04/24/11 Buenos Aires, Argentina – Choppy week in the markets, wouldn’t you say? Gap down one day, gap up the next. That’s what you get when the tub is full of Fed-faked funny-money. Bigger waves…more tumult…less predictability. And a whole lotta motion sickness along the way.
Markets are always and forever in a process of price discovery, torn between demand for lower prices from buyers on one side, and the profit motive from sellers on the other. Somewhere in the middle, the two parties will come together to exchange their goods and services. In other words, they “discover” an agreeable price at which everyone finds value. This is what the free market does naturally. Low prices invite demand…driving prices higher. High prices invite competition (supply)…driving prices lower.
Obviously, therefore, you expect a bit of movement, a bit of price fluctuation as buyers and sellers jostle for position. What you don’t expect is multi-hundred point daily swings in the stock markets. You don’t expect gold to jump $20, $30 or more in a 24-hour period. (Remember, before FDR confiscated all the gold in the land back in 1933, an ounce of gold was only “worth” $20. More correctly, a dollar was worth 1/20th an ounce of gold. Then, in one fell swoop, the original New Dealer “revalued” the metal to $35 an ounce, thereby devaluing the dollar to 1/35th an ounce of gold.)
The point is, a $20 or $30 movement in the price of gold back then would have been unthinkable (but for political strong-arming). Today, with the dollar having been beaten, bludgeoned and fisticuffed down to less than 1/1,500th an ounce of gold, twenty bucks here or there is hardly worth mentioning, such is the woeful state of the world’s leading fiat money.
Of course, markets don’t demand fiat currencies. Free individuals don’t wake up one day and say to themselves, “Gee… Wouldn’t it be nice if we had an unquestionable, unaccountable, centrally controlled monopoly on counterfeiting to help debase our medium of exchange, saddle the populace with that most insidious of all taxes – inflation – and to sell our kiddies future down the drain? I know, let’s create a Federal Reserve!”
Such institutions don’t come about “naturally.” They require political pull and the gun-for-rent that is the government. They take cover behind rooking legalese, as is found in “The Federal Reserve Act of 1913,” and the absurd prevarications of its “dual mandate,” which is, at present, sold to the terminally credulous public under the noble-sounding, though entirely erroneous mission statement of “price stability and maximum employment.”
Anyone with a basic, non-Ivy League-approved understanding of economics knows this to be a ridiculous goal in the first place. For one, gold takes care of price stability itself. Has done for thousands of years. Price instability is the direct result of fiat monies and manipulation of the money supply by self-serving central banking cartels. From tulipmania to techmania, one can find, at the rotten heart of every inflationary crisis, a central banker with an equally rotten brain and/or heart.
As for the “fetish of full employment,” as Henry Hazlitt so eloquently explains in his classic, Economics in One Lesson:
“The progress of civilization has meant the reduction of employment, not its increase. It is because we have become increasingly wealthy as a nation that we have been able virtually to eliminate child labor, to remove the necessity of work for many of the aged and to make it [financially] unnecessary for millions of women to take jobs.
“The real question,” continued Hazlitt, writing in 1946, “is not how many millions of jobs there will be in America ten years from now, but how much shall we produce, and what, in consequence, will be our standard of living?”
The Fed is the work of Woodrow…a creature of Congress. As George F. Will, writing in The Post, once put it, mission creep is part of the “metabolic urge” of government agencies. The Fed is no different. It is an Ouroboros running out of tail on which to feed. There’s nothing free market about this beast, Fellow Reckoner…and nothing free market about the economy that stands on its sunken shoulders.
Without space for competing currencies, the invisible hand is bound and cuffed, unable to feel around in the dark, to set reliable prices. Value is distorted, malinvestment promoted.
In the end, you get unpredictable stock market volatility and a dollar shaved to within 1/1,500th of its life. Exactly what you’d expect, in other words.
The solution? Here, a modest suggestion:
End…The…Fed.
