Outlaw Gold Hoarders

There aren't many people around anymore who understand how the old gold standard worked. First of all, gold flows were largely regulated by interest rates, not exchange rates. Gold didn't really have a "price" in the sense that the dollar today is priced in Yen or Euros. Gold traded on weight and interest rates. This made it totally unnecessary for the government to intervene and confiscate gold. The other myth is that countries could benefit by setting the "price" of gold in their own currency. This is the old mercantilist theory of trade that basically was totally discredited long before the 20th century. So the normal and easiest way to stop an outflow of gold was to raise interest rates on gold-backed bonds. Since gold is traded as a weight and gold is gold regardless of the currency it is denominated in, gold would flow toward the highest interest rate per ounce. So the "normal" way to stop a gold outflow and restore the balance of trade was to let interest rates increase, not confiscate gold and stop imports. If rates per ounce were higher in London, gold would flow out. If rates were higher in New York, gold would flow in. Under normal circumstances, the rates fluctuated in a narrow band which accomodated the normal flow of goods between nations to achieve a balance. There was an old saying at the time that "6% rates will draw gold from the Moon." And in practice the rates generally fluctuated between 4% and 6% for decades in Europe and North America, keeping trade and exchange rates under control within a free market framework. Somehow everybody always thinks that everybody else forgets how the process worked before actually understanding it themselves. But it's a free country and we aren't on the gold standard so there is probably no harm in believing whatever makes one comfortable regardless of whether it is grounded in fact or myth.

What it boils down to in the end is that some people believe in free markets and others are more comfortable with the thought that government intervention in markets will improve the process, even if it involves the taking of assets by force "for the good of the nation." I think Speedy is on the right track with his investigations.

 

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Thanks for the nice words guys....
My article isn't much...just some thoughts that I wanted to put down.
I have a few more thing that I want to write about but haven't had much time.....

It just wasn't conspiracy....it was just plain wrong---FDR wasn't acting for the PEOPLE in that thing....he was acting for himself IMO.

Speedy

 

I hate the word "conspiracy" and I wish there was a better one. All that it really means is that an event was planned, but reason for the plan and the players involved are generally not made public. The alternative is to believe everything happened pretty much by accident. It's just that the word conjures up all sorts of dark images.

 

Economics seems like a pretty subjective subject to me. Some call it a science, but I don't see it that way. I don't know much about the "flow" of gold between nations of the world, but I do know that FDR's Executive Orders seriously damaged gold mining in California. Tons of California lode gold will remain in the ground because of FDR's Executive Orders.

Presidential Executive Order 6102 of April 1933, which impacted the sale and purchase of gold, was bad enough, but later he pulled gold miners out of California's mines because this industry was alleged by FDR to be "non-essential". Some terrific underground gold mines closed in the early 1940s and were never reopened.

The great Idaho-Maryland, Gold Center, and Empire mines of Nevada County were almost connected. The Empire Mine was 12,000 feet deep (on the incline). Once deep mines are allowed to flood, they are almost impossible to reopen due to prohibitive dewatering costs and underground infrastructure damage. Now, because of environmental regulations and a vast army of lawyers, these mines will likely never be reopened.

Gold "flow" or not, a lot less gold ultimately made it into the economy because of actions of FDR. :headbang:

 

Why should it stay....people can now mine gold.
I would say it would cost $$$ to get started again but at least its not against the law.

Speedy

 

Simple economics no longer dictates the success of some businesses in this State. One aggressive little old lady in tennis shoes with a Sierra Club backpack can stop almost any prospective industrial project. There have been hundreds of essential mining operations shut-down in California as a result of the concerted efforts of environmental political action committees (PACs), State and federal bureaucracies, pandering politicians, and "concerned" urban citizens.

In my opinion, from the inside, there has been, and still, is a well-oiled conspiracy to alter the industrial landscape of California. At times, the effort to shut down mines and quarries has involved unpunished criminal conspiracies.

The coordinated environomental juggernaut began in about 1970. It behaves like a huge glacier. It moves forward, rests, than continues forward. Even a $25,000,000,000 State government deficit has not changed the momentum of the environmetal movement. It will be interesting to see how long California can sustain horrific deficits and maintain the worst bond-rating in the United States without economic collapse.

