff jailed and not the
lawmakers and administrators of Social Security? If the Madoff plan can be
unceremoniously shut down, why can’t Social Security be shut down just as
unceremoniously? The answer most people give is that they were forced into
paying for someone else’s benefits, so someone else can do the same for them.
In other words, since they were victims they have a right to victimize others.
I call this very common response to be highly unethical. At some point the
Social Security Ponzi scheme must end and, when that happens, some will lose.
Would a victim of the Madoff scam feel justified in allowing Madoff to peddle
his snake oil to more victims just because he was a victim? I think not.
Likewise, Social Security recipients have no ethical leg to stand on; neither
do those who have been forced to pay into the Ponzi scheme for many years and
have yet to receive any payouts. Being a victim certainly does not make it
ethical to victimize someone else. Therefore, the only ethical thing to do is
end Social Security right now. No more checks. No more taxes. Fire all the
employees, destroy all the records, and sell all the buildings and office
equipment. Cut out this unethical financial cancer that will destroy the body
politic.</p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-34647486853821548772022-12-03T08:54:00.002-08:002022-12-03T08:54:21.622-08:00Consequences of the End of World Dollar Hegemony<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">In my previous essay I explained how over time the US abused its
responsibility to control the supply of dollars, the world's premier reserve
currency for settling international trade accounts among nations. This
abrogation of its duties is leading to the likely adoption of a new reserve
currency, commodity based and controlled not by one nation but by members, all
watchful that the currency is not inflated.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Let us continue the analogy of an individual receiving a "magic
checkbook" which allows him to write as many checks for as much money as
he desires. Receivers of these checks could only pass them along to others
through the normal course of trade. Over time the owner of the magic checkbook
becomes increasingly irresponsible. He funds all kinds of welfare and warfare
initiatives. Naturally dollar reserves build to levels completely unnecessary
for peaceful exchange. Prices start to rise at a faster and faster rate. Then a
reform consortium assembles a team to offer an alternative currency. Why, one
may ask, is that such a problem for the dollar and dollar users?</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">A
Lesson in Supply and Demand from the Weimar Republic<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">A successful alternative reserve currency would dilute demand to hold
dollars. When demand for dollars drops, its price must drop unless and until
its supply drops. (A drop in the dollar's "price" is just another way
of stating that its purchasing power falls; i.e., more dollars are required to
buy the same goods and services.) Through irresponsible use of the magic
checkbook you have obligated yourself to funding a free-for-all of entitlements;
i.e., Social Security, Medicare, and the military-industrial complex being the
largest by far. Politically, it may be almost impossible to cut any of these
three categories of spending to the extent necessary to arrest the dollar's
drop in purchasing power. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The world has seen all this before, and not just in less developed
nations like Zimbabwe. The US will find itself in the same trap as experienced
by Germany's Weimar Republic following World War I. The Reichsbank, Germany's
central bank, printed papiermarks in order to placate powerful constituencies
within Germany. As the Reichsbank printed more money, the purchasing power of
papiermarks dropped. And herein lay the trap. Rising prices led powerful
constituencies to demand increases in pay and benefits. Industrial labor
unions, government civil servants, welfare recipients, old age pensioners whose
life savings were being decimated--all demanded more money. Strikes and violence
became endemic. So the Reichsbank printed more money...which, of course, simply
led to higher prices and another round of payment increases...which led to even
higher prices, etc., etc. until the papiermark became worth more as wallpaper
than money.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Why did the Weimar Republic government continue to increase payments,
and why did the Reichsbank continue to print papiermarks? Many sophisticated
answers have been advanced, such as that the government and the Reichsbank
deliberately destroyed the papiermark in some kind of roundabout plot to thwart
the financial terms of the Versailles Treaty in which a defeated Germany was
ordered to pay reparations to the Allied powers. But the simplest answer is
that both believed that there was no other choice than to increase payments and
print money in a crisis. It was felt that powerful constituencies must be
placated in the short run. But short run tactics just made things worse. There
was neither the political will nor the economic understanding of the need to
end excessive spending and currency debasement and endure the pain thereby
induced. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">The
Lack of Both Political Will and Economic Understanding in the US and the UK<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">I fear that the same is true today. In fact the seeming lack of adverse
consequences (all in the long term) and advantages of money printing in the
short term have led to a knee-jerk response by the US Treasury and the Federal
Reserve Bank to increase the money supply and lower interest rates in the face
of any economic problem, even higher prices themselves. As a example, just look
to Britain. Its energy shortages have caused prices to rise. The government's
response has been to pledge payouts to households! That's right. No pledge to
dismantle barriers to increased energy production...just a pledge to increase
the government's deficit, which requires more money printing! As the saying
goes, you can't make this stuff up. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">One thing is certain though. What Britain can do, the US can and will
do in spades. Hyperinflation is a real possibility. Remember, the Reichsbank in
Weimar Republic Germany actually had to print physical money. The US Federal
Reserve Bank need only click a few buttons on a computer. As prices rise,
powerful groups demand more money. Police, firemen, road workers, etc. demand
that they not suffer a lowering of their lifestyle. Since government is spending
someone else's money, it accedes to these demands.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Back to our British example. The exchange value of the pound has been
plummeting in currency markets, leading to serious consequences. The Bank of
England was forced to raise interest rates and now government debt has become
unaffordable. So the Bank, as handmaiden to the government, has applied the
only politically permissible remedy that it knows: its computers' money-printer
is forced into overdrive, just to keep up.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">What
Happens on the Ground<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Where in reality does government get its money? State and local
governments get money from state and local taxes. So captive property owners
get increased tax bills to pay for maintaining public school teachers, police,
etc. Social Security recipients must be compensated, of course, so payroll
taxes are increased, which depresses business. American products become less
competitive on the national and world market. The price spirals continue to
destroy all in their path until the dollar loses all purchasing power and
society descends into chaos. And not one politician in a thousand understands
what happened or, if he did understand, did not have to political will to do
anything about it; i.e., reduce public spending, liquidate the Fed, and tie the