Instead, allow competing banks to issue competing currencies. Allow the fundamental underpinning of an economy – it’s medium of exchange – to discover its own “fair value.” Witness competition weed out banks that lend imprudently and that rip off customers, to the favor of those operating with prudence and fiscal integrity. Watch institutions that choose to issue baseless, paper money go bust without federal bailout funds and those that adhere – freely, without let or hindrance – to a gold standard garner the public trust their thrift and judiciousness earns them.
Wishful thinking, you say? Well, until such a time comes to pass, here’s another suggestion, courtesy of our Reckoner-in-Chief, Bill Bonner:
“Buy gold. Be happy.”
Cheers,
Joel Bowman
for The Daily Reckoning
Joel Bowman
Joel Bowman is managing editor of The Daily Reckoning. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world.
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Joel,
I most definitely think we should end the fed and make sure our currency is always pegged to gold. But to allow banks to issue competing currencies is just crazy. All of wall street cooked their books with leverage and created the financial meltdown. Rating agencies went along with all the MBS’s the CDO’s the CDS’s etc and gave it all AAA ratings. Because if they didn’t, many wall street firms would simply get it rated somewhere else. the investor didn’t REALLY KNOW how toxic all of these were was until it came crashing down. The same will happen with competing currencies. No one will really know which currency is the strongest or best until they come crashing down. by then many investors will have lost everything. Lets just peg the dollar to gold. Peg our tax system so politicians will quit *ucking around with it. As a nation quit trying to be an empire. And get down to the business of being a world leader in manufacturing and business.
What would be the best ETF to protect my investments against the US Monetary System?
The 3 words your looking for are: Mathematically Perfected Economy
It is a crisis of money management, and the result of permitting ruthless private international financiers to gain and keep control over “OUR” money AGAIN. Yes, money is a sovereign right that arises from the sovereign right of an individual to enter into contracts. By allowing that right to be usurped by private banking interests we have lost the greatest power a free and democratic people can have – economic power. I would say that 90% of all the people are confused about money. About what it is now, where it comes from, but more importantly, what it should be, and where it should come from.
Wealth often confused with money, can take almost any form, and historically it has, from gold to cattle, from grain to salt, and water to land. These are all forms of wealth, commonly called commodity wealth with the exception of land, which is known as “real wealth” or “real estate” because it has certain distinctions that commodity wealth does not. Notes or deposit receipts (money) for grain, metals, gems, or other items of value have served throughout time as a safer, more convenient means of transferring payment. Here the reputation of the issuer was the key factor in its acceptance.
But the point here is that “money” is a medium, or means of exchange that takes the place of the items being exchanged. When items of value are exchanged that is called “barter”. Money is used in place of barter. Money is not the things themselves. For money to retain it´s integrity it should be free of any intrinsic manipulation which one of them is interest.
Mathematically Perfected Economy NOT ONLY restores our sovereign right to issue our own promissory notes to each other, but also offers a money management system at the same time.
I explained 30+ years ago how it’s impossible to solve inflation OR deflation with a gold standard. If represented wealth is less than the representative reserves, still, no precept prevents you from suffering a circulation exceeding the reserves, particularly if you further subject debts to interest. But this objection is largely only hypothetical, because generally, on the contrary, the real danger is suffering a restricted circulation (deflation). As industry and production tend to grow, you are deprived of the further circulation which you need to sustain that industry, if and when it exceeds the monetary reserves. So the more real (practical) fault is it cannot solve deflation. But even worse, is its further fault, that if it coexists with interest, it can’t solve terminal failure, or perpetual subversion of the *disposition* of the currency (my original term of course), that as interest inherently and irreversibly dedicates ever more of every unit of the circulation to servicing falsified, artificial debts, versus sustaining the desired industry. It means nothing to pretend solution then, unless you have answered for all three faults: inflation, deflation, and disposition.
Jack: Joel didn’t say “gold standard”; he said “competing currencies”!
“(…) and those that adhere – FREELY, without let or hindrance – to a gold standard garner the public trust their thrift and judiciousness earns them.”
“Freely” is the key word here. Gold would have to compete with other currencies. So, if you’re right, Jack, there will be demand for alternatives to a gold standard, as long as the state doesn’t impose it.
http://endtheecb.ning.com/video/maths-a-universal-language
You simply refuse the only Mathematic Prescription for what you have declared you actually want.
