A Note: I originally started writing this reply to Bron to be posted in the last comments section. But somewhere around page 7 I realized it was too long to be a "comment." To anyone I have ever replied to: While my replies may be addressed to you, they are often written for everyone but you. To Bron: Once this reply got away from me a bit, I just sort of let it run. Hope you understand. End of note.
I see now that it is true, that there is little new under the sun. (Bron, meet ORO.)
You write: "The phrase "always leads" I think is only true where fractional reserve banking is allowed.
"If… the law only allowed 100% reserve banking and time deposits (what I refered to previously as NON-maturity transformation) then you do not have credit being created or volume expanded.
"I don't think the problem is gold being used as a currency, rather the rules around banking."
I remember when FOA and Aristotle had similar conversations. So let's pretend we've eliminated fractional reserve banking yet we still have gold loans. The big difference would be that the banks (or whomever) could only lend gold that was put on deposit for the expressed purpose of lending. And the note held by the depositor would be a time deposit, not a demand deposit. Demand deposits could not be lent. Does this sound like what you are imagining?
So the depositor could not spend that gold note as it is not a spendable currency, not a bearer bond redeemable on demand. Problem solved, right? Wrong. The depositor can no longer spend the gold he deposited, but the borrower can! And he will give it to someone in exchange for something, and that someone may deposit it with the expressed purpose of lending.
Now we will have two notes out on one piece of gold. The second borrower will now spend that piece of gold and soon we'll have three notes out on that same piece of gold. This leads to a "synthetic supply" of savings, granted they are time deposits, as well as an increased velocity of the underlying reserve (which suppresses its value just like volume expansion), all with 100% reserve banking.
Now these time deposit notes are more like Treasuries than base money, I'll agree with that. But at some point we always end up with a borrower who must default on the terms of his loan. And then those depositors will lose their savings. But when this happens on a large enough scale (a chain reaction?), society simply never gives in to a large segment losing its nominal savings. So the rules are always changed, the repayment terms made easier, the losses are papered over, and the synthetic supply exploded.
It seems the ingredient that you (and most everyone) miss is the ever present evolution, due to what FOA called the changing "political will." You (meaning y'all) point with great precision at the maths and structures that add up to: here is how it will work if we do this. "If we only constrain and regulate da banks in this or that way, the problem will be solved…" It's all the banks' fault, not the political will that flows directly from human nature. It reminds me of what I wrote about deflationists in Just Another Hyperinflation Post – Part 1:
"What is a deflationist? It is one who looks very closely at the present structure of everything, the laws, the rules, the regulations, what is supposed to happen, who should fail, etc… but ignores the political (collective) will that backs it all up."
What you (and virtually everyone) ignore is that every time something similar is tried, the same tribulations emerge and are dealt with the same way, over and over again, through a changing political will.
I present now a few discussions from the past along these same lines of Thought. Please don't be angry at the length. I am not trying to bury you with words. Quite the opposite. I am trying to do you a favor by hand-picking a few key "off-Trail" posts and selections from what is actually quite a lot of fantastic material on this subject (as well as a couple brief detours). First up is Aristotle summarizing the logical journey of the mind he laid out in a 5-part series that developed into an extended discussion about Freegold, prior to the start of the Gold Trail.
(I recommend reading the full 5-part series at the link, but I'll warn you that it is 50% longer than this entire post! So I offer his very brief summary.)
From Hall Discussion Page 1:
** Gold is the only real money there is--fiat currency is not money--so only Gold should be used as currency.
** Fractional reserve lending destroys a currency's value in trade, and therefore must not be allowed.
[time for concessions to the real world]
** People will always want to borrow for the things they want to have beyond their current financial means.
** Spending Gold into the marketplace, whether by the owner or by a borrower, would tend to result in prices "that weigh more"--cost more Gold, that is.
** As ever more Gold is borrowed out of other people's savings to be spent into the economy, the Gold's purchasing power is lessened from what it otherwise would be...hurting those who have elected to hold their Gold instead of risking it by lending it out as a source of income.
[notice in the above that we have all the bad devaluation effects without a single bank entering the equation!]
** For Gold to find its truest value, all savers must retain their Gold for their own use. Its properly retained value will more than make up for the foregone interest income. Gold must not be lent! [Gresham's law alone is adequate to achieve this.]
** With Gold as the only money, people will not be able to get loans. [In the real world, this is hard to imagine!] As an alternative, they will work up complicated contracts for the item they desire (new home or car?) in which they promise to deliver a certain level of their future productivity against a pledge of real wealth collateral.