dollar to our still significant gold reserves. It can be done.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-19895493967602510372022-11-06T08:15:00.002-08:002022-11-06T08:15:30.484-08:00Hysterically Funny Article Headline<p><b style="background-color: white; font-family: Calibri, sans-serif; font-size: 11pt;">Sent:</b><span style="background-color: white; font-family: Calibri, sans-serif; font-size: 11pt;"> </span><span style="background-color: white; font-family: Calibri, sans-serif; font-size: 11pt;">Sunday, November 6, 2022 11:07 AM</span></p><div dir="ltr" id="x_divRplyFwdMsg" style="background-color: white; border: 0px; font-family: "Segoe UI", "Segoe UI Web (West European)", "Segoe UI", -apple-system, BlinkMacSystemFont, Roboto, "Helvetica Neue", sans-serif; font-size: 15px; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="color: black; font-family: Calibri,sans-serif; font-size: 11pt;"><b>To:</b> andrew.ackerman@wsj.com <andrew.ackerman@wsj.com><br aria-hidden="true" /><b>Cc:</b> Wall Street Journal <wsj.ltrs@wsj.com><br aria-hidden="true" /><b>Subject:</b> Your Hysterically Funny Article Headline</span><div aria-hidden="true" style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> </div></div><div dir="ltr" style="background-color: white; border: 0px; font-family: "Segoe UI", "Segoe UI Web (West European)", "Segoe UI", -apple-system, BlinkMacSystemFont, Roboto, "Helvetica Neue", sans-serif; font-size: 15px; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><div style="border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Re: "Elevated Inflation Presents Risk to US Economy, Fed Report Finds", by Andrew Ackerman</div><div style="border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><br aria-hidden="true" /></div><div style="border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Dear Mr. Ackerman,</div><div style="border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">I look forward to the headline of your next report. I suspect it may be "Setting Fire to Buildings May Cause Immense Damage, Well-Know Arsonist Finds".</div><div style="border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><br aria-hidden="true" /></div><div style="border: 0px; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Patrick Barron</div></div>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-33275514244188940152022-11-02T09:20:00.002-07:002022-11-02T09:20:24.445-07:00Letter to NY Times Review of Books re: McKinsey & Co<p> <b style="color: inherit; font-family: Calibri, sans-serif; font-size: 11pt; font-style: inherit; font-variant-caps: inherit; font-variant-ligatures: inherit;">From:</b><span style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> </span><span style="color: inherit; font-family: Calibri, sans-serif; font-size: 11pt; font-style: inherit; font-variant-caps: inherit; font-variant-ligatures: inherit; font-weight: inherit;">Patrick Barron <</span><a data-auth="NotApplicable" data-linkindex="1" href="mailto:patrickbarron@msn.com" rel="noopener noreferrer" style="border: 0px; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;" target="_blank">patrickbarron@msn.com</a><span style="color: inherit; font-family: Calibri, sans-serif; font-size: 11pt; font-style: inherit; font-variant-caps: inherit; font-variant-ligatures: inherit; font-weight: inherit;">></span></p><blockquote style="background-color: white; font-family: "Segoe UI", "Segoe UI Web (West European)", "Segoe UI", -apple-system, BlinkMacSystemFont, Roboto, "Helvetica Neue", sans-serif; font-size: 15px;" type="cite"><div dir="ltr" style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><div style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><div style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><blockquote type="cite"><div style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><div dir="ltr" id="x_divRplyFwdMsg" style="border: 0px; color: inherit; font-family: Tahoma; font-size: 14px; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="font-family: Calibri,sans-serif; font-size: 11pt;"><b>Sent:</b><span style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> </span>Wednesday, November 2, 2022 10:30 AM<br aria-hidden="true" /><b>To:</b><span style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> </span><a data-auth="NotApplicable" data-linkindex="2" href="mailto:books@nytimes.com" rel="noopener noreferrer" style="border: 0px; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;" target="_blank">books@nytimes.com</a><span style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> </span><<a data-auth="NotApplicable" data-linkindex="3" href="mailto:books@nytimes.com" rel="noopener noreferrer" style="border: 0px; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;" target="_blank">books@nytimes.com</a>><br aria-hidden="true" /><b>Subject:</b><span style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> </span>A hit job on McKinsey and Co.</span><div aria-hidden="true" style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"> </div></div><div dir="ltr" style="border: 0px; color: inherit; font-family: Tahoma; font-size: 14px; font-stretch: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><div style="border: 0px; color: inherit; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><span style="border: 0px; color: inherit; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Dear Sirs:</span><br aria-hidden="true" /></div><div dir="ltr" style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><div style="border: 0px; color: inherit; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Your review of "When McKinsey Comes to Town" contains some logical fallacies and errors of fact. The review of the book, which I must admit I have not read, creates the impression that had McKinsey not recommended techniques for improving companies' performance then no one would have. McKinsey's techniques are very well known and did not originate with that company. For example, after WWII Dr. Edward Deming, an American, took well known productivity enhancing techniques to Japan and helped such companies as Toyota become world class companies. But even Deming's techniques were not necessarily invented by him or anyone. They are pure common sense applied to business. For example, Dr. Deming recommended that different shovels be used for different jobs. Not very high tech, is it? "Right sizing" is nothing more than applying work standards to certain jobs, which we see everywhere today from housekeeping services at hotel chains to computer programmers. The review also creates the impression that adopting these techniques are intrinsically bad, bad for employees and bad for company towns. Unproductive companies cannot pay their employees very well and cannot invest in modern plant and equipment in order to compete in the future.</div><div style="border: 0px; color: inherit; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><br aria-hidden="true" /></div><div style="border: 0px; color: inherit; font-family: Calibri, Helvetica, sans-serif; font-size: 12pt; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Sincerely,<div style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Patrick Barron</div><div style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">20 McMullan Farm Lane</div><div style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">West Chester, PA 19382</div><div style="border: 0px; color: inherit; font: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">610-793-3605</div></div></div></div></div></blockquote></div></div></div></blockquote>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-87477709571219892822022-10-24T14:29:00.003-07:002022-10-24T14:29:53.199-07:00Pipeline Sabotage and the Assassination of Archduke Ferdinand<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;">In the course of history there sometimes
occurs events that are monumentally important yet were hardly noticed by much
of the world at the time. The assassination of Archduke Ferdinand in Sarajevo
in 1914 went almost un-noticed at the time, yet it started a war that killed
millions of people and ended four empires within four years--the Ottoman
Empire, the German Empire, the Austro-Hungarian Empire, and the Russian Empire.
Eventually even the British Empire succumbed.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;">The sabotage and what now appears to be the
irreparable destruction of the Nord Stream Pipelines has every indication of
being such an event.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 12.0pt;">The Attack Upon the Pipelines Is an Attack Upon
Germany<o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;">The American political establishment has
been railing against the pipelines for years, claiming that Germany will become
so dependent upon Russian natural gas that it will be easily blackmailed in the
future to do Russia's bidding or suffer a cutoff of natural gas. This is
ludicrous from the start, because Germany can prevent this contingency by diversifying
its energy sources. The fact that Germany has not chosen to do so is an
indication that its leaders do not view a cutoff of Russian gas as credible. Is
Germany wrong? Perhaps. But Germany is a sovereign country with its own
constituency to which its political leaders must pander. The Green energy
movement, which opposes nuclear, coal, and even natural gas exploitation on
German soil is supported by a substantial segment of the German people and
cannot be ignored by its political leaders. Some American leaders, such as
California Governor Gavin Newsom, are building careers by following the same
political winds. Since German industry and the comfort of the German people are
dependent upon Russian natural gas, the attack upon the pipeline is an attack
upon Germany itself.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 12.0pt;">Cui Bono?<o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;">Asking "Who Benefits" suggests
that those responsible for a certain event are those most likely to gain from
it. Logically there are only three possible culprits to the attacks. (The
difficulty of the attacks rules out terrorist organizations, I think.) That
leaves Germany itself, Russia, or the United States. Germany probably has the
capability and, of course, access to the pipelines, but no motive to destroy it.