 

the thing about the gold standard doing the U.S. or us in, well if the rest of the world was on a gold standard, it would work. but when you can buy american currency with non-gold backed insert-foreign-currency-of-your-choice here x, and in turn redeem those dollars for gold, yeah, someones gonna get took. us.


and as for any industrial development in america, big industry has just about been regulated out of america. why open up shop here, when you can do so in another country with much less government interference and cheaper labor? no osha to answer to... no name-your-regulatory-outfit here x to be hassled by.

but God bless America, thanks-for-giving me the ability to make the living i do. :bow:

 

crazy larry,

The thing to keep in mind is that once one country goes on the gold standard, any other country that wishes to buy anything in that market must first 'purchase' that country's currency. If the US was on a gold standard, another country would first have to purchase dollars, and pay in gold to obtain a gold dollar. So the gold flows TO the country on the gold standard, not out of it. It becomes less likely that a country on the gold standard will accept another nation's "script" currency because of the lack of quality. If what you suggested was true, then when Germany went off the gold standard after World War I, they would have absorbed gold from other nations still on the gold standard, but the opposite occurred and the German currency was destroyed. This is why the IMF currently outlaws gold backed currency for any of its member nations. The first nation to return to the gold standard will expose the weakness and fundamental flaws in the other currencies. Gresham's Law will go into effect and everyone will want to obtain the gold currency and pass on the fiat currencies, sort of like getting rid of the Old Maid. It's interesting stuff.

 

I'm not so sure about any country going on the gold standard being able to set that off. Sure, South Korea or Russia or China, definitely. Medium-sized economic powers like Chile or South Africa, probably. But imagine, if you will, Belize going on the gold standard. I doubt that would send major shockwaves through the world economy. Venezuela (or more correctly, Hugo Chavez) is peeved at the US right now. If Chavez thought he could "pluck the eagle's feathers" by going on the gold standard, he would do it, I think. Yet he (or any other nation upset at the USA - and there are a lot of them - that's not on the take from the IMF) hasn't done it yet. Why?

 

I don't expect to convince you of your error, but I feel compelled to respond in order to perhaps prevent this sort of misstatement from being accepted at face value by others. I apologize in advance if this is offensive in any way, but it must be said.

Regarding whether or not it works: It's pointless to say a gold standard doesn't work when it did work for hundreds of years. In fact, the fastest economic growth rates in the West occurred under the gold standard, and have been only about half that level since its abandonment.

Regarding bankruptcy: There is no case in history you can point to where a country on the gold standard went into bankruptcy, but there are many cases where countries went into bankruptcy after going off the gold standard. Let's not resurrect the tired old misinformation about the US and the Great Depression because our country basically went off the gold standard in 1913 and move to a fractional reserve convertibility standard -- an entirely different system. Besides, there is no evidence that the gold grab by Roosevelt helped the economy in any way, although it enriched the Eastern bankers while impoverishing the people. Most of the real purchasing power was extracted from the economy and then people wonder why the economy was weak for a decade. Amazing!

Regarding why some other countries don't go back on the gold standard, there are two primary reasons: First, the IMF prohibits it for member nations, so a nation would have to resign from the IMF to implement this sort of program. Second, fiat currency is the only currency that makes it possible for a statist regime to function. No authoritarian government would ever voluntarily go on the gold standard because it breaks their control over the money supply. Under our present system, the government can spend any amount of money they wish without collecting dollar in taxes if the so choose. All of their spending is paid for through the debasement of the currency, which is little concern to them since they are the first spenders. Imagine if the government had to first tax gold and silver dollars away from the people before initiating any spending programs. No tyranical government will ever voluntarily subject itself to that sort of control. In the meantime, keep an eye on Mexico. There is a strong movement down there to go back to a silver currency standard because it is recognized that this is the best way to break the cycle of poverty and overbearing government. However, I don't expect them to succeed because of the opposition from the government and central bankers who depend on the ability to freely print new money at will.

Americans are very badly educated when it comes to economics, and therefore the media is filled with opinions about what will and won't work with no facts to support them. But in America, facts and opinions are considered of equal value today, and the majority of people can't even tell them apart in daily use.

Anyway, if there is even one person out there who is influenced enough by this post to examine the facts about a gold standard, it is worth the effort. I have no real interest in convincing people either way except to provide a select few open minds with enough information to begin their search for the real story instead of accepting disinformation unchallenged. I know the majority of people will continue to believe that the way things are is the only way they can possibly be, because that is what they have been taught to believe. It is there loss. Don't let it be yours.

 

Cloudy, "Americans are very badly educated when it comes to economics, and therefore the media is filled with opinions about what will and won't work with no facts to support them. But in America, facts and opinions are considered of equal value today, and the majority of people can't even tell them apart in daily use."


Where is the world-bastion of economic enlightenment?

 

Gosh, all this economics talk makes me want to pull one of my old calculus books of the shelf and do some light reading, either that or put some fish hooks in my eyes.