** These contracts for the delivery of future man-hours would eventually be organized into their own market, and quantified into standardized units (called something like "manos" [generic form for the modern dollar]) functioning as a currency. Everyone would know what the price for a loaf of bread would be in "manos," and they would all revel at the high price of Gold as quoted in "manos".
** As more future productivity is brought forward into today's market, we would see this "manos" currency-supply inflate, and each pledge of future manhours would be seen as less and less valuable when compared to real goods.
** Someone holding Gold in savings who needed to get some work done or to buy goods could purchase it directly with Gold. They could also sell a quantity of their Gold on the free market to buy the Man-hours they needed to get the job done. There will always be people with an excess of "manos" that will want to move them into this supreme monetary asset--Gold.
** Such a system is not prone to shocks (bank runs and currency crises, etc. are like earthquakes where pressure builds and then is suddenly released) because at all points the assets may freely come into balance against each other in the free markets of the world.
There is little difference between a manos in Bangladesh and a manos in Canada where one manos is taken at a moment in time as the work equivalent to a healthy man shovelling sand with a spoon into a soda bottle. Who cares if one manos is actually called one, ten, or 27.34 rupees in one dialect while in another language it is called one, two, or 6.45 dollars? Its really just a mathematical exercise. Who's to stop the real world from pursuing such a system? It's basically what we have now, except the evolution took another route!
The key is that Gold must be assisted towards its own final and perfect destiny through the straightforward mandate (whether social, governmental or religious) that Gold shall not be lent as it has been, or otherwise attached to various financial derivatives. You can work for it, mine it, buy it, and sell it. You can't borrow it. Monetary perfection for an imperfect planet.
Gold. Get you some. We are moving in this direction faster than you imagine. ---Aristotle
FOFOA: Next, ORO objects. Just a snip:
ORO: Wrong. Non fractional lending does not increase the money supply because the great variety of non-bank notes are not bearer bonds, and not redeemable upon demand. They don't function fully as money substitutes - $1 of bank debt = $2 of money supply, $1 of bonds = $1 to $1.2 in money supply, and up to $1.5 for the most liquid bonds. (I am assuming that the situation is the one you refer to in the brackets). This bond type lending only increases the velocity of circulation and has little effect on gold's purchasing power.
FOFOA: FOA comes to the rescue explaining how the issue of political will applies, with shades of what I later covered in The Debtors and the Savers.
From Hall Discussion – Page 2:
Trail Guide (2/12/2000; 9:52:36MDT - Msg ID:25137)
Well, I knew that if I only asked, we would all receive! Boy did you deliver in ORO (Msg ID:25113).
Good stuff for everyone to read, my friend. You mentioned; """ The comments below - particularly those to Aristotle, are somewhat harsh. I hope this is taken in the spirit of friendly criticism."""
Sir, you can serve me (and probably everyone here) your "harsh" anytime. Waiter ,,,,,,,, I'll have a double order of that please! (smile)
OK, brace yourself ORO ,,,,,, a big plate of my "Trail" harsh coming up!
-------There are consequences to the existence of a fiat currency and for the use of debt money for trade settlement. FIAT HAS NEVER BEEN THE CHOICE OF THE PEOPLE ACTING IN COMMERCE OF THEIR OWN ACCORD. Even when wildly popular, fiat money has not had a single instance when it had not been established by force - by laws imposing its use.-----------
On a larger scale there was always more to it than this. Human society has from the very beginnings formed tribes and picked sides against each other. When we are not battling nation against nation, we jockey for position within our own groups. Right down to "me and my neighbour against the three houses down the street". As a tribe ,,, as a nation ,,,,,, as a group ,,,,,, our war is really a human problem with each other and always has been. In better context; the problems are in the way we use our laws and governments to gain advantage over the next in line.
Whether through force (war) or democratic means, we subject ourselves to the order of governments. We rightly perceive that,,,,,, the order gained from this action ,,,,,,, the security of a group, overcomes the rights and property lost on a individual level that living in a tribe requires. It's been this way through the ages. It's a political process that has always had its in-house battles ,,,,, namely portions of society try to circumvent their percentage of lost rights and property by maneuvering the rules (laws) in their favor. Yes,,,,,if I can gain the advantages of tribe life and still keep my "portions lost",,,,,I'm gaining wealth to the disadvantage of the group. Truly, the most obvious action of not paying your taxes,,,,,and that's only a small item when viewing the world battle as a whole.