Sure, Germany may shun Russian gas now, but why destroy something that it may
desire in the future under a more favorable geopolitical climate? As for the
Russians, could there be some deep geopolitical game to destroy the pipelines
that took years to build and cost eleven billion dollars? After all, if Russia
wanted to shut off gas to Germany, all it had to do was stop the flow at its
end. That leaves the US.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><a href="https://www.britannica.com/topic/Occams-razor"><span style="font-size: 12.0pt;">Occam's Razor</span></a><span style="font-size: 12.0pt;">
is a principle that "The simplest explanation is preferable to one that is
more complex." America has been opposed to the pipelines long before the
Ukrainian war. See </span><a href="https://www.reuters.com/business/energy/us-european-lawmakers-issue-statement-opposing-nord-stream-2-2021-08-02/"><span style="font-size: 12.0pt;">here</span></a><span style="font-size: 12.0pt;">, </span><a href="https://www.congress.gov/bill/117th-congress/senate-bill/2894"><span style="font-size: 12.0pt;">here</span></a><span style="font-size: 12.0pt;">, and </span><a href="https://www.nytimes.com/2022/01/28/world/europe/nord-stream-2-ukraine-russia.html"><span style="font-size: 12.0pt;">here</span></a><span style="font-size: 12.0pt;">. Watch </span><a href="https://www.naturalnews.com/2022-09-28-nord-stream-pipeline-sabotage-likely-orchestrated-by-ruthless-biden-regime.html"><span style="font-size: 12.0pt;">this video clip</span></a><span style="font-size: 12.0pt;">
of an exchange between Senator Ron Johnson and Russophobe State Department
official Victoria Nuland, starting at the 2:52 mark. In separate public
statements, President Biden and Ms Nuland said respectively that "there
would no longer be a Nord Stream 2" and "Nord Stream 2 will not go
forward". Furthermore, America is an </span><a href="https://www.reuters.com/business/energy/us-lng-exports-europe-track-surpass-biden-promise-2022-07-26/"><span style="font-size: 12.0pt;">exporter</span></a><span style="font-size: 12.0pt;"> of
liquefied natural gas to Europe. Russia claims that American gas costs </span><a href="https://www.aa.com.tr/en/energy/energy-diplomacy/us-lng-price-up-to-40-higher-than-russian-gas-novak/20225"><span style="font-size: 12.0pt;">30% to 40% higher</span></a><span style="font-size: 12.0pt;">. As for deeper, geopolitical reasons to destroy the pipeline, it is
entirely possible that America does not want peace in Europe. It may not want
actual war, but it's actions indicate that it wants a permanent, armed presence
in Europe and needs a reason to keep the NATO nations tied to its apron
strings. If Russia is just another commercial nation, vying for natural gas
contracts in Europe, who needs the American military? Thus, the incessant
vilification of the pipelines. <o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 12.0pt;">The Lessons from Sarajevo<o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;">Getting back to the lesson to be derived
from the assassination of Archduke Ferdinand, let us consider consequences of
sabotaging the Nord Stream Pipelines between Russia and Germany. Eventually the
culprits will be identified. I highly doubt that placing the blame on anyone
except America is feasible. There is no motive for those who had access and
capability, and there is no access and capability to those who might have motive
(such as terrorist organizations). That leaves America. America may deny
involvement, but Occam's Razor tells us otherwise. That means that America
attacked either Russia, Germany, or both. The legal issue is irrelevant. If
Russia feels that America attacked its property, we may see a tit-for-tat
escalation similar to what happened in Europe a month after the assassination
of Archduke Ferdinand. If Germany feels that its sovereignty was violated and
its industry and people permanently harmed, it will break with America, leave
NATO, and most likely take all of Europe with it. Who knows what the
repercussions will be around the world, especially as our other allies see us
in an entirely new light. Furthermore, our enemies will be emboldened to
exploit our perfidy to the political maximum.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;"><o:p> </o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="font-size: 12.0pt;">If there is any beneficial consequence
to this heinous act, it would be that the American people rid themselves of
these interventionist elites who treat the world as toys to be broken with no
consequences. As a people we can rid ourselves of the hubris that we are the
indispensible nation with a moral right to intervene in the affairs of friends
and foes alike. How a nation of 330 million can assume such hubris in a world
of almost eight billion people borders on political megalomania. It is past
time to face reality.<o:p></o:p></span></p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-10907346003759253372022-10-24T08:59:00.002-07:002022-10-24T08:59:20.538-07:00World Dollar Hegemony Is Ending<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The end of world dollar hegemony is coming and hardly anyone in
government is taking notice or even understands what this means. Since the
Bretton Woods Conference in 1944, the dollar has been the only currency
accepted throughout the world for settlement of international trade accounts
among nations. Prior to 1944, physical gold was used for international
settlement. When an exporter in country A sold goods to an importer in country
B, country B would pay with its own currency. But country A would have no
interest in allowing country B's currency to build up in its vaults beyond an
amount required to settle its own importers' needs. Thus country A would demand
that country B redeem its own currency in gold. Sometimes country B would ship
physical gold to country A. Or perhaps gold held in safekeeping in a third
country would be designated as now belonging to country A, a book entry
transaction that is more convenient than physical movement.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">The
Bretton Woods Agreement and Its Demise<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The Bretton Woods Agreement added the dollar as tantamount to physical
gold at $35 per ounce. The reason was simple: at the end of World War II the US
had accumulated a preponderance of gold, due primarily to its role as the
"arsenal of democracy". Thusly, central banks could exchange dollars
for settlement rather than moving or re-designating the ownership of physical
gold. The weakness of this system was that the world had to trust the US not to
create more dollars than it could redeem for gold at $35 per ounce. But central
banks always had the option to demand physical gold from the US and hence
ensure that their trust in the measure of $35 per ounce was fully supported. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">After approximately twenty years of this arrangement the market became
concerned that the US was not living up to its obligations. The origin of this
concern was centered in France. President Charles De Gaulle himself was a firm
proponent of the classical gold standard as was his financial advisor <a href="https://en.wikipedia.org/wiki/Jacques_Rueff">Jacques Rueff</a>. Starting
in the late 1960's De Gaulle ordered the Bank of France to redeem eighty
percent of its vast dollar reserves for gold. Other central banks followed suit,
and a typical bank run developed. As US gold reserves reached critically low
levels, President Nixon took the US off the gold exchange standard, as the
system of central bank redemption was called, in the fall of 1971. It did NOT
devalue the dollar to gold, which it could have done, and promise to stop
dollar expansion. Instead the US simply ended dollar redemption for gold,
allowing the US to create as many fiat dollars as the world market would
accept. It turned out that the world market would accept a lot of fiat dollars.
One of the reasons was that Saudi Arabia, the world's largest oil producer,
agreed to demand payment in dollars for its oil, thus, creating worldwide
demand for dollars.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">The
Petrodollar Era Supplants Bretton Woods, But Its End Is Nigh<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">This "petrodollar" arrangement is now breaking down, due to
the ever accelerating debasement of the dollar. The cause of the debasement is
the unholy alliance of the Federal Reserve, the US central bank, and the US
government.<span style="mso-spacerun: yes;"> </span>The Federal Reserve prints,
out of thin air, all the dollars that the US government needs to maintain its
massive and ever increasing spending deficit. The monetization of these
deficits has led to a loss of dollar purchasing power at an accelerating rate.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The purpose of explaining all this is to give background to the
currently developing situation. For almost eighty years the federal government
has been able to spend as much as it desired, knowing that the world either
would hold its dollars or that the Fed would monetize whatever the market would
not accept; i.e., the Fed would buy the government's debt itself and
(figuratively) print the money it would give to the Treasury. The Fed would
then hold the debt on its own balance sheet. The sheer scale of its
intervention is shocking. In 2008 the Fed's balance sheet what slightly under
$.880 trillion. Today it is $8.816 trillion. (See <a href="https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm">this
graph</a> from the Fed's own website.)</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">So, what did the federal government do with all that newly printed
money? It spent it on war and welfare, of course. Lyndon Johnson's Great
Society welfare state is now firmly entrenched and constantly expanding. The
American military has intervened in every corner of the world. It seems that
all that is necessary for the US to intervene militarily is for some local
disputant on the other side of the world, with its own incomprehensible
historical animosities, to claim that its neighbor is invading its sovereign
territory and/or committing atrocities. The American people are whipped into a
frenzy of righteousness and off we go to Timbuktu. The result is thousands of
dead, billions squandered, and the local situation even worse than before.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">All this mayhem could only be funded by worldwide acceptance of the
fiat dollar. But much of the world has had enough. There are several
organizations that are cooperating to develop an alternative to the dollar for
the settlement of international trade. The <a href="https://en.wikipedia.org/wiki/BRICS#:~:text=BRICS%20is%20the%20acronym%20coined,significant%20influence%20on%20world%20affairs.">BRICS</a>,
the <a href="https://en.wikipedia.org/wiki/Shanghai_Cooperation_Organisation">SCO</a>,
and the <a href="http://www.eaeunion.org/?lang=en">Eurasian Economic Union</a>
have formed a working group to develop a commodity based medium of exchange to
replace the dollar as the premier means for the settlement of international
trade. <a href="https://www.goldmoney.com/">Goldmoney's Alasdair Macleod</a>
has written extensively about this project. More countries--especially
countries currently using the dollar, such as Saudi Arabia--have announced
their intensions to join the project. More, many more, will follow Saudi
Arabia.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">How to convey the importance of this development to the general public?
