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There was a time in this country when those who advocated a Fiat Monetary Standard were considered certifiable crackpots, monetary quacks and dangerous interventionists set on domination of both the political and economic processes in this country, the roles have been reversed and those who advocate sound money are assigned such epitaphs of derision. Fortunately, that will change at this point in time, rather rapidly as the true nature and inherent problems of fiat money become evident to the people themselves.

At one time, Classical Liberalism promoted the ideals found within the principles of a sound monetary unit that not only provided stability economically, but also provided for the spread of real prosperity and liberty. The cornerstone of Classical Liberalism was private property rights and the cornerstone of all private property rights was, and is sound money, money that is actual real property, solely owned by the individual who labored either by the sweat of his brow or the sharpness of his creative mind. Such money was not owned or controlled in any significant way by government except in trust through the regulation and verification of the fineness of coinage in purity, weight and measure. Otherwise, money was the property of the individual, or legal corporation, just as any other property of which legal title may be held.

Along with the ideal of private property rights, Classical Liberalism, which could just as easily be called Jeffersonian Liberalism, promoted a confidence in the market economy, as free as possible from all interventions, especially from the government. They held, and still hold that private property rights, in all aspects, provides for the best means of production and distribution of prosperity within society with a system of economic organization organic in both concept and operation. It was, and is, the best system to secure the broadest means of prosperity and individual protection within a society for it assigns the individual consumer the power to choose which producers provide the best quality at the lowest possible price for the consumer’s needs and desires. The principles of sound money and free, unencumbered markets were just some of the foundation stones that help create this wonderful and I might add, successful experiment in the broadest spectrum of individual freedom and liberty the world had experienced: These united States of America under an mutually agreed Constitutional Compact between the people and their government.

The Founders of our country realized that the main challenge facing such a liberal system of government and society was how to control the only real danger that would ever face the country, the government itself. The goal of the Founders was to institute a government so cumbersome, so divided in function and authority that all power would be distributed between the general government and the independent State Republics; the best description could be called a Republic of Republics, functioning in a cooperative compact. Then, of course, they implemented further divisions within the general government itself, once again dividing function and authority to ensure that power could not easily be concentrated or consolidated.

In essence, the general federal government was simply a reflection of the will of the people through the agency of their respective State Republics. So, the main problem, in the minds of the Founders, was how to prevent those who are entrusted to govern by consent from becoming despots, endangering and enslaving the citizenry in their stewardship. The layers of defense for individual liberty was obviously the primary goal in the institution of our system of governments and the focus of each layer of defense was the broadest application of individual freedom and liberty possible within such a system. What an absolute shame that we have allowed ourselves and our country to devolve far from such a very workable, very efficient ideal.

Today, there are few who seem to realize or understand that within all the defenses for individual freedom and liberty laid out by the Founders, was the principle of sound money. It is absolutely impossible to understand the full meaning and import of sound money without understanding that one of the primary purposes of sound money is the protection of individual freedoms and liberty, private property rights, as well as a protection against government intrusion. Sound money is politically and ideologically in the same strata as our Constitution and our Bill of Rights, and it is just as important to our freedom and liberty. It was, and should be considered, the most essential restraint upon arbitrary government expansion and the potential for unbridled consolidation of power.

The principle of Sound money has a dual purpose, one positive, one negative; in the positive aspect it provided for the greatest degree of individual freedom and liberty while providing for the broadest spectrum of free market choices. On the negative side, its aspect was one of governmental restraint, an abutment of reckless expansion, potentially dangerous debt aggregation and of course eventual despotism. In such a system, only actual coinage was to be considered loose legal-tender, all tokens, scripts and types of “paper-money” were to only represent the real money and only served as fiduciary mediums, which upon demand of the holder, were completely redeemable in lawful real money. “Real money”, it definitely has a wonderful ring to it, doesn’t it?

I wonder how many in our government, or in the Federal Reserve for that matter, finds the term “Fiat Money” as oxymoronic as I do? Money, by definition, is a store of value; fiat, by definition is simply a decree without intrinsic value. Fiat money is an impostor, giving the impression of value without retaining a store of value as a medium of exchange. With the dedicated assistance of the Federal Reserve, this country is in now in a state of irreversible collapse, technically bankrupt for several years, it will absolutely be unable to climb out of the horrible pit these criminals, both in the Federal Reserve and the government, have share in taking this country to the precipice of disaster and they are still pushing.

“… the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.” –Ben Bernanke 2002

Today, we are so far-removed from the concepts of sound money that it is totally foreign to our understanding; we have been convinced that the only monetary system that is acceptable or applicable is the one we current have imposed upon us and that is the fiat monetary system. Sound money is an alien concept, so much so that we don’t realize just what we are missing, it doesn’t enter our minds, for the most part we are totally unaware of the benefits of a sound monetary system. Of course, a fiat monetary system requires ignorance, equalized with confidence, in the general population to function properly, without widespread ignorance or confidence, the system fails, as we will see.

The fiat system not only relies upon widespread ignorance and misplaced confidence, but it also relies heavily upon government intervention and regulation. A sound money system, on the other hand, doesn’t rely upon such numerous variables in order to function; actually it is extremely simply and straightforward in both functionality and application. A sound money system can easily operate independently of all government policies and the pressures of political intrigues, including very divisive party politics. Such a system also helps to prevent government officials, and representative assemblies, from using various tricks to elude their budgetary and fiscal responsibilities to the people and the country.

Since the rather subversive introduction of the fiat monetary system in this country, there has been little room for the consideration of a sound monetary system. The proponents of the fiat system have for the most part, effectively exiled it from economics and serious monetary studies for good reason, for it poses the greatest danger to the fiat system and those who enormously benefit from that system. The various proponents and schools of economic thought have yet to consider the precarious position they are in because they have failed, utterly failed to contemplate that all their theories are based upon a monetary system inherently doomed to failure. Such a foundational flaw will always ultimately distort all conclusions associated with it, especially when the flaw is not considered to exist. Today, our country is fraught with what could only be considered “Crypto-Despots”, eager to maintain their position as well as their power, the prime impetus of which has been the introduction of a system of fiat money for it provides them with medium of control over society that they crave.

So, there are few questions asked and the questions that arise are based upon incomplete assumptions because the foundational structure of the economy is completely based upon a system that contains two divergent fault lines, which will, in time converge in disaster. The first fault line consist of the inherent terminal life span of all fiat monetary systems due to the systemic inflationary depreciation, the second fault line consist of requirement of absolute widespread public confidence in fiat money itself.

Eventually, these two fault lines converge and the system collapses. Such collapses are not preventable any more than the system itself is sustainable without massive government and central banking interventions. The system lends itself to those who require the benefits of inflationism, this trait, of course, is welcomed and enhanced by both government and central bankers who are all too eager to utilize such a trait to their best advantage. What need is there to operate within budgets, to maintain expenditures by within tax revenues since, according the a former Chairman of the Federal Reserve of New York: “taxes for revenue are obsolete”, and indeed they are obsolete within a fiat monetary system. I have found that the full import of that statement has yet to be realized, especially within the minds of the majority of economists and their feeble schools of economic theory fashioned around the fiat monetary system, a system that is inherently flawed.

Eventually, of course, the people, the economists and the politicians will become painfully aware of just how flawed the fiat monetary system really is as the very harsh reality rises into view, affecting everything and everyone within this country. Like all fiat monetary systems, ours is destined to go through the same stages of failure as all others before it, and our economy will, at that moment, collapse under the inflationary pressures of an enormous expanding government.

Inflation is an easy tool in the hands of the government as long as they can maintain it at gradual incremental increases over long periods of time, but the moment a rapid increase occurs, the ruse becomes far more difficult to maintain. In the first stage, the people will begin to witness the rapid increase in prices for both goods and services. While at that point they simply believe the government when it states that commodity prices are rising for various reasons; the government of course, always has a plethora of reasons on hand to justify such price increases, all in the hope of maintaining the charade.

At this stage, there will be a few people who actually realize just what is going on in the economy, but unfortunately the majority will remain true to their conditioning and while they may gripe, will not question the true cause of their financial pain or the culprit behind it. The majority will continue living their daily routines as though the inconveniences of higher prices will be a passing phenomena, continuing to misplace their trust in a government that was in on the damnable ruse from the beginning as it shifts all blame to something or someone other than itself.

While, at this stage, people may wish to make certain purchases, they think that prices will eventually retreat so they put off the purchases in the short-term until a later date. This common attitude is relatively short lived because as prices continue to rise, at unprecedented levels over longer, consistent periods of time, people will begin to think that because prices are so high that they will then put off a purchase for a year or two, perhaps then prices will once again subside to more normal and manageable levels for their income. The last stage abruptly hits and the entire system then faces catastrophic collapse when the people begin to think that they had better make a purchase, any purchase immediately because they realize that the purchasing power of their fiat money is rapidly loosing its value of exchange.

So, the people, in a panic, will withdraw, if they are allowed, their bank deposits, cash in their stocks, redeem any bonds for cash to exchange for commodities or merchandise they feel will retain value even if they have no real needs for the commodities or merchandise they are buying. As the panic spreads, shortages being to take shape, manufacturing slows to a halt, unemployment skyrockets, and public services breakdown and in the last stages chaos ensues. The government seeks to assert itself, but to no avail for even the government under these circumstances, in this present age will prove to be as impotent as the fiat money they so ardently promoted, to solve the problems faced by the country and the people.

While it is easy to see the conclusion of such a system as a failure, the truth of the matter is that entire system, and the policies created to sustain it, were failures from the beginning. The purpose of the system is not, nor has it ever been throughout history, for the benefit of the people; its sole purpose is to provide the government with unlimited, unrestrained finance and the central bankers with an incredible profit machine without much oversight or regulation to impede their government authorized monopoly.

So, the system of government and central banking fiat money, dependent upon intentional deception of the population to remain viable comes to an abrupt end, it is no longer a manageable system of exchange, nor will it provide the government with a free financial reign. There...

Republicae 5 Mar 13
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1

Gold has always been the answer. The liberals (FDR) wanted control of the . By taking gold out of the equation, they took control. A short story: I met a man in his 90's, he showed me $20 gold coin. He told me that he had it since he was young. He said at the time he got the gold coin, he could go to a fine men's store and a really good suit with the coin. Then, he said, "I can go to a fine men's store today and a really good suit with this coin, the value of this coin has not changed".

0

Of all the ways to define the scale of our economy, is “how thinly are we able to slice gold?” really the best metric to use?

If fiat currency is as useless as you say, can you send me some of yours? I mean if people will soon come to their senses and realise that it’s not real, what difference does it make to you?

Ah, a man with a null hypothesis, lovely! In Zimbabwe you had a population of some of the richest poor people on Earth. Trillionaires in fact, according to the nominal face value of their fiat currency in their possession, but they couldn't buy a dozen eggs with all their money. History, which is perhaps one of the greatest teachers, if we pay attention, has proven that when governments assume the power to control the money supply, the power to indiscriminately print or produce it at will, the endgame is always the same.

It's not the quantity of money you possess, but the amount that money can buy that is meaningful. Thus, you can have a Trillion Dollars printed on your paper money, but if it only has the power to buy $2.95 worth of eggs then what do you really have?

The U.S. Federal Reserve Notes today have, thanks to our government borrowing and central bank inflationary depreciation, the purchasing power of a few Cents each compared to the purchasing power of a 1913 100 Cent Dollar.

So today, all those slips of paper you have in your pocket, printed with the images of Washington, Lincoln, Hamilton, Jackson, Grant and Franklin, with the nominal value of $1, $5, $10, $20, $50, $100, all costing a few Cents each to print, eventually will end with the same value ZERO.

You must be a big fan of the Federal Income Tax and other taxes, I mean if you like fiat money. Of course, is rare that people understand that Fiat currency is little more than an official form of legalized embezzlement from the working class to the government and those who are politically connected.

Fiat money is bad for several reasons, I suppose it's great if you like to be taken advantage of by your government, if you like a feudal peonage system where you pay to live, you pay to work and don't realize that you're being screwed by a dishonest system that continually robs you blind that you're too blind to see what's happening.

For instance, it takes $2,566.00 of our wonderful U.S,.Federal Reserve Notes to buy what $100.00 U.S. Dollars bought in 1913. So since 1913, the rate of inflation is 2465.72%. Take a single One Dollar Bill out your wallet, it would take 26 of those One Dollar Bills today to buy what one of those One Dollar Bills bought in 1913. No big deal you say, maybe not if you like to give your labor away for pennies an hour, maybe not if you like to be a pawn in a peonage as a virtual serf.

Fiat currency is the source of a future debt default, is a liability on both sides of the ledger. It's neither efficient nor effective as a long-term monetary system because eventually its economic potency is inflated away and we are almost there, the endgame is right around the corner.

The Dollar Bubble is so big, the Federal Reserve has a bag why no tricks left in it, that it is going to take just a very little prick and POP and there is nothing the government nor the Federal Reserve can do to put it back together. After the 2008 Crash, not one thing was done to correct the underlying fractures in the global financial system, all they did was paper over the fundamental flaws that they helped create wet this dishonest system of debt money.

The entire system is fragile, it has a number of very weak links, perhaps the weakest is the Global Supply Chain, which is totally dependent on the system's credit liquidity. In 2008, we came close to a collapse of the Global Supply Chain, you might say so what. Because of the relationship between global systemic system of banking, fiat monetary and solvency, there is a very thin line that can be easily broken, but most of us live, obviously, in a very insular world it appears, most people never concern themselves with understandings deeper than cellophane. Because of the entire systems fragility, a minor liquidity contagion can cause a collapse in the two time flew off all goods and services. Such a collapse would be almost semi-autonomous, like a domino effect. So what so bad with Fiat money, let's see.

Because of the way the economy was restructured after 1971, when Nixon defaulted on our foreign debts, which forced to worked into a globalized Fiat monetary system, the global financial system became interlinked in ways that were never possible before, but with that linkage came unforeseen and unanticipated fragilities that are extremely difficult to stop once a contagion infects the system. The problem is that because of the interwoven nature of the system a cross-contagion can easily move between the financial system and the Trade/Production, so much so, that the contagion becomes mutually reinforcing.

The key to the problems facing the entire system and the future volatility is Fiat currency, no ifs, ands or buts. It is the foundation upon which future failure is built.
It takes fewer failures in such a system to transmit a cascading failure throughout the socio-economic systems globally. Everything that underpins our modern society and our welfare. It's always difficult seeing problems and almost impossible to plan for such eventualities, all the while the risks of contagions fracturing the entire system has steadily increased since 2008.

Again when looking at the Fiat monetary system, what might start as a debt crisis in a small country could easily spread into an intertwined systemic banking crisis letting to a systemic Global Supply Chain crisis what could, within days, lead to for insecurities within the immediate countries affected with an exponential spread of production failures across the world within a week of the initial contagion. Within a short time it would be completely irreversible within less than three weeks.
All of this is directly linked to the foundation of Fiat monetary systems. The contagion can move from bank failures, to the re-issue of Fiat currencies into higher denominations because of rapid hyper-inflation, collapse of Letters of Credit with the panic growing and spreading rapidly shutting down trade globally, within a week factories close, all communications impaired, both social disorder and government panic become epidemic, after a week all businesses are closed, critical infrastructure crashes.

Once the financial contagion spreads to the trade/production system, it will only take a few hours for that to occur, the destabilization of the globalized economy is them almost impossible to stop. Now the central planners of governments and central bankers are well aware of this inherent fragility and they will do anything to stop the monetary system from returning to sound money because the Fiat monetary system is so profitable for them and the gold monetary system prevents them from skimming of the top and gaming the economy. Once collapse occurs it can't just be restarted, once the supply chain breaks, the world basically returns to the 12th Century.

@Republicae There are hundreds of countries around the world using fiat money, yet there have only been a handful of incidents of hyperinflation on the level of Zimbabwe. Let me guess, you’d follow that up with Weimar Germany and maybe Venezuela?

And you of course don’t mention the causes of these problems: either printing money to pay off unaffordable debts, or radical changes in society. In other words, hyperinflation is only a concern in outlying cases and not under normal economic conditions.

You also completely ignored the problem that I referred to, the reliance on an arbitrarily limited resource to back an expanding economy. You don’t discuss the economic contractions that would occur if we relied on a gold standard... Why not?

Isn’t it just as much of a problem if I have to use a 0.000000000000001 cent coin to pay for a loaf of bread?

And I agree the system is screwed, capitalism is fundamentally unstable. But not because of fiat currencies.

@InternetDorkWeb

Since 1990 alone hyperinflation has occurred in 28 countries on 35 different occasions. In history, if you go back you find that there have been over 700 instances of hyperinflation since the Song Dynasty.

Again, you make a point for sound rather than fist currency, because of the physical limitations of sound money debt accumulation is also limited to the actual revenues of the State, changes in society need not be financed or coerced if it is indeed based on the good of society rather than merely the good intentions of politicians.

Hyperinflation is not an event, it is a process, reaching the tipping point can be slow and drawn out our in some cases, as we've seen, rapid and pronounced. If you haven't noticed, we are not in normal economic circumstances and haven't been in several years. Global debt and obligations, both funded and unfunded, are at epidemic proportions, Fiat printing (digital and physical) is essentially out of control, even the FED is technically insolvent losing $66 Billion on its Bond asset portfolio, I believe that was reported last September, is been attempting to liquidate it's immense holdings, but I bet you another round of Quantitative Easing is just around the corner and they will once again be forced to a Zero-Bound interest rate or perhaps a negative rate of interest just to keep the bubble they have been trying to pump up since 2008 inflated. You don't see it yet so you, you don't understand that they have already hyperinflated the money supply, the economic lag-time can be extensively drawn out by the Fed because at the moment the U.S. Dollar remains the Reserve Currency of the world, but that's beginning to teeter. Most dollars circulate outside of our own country, if the governments of the world ever repudiate the U.S. Dollar as the Reserve Currency, the repatriation of that massive number of Dollars will effectively create an untenable situation that would be difficult to control.

Have you read much about past gold standards, the history of their use in terms of the periods of government intervention verses times of non-intervention, perhaps you should, you will instantly find your answer. Money is a commodity, it is exchanged just like any other commodity if there is a valid power to purchase using it. If you look at the history of banking and government in this country and others, you will find periods of economic stability and instability, during the periods of stability you find that governments and banks keep their hands of the economy, grated there are external forces that can infringe upon that stability, such as war, but overall the periods of stability relate to times when the markets, yes even monetary markets were free of government intervention. Likewise, those periods of instability were marked by intrusive policies. The Classic Gold Standard was perhaps one of the most successful periods from 1879 to WWI. That period is considered the most economically stable periods in our history with an average deflationary rate of -0.02 and an inflationary rate that remained stable throughout that period at the highest of only 4.53%, we've had nothing like it before or since, it was the one time the government got something right. I compare what works and what doesn't, looking at the history of this country I see one period and that period is an economy under the Classic Gold Standard, we've had no period more stable since. If we are to judge the Federal Reserve in terms of an actual effective record, based on the readings it was created, them it's been an abject failure. Even Ben Bernanke confessed at a lecture in 2004 at Washington and Lee University, that the Fed monetary policies from the early 20s through 1928/29 were the cause of The Great Depression, I almost fell out of my seat. The fact is that is it the Fed monetary policies that have fingerprints on every recession, panic and crash since 1913.

There was a very interesting article in the Canadian Financial Times several years ago, it concluded that if the United States ever returned to the Classical Gold Standard that the U.S. would be so economically competitive that such competition would force Canada and the rest of the world to return to the Classical Gold Standard. I've been searching for that article for a while now in the archives, so far no success.

As far as capitalism, we've not seen free-market capitalism since the 1930s, the instability you speak of is a mixed economic model and such systems always suffer instability, along with an unlevel playing field of economic opportunity, it is always indicative of officially sanctioned Cronyism.

The idea behind a gold monetary system is to maintain a currency with full purchase power value, if a Dollar is denominated as 100 Cents then that is what should be maintained. That is not a difficult task when the money is sound, when the government doesn't intrude on the money nor economic system.

Again, I can argue that the current Crony system is indeed unstable because of the effects and characteristics of a monetary system that has been abused and depreciated to the point that it has almost lost all of its economic potency, and from the economic policies that must accompany a Fiat money system, without which the monetary system would collapse. It's really a Catch 22 they have created.

0

Cryptocurrency anyone?

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