So, how does this apply to money?
When you and others say """ FIAT HAS NEVER BEEN THE CHOICE OF THE PEOPLE ACTING IN COMMERCE OF THEIR OWN ACCORD """ ,,,,,this is true.
This is true, but this was never the thrust of the argument. The use of money in any context, fiat, gold or seashells, has always entailed the use of borrowing and lending... And as long as economies function at a profit, debts are made and paid back without argument. However, when the eventual downturn arrives, some portions (perhaps a large portion) of the owed wealth (debt) cannot be returned.
It's here,,,,at this point in tribal life,,,,,,,that all of the context from above comes into play. The "reality" of life on this earth is this: ,,,,,,Some portion of society will use their influence or control of the leaders to make their debts easier to pay. In fact,,,,,it's times 2 for that number of government influencers ,,,, because even the ones that have debt owed to them will try to alleviate an impossible payback situation the ones that owe them face.
You see,,,,,tribal life and the human nature that comes with it,,,,,,,,will not allow any money system to "completely" destroy the wealth of a good portion of society. Even if everyone is plainly shown that they are going to lose something ,,,,,,they would still option for the good of the overall tribe. This is why we return,,,,time and again to fiat monetary systems. In the few examples where a gold system brings the harsh reality of loses to bear on a nation,,,,,,usually war is the result. Not a good outcome.
Yes, we can break gold into many small parts,,,,,,stamp it into coins and circulate gold certificates as money. We can borrow it, lend it and also circulate gold bonds as the economy grows. It is the perfect "weights and measures" monetary system. Exactly representing our productive efforts in every faucet of human endeavour. But, when the loses mount, our tribal human tendencies will not allow us to support a government or banking system that forces these real loses on only a portion of the group. Never has,,,,and never will! Without this escape valve, we go to war ,,,,,, internaly or on a world scale,,, so we all can share the loss,,,one way or another. As a human society of thousands of years,,,outside of war,,,,,we have learned to inflate our loses upon everyone as a whole,,,,,for the good of the keeping the whole from each others throats. Even to the point of a total loss of the current system,,,,,and all the destruction that entails for everyone.
Yes, indeed,,,,,,,we will transition to the next fiat system from the dollar, when the time comes. Believe it!
For myself and other observers ,,,,, we know about "peace on earth" and live our life in this context but,,,,as a member of the world tribe,,,,,,and following our best interest,,,,,, one must still arrange his affairs to shield their family from the "I'm going to get yours" times we live in. Should we get our leaders to help us? Well, the leaders of this world can only be but a reflection of us as a whole. Yes, many things are not right, but they can only strive to do what can be done, not what must be done.
Consider the dilemma:
If a small portion of society telegraphs thoughts that "if we cannot have our oil we will go to war",,,,,,,,how would you force them to not elect officials that ease their pain in a gold money system? What's right and what's wrong is not the issue,,,,,,it's what this present generation will live with that rules. If they will break the gold yoke, no matter,,,,then why place gold on them? Is it not better to at least free the "knight" (gold) for the good of those that would stand with him?
During the period we are now entering,,,,,we can see all the ugly aspects of a fiat system that is failing its tribe. Look far and wide and witness the various groups ,,,, all jockeying for position as they use whatever influence they have to lessen their own private loses. If this had been a gold system, the outcome would be the same,,,,,as players force their leaders to lessen the gold debts that could not be paid. They would raise the price of gold and inflate their way out of it,,,,,,for better or worse ,,,, come hell or high water.
So, my friend (smile),,,,,,,as you can see,,,,,I completely agree with all of your post. Only, my trail is hiked with a different mind. "Another" mind set, if you will. We use the life experiences of man to dictate the best path to follow. As such,,,,,,Gold must not be part of any money system,,,,,,it must reside as a freely traded asset without debt or paper to resemble it. In this position ,,,,, its value can fully represent the ebb and flow of the affairs of man. And in doing so retain the wealth of man as a holding of things. Truly, the "Wealth of Nations" in the peoples' hands. We move forward by starting at the beginning of time.
Trail Guide (2/14/2000; 8:08:19MDT - Msg ID:25302)
NOTE: These are (see the bottom) segments of questions and answers copied from this interview. I PLACE THEM OUT OF CONTEXT TO UNDERSCORE THE THOUGHT! Please see the link above for the full discussion. It's very good and so is Mr. Park's and his site.