It all seems complicated and probably years away. Plus it may not work. That is
the purpose of the next part of my article.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">The
Magic Checkbook<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Let's break this down to the individual level, so that everyone can
grasp its full meaning. Let us assume that you were handed a checkbook and told
that you could write as many checks as you wished in any amount you desired
and, most importantly, no one would refuse to take your check and no one would
cash it because the checking account has no money anyway. Whoever receives the
check can only pass it along, via ordinary trade, to someone else. First of
all, you can see that once this money is created by you, it will never be
destroyed. It will continue to grow every time you write a new check. In other
words, the money supply will grow according to your propensity to spend. Now
let's assume that when given this magic checkbook, you had been a fairly frugal
and responsible person. That's one of the reasons that you were given it in the
first place. For some time you continued to live frugally, but over the years
your self-control breaks down and you start to spend. To placate your
conscience you spend some of the money on others; i.e., the poor, the elderly,
the disabled, etc. But eventually you succumb to ever increasing DEMANDS for
money to compensate the victims of all kinds of disasters. If you don't send
money to the suffering masses, you are condemned by all. So you spend. Then you
decide that you should spend money on rehabilitating humanity, exploring the
solar system, funding higher education. The DEMANDS for money from your magic
checkbook grow and grow. If you try to moderate your spending, you threaten to
damage your reputation internationally. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Things get out of hand. But this isn't the end of the story. The
spending from the magic checkbook has created massive price increases and has
funded a class of sycophants, deadbeats, and megalomaniacs. A splinter group
decides to spurn accepting checks from the magic checkbook and develop a new
medium of exchange. It isn't easy, and it takes quite a while. There are
advances and retrenchments, but eventually honest money re-emerges. Now more
and more people refuse to accept your checks from the magic checkbook. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Rise
of a Competing Reserve Currency<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">This is where the world is headed, because the US cannot force
sovereign nations to accept the dollar, especially if there is another and
better choice. The US has not lived up to its responsibility to protect the
purchasing power of the dollar via controlling its supply. Lord Acton's warning
is as important today as ever; i.e., "Power tends to corrupt, and absolute
power corrupts absolutely." The new SCO currency will supplant the dollar
as the world's premier reserve currency primarily because it will be backed to
a large extent by commodities and it will not be under the control of one
sovereign country but a number of sovereign countries, all dedicated to its
monetary health in ensuring the free flow of international trade and payments.
It will be a loss for the dollar, of course, and for the US, but frankly the
world will benefit overall.</p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-9846237549011078382022-10-19T14:10:00.001-07:002022-10-19T14:10:23.160-07:00The Missing Factor in Liz Truss' Economic Recovery Plan<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Despite much anticipation the economic recovery plan proposed by
Britain's new prime minister, Liz Truss, is missing one key ingredient that
will ensure its failure--spending cuts. The new "temporary budget"
presented by her Chancellor of the Exchequer, <a href="https://www.nytimes.com/2022/10/02/world/europe/uk-kwasi-kwarteng-truss-economy.html">Kwasi
Kwarteng</a>, proposed tax cuts and regulatory reform but not spending cuts. According
to the Spectator of London on October 12, 2022:</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><i style="mso-bidi-font-style: normal;"><span style="background: white; color: #333333; font-family: "Garamond","serif"; font-size: 12.0pt;">"Liz Truss
told PMQs there would ‘absolutely’ not be any cuts to public spending. Downing
Street clarified that ‘government spending will continue to rise,...</span></i><i style="mso-bidi-font-style: normal;"><span style="font-size: 12.0pt;"><o:p></o:p></span></i></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">This exposes a serious misconception of the real impact of government
spending on the economy. Of course, Keynesians see nothing wrong and lots that
is right about increasing government spending, especially if the goal is to
spur the economy to create more "aggregate demand".</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The problem is a complete misunderstanding of the nature of government
spending. Here's the key takeaway: <b style="mso-bidi-font-weight: normal;">Government
spending consumes societal resources rather than increasing them</b><b style="mso-bidi-font-weight: normal;"><span style="font-size: 12.0pt;">. <o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Any supposed increase in economic performance is nothing more than an
increase in monetary inflation. Resources that had been directed to satisfying
private demand now are satisfying government demand. If these were one and the
same--i.e., that government spending was just as effective in meeting private
needs as private spending--then logic tells us that there would be no reason
for government to increase spending at all. Therefore, government spending
pulls resources out of the economy and wastes them to some unknown extent.
Overall, the economy retreats in its ability to satisfy real needs.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Nobel Laureate Milton Friedman had a wonderful explanation about the
difference between government spending your money and you spending your own
money. If you spend your own money on yourself, you will spend it wisely. If
you spend your own money on someone else, a Christmas present perhaps, you will
spend it somewhat less wisely. If you spend someone else's money on yourself,
you will spend it even less wisely. If you spend someone else's money on
someone else, you really cannot know what other people want and you really
don't care how the money is spent. The last is what government does.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">In his magnum opus <a href="https://mises.org/library/man-economy-and-state-power-and-market"><i style="mso-bidi-font-style: normal;">Man, Economy and State with Power and Market</i></a>,
Murray N. Rothbard discredits the whole idea that government spending
contributes something to satisfying consumer needs. Where does government get
this money that it uses to satisfy the needs of "fill in the blank"
(the military, welfare recipients, corporate handouts, etc.) if not from the
productive economy? On page 940 of the Scholar's Second Edition, Rothbard says
that <i style="mso-bidi-font-style: normal;">"...we must conclude that the
government's productive contribution to the economy is precisely zero.</i>"
Further down the page he elaborates on this theme by pointing out that
"...<i style="mso-bidi-font-style: normal;">private consumers would have
done something...more productive...". </i>Therefore<i style="mso-bidi-font-style: normal;">, "...the government's spending is not simply zero, but negative
for it has imposed a loss in productivity upon society.</i>"</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Perhaps using an individual actor's dilemma would be more helpful to
understand Rothbard's very important point. Private homes deteriorate over time.
They require constant upkeep just to keep them in the same functional
condition. Private homes need new roofs every few decades, repainting,
re-stuccoing, repairs to the driveway, plumbing, etc. If government raises
taxes <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">for any reason</i></b> the homeowner has fewer resources with which to
maintain his property in good condition. If the government prints money instead
of raising taxes, the result is approximately the same, because maintenance
costs will increase in dollar terms. Economists refer to this phenomenon as
"<a href="https://thehill.com/opinion/finance/580043-the-inflation-tax-is-not-only-real-its-massive/">the
inflation tax</a>". </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Conclusion<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Government spending destroys economies, whether taxes increase or not.
It is the spending itself that sucks real, productive resources from the
economy. Ms. Truss and her followers will be bitterly disappointed that the
British economy does not recover and may actually regress due to their
unwillingness to cut spending and their willingness to increase it.</p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-88642754723465629392022-09-05T06:30:00.002-07:002022-09-05T06:30:34.018-07:00Despite Their Hubris, Monetary Authorities Do Not Have Total Control<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">A new monetary age is coming and sooner than anyone thinks. Since 1971
the world's monetary system has been unanchored from anything of intrinsic
value. In the fall of that year President Nixon took the US off what remained
of the gold standard, called the gold exchange standard, in which foreign central
banks could redeem dollars for America's gold reserves at $35 per ounce. The
reason for Nixon's action was simple: the US had cheated. Dollars were supposed
to be fully backed by gold, meaning that the US would not print more money than
it had the ability to redeem in gold at $35 per ounce. In effect, the US
counterfeited its own currency. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Ever since 1971 the world has been on a fiat monetary system, allowing
the world's central banks to print as much currency as their profligate
governments demanded. Today the dollar is worth only two cents of its 1971 gold
value. ($35 per ounce of gold in 1971 divided by $1,749 per ounce of gold on
August 29, 2022). One thing is certain, with greater and greater government
deficits, funded by greater and greater amounts of fiat currency, the dollar
will continue to lose purchasing power, perhaps falling to zero.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">As the US government keeps spending, a milquetoast Fed creates even
more dollars in order to prevent interest rates and/or taxes from skyrocketing,
which would cause the stock market to implode. The consequences are only just
emerging; i.e., higher prices. Nevertheless, we are told that our monetary
masters have the authority to force us to use the dollar, despite its steady
drop in purchasing power. Nothing can or will be done. The Fed controls the
dollar. The Bank of England controls the Pound Sterling. The European Central
Bank controls the euro, and so on. Or so it is claimed. But is that really
true? <b style="mso-bidi-font-weight: normal;">It is the hubris of our monetary
masters that they have total control over whatever fiat currency is made
mandatory.</b> </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">An
Idea Whose Time Has Come<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Victor Hugo wrote that "There is nothing more powerful than an
idea whose time has come." In 1971 that idea was Keynesianism. Keynesian
monetary theory gave central banks worldwide the philosophical endorsement to
print money in order to prevent recessions and to contract money when the
economy overheated (prices started to rise). It was oh so technical, modern,
and reassuring to the public, who even today venerate our monetary masters at
the Fed, the Bank of England, the European Central Bank, the Bank of Japan, etc.
