"Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration." ~Abraham Lincoln
A currency does not have to be tied to gold to be 'hard'. It just has to be backed by something. By tying it to the assets of the producers, you get that. Having a scientific formula, that is not 'tweakable' by politicians & con men would stabilize the currency, slow or end inflation, & make money shuffling as a vocation less lucrative.
The PRIMARY problem is the dilution of the currency by QEs & banker money shuffling. THAT is what saps the value from the currency & 'redistributes' it to the non working, non producing leeches of society.
It would not be that hard to put some ELECTED representatives in charge of currency oversight.. with the EXPRESS goal of stability, transparency, & accountability. A mission statement can be drawn up declaring that purpose, & every congressman elected to that committee sworn to uphold it. Punishment for corruption should be swift & severe, with checks & balances to discourage it. Put term limits on that committee as well, & keep the public service concept fresh.
There are normal economic cycles, & the fiat drivers claim that govt manipulation can soothe & smooth these out. But in fact, the opposite is true. Economic contractions are actually worse, under fiat. The great depression can be explained better with simpler economics.. the 'new' dollar made people nervous, but it was mandated by the govt, & alternatives were forbidden under FDR.
The larger problem is the manipulation of the currency by whatever 'powers that be'. They can do this with gold, too, so a simple formula is not enough. '1 oz silver = $1 still bases valuation on a single marketable commodity: silver. Gold hoarders in the 20's.. especially in france, contributed to the world wide contraction in the 30's. But the statist's solution of fiat is using ponzi scheme dynamics to solve a much simpler problem:
How can we have a stable, simple currency?
Here are some ideals to target:
1. Stability in value over time. Inflation is a great evil & kills thrift. Spending is good for an economy short term, but without real production to back it up, spending leads only to bankruptcy. This is true on any scale, individual or national.
2. The currency should be difficult to manipulate by bankers, politicians, or other leeches on the producers of the nation. The more formulaic & scientific we base our money on, the less ability there is to manipulate it.
3. Money supply HAS to be tied to actual production. Fractional reserve banking does this, as loans are made on things of value.. collateral is give. Fractional reserve banking increases the money supply but it does so using production as the basis. You build a house, plant a crop, etc, you can take a loan out on it.
4. Predatory interest rates are dark ages practices, & are valid regulatory responsibilities of govt. Look at the interest rate chart. Before the major manipulations from politicians & their banker cronies, there were small market cycles.. but the big swings started AFTER fiat was declared. Since WW2, the birth of american big govt, the interest rate has swung wildly up & down, based primarily on banker manipulation, not real demand or supply, & especially not real production.
If you link the money supply to REAL production, you would not get the manipulations. More production would equate to more money. Normal contractions would bring a natural slowdown, without some bankers or politicians getting rich from the dilution of the currency. Then, as demand went up, so would the money supply. Interest rates would swing less wildly, & reflect actual supply & demand.
I'm probably getting too many charts in here, but if we tied money supply to production, there would be a natural buffering of the contractions, & people's savings would be protected. Economics isn't voodoo, or 'feel'. It is simple arithmetic.
The housing crash is a perfect example of currency meddling.. & govt using its power to try to redistribute. 'Everyone should have a home', was dubya & frank's heartfelt cry, & they tried to mandate it by govt decree. The banks were only too happy to go along with it, because it meant they could hand out money with no restraint or fear of default, since the govt promised to cover any deadbeats. That created the bubble, not the inflation of the currency. It was a false bubble, created by demand without ability. It is a side note of sorts, & illustrates the problems with govt meddling with the currency.
The housing boom of the last decade 'created' a lot of money. It was partially justified, since it coincided with the construction boom, but the artificial inflation of prices caused by the artificial demand created more than was actually justified. The rampant inflation in the 70's caused primarily by opec & the raising of oil prices, along with the complete abandonment of the gold standard by nixon in '73 created a bubble then, too. Everything was inflating, as the dollar diluted. I knew many old folks then who were unsophisticated savers.. they had a savings account in a bank, & their life savings were there. Year after year they watched as the value slowly diluted. Even Reagan spoke against it. And even with the high interest rates of the time, it was not enough to cover the losses of inflation. The bankers & their political puppets got rich off this scheme, & they plundered the savings of hard working people to do it. They produced nothing, they only took the people's money by diluting it.. just like a drug dealer 'cuts' the drugs with sugar or some other cheap filler.
The currency can only survive, as well as the nation, if it is tied to something of real value. Fiat money dooms any system that uses it. Even now, the euro zone is diluting the euro more, to compete globally with other currencies. It is political manipulation, & the only ones who win are the bankers.. the money shufflers, who produce nothing. All involved in the process are merely stealing from those who actually create the wealth. They don't do it directly, like with taxation, but slowly, by diluting & devaluing the currency. It brings temporary relief, by making imports seem cheaper, but then the fiat pendulum swings the other way, & the temporary price cuts of imports are all lost as the inflated currency buys less & less.
Fiat money is a recipe for disaster, & we have been on that road for decades now. With no restraint on the money supply, the currency can & has been constantly diluted, devalued, & manipulated.. all for political & secret board room deals. Tying the money supply to actual production would limit that, & base it on reality, instead of mandate.
Or, we can let the bankers & politicians relax on the train while they crush production & the livelihood of the workers.
The proper course of action would be so detrimental to a large segment of society that it would spark a revolution. The whole system relies on plundering the producers AND borrowing from future producers to support an ever growing entitled class. It is a ponzi scheme, & we are in the middle of it. But the courageous & RIGHT thing to do would be to stop deficit spending, CUT govt, the welfare state, & make all systems solvent. It would cripple the economy for a while, as it will take a long time to get solvent again. That is why all politicians just kick the can down the road, hoping they can get theirs before the house of cards collapses.
Here are the steps it would take to bring us back to fiscal sanity:
1. Commit to a hard currency.. stability & consistency for all the nation.
2. Index the currency to a group of hard assets.. gold, oil, food, construction, whatever.
3. Provide a formula for the currency that prevents swings in value.
4. This currency could be constructed concurrently with the existing dollar, as a transition occurs.
5. Eventually the old fiat dollar would be phased out, like confederate dollars after the civil war, or the Wiemar marks in Germany.
6. Stick to the plan. Don't let moochers or looters get control of the system, to corrupt it & use it to plunder the treasury.
7. Pay off all public debts with the old dollars.. should be plenty of them around, & all the creditors can have them.
In the long run, this is a better system for a society. It rewards thrift, hard work, & minimizes money shuffling as a vocation.
The data clearly shows the direction that inflation & fiat monetary policy have brought us, & we have many examples in different scales of economic collapse to choose from. Rome was large scale, at the time, & it collapsed, primarily because of fiscal mismanagement. Russia, Argentina, England in the 60's.. many examples of corrections & failures to correct bad monetary policy. The US will face this, if we continue down this path. If we can arrest the spending, shore up the dollar, increase production, & revive a strong work ethic, we can have it all.. prosperity, affluence, world hegemony status. But, if we keep running the charge cards, despise production, encourage dependency, dilute the dollar... then we will follow in other footsteps of failed nations.
No comments:
Post a Comment