It must be cocktail time somewhere in the world. :desk:

 

Doug,

With all due respect, you owe it to your readers to inform them as to what was being used as money prior to the dates you cite if it wasn't gold or silver coinage. Citing the years that various governments officially accepted the currency system that was already in use in those nations, or the shift from silver to gold as was the case in the US, doesn't add much to the discussion. The US is a perfect example since people are probably most familiar with it. The Constitution plus the Coinage Act of 1792 put the US on silver dollar based bi-metallic system. Silver coinage was preferred in commerce even prior to that time. Trying to tie this to the "official" date upon which the banking system was converted to a gold reserve basis [for the purpose of giving eastern banks which held primarily gold reserves a commercial advantage over western banks which held primarily silver reserves] doesn't tell us much of anything about how commerce was conducted prior to then. The colonial use of fiat currency, Continentals, did not end well. The Confederacy's use of paper currency during the Civil War didn't work out much better. Other nations that adopted unbacked currencies did not fare well either [research France toward the end of the 18th century]. Maybe you could provide just one example, say Great Britain, of countries that never used gold or silver coinage prior to the dates you cite. If gold or silver were not in use as currency prior to 1844, what was? The readers should know.

In one sense you are correct. It is possible to Google about a million web sites that will cite how gold and silver based currency systems don't work, particularly the sites with some connection to central banks and universities. History is written by the victors. There is even a Nobel Prize for work in this area. Consider for a minute where this comes from. The correct title for the Nobel Prize in economics is the "Bank of Sweeden Prize in Economics in Memory of Alfred Nobel." The Bank of Sweden's main product, as it were, is fiat currency. Can you imagine any situation where the Bank of Sweeden would give a prize to anyone coming forward with research that suggests their fiat currency might not be the only or best alternative? Of course, the defenders of fiat currency will reply that no such research is possible.

You are also correct in another sense, gold and silver currencies don't work for governments bent on spending more than thier citizens are willing to provide in tax revenue. Fiat currency solves this problem by debasing the currency and savings of the people, and as Keynes once said, not one man in a million will figure it out. So a fiat currency is a great tool for a government to use to conduct war and buy votes.

So the readers have both sides of the story, and are free to conduct whatever research they wish, or none at all. Most won't. If one does, this has been a worthwhile discussion. Good places to start are with the writings of the Austrian School of Economics and with the writings of Professor Antal Fekete, a university professor in Canada whose specialty is researching the history of international commerce back to the middle ages under the gold system.

Good luck to everyone in whatever they decide to do or believe.

 

There is a guy in USENET who blindly supports Pete Rose's reinstatement of Baseball and ends every post with something like, "cordially, as always". Its not offensive, but your sounding increasingly like a nut case pulling facts out of thin air selling Amway.

I've learned in Pharmacy that nut cases pushing herbal remidies are danergous to the public, but there is not much I can do about their misinformation and lies.

This gold standard BS is about the same.

When you have no civilization and a breakdown of social order, you need gold. Fourtunately, we no longer live like that.

Ruben

 

http://www.constitution.org/mon/greenspan_gold.htm

Ruben, you are free to believe what you wish, and it was never my intention to open closed minds; just give open minds a starting point for further investigation. It doesn't impact me either way. I'm just offering up a little economic history free of charge to anyone who cares to investigate it further. Frankly, I'm not sure why some people feel compelled to surpress it as if it were threatening to them. Alan Greenspan has stated in a number of times in his testamony before Congressional committees that it is a function of a central bank to mimic a gold standard in the management of the currency. As late as the 1980s, various economic thinkers were still expressing the opinion that it was still uncertain whether the experiment of using fiat currencies would succeed or fail, therefore making it prudent for central banks to retain a gold and/or silver reserve if the need arose to return to a hard money standard. The number of countries with failed fiat currencies continues to grow. [I believe Turkey was the latest casualty, with the old currency being retired as completely worthless last year.] Therefore, the link above to an editorial penned by Greenspan before he was placed in charge of the Federal Reserve should come as no surprise to anyone who has paid attention this far [perhaps nobody]. If you want to believe the nonsense that gold and silver currencies never worked anyplace at anytime, and would cause some sort of economic chaos, feel free to do so. But to label it misinformation and lies and to illogically try to tie economic history to your pharmacy experience is just an obvious attempt to disparage something you don't understand. I suggest permitting others to just investigate the facts of history even if you don't care to, and draw their own conclusions. That's what freedom of thought is all about.

 

I should have added that earlier this year, congressman Ron Paul asked Greenspan during his testamony if he still believed what he wrote in that editorial in 1966. Greenspan replied under oath that he still believed it and wouldn't change a single word. So Greenspan is a very hard man to understand, with the intelligence and mental flexibility to operate a system for the benefit of the nation that is fundamentally different from his personal core beliefs. Very interesting stuff.

 

We also have to remember that when precious metals (gold and silver primarily) circulated as money, they weren't the only way of holding wealth. Land is the most common way, but other forms of property count as well. The wealth of the aristocracy up through the 19th century (and later in some countries) was often held in land (these aristocrats also tended to look down their nose at "tradesmen" - who traded in gold and silver coin). The South in 1861 had considerable wealth, but it was tied up in land and slaves. Even today, we hold our wealth in many things. I can trade frequent-flyer miles for airfare, hotel, or rental cars. A created item of "value" for a service.