But that was then. This is now. Now all is not as it seems. There is a new idea
whose time has come. Or, rather, it is an old idea that is making a comeback.
That idea is sound, commodity based money that cannot be inflated.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Some nations, especially those outside the Western orbit, are starting
to realize that their hoards of dollars, received in exchange for valuable
goods, are shrinking in purchasing power at a faster and faster rate. The great
con has been exposed. Many countries are not happy and want to do something
about it. Herein lies a great lesson. <i style="mso-bidi-font-style: normal;">The
world is a very big place. One can happily live in this world only if he is
honest, trustworthy, reliable, friendly, and doesn't meddle in the affairs of
others.</i> This lesson applies to nations as well as individuals. But the US
has violated these time-honored traditions. It has debauched the dollar, the
world's premier reserve currency for settling international trade. It has used
the international settlement system (SWIFT) as a weapon to ostracize nations,
such as Iran, that it does not like. It has confiscated assets held in the US that
belong to others, most recently Russians. As a result, some nations are working
to replace the dollar and the US controlled international settlement system
with one of their own. It is not an easy task, but, as Victor Hugo pointed out,
the idea of sound money and friendly, non-interventionist relations is taking hold
and will not be turned back.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">The
Warning Signs of Change Are There to See<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">There are some warning signs. Some members of the <a href="http://eng.sectsco.org/">Shanghai Cooperation Organization</a> have been
working on a new medium of exchange for settling international trade, bypassing
the dollar. (See <a href="https://www.silkroadbriefing.com/news/2019/08/06/brics-bank-move-away-us-dollar-loans/">this</a>
article and <a href="https://www.silkroadbriefing.com/news/2020/03/18/shanghai-cooperation-organisation-introduce-mutual-settlement-national-currencies-ditch-us-dollar/">this</a>
article) This money will contain a large gold content, making it difficult, if
not impossible, to debase. The Russians and the Chinese are involved, of
course, which is very important because both of these nations probably hold
more actual gold specie than any Western nation, including the US.
Significantly Saudi Arabia is considering joining. This is crucial, because
since 1971 the Saudis have demanded that payment for oil be made in dollars
only, creating the so-called petrodollar market. If the Saudis decided to
accept a new SCO currency in addition to the dollar, demand for the dollar
would drop. This would signal an end to the dollar as the world's preferred
reserve currency and set off seismic financial shocks, especially in the US.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">But let us not discount the possibility that some currently friendly
nation, such as Germany, might not seek an alternative to a steadily shrinking dollar.
Currently the euro is legal tender in Germany, but many German economists are
not happy with European Central Bank policies. The euro has been inflated as
much as the dollar. This is anathema to Germans who understand how their
country was destroyed by hyperinflation in the 1920's. Germany's federal
government is the most fiscally responsible in the industrialized world. It is
ludicrous that Germany's monetary system is run by inflationists at the
European Central Bank. Germany needs its own currency. Were it to reinstate the
deutschmark, the European Monetary System would collapse, and good riddance to
it. Many European nations probably would choose to join a deutschmark zone. In
the long run this would be beneficial to strengthening the dollar.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">International
Currency Competition Would Keep the Fed Honest<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Foreign central banks would not need to hold as many dollars, most of
which have been used to buy US Treasury debt. They will flow back into the US,
exposing the current system's weakness; i.e., that US price inflation was kept
in check only by world demand to hold dollars for international trade purposes.
That need will diminish and foreign dollars will start entering the spending
stream instead of being held as reserves. To stem the inevitable increase in prices
the Fed must allow the interest rate to rise and the federal government must
cut spending. Otherwise, the dollar's exchange rate with a new SCO currency or
a new deutschmark will fall. The US would be unable to afford necessary
imports. To prevent this disaster, the economy must be unshackled from needless
regulation, taxes must be cut, the dollar must be made redeemable in gold, and,
most importantly the federal government would have to cut spending. Otherwise
the economy will not progress. <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">It is important to remember that the federal
government is a parasite on the economy. Every dollar that it cuts from its own
spending frees resources for the real, private economy.</i><o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The long, steady march of the dollar to complete loss of purchasing
power would be arrested. This is good news for Americans and all other holders
of dollar reserves. What the public calls "inflation" would moderate.
There would be a reassessment of US economic policy. For example, the green energy
movement would be over. Wind and solar infrastructure would revert to niche
markets at best. They were never capable of meeting America's energy needs. International
interventionism would be over. The American people would finally see the full
monetary cost of America's wars, which would<span style="mso-spacerun: yes;">
</span>have to be supported by higher taxes. Reality would reassert itself. All
this is very good news for the future of America, which henceforth must live
within its own means and behave honorably with the world. I see nothing wrong
with that prospect. The important point is that the current monetary expansion
eventually will come to an end, one way or another. Various economists like
Frederick Hayek and Herb Stein have said in one form or another: that which
cannot go on forever will not go on forever. The sooner the US ends its
monetary expansion of the dollar, the shorter will be the necessary period of
economic adjustment. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com1tag:blogger.com,1999:blog-5649887104105216342.post-27208015755623630002022-08-22T09:17:00.000-07:002022-08-22T09:17:01.648-07:00Mandatory Vaccines vs. Logic and Kantian Ethics<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The case in favor of mandatory vaccines rests upon faulty logic and
violates ethical principles. A vaccinated person protects himself to the extent
of the vaccine's capability, which may be close to one hundred percent, as in
the case of polio and small pox vaccines, or much less, as in the case of the
Covid 19 vaccines. One may take the vaccine and enjoy its full protection even
if one is the only person so vaccinated. If everyone else takes the vaccine,
one's protection is NOT increased. And if everyone else refuses to take the
vaccine, one's protection is not diminished.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">So, why insist that "society" must be allowed to force you to
take a vaccine? If you refuse to take it, you are not a threat to anyone who
does take it. And those like you who refuse to take it assume the risk.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">One argument is that the more people who take the vaccine, the less
chance the disease has to spread and, it is hoped, will die out before it has a
chance to mutate to something else for which the current vaccine will not provide
protection. This is what the epidemiologists call "herd immunity". </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Kant's
Humanity Principle<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The problem with this argument is that it violates Emmanuel Kant's
"<a href="https://en.wikipedia.org/wiki/Kantian_ethics#Humanity_as_an_end_in_itself">Humanity
Principle</a>"; i.e., that man is an end in himself and may not be used solely
as a means to some other end. The advocates of mandatory vaccine want to force
individuals, against their will, to take a vaccine in order to protect unknown
and perhaps nonexistent others for something that may or may not happen. Not
only is this very thin soup indeed, and smacks of totalitarianism, but is a
clear violation of Kantian ethics.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">So, what's so important about Kantian ethics? Well, we see the problem
all around us. It is so ubiquitous that that we take it for granted. The state has
expanded from one organized for the <span style="mso-spacerun: yes;"> </span>protection of life, liberty, and property to
one of coercion to attain societal engineering on both a domestic and
international scale. I refer to the warfare/welfare state. On the thinnest of
pretenses man becomes cannon fodder for continuous wars, not to protect our
lives, liberty, and property in the present, but as preventive wars to stop
some supposed attack in the future. If we don't stop those terrible
"fill-in-the-blank" over there, they will be at our doorstep as sure
as night follows day, say the warmongers. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Domestically we are used to pursue a theoretical ideal called the
welfare state, where our property is confiscated in ever increasing amounts in
order to uplift others. Most often the failure of these programs becomes prima
facie reason to expand them, never to end them. The welfare state has pushed
aside voluntary private charities and benevolent associations, who must
continually show their financial supporters that they are effective and
efficient in order to retain their voluntary funding. Such organizations do not
violate Kantian ethics. Not so with government welfare, where the public are
used as means and not ends.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The mandatory vaccinations are both illogical and ethical failures. But
they are just one manifestation of a wide problem.</p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-6690563949788838452022-08-22T09:15:00.002-07:002022-08-22T09:15:53.729-07:00Diversity, Equity, and Inclusion Goals Are Illogical and Harmful<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Does society really need and can it benefit from goals designed to
achieve statistical "Diversity, Equity, and Inclusion" metrics? The
answer, of course, is "no" on both counts; i.e., society neither
needs these goals and cannot benefit from attempting to achieve these goals.