ALSO: The point I was trying to make in #25137 (and the question I was asking) was this;
A full gold money system works during level and rising economic dynamics. It also works "VERY" well during a downturn. In fact it works "Perfectly" all the time! It's the lending of money that creates debt, be it gold debt or fiat debt ,,,, and the failure of that debt during a downturn is what causes the pain.
I ,,,,, we as gold bugs ,,,,,, most financial thinkers ,,,,, do not debate this point. The argument is that:
If the pain dynamic (loses) of a financial downturn is not "Somewhat" shared by society as a whole ,,,,, the economic dislocation always intensifies until we go to conflict. (see my earlier post)
It's during the downturns that society in general will not tolerate a full gold system because it concentrates the loses upon their rightful owners. As such "these same" are usually "wiped completely out" and their fallout effects on the social and economic structure can be widespread and very destructive to tribal life.
Again, history has proven, time and time again that humans will not allow the full (natural) effects of gold money ,,,,, if it threatens to create factions. They accept gold during long periods until conflict (internally political or externally war) forces a break in the gold bond.
We as nations will break the "gold bond" by calling for the shared pain of inflation. Whether we (as countrymen) understand the reasoning behind it or not; currency inflation (not price inflation) in the modern world is carried out until its debt destroys the current system ,,, there by, sharing all the pain of the loses before it. We then move into the next fiat system.
Is it not better for all ,,,, if we remove gold from the official currency structure by forcing derivitives failure and creating a free physical only marketplace,,,,, so as to keep "US" ,,,,,, ourselves ,,,,,, from controlling it through our politicians?
Through "legal tender laws" currently in place ,,, let's force us (ourselves) to continue to create debts only in paper.
As such, "they" ,, "we" can manipulate the fiat as needed for society.
Does this not place gold in its rightful position of being a "real currency asset" as it was chosen to be used from the beginning of time?
A private money for trade and savings that's outside the "contract / debt' system. Your thoughts?
--------I think that legal tender is a very old institution. It certainly goes back thousands of years and legal tender is an institution, whether we like it or not is going to stay. ----------
Robert Mundell :
------There's no institutional mechanism by which we could ever duplicate the kind of financial system we have under a system that relied almost entirely upon gold. Of course you could always have a system that used a lot of paper that was in some sense convertible into gold. You could always find a price of gold that you could convert that paper theoretically into gold. But I don't think anyone has thought in terms of the enormous price of gold that would be required in order to achieve that.-----------
---------George Soros says in his book Soros on Soros that the gold standard had to be given up because it did not make possible a lender of last resort. And says Soros, because financial markets are in his words ìinherently unstableî you have to have a lender of last resort.-------
Trail Guide (2/14/2000; 18:20:51MDT - Msg ID:25335)
…Yes, our present financial system gives the impression of total insanity,,,, but we are looking at the very "end of the timeline",,,, not how it began. It all starts with the very first loan and progresses until everyone has borrowed "too much", but no one wants the music to stop. Last resort lenders then become the norm because society will lose "across the board" if everything is "marked to the market". It is not a circle (smile) as it starts and ends with the currency system (gold or fiat) everyone demands to borrow into. It all ends in the shared pain of debt collapse as the debt is discounted to zero from price inflation ,,,, even if it's based on gold ,,,,,, gold that cannot be returned. Not much different from our present gold loan structure.
We will move on to the next money system when this one ends.
If it were gold we started with? The banker would lend his gold only to find the same metal returned to his bank as a new deposit. The "society at large" would remove his franchise if he did not re-lend that same gold during "good times", "booming times" no less! Round and round the gold goes. Reserve lending hits its limit and society demands the limits be raised again ,,, and again ,,, and again! Lender of last ,,,,,, or not.
In our modern world we must remove gold from the official money system, place it in a free market and people will use it as wealth money, not borrowing money. Then the fiat can come and go as the wind! Yes?
You agree now!
I'm so very glad!
From Hall Discussion – Page 3
Trail Guide (2/16/2000; 16:14:06MDT - Msg ID:25476)
Just read again your post of: Journeyman (02/15/00; 11:10:43MDT - Msg ID:25391)
Journeyman: -----The writing of IOUs, that is, lending, is unavoidable, and when done "correctly," is good. (There is "consumer debt," which except for rare instances is in the long run inherently "bad," and "commercial debt" which is good or bad based, ultimately, on whether or not it increases productivity.) But how are you going to stop Uncle Joe from writing an IOU and using his gold sovereign as collateral?--
FOA: When gold is trading in a free physical market,, outside the currency perception,, Uncle Joe can use his "Swiss 20 Franc Helvetia's" all he wants for collateral in a currency loan. In this context gold is no different from any other item of wealth we own. Be it a car, house, furniture or a petroleum cracking unit in a "Texas City Texas refinery ,,,,,, we are borrowing the fiat currency not the item of wealth.
As long as gold is "ideally" implicated as some form of "official money", modern society will try to lend "it" (the gold) and borrow "it" (the gold). Then it becomes part of the debt itself and is entangled in all kinds of ,,, "oh where am I going to get the gold to pay off this loan",,,,, issues! This throws it right back into the arena of "currency manipulations" by officials,,,,, all in an effort to maintain the economic momentum. The very same thing we are into today.
Again, today gold still carries the baggage of past associations with "official currency / money schemes of yesterday year. As time has progressed, and our economy has developed, each passing stage of using gold in the official money / currency mix has become more convoluted. As I noted to ORO, it's a shame we cannot just use gold,, outright,, but modern society has proven that it will never leave it alone.
We have evolved to a point where no one,,,, gold bankers, gold miners, politicians or private savers even knows what the term "today's gold market" really means! We have distorted the physical gold market to the point that the trading of "paper contracts",,, that have virtually no call on real gold (ABX cash settle calls as example??) price the supply and demand of real gold. All in an effort to keep the dollar looking good. And do we blame them for doing it?
Think about it,,,, prior to the birth of another possible currency system (Euro),,,,,, looking from 1990 backwards,,,, the amount of economic loss that would have been associated with a dollar failure made the minor loss of killing the gold industry look,,,,, well,,,, like nothing! Kind of like sending in your best troops to be mowed down,,,,all to build time to assemble a full army.
Thanks for discussing Jman,,,,,,, I have more for Cman and ORO later.
Trail Guide (02/16/00; 19:22:58MDT - Msg ID:25485)
My FREEGOLD discussion with ORO and others is not a change of venue for me. Actually, I am laying the foundation for much of the discussion I will undertake on the "Gold Trail". Here, as Trail Guide I am debating the issues as myself. As FOA I will be offering the Thoughts and Reasoning of others.
Trail Guide (02/17/00; 06:45:40MDT - Msg ID:25508)
----- During the few times in history in which man has chosen this path, great leaders have arose to lead them there and thence out again once the danger has passed. Wherefore are such leaders today? Are the spirits of Jefferson and Jackson truly dead?---------------(and)--Was Freeman Tilden truly correct when he wrote the following in his book, A World in Debt? "Nothing, has been more amply demonstrated during the past three thousand years than this: that the great majority of men do not esteem, or understand, or even desire personal liberty. What they value is the semblance of liberty accompanied by indulgence."-----
Oh boy, Tilden said it right,,,,, "semblance of liberty accompanied by indulgence"! This very aspect of modern life is clearly visible in our money systems today,,, and will most likely be the norm for some time.
It's one of the reasons I brought up Freegold,,,,,, so we can all air our feelings and perceptions about money and life,,,,,, past and present. I submit that most goldbugs are not preparing themselves for the trail ahead. "Reality",,,, in today's context is that the world is going to use a fiat system for the foreseeable future,,,,, come what may.
If we can understand the impact a currencies "timeline" has on its value, we can position ourselves to dodge "at least" the "worst effects" of that speeding truck you speak of.
------Haven't you, yourself, argued that our entire standard of living is but an illusion based on that robbery of others?---
Yes,,,, AND eventually??,,,,, or perhaps most likely??,,,, the fiat Euro will also create the same illusion of wealth that the dollar has given today. But, the size,,,,,, scope,,,, perception of that wealth illusion is most evident at the end time of a currency's life,,,,,, not the beginning.
This is one of the reasons my friends question the over dependence,,,,,, the over positioning of ones wealth in dollar based wealth and gold derivatives for this transition. For myself, it amazes me what a difference there is from Western perceptions and much of the rest of the world. In America, for instance,,,, investors know little about the true need for "real gold" and put perhaps 10% into it at best. And even little of that position is real metal. Major private players elsewhere consider 30% a good mark for our present time. It used to be 90% (talking about the hard money portion of ones overall wealth) of our (American view) metal holdings was in derivatives with 10% in metal. In the 70s that meant gold futures and mining stocks as the paper portