The Absolute WORST of the Anti-Gold Monetary Fallacies
Before I get into today's post, let me first say as a lifelong fan of the NFC North Division Champion Chicago Bears, that if Rex Grossman provides your franchise with any answers, you are asking all the wrong questions.
I think I have identified the one monetary fallacy that makes my blood boil more than any other. Of course, there are plenty to choose from. Not a single American is taught any monetary theory unless they get some instruction at the University level. Think about that. No wonder so many horrible half-truths and falsehoods receive widespread public acceptance. No wonder the ideas of hard money scholars like Ron Paul are derided as fringe and impractical. He's talking to a room full of monetary idiots 99% of the time. (At least, that used to be the case.)
So here's the one fallacy I hate the most:
"The global economy has become too complex and too intertwined to be constrained by the gold
standard. The fiat currency system is a product of economic evolution and the growing demands and strains of international trade." - Reflections on Gold as an Asset Class, The Pragmatic Capitalist, here.
That article contains at least a dozen horrible economic fallacies, but that particular one is so prevalent in modern economic thinking that it needs to be squashed once and for all.
It requires some or all of the following assumptions:
1. The market required, perhaps even demanded the end of the gold standard and the ushering in of an unbacked paper money world.
2. Or, even if it didn't, the market was unaware of how blissful it would be once the shackles of a gold standard were removed. Now that the market is swimming in glorious "global, intertwined (and any other loaded adjective I can throw out)" prosperity, returning to gold would choke the life out of its delicate body.
3. Governments acted in the market's interest, and not their own, when they ended the gold standard.
4. Governments are part of the market.
5. Governments reacted wisely to help fill a market need, introducing unbacked paper, to facillitate global trade.
6. Without unbacked paper money, we would return to the horrible pre-1971 world where global trade was "constrained." Those barbarians!
The worst part about this fallacy is that anyone who spends 20-30 minutes studying the downfall of the gold standard (which began in 1914 at the onset of the Great War), would see that this is all absolutely, f*cking ridiculous.
It's the worst lie I've ever read, and I wrote about how the world went from gold to monetary chaos here.
IT IS THE GREATEST LIE EVER TOLD.
Here is the truth:
1. The market never required nor demanded an end to the gold standard. The market only requires sound money. Unbacked paper is unsound. Why would the market do better with unsound money than sound money? That's f*cking retarded. Stop believing in ideas that are f*cking retarded, people. The government required an end to the gold standard because they couldn't pass their war debts off to the tax payers while they were on it. It was politically infeasible. But under paper money, suckers... uh, I mean taxpayers can be convinced to pay for just about anything under the guise of inflation.
2. The market has not progressed any further with unbacked paper money than it would have over the same amount of time with sound money. There is simply no way to prove it empirically. You can't compare America from 1971-2010 on paper vs. America from 1971-2010 on sound money. Guess why? So you have to use this little known economic idea called logic. In which case, you determine that any amount of money is enough for an economy as long as it is difficult to manipulate and of near-infinite divisibility. Gold meets both criteria. Paper meets only one.
3. The State never, never, ever acts in the market's interest. The market is you and me. The State is them. It's the State vs. the market. Not the State working for the market. Does the State look out for you? What, while it gropes your twelve year old daughter and humiliates you with taxation and surveillance? Ok... The State acts in its own interest, which is the accumulation of power at your and, therefore, the market's expense.
4. Likewise, the State is not a part of the market. The State's role, historically and for all time, is to find a market (a group of people like you and me) and subjugate it to its interests, so that it can feed off it and grow rich as the beneficiary of other people's productivity. This is how empires are formed. No State ever created a center of commerce. They are a parasitic class of people that attach themselves to already existing growing centers of commerce.
(Btw, be careful not to confuse the functions of government with the State. For example, you can have a community that is self-governed that does not contain the parasitic apparatus known as the State. For more on this, read Albert Jay Nock. You will not learn this distinction, or anything else really, in public school.)
5. The State introduced unbacked paper to paper over war debts. The last time there was a semi-worldwide gold standard was 1914. From 1914-1971, we had pseudo standards that were the ad hoc desperate moves of pathetic losers called bureaucrats and bankers. Does that sound like the wise interventions that filled a market need? No, it's a collection of idiots doing what idiots do.
6. Global trade is hindered, not helped, with unbacked paper money. It causes distortions in economic calculation. It prevents poverty stricken nations from maximizes capital allocation. It robs the productive class and passes those earnings to bankers who then enslave entire populations through national debts. Unbacked paper destroys capital. How the f*ck does that "improve" trade?
Opt of the State
David in Qatar