There are two illogical assumptions embedded in the DEI movement.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Illogic assumption number one: If superficial characteristics really
are meaningless, then those individuals who possess these characteristics do
not need goals for them in order to be fully included in society. For example,
I am certain that a person's eye color has no bearing upon one's ability to
function fully in society; therefore, there is no need for a goal to ensure
that individuals with all possible eye coloring are represented on an equitable
basis in whatever enterprise is being measured. The same undoubtedly is true
for height, hair color, and other random characteristics of birth.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Ah, but you may say, the very fact that people with noticeable characteristics
are in fact underrepresented in desirable societal classes is prima facie
evidence that dark forces are at work. And here we have the crux of the matter;
i.e., that government coercion is needed to defeat these dark forces.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">That claim leads us to illogic assumption number two: If superficial
characteristics are meaningless, then those enterprises who discriminate based
upon these meaningless characteristics will fail. Those who discriminate
AGAINST people with certain personal characteristics discriminate in FAVOR of
lesser talented people who do not possess these characteristics. The iron rule
is that discrimination always has a flip side. If an enterprise refuses to include
people with brown eyes, then it must discriminate in favor of lesser talented
people with blue, green, or grey eyes. Since the pool of talented people is
roughly the same for brown eyed people, then very talented brown eyed people
will outperform their lesser talented blue, green, and grey eyed competitors.
In an open society with free entry for competition, the cream will always rise
to the top.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">In conclusion, discrimination based on superficial characteristics, if
it really does exist, is self-correcting in a free labor market. Any perceived
statistical aberrations are meaningless or there are other explanations at
work. Insisting on fighting unnecessary battles are extremely harmful to
society for the simple reason that there is nothing that society can do. DEI
warriors will be persecuting the innocent, exactly the type of injustice they
wish to stop. My advice is this: Instead of searching for dragons to slay, just
mind your own business and set a good example. You will be happier and you will
accomplish more good for yourself and the society around you. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-78040643352174800992022-08-22T09:14:00.002-07:002022-08-22T09:14:07.129-07:00Sound Money Can Prevent What Representative Democracy Does Not<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">One of the arrogances of "Western" nations is that our way of
life and our liberties are protected by periodic elections as required by
constitutions, written (America) or not (Great Britain), containing bills of
rights, etc. The people rule, it is claimed, and we get exactly what we want,
even if those in the minority are unhappy with the result. Minorities can
always become tomorrow's majority and institute alternative policies.
Therefore, Western nations really cannot get into too much trouble, since
everyone wants peace, freedom, and prosperity, even if we disagree on the
proper route to take to get there.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">But what if I told you that there was a fatal flaw embedded in the very
structure of Western nations that undermined this view? What if we common
citizens can vote, change leaders, change parties, and it's all meaningless? A
good argument can be made that Ludwig von Mises believed exactly that and
warned nations repeatedly in book after book to eliminate this fatal flaw or
suffer complete societal collapse. Mises knew this could happen, because he had
seen it happen first hand. He pleaded with the elected leaders of Austria, his
beloved homeland, to take action in order to prevent what had happened in Weimar
Germany.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; tab-stops: 388.15pt;"><span style="mso-tab-count: 1;"> </span></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">The
Cause of Societal Collapse in Weimar Republic Germany<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">What happened in Weimar Germany--a real republic with democratic
elections, by the way--was a test case that should not be ignored. The collapse
of the German Weimar Republic led directly to the rise of National Socialism. <b style="mso-bidi-font-weight: normal;">The cause was unsound money</b>; i.e.,
money printed (literally at the time) in such quantities that the <a href="https://en.wikipedia.org/wiki/Papiermark">Papiermark</a> became
worthless. Society was thrown into chaos. Germany had lost <a href="https://www.statista.com/statistics/1208625/first-world-war-fatalities-per-country/">two
million men</a> in World War I out of a total population of <a href="https://www.reddit.com/r/MapPorn/comments/gnvij1/population_of_european_countries_1914_before/">sixty-eight
million</a>. The nation was one of widows, orphans, and the aged almost
entirely dependent upon what savings they had accumulated. These savings became
worthless. Widows became prostitutes, children became thieves, and aged parents
committed suicide. One of the best descriptions of this disaster is Adam
Fergusson's <a href="https://www.amazon.com/When-Money-Dies-Devaluation-Hyperinflation-ebook/dp/B0042JSRU0/ref=sr_1_10?crid=L7RVLQ0AOFDG&keywords=Collapse+of+the+Weimar+Republic&qid=1659886921&s=books&sprefix=collapse+of+the+weimar+republic%2Cstripbooks%2C59&sr=1-10"><i style="mso-bidi-font-style: normal;">When Money Dies: The Nightmare of Deficit
Spending, Devaluation, and Hyperinflation in Weimar Germany</i></a>. The book
is not for the squeamish.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Mises wrote repeatedly that unsound money was just as important,
perhaps more important, that the trappings of popular government. Perhaps his
best known quote is found on page 455 in <a href="https://mises.org/library/theory-money-and-credit"><i style="mso-bidi-font-style: normal;">The Theory of Money and Credit</i></a>:</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;">"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
bill of rights."<o:p></o:p></i></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Notice that Mises does not qualify the kind of governments that may
succumb to the despotism of money printing. This is very important. All
governments, democratic republics or totalitarian states, are susceptible to
the despotism of money printing. Mises returns to this subject time and time
again. Here is just one quote from <a href="https://mises.org/library/economic-policy-thoughts-today-and-tomorrow"><i style="mso-bidi-font-style: normal;">Economic Policy</i></a>, page 65.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;">"The gold standard has one tremendous virtue: the quantity of the
money supply, under the gold standard, is independent of the policies of
governments and political parties. This is its main advantage. It is a form of
protection against spendthrift governments."<o:p></o:p></i></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">A
Budding Alternative to the Fiat Dollar<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Iran, of all nations, recently accepted as a member of the <a href="http://eng.sectsco.org/about_sco/">Shanghai Cooperation Organization</a>,
has proposed that the organization <a href="https://news.cgtn.com/news/2022-06-07/Why-is-Iran-proposing-a-single-currency-for-SCO-region--1aFMkdBAOje/index.html">establish
a new currency</a> in order to bypass the dollar for settling trade among its
members. Alasdair Macleod has studied this process and written two learned
articles, <a href="https://www.goldmoney.com/research/inflation-recession-and-new-currencies">here</a>
and <a href="https://www.goldmoney.com/research/russia-is-winning-the-financial-war">here</a>,
which refer to their progress. The key points:</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;">"The Eurasian Economic Union (EAEU), consisting mainly of a
central Asian subset of the Shanghai Cooperation Organisation (SCO) has
announced plans for a trade settlement currency backed by a mixture of
commodities and the currencies of member states."<o:p></o:p></i></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .3in; margin-right: .3in; margin-top: 0in;"><i style="mso-bidi-font-style: normal;">"...a successful EAEU trade settlement currency can be extended
from EAEU nations to both those in the wider SCO and the BRICS members not in
the SCO. It could also be an acceptable replacement of the petrodollar for oil
export payments to the Middle East."<o:p></o:p></i></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The SCO members are negotiating over the new currency's structure, but
the important point is that it will have a very large commodity-based component,
including gold. The SCO's understanding of money is more in line with that of
Ludwig von Mises, who defined money as the following on page 425 of his magnum
opus <a href="https://mises.org/library/human-action-0"><i style="mso-bidi-font-style: normal;">Human Action</i></a>:</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><i style="mso-bidi-font-style: normal;">"Under
the gold standard gold is money and money is gold."<o:p></o:p></i></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Sound
Money Prevents War<o:p></o:p></b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Top among the most important reasons for sound money is that it
militates against unnecessary wars. Wars are tremendously expensive, of course,
and usually are undertaken only as a last resort or as a purely defensive
action. But unsound money makes it appear, for awhile anyway, as if war is cost
free. The US is the poster child for entering wars not as a last resort but for
other reasons. When Eisenhower left office in early 1961, the US dollar was,
well, as sound as a dollar. Eight years later, after Lyndon Johnson's "<a href="https://daytradrr.com/economics/guns-and-butter-what-does-the-phrase-guns-and-butter-mean/">Guns
and Butter</a>" policy, the dollar's value was under threat, as the US's
dwindling gold reserve amply illustrated. Two and a half years later, rather
than end the Vietnam War and other Johnson-era welfare programs, Richard Nixon
ended gold redemption by our trading partners. The war continued to its
ignominious end. Had he done his duty the US would have remained on the gold
standard and avoided other failed military adventures, a list so long that it is
embarrassing to list them all.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;">Which
Works Better--Gold or Representative Democracy?</b></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">In other words, gold would have done its primary duty; i.e., make the real
cost of government spending perfectly clear so that people, through their
elected representatives, can decide the extent of government spending. Instead,
the complete absence of any kind of objective barometer of the real cost of
government merely encouraged US neoconservatives to search the world for
dragons to slay and, if dragons were hard to find, to convince the people that
the dragons existed in places very far away--Libya, Iraq, Syria, Somalia,
Afghanistan, Ukraine...have I missed any?--and were a threat to our way of
life. Few, if any, of these failed adventures would have been undertaken had
the US been on an enforceable gold standard. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Representative democracy is important, yes, but it does not prevent
societal collapse from fiscal and monetary irresponsibility. Whereas, a gold
standard dollar quickly shows the true cost of government and can prevent most
follies. To put it bluntly, there are thousands of mothers who today would have
their sons by their sides rather than a <a href="https://en.wikipedia.org/wiki/American_Gold_Star_Mothers">gold star</a>
in their windows.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">But wait! There's more!, as the late night TV salesmen of tchotchkes
for the gullible used to say. Printing money out of thin air causes multiple
adverse effects, but most are delayed somewhat. Higher prices. The Boom/Bust
Credit Cycle. Resource misallocation. Plus many more, and all leading to a
lower standard of living. But a sound money standard reveals the sacrifices
that the public must make to fund more government spending. Taxes must be
raised, borrowing increased, or other programs defunded. These adverse
consequences happen almost immediately and are visible to all. If the public
thinks that the war or other spending program is necessary, then the government
will get its approval. But, really!, how many ordinary people can even find the
location on a map of our many wars of the last sixty years or understand and
support boondoggle spending programs that never die and, most often, get
increased funding?</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The worst spending programs in the past few years were the so-called
"stimulus checks". Even died-in-the-wool big spenders would question
the rationale of taxing the public in order to send them checks, minus the
government's bureaucratic handling fee, of course. Ladies and gentlemen, this
makes no sense and under a sound money environment would never happen. Yet our
federal government sent out three of them! And now our rulers are trying to
convince us that increasing the money supply to fund all these fiascos had
nothing to do with higher prices and shortages. Sure. But then again, those
late night TV salesmen like Ron Popeil sold lots of <a href="https://americanhistory.si.edu/collections/search/object/nmah_323705">Vegematics</a>!</p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-60470959519846194812022-08-11T04:38:00.003-07:002022-08-11T04:38:54.887-07:00An Opportunity for Real Change in Britain<p> </p><p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">In a few days the British Conservative Party will select a new prime
minister from within its ranks. The new PM will have a short-lived opportunity
to select new ministers. But more importantly, due to the inevitable adverse
consequences of a decade and a half of unprecedented money printing, little
real action to complete the promise of Brexit, and war in Ukraine, the new PM
can select ministers pledged to sound money, a rational and pro-growth tax
policy, free markets, limited government, and a non-interventionist foreign
policy.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14.0pt;">Sound Money</span></b><span style="font-size: 14.0pt;"><o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">In perhaps an apocryphal story, it is held that Ludwig von Mises was
once asked what one reform he would select if allowed only one. He quickly
answered...return to sound money. By sound money, Mises meant a money not
controlled by government but rather by the market. Without a doubt the market
would choose a commodity based money, most likely gold. Sound money would force
government to live within its means. Under a sound money regime, it becomes
clear that every pound or shilling spent by government comes directly from the
people. Government spending reduces private spending pound-for-pound. The so-called
"spending multiplier" by which one pound of government spending
increases total spending by multiples of that amount is a complete fallacy. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">New taxes will always be unpopular and rightly so. Increase in
government borrowing can only happen by pre-empting private borrowing, via
higher interest rates, which is recessionary by its very nature. It is natural
and good that government must overcome the public's reluctance for new taxes
and more government debt in order to increase spending. Government must justify
their increased spending plans to the people. By the same token, government
spending cuts will mean that the public will have more to spend themselves.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="text-align: center;"><b><span style="font-family: "Cambria","serif"; font-size: 14.0pt; line-height: 115%;">A
Rational Tax Policy<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-family: "Cambria","serif";">Like the need
for sound money, the need for a sound taxation policy is one of the most
important, yet least understood, aspects of government. Even the current debate
between the final two Prime Ministerial contenders, who of all people should be
better briefed, reveals a profound confusion that exemplifies Frederic
Bastiat’s distinction between what is seen and what is not seen. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Cambria","serif";">Every time one
of them declares an intention to cut, say, corporation tax and, more recently,
even income tax, the predictable counterblast is <i>“but that will cost the
Exchequer ‘£x billion’ per annum and will mortgage our children’s future, creating
‘£y billion’ of additional borrowing that will take ‘z years’ to repay. The
nation can’t live on credit-card economics! I will first address the problem of
inflation, and only then cut taxes – that’s the responsible approach!”<o:p></o:p></i></span></p>
<p class="MsoNormal"><span style="font-family: "Cambria","serif";">These emotive responses
perfectly illustrate Bastiat’s <span style="mso-spacerun: yes;"> </span>“what is
seen” – but it completely misses the vast potential increase in tax revenues
that might flow from a lower rate. What is not seen is the effect of
international tax competitiveness on the number of businesses that will
register their residence in the UK because it has a comparatively low rate of
corporation tax – witness Ireland, which has a corporate tax rate of only
12.5%, compared with the USA rate of 21%. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Cambria","serif";">Consequently, <i>what
is not seen</i> is the gain to the exchequer of welcoming thriving, profitable
companies into the UK, rather than the converse - losing UK businesses to
jurisdictions with lower tax rates. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Cambria","serif";">Also “not seen”
is the economic benefit that will flow from the presence in this country of
thousands of employees and their families. Because it is not seen, it is also
unquantifiable – but what is certain is that we shall see supply-side net
economic growth. The “tone” will have been established – and the direction of
travel is bound to be positive. It will result in a bigger pie – not a bigger
slice of a diminishing pie.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Cambria","serif";">What is seen is
always limited – such as revenue from new tariffs on imports – while ignoring
the harmful market distortions and negative price impacts that impinge directly
and indirectly on the cost of living. There are important lessons here.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Cambria","serif";"><o:p> </o:p></span></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14.0pt;">Free Markets</span></b><span style="font-size: 14.0pt;"><o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The examples of the failure of government run programs is there for
anyone who is not an ideologue to see. Just this past week, the Financial Times
reported that the government may halt all increases in new housing in the
London area due to the lack of adequate capacity in the power grid. In other
words, Britain's publicly owned and operated power system is not producing
enough electricity. A top to bottom privatization of not only power generation
but fuel sources is required. Scrap regulations on all sources of energy
including nuclear and fossil fuels. Nuclear power is one of the safest and
lowest cost sources of power available. Its higher costs are completely the
result of unnecessary regulation that, frankly, seems intended to end nuclear
power completely. Britain has been a leader in nuclear power technology for
over half a century. All its important warships and submarines run on nuclear
power, and hardly anyone thinks a thing about it.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Britain has been a fossil fuel giant since the eighteenth century. Coal
made the industrial revolution possible. North Sea oil has never met its full
potential. There is no reason that Britain need import fuel, unless it can be
purchased more cheaply elsewhere, such as the Middle East or even, dare we say
the word, Russia.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14.0pt;">Limited Government</span></b><span style="font-size: 14.0pt;"><o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Limited government means two things--limited government involvement in
the economy and limited spending. The two go hand-in-hand. An additional
benefit is that limited spending can be funded out of lower taxes. The British
legal system, based upon the common law, is all that is required for the smooth
regulation of economic matters. For example, fraud and contract law are well
defined in the British legal system for the smooth regulation of commercial life.
