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
Articles
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
Advertising
Blogging
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
Insurance
International Investing
Investment Basics
Job and Calling
Keynesian Economics
Leadership
Marketing Case Studies
Obamanomics
Precious Metals
Real Estate
Retirement
Safe Places
State of the Economy
Stocks and Bonds
Study Habits
Video Channel Profits
Members' Free Manuals
Our Products
Contact Me
Help
Tell a Friend
Text Size
Your Account
My 100% Guarantee
Privacy Policy
Terms of Use


This site powered by MemberGate

How to Defend the Free Market Gold Coin Standard: Stop Defending the Government Counterfeits.

Gary North
Printer-Friendly Format

Dec. 27, 2010

This was posted on one of my site's discussion forums on the night before Christmas:

Gold based economies more volatile than central bank fiat based money economies??

Roubini: On a return to the Gold standard

"When you had a traditional gold standard, boom and bust with severe swings in economic activity were the norm--really big ones. It was only once we moved to fiat money that central banks were able to smooth the business cycle, and make it less volatile, as we did during the financial economic crisis." - Nov 2010

Where do they get these ideas? Or rather where did I get the idea the boom and busts would be smaller in a gold based society? I know I have heard this multiple times.

But they did have bank panics in the 1800s. So maybe they are right?

My bet is that the booms and busts will occur in a gold based economy but they will not be so big and wild or last as long as in a fiat money based economy.

The person who posted this is well meaning. He senses that Roubini is wrong, but he is not sure exactly why. He is typical of the overwhelming minority of those who think that a gold standard would be a good idea. He means well, but, as they say, he doesn't get it.

What is "it"? The logic of the free market.

So, let us begin. First and foremost, a government-guaranteed gold standard is a rotten idea. It is just a little better than a fiat-money standard. But advocates of "the gold standard" almost always mean "a government-guaranteed gold standard." Therein lies the problem. Governments lie. They cheat. They steal.

Over and over, I have returned to this theme: a government-guaranteed gold standard is a fool's gold standard. I have had great trouble in getting this idea across.

There are two kinds of gold standards: government-guaranteed and privately administered. The first is a counterfeit of the second. The politicians set up the rubes to be skinned. I have written about this here:

http://www.lewrockwell.com/north/north201.html

I hope you will click the link, print out the 2003 article, and read it twice.

The idea of the gold standard pre-dates Austrian School economics by a century. Ludwig von Mises created the Austrian School by applying the general principles of economics developed by Menger and Bohm-Bawerk to monetary theory: The Theory of Money and Credit (1912). Here, we find the first integrated defense of a free market gold standard.

A short presentation is Murray Rothbard's mini-book, What Has Government Done to Our Money? (1964).

Something close to a free market gold standard existed in California in 1849-54. That is about the only place it has ever existed.

Here are the characteristic features of a free market gold standard:

1. Private property
2. The right of contract
3. The enforcement of contracts by the government
4. No government licensing of banks
5. Open entry in coin production
6. No government mint
7. No government currency or coins
8. Therefore, no legal tender laws

The legal framework begins with private property. The monetary system develops out of this. If the monetary system does not begin with private property and the right of contract, then it is just one more government substitute for liberty. It will fail to bring liberty or maintain it.

Here was what Mises advocated: free banking, no bank regulations beyond the general enforcement of contracts, and no central bank supported by the government.

Out of this legal framework will develop a free market gold coin standard, a free market silver coin standard, and maybe other standards. The various currencies would fluctuate in price, just as all other commodities fluctuate in price. These would be parallel currencies, not price-controlled currencies. There would be no government-enforced price controls that set the price of silver in terms of the price of gold.

The government would specify the form of acceptable currency for the payment of taxes -- nothing else. It would not issue coins or currency of its own. It would not enter the money business. Whenever governments enter the money business, the public should expect monkey business.

This system of economic liberty is the great enemy of civil governments. Therefore, they all create alternative monetary systems. One of these is the government-guaranteed gold standard. A government-guaranteed gold standard is not worth the paper it's written on. It's a deception. It is always violated at some point.

Conservatives who have never read Mises or Rothbard on money nevertheless regard themselves as free market economists, because they favor a government-guaranteed gold standard. Such a standard has not existed anywhere since 1933, and did not exist anywhere else, 1914-1933.

So, when anti-gold economists attack the gold standard, they are attacking the phony gold standard -- the imitation standard -- created by major European governments in the 19th century. Those governments did the following:

1. Limited private property
2. Did not allow the right of contract
3. Did not enforce all voluntary contracts
4. Licensed banks
5. Forbade entry in coin production
6. Ran government mints
7. Established government currency and coins
8. Passed legal tender laws

The critics think they have been successful when they point out that this pseudo-gold standard had major problems. Of course it had major problems. It was an anti-free market gold standard.

The Keynesian critics' preferred solution is fiat money: unlimited deception, corruption, and currency destruction by the national government.

The defenders of the phony gold standard have self-doubts. This is good. The system they defend was corrupt from day one.

Now, if I can just persuade the self-doubters of the legitimacy and wisdom of the free market. . . .


Printer-Friendly Format

 Tip of the Week
Sign up for my free
Tip of the Week
Verification Characters:    Type     T  Y  P  7  9     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
Affiliates
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
Copywriting
Education Alternatives
Food Storage
For Women Only
Fukushima
GNC Benefits
GNC Testimonials
Gold and Silver
Great Default Forum
Health and Diet
Health Insurance
Homeschooling
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
Privacy
Public Speaking
Real Estate Forum
Remnant Review Forum
Safe Places Forum
Taxation Policy
Typographical Errors
Video Production Basics

 Archives
Reality Check
 Discussion Forum
Search Discussion


Recent Forum Posts
• Cashing in 401k??
• Rare Coins vs. Gold
• ETrade Dumping Global Trading
• The New World Order Just Got a Wake-Up Call
• Are rates rising or falling ?
• The Next Market Crash article
• Gary, what IS your long term investment outlook?
• Trailer parks as a sound investment
• Prices for US treasuries headed south?
• Copper
• Negative interest rates
• Looking for educational material
• Safe currencies to hold
• Benjamin Graham?
• A Motif masochist investor asks
• Buy or Rent for a Young Family
• Raising Rent
• Financing vehicles
• Sell or Rent with Recession on the Horizon
• VA Home Loan
• House flippers are back with Wall St help
• Is there a large brokerage you recommend.
• Ever hear of Exit Realty?
• What commission do you think a broker should get?
• Capital gains
• Developing a mobile home park
• Word press plug in
• Rent controls in mass inflation:where to go?
• How to calculate ROI for a rental property?
• How should I sell a house?
• Let's not make a deal!
• US Pop update: 78% pop decline by 2025 !
• Price Book- End of America
• 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
• 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
• Cost of war
• Fine for refusing to bake a cake for gay couple
• TPP trade bill whats the senate bill number?
• Free Screening: The Greenhouse of the Future
• Learning to program
• A Way to Brew Morphine Raises Concerns Over Regula
• New McDonald’s In Phoenix Run Entirely By Robots
• Video: Trumpet-Like Sounds, Worldwide
• This just in ...
• No kidding?
• Osama and me article
• Cartel busting by Uber
• Top universities want you to homeschool
• Someone argues that God sustains without job
• State deficits
• Loyalty
• Small business loans
• Metrics for growth of online education?
• How to best build email list of High Net Worths
• Competing where no one wants to
• A Low-Cost Weekend Business to Retire Into
• 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 = $$$