Gary North on current economic affairs and investment marketsGary North -- Specific Answers
HomeContact MeTell a FriendText SizeSearchMember Area
Gain immediate access to all of our current articles, the question-and-answer forums, dozens of free books, and article archives. Click here for details on how to join.

About This Site
Academic Gaps
Capitalism and the Bible
Christian Economics
Clichés of Protectionism
College Finances
Debt Management
Ellen Brown: Critique
Federal Reserve Charts
Gary North's Free Books
Get Published Here!
Gold Price & My Report
Keynes Project
One Lesson
Price Index (U.S.A.)
Questions for Jim Wallis
Remnant Review
Social Security/Medicare
Sustained Revival
Tea Party Economist
U.S. Debt Clock
Yield Curve
Your YouTube Channel
Gary North's Miscellany
Budgeting for Wealth
Business Start-Up
Career Advancement
Digital Tools
Education That Works
Evernote: Free Notes
Federal Reserve Policy
Fireproof Your Job
Goal-Setting for Success
Great Default
Inheritance Strategies
International Investing
Investment Basics
Job and Calling
Keynesian Economics
Marketing Case Studies
Precious Metals
Real Estate
Safe Places
State of the Economy
Stocks and Bonds
Study Habits
Video Channel Profits
Members' Free Manuals
Our Products
Contact Me
Tell a Friend
Text Size
Your Account
My 100% Guarantee
Privacy Policy
Terms of Use

This site powered by MemberGate

Economic Error #11: A Monetary System Is a Contractual Agreement of an Entire Nation.

Gary North
Printer-Friendly Format

Ellen Brown is a Greenbacker. The theory of money that is offered by all Greenbackers never changes. They argue that fiat money is a contract among all members of a society. The civil government is in charge of the issuing of fiat money. The civil government is therefore part of the contract that everyone has made regarding the value of money. Here is what she says.

Money is a token representing the value. A monetary system is a contractual agreement among a group of people to accept those tokens at an agreed-upon value in trade. [Web of Debt, p. 347.]

You do not know what this means. Neither do I. Neither does she.

How does a token represent value? What is a token? There can be a ticket, and this ticket may entitle you to claim something. It could be a warehouse receipt. It could be a hat check. (Remember hats?) But this legal claim to an item does not determine the value of whatever is stored.

In a changing society, the economic value of everything is constantly changing. People regard the value of something in relation to their goals, their opportunities, and their plans for the future. When circumstances change, this affects their goals, their opportunities, and their plans. Prices change because conditions change.

If money is a token representing value, how is that token initially established? Who determines what the value of a token is? Is it the government? Does this mean that the Federal government at some point had to establish the value of every item offered in exchange? This would be preposterous. It could not be done. Who would want it to be done? Who would want to entrust government bureaucrats with that degree of authority?

The reason why the Greenbackers adopted this definition is because they believe that the government has the authority to regulate the value of money. They believe that the government can lawfully and rationally set prices as denominated in the government currency unit.

The trouble is, prices keep changing. People's assessment of what something is worth is constantly changing. There is no way for the government to assess prices and value, because there is no way that the government is God. Ellen Brown and the Greenbackers argue that the government has the authority to establish value, yet the only way that a central planning agency could do this is if it were God. It would have to be omniscient. The state is not omniscient. Government bureaucrats are not omniscient. But the Greenbackers have to assume that, in theory and practice, government bureaucrats are omniscient.

No group of people ever accepted these tokens at an agreed-upon price in trade. You did not agree to it, and I did not agree to it. Even if we had agreed to it, there is no way that we can stick with the agreement, because our assessments of the value of items is constantly changing. There are new inventions, new developments, new conditions. How would it be possible for any group of people to determine what the value of anything is, let alone what the value of everything is?

The only way that the Greenbackers can logically say that the government is a reliable agency for the preserving the value of the currency is to say that the government has the ability to regulate the supply of money so that all prices will remain the same, because all value must remain the same. It is obvious that no government agency has this ability. Government bureaucrats do not know what all prices are. They do not know what the value of all the items are. There is no way that money can be a token representing value.

If I give my hat to a hat check lady, assuming that I owned a hat, which hardly anybody does anymore, the hat check lady puts the hat in a location that is supposedly safe. Later in the evening, I return to the hat check lady and hand her the check. She goes into the room where the hat is, and she grabs my hat. There is some sort of temporary tag on my hat that is consistent with the number on the check. She gives me back my hat. I, if I am a gentleman, will give her a tip. I suppose my tip would be not to buy Ellen Brown's Web of Debt.

The point is, the value of the hat may have changed since the time that I handed it to her. Maybe I find out that the party that hats are no longer in style. I had not known that. Now I really do not want the hat anymore. I cannot sell my hat, because hats are no longer in style. So, the hat check entitles me to get my hat back, but there is no way that the check can establish the value of that hat.

You may think that this is a joke. It really is not. My father was an FBI agent for 20 years. J. Edgar Hoover required all of the agents to wear hats in public. The problem was, by the late 1960s, the only people wearing hats in public were FBI agents. So, if an FBI agent were tailing someone, the person would know he was being tailed. The agents did not know what to do with their hats. They would sometimes leave them in the car, or they would hold them in their hands. But, ultimately, they could not conceal the fact they were FBI agents. Finally, Hoover rescinded the requirement.

The value of hats in the United States plummeted in the 1960s. Men's hats have never become popular again. Very few women wear hats in public. So, how can a receipt for a hat maintain the value of the hat? The idea is absurd. Yet this idea is the foundation of Ellen Brown's entire economic theory.

Ludwig von Mises was correct: money is the most marketable commodity. There is no agreement among individuals about the value of money. The value of money is constantly changing.

People make voluntary exchanges, one exchange at a time, in terms of the prevailing value of the currency unit. There is no social contract among all participants regarding value. The only contract that exists is this : if someone issues a receipt, there is supposed to be in reserve whatever the receipt promises. This is not a token to value; it is a token to a specific physical item.

Because paper money units (IOUs) are severed from gold or silver coins on demand, there is far less predictability of the value of the currency unit than there was when the currency unit was a specific quantity of gold or silver. It is easier to print digits than it is to mine gold and silver.

For a detailed critique of Ellen Brown's economics, go here:

Printer-Friendly Format
 Tip of the Week
Sign up for my free
Tip of the Week
Verification Characters:    Type     R  J  S  V  X     here   

Tip of the week archives
On what this icon
means, and how it
can help you,
click here
 Q & A Forums
General Q&A Forum
Advertising and Resumés
American History Topics
Backyard Food Gardening
Banking and Politics
Blog Sites and Web Sites
Books Worth Reading
Bumper Sticker Slogans
Business Forum
Buying Smart
Christian Service Forum
College -- The Cheap Way
Education Alternatives
Food Storage
For Women Only
GNC Benefits
GNC Testimonials
Gold and Silver
Great Default Forum
Health and Diet
Health Insurance
Investments Forum
Iran War
Job, Calling, and Career
Leadership Development
Legacy Building
Less Dependent Living
Local Political Action
Non-Retirement Forum
One Good Idea
Police State
Public Speaking
Real Estate Forum
Remnant Review Forum
Safe Places Forum
Taxation Policy
Typographical Errors
Video Production Basics

Reality Check
 Discussion Forum
Search Discussion

Recent Forum Posts
• Safe currencies to hold
• Benjamin Graham?
• A Motif masochist investor asks
• "Asset Based Long Term Care" annuities
• Buying pipelines at the next crash
• RE:Concierge Doctor
• Discover Bank 0.9% APR?
• getting out of the euro
• Amazing Dollar Strength
• Stuck in 401K. Help!
• Currency Wars
• Need Any Adjustments?
• What is the third question?
• What to do with my IRA funds?
• 529 plans
• Rent controls in mass inflation:where to go?
• How to calculate ROI for a rental property?
• How should I sell a house?
• location Vs. amenities
• DFW Real Estate - Bubble Economy
• Rental houses: cash flow
• RentoMeter site
• Renting individual Rooms vs. Whole house
• Are real estate agents driving this phenomenon?
• Intro to Real Estate
• best-and-worst-m arkets-for-rent al-returns
• Establishing a rental farm away from where I live
• 9 out 10 Most Expensive Cities are in California
• Moral standards and renters
• Malls Fill Vacant Stores With Server Rooms
• Time to leave America while you still can ?
• Impact Fees for New Florida Residents
• New Hampshire and Florida
• Ecuador and PR
• Survivor library
• Missle Silo converted to Condos
• Does the South suck?
• Moving TO the US?
• No City for Old People
• Will you die getting to your bug out location?
• teaching English overseas - some questions
• The state with the most Liberty
• Switzerland and Firearms
• On "Zip Code Searching On The Web"
• Crash Course in becoming an Expat
• Kurzweil on Financial Times
• Why is this fantasy world stuff?
• One change could help saving for retirement
• Forced retirement - lump sum - legal work
• Moving Retirement Funds
• Sudden Wealth Advice
• Sudden Wealth Advice
• Question on Traditional Pensions
• advice on how do I interact with my older parents?
• Do You Sincerely Want to Be Rich? Why?
• Req. For No 401(k)/Other Pensions via Relocatio
• Cashing out 401K to pay student debt?
• SS @ 62 and still working
• Desolation or Prosperity?
• I take it Retirement Armageddon is not available
• Total bank failure
• The future of work - There’s an app for that
• Re: Hijacking Your Email Address
• Business in 3rd world vs Working in 1st World
• Robert Ringer dealmaking course
• Original Watson video
• Residential Real Estate and the Great Default?
• Walmart shutting stores across America?!?
• Mini-Defaults: Municipal Equity Issuance
• My heart attack, update
• Great Default: How Are You Preparing Now?
• Where to find the COR position papers?
• Driverless Cars
• Greece vs the Eurozone
• Questions for small business owners
• Leasing Question
• New Motor Technbology
• MBA programs that get you where you want to go
• a different marketing - using academia
• Video Interview Equipment
• Beginner Business Structure
• Apply 80/20
• Good Recruiting wins Championships = $$$
• Meeting with the State
• Family earns $1 Million from YouTube vids
• Customer Service and Ethics Still Rule?
• Business Loans Question
• The life value of a customer ?
• If an Algorithm Wrote This, How Would You know?