Tort law regulates harms actually inflicted, making product liability laws, for
example, unnecessary. Just as a better mousetrap drives less effective ones
from the market, better and cheaper products drive less effective and more
expensive ones from the market, making product regulation completely
unnecessary. A better template than the unitary state is the Swiss principle of
subsidiarity. Switzerland is a multi-ethnic land, making a one-size-fits-all
government impractical. Therefore, government is pushed down to the lowest
governmental level possible wherever practical, and it turns out that much of
day-to-day practical government can be handled at local levels where the people
really do have a voice. Britain should try this approach</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The National Health Service is a disgrace on almost any objective basis
of functional and cost-effective analysis, and it's getting worse rather than
better. End taxpayer support and put a fee-for-service price on its operation,
forcing it to compete with private healthcare providers. </p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Needless to say, there is no room for EU regulations, quotas, etc. in a
sovereign country ruled by common law with limited government. Only Brexit
supporters should be considered for ministerial jobs.</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p align="center" class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14.0pt;">A Non-interventionist Foreign Policy</span></b><span style="font-size: 14.0pt;"><o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">The war in Ukraine has illustrated how nations can be dragged into war
when their own national interest has not been threatened. NATO expanded
eastward after the fall of the Berlin wall three decades ago, until it ran into
real opposition in the form of Russia. There was no need for this expansion and
there is no need for Britain to be involved in Ukraine in any way. The war
there has taken on a life of its own and only a strong leader with a dedicated
cabinet of peace minded ministers will be able to dislodge Britain from this
conflict and prevent Britain from being dragged into similar conflicts, such as
the new dispute between Serbia and Kosovo. Instead of taking sides in purely
local conflicts, Britain should do all it can to create a new Concert of
Europe. This will require real statesmanship. Britain can and should lead the
way. A truly sovereign Britain can defend itself when its real interests are
threatened. Armed neutrality requires a strong national defense and a
non-interventionist foreign policy. The emphasis is on "defense" and
"non-intervention". A good maxim to follow is "Mind your own
business and set a good example".</p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><o:p> </o:p></p>
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="mso-spacerun: yes;"> </span></p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0tag:blogger.com,1999:blog-5649887104105216342.post-61441100395548825092022-07-26T07:11:00.003-07:002022-07-26T07:11:35.839-07:00The Future of the Dollar Is Bleak<p> </p><p style="background: white; margin-bottom: .0001pt; margin: 0in; vertical-align: baseline;"><span style="border: none windowtext 1.0pt; color: black; font-family: "inherit","serif"; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; padding: 0in;">From an Austrian school of economics perspective the dollar is weak
and growing more so every day, despite the fact that it is gaining against
other currencies on an exchange rate model. There are some specific causes of
this phenomenon, but the important point is that the dollar has been inflated
massively and will continue to lose purchasing power against real goods and
services, what the public and the press mislabel as inflation. The dollar's purchasing
power will deteriorate at an ever-faster rate, primarily due to the Fed
continuing to print dollars to fund the federal government's deficit spending
and to spur the economy through monetary means. As Alasdair Macleod of
GoldMoney.com has pointed out, the dollar already exhibits hyperinflation
characteristics, because the federal government cannot fund its debt without
the Fed's cooperation in monetizing it. Therefore, eventually the public will
understand that the dollars in wallets and bank accounts will fall toward
worthlessness and will begin to shed dollars in favor of real goods. Since the US
monetary authorities are died-in-the-wool Keynesians and completely clueless to
both history and sound economic and monetary theory, there is no hope for
changing this outlook.<o:p></o:p></span></p>
<p style="background: white; margin-bottom: .0001pt; margin: 0in; vertical-align: baseline;"><span style="border: none windowtext 1.0pt; color: black; font-family: "inherit","serif"; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; padding: 0in;"> </span><span style="color: #201f1e; font-family: "Calibri","sans-serif"; font-size: 11.0pt;"><o:p></o:p></span></p>
<p style="background: white; margin-bottom: .0001pt; margin: 0in; vertical-align: baseline;"><span style="border: none windowtext 1.0pt; color: black; font-family: "inherit","serif"; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; padding: 0in;">One would assume that the world is headed for disaster, but that
would not be entirely correct. There is a new international currency in the
works, sponsored by the </span><a href="http://eng.sectsco.org/for_media/20180606/441009.html"><span style="border: none windowtext 1.0pt; font-family: "inherit","serif"; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; padding: 0in;">Shanghai Cooperative
Organization</span></a><span style="border: none windowtext 1.0pt; color: black; font-family: "inherit","serif"; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; padding: 0in;">, sponsored by Russia, China, India, Pakistan, and other Asian
nations. The new currency will be backed by commodities, including gold. It
will be used first of all for settling international trade among its members.
Be prepared for more countries to join this new group. Also be prepared for the
Western press to paint the SCO and its new currency in the worst possible
light, as if the members of this group were waging economic war on the West.
Such is not the case. These countries are just wiser than the West. They have
seen currencies collapse and know the chaos that ensues. Of course, it would be
possible for the West to tie its currencies to commodities, as these nations
are doing, but there is little hope of that happening. Our economic gurus will
use the police power of the state to prevent the public from using this new
currency.<o:p></o:p></span></p>
<p style="background: white; margin-bottom: .0001pt; margin: 0in; vertical-align: baseline;"><span style="border: none windowtext 1.0pt; color: black; font-family: "inherit","serif"; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; padding: 0in;"><o:p> </o:p></span></p>
<p style="background: white; margin-bottom: .0001pt; margin: 0in; vertical-align: baseline;"><span style="border: none windowtext 1.0pt; color: black; font-family: "inherit","serif"; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; padding: 0in;">At the current time the only safe haven is gold. Not electronically
traded gold funds (ETF's), which are not fully backed by specie, but the real
stuff. Gold is money. All the rest are currencies that may or may not be
redeemable in real specie, i.e., gold. As the lapdog of the federal government,
despite its claim to policy independence, the Fed will not use its very
substantial gold holdings to back the dollar. To do so would be to expose the
federal government's budget deficit and debt to reality. Without the Fed's debt
monetization services, the interest rate required to fund the deficit would
drive out all other borrowing, public and private. The federal government
cannot balance its books without cutting entitlements, primarily Social
Security and Medicare, or its military empire. Its current debt would be valued
at less than junk bond status.<o:p></o:p></span></p>
<p style="background: white; margin-bottom: .0001pt; margin: 0in; vertical-align: baseline;"><span style="border: none windowtext 1.0pt; color: black; font-family: "inherit","serif"; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; padding: 0in;"><o:p> </o:p></span></p>
<p style="background: white; margin-bottom: .0001pt; margin: 0in; vertical-align: baseline;"><span style="border: none windowtext 1.0pt; color: black; font-family: "inherit","serif"; mso-bidi-font-family: Calibri; mso-border-alt: none windowtext 0in; padding: 0in;">This is the reality of the future demise of the dollar. I wish it
were not so.</span><span style="color: #201f1e; font-family: "Calibri","sans-serif"; font-size: 11.0pt;"><o:p></o:p></span></p>PatrickBarron@msn.comhttp://www.blogger.com/profile/15099283038936284127noreply@blogger.com0