Austrian economics, Mises, Hayek are no help, come to think about it any system that still has USURY or INTEREST %%%%% as part of it will also FAIL us as never in history have any precious metal monetary standards either sustained industrial production requiring greater circulations; nor is it possible for them to arrest multiplication of indebtedness by interest.
The only currency which we should be considering is mathematically perfected currency‚ As there is one and one only solution to inflation and deflation; to systemic manipulation of the cost or value of money or property; and to inherent, irreversible (and therefore terminal) multiplication of artificial indebtedness by interest… thus it is only by eradicating altogether the latter costs; manipulation of the cost or value of money or property; and inflation or deflation.
The so called central banking systems The Fed, BOE, ECB, World Bank, IMF of the world in fact never earn this “money,” not only because they produce no product or actual service for it, but because the “money”
they pretend we must borrow from them is no more than our own promise to pay. Nor are they actual creditors, for on the contrary, they give up nothing for our promises to pay, and only intervene upon our commerce to pretend the justification for dispossessing us of all our production is no more than their unassented authority to no more than publish our promissory notes, at no practical cost to themselves whatever. They thus collect, just in ostensible principal, so much as all the wealth which is ever subjugated to these obfuscations, only as if this mere publication of our promissory notes made them actual providers of credit; and only as if any resultant debt is ever actually owed to them.
They further subject these lies then to interest, as if actual risk existed in the negligible costs of no more than publishing our promises to pay. All these intentional falsifications of principle then are such blatant, self evident, and ever demonstrable facts that it is amazing any truly free and just people would ever tolerate their fatal subjugation to these obfuscations for nought. Evidently too, this is the common observation of today’s vast pretended representation, for never were these purported principles subjected to the assent of a knowledgeable, intelligent public; nor is it possible they were ever passed by one, for it is intellectually impossible to intelligently ensure our demise for no more than handing over the publication of our promissory notes, the very fulfillment of which is ultimately even made impossible by the breaches of principle in the resultant, wholly unnatural, ever unjustified, and fatal arrangement.
Pretended representation therefore would hardly achieve these purposes if a knowledgeable public discovered that the lies of pretended economy invalidate its every asserted principle; that none of this has even the least power to serve us in any way; that the allegiance of the government of every republic owes to the very perpetrators who, by taking so inconceivably from us, readily install and enforce usurpation in every vital office and controllable media. The perpetual, concerted evasion of accountability before us therefore is no accident, it is instead a calculated, vital accessory to the most serious, arrogant, and repulsive crimes in history.
Can´t post a longer reply. So here´s the link:
http://endtheecb.ning.com/forum/topics/to-mr-ron-paul-and-the-likes
Marcelo y Mariana,
I invite you for a debate with Mike Montagne to be broadcasted on TNS radio.
You can send me a private message on my youtube channel http://www.youtube.com/user/chelonia1663?feature=mhum
Alternatively you can send a Skype request to: m_montagne
I sincerely hope we hear from you as no other libertarian/austrian follower has ever challenged MPE in a debate before.
@Bob Blinker
Invest your money in physical gold and silver, and Managed Futures. I have 50% in physical and 40% in a basket of CTA´s. Trend Edge Multi Diversified Fund, Winton Capital, Transtrend, to name a few.
Cheers mate
Thanks for the link.
I find it interesting that most sheeply Americans willingly accept and defend the status quo (Federal Reserve System) just because it is already in place, regardless of how complicated or corrupt it is.
Meanwhile, if you propose something “radical” like competing currencies, a gold standard/bimetalism, abolishing the FDIC or allowing individual banks setting their own competing interest rates (vs. the Fed setting rates for all) people think YOU are the wacko…as they continue to hold their intrinsically worthless paper FRNs…
Jack, what the heck is MPM? If it is a monetary system established and run by the federal government, I wouldn’t trust it as far as I can pee.
MPE is the people for the people. No more banks, little government. A republic btw
http://i41.tinypic.com/wi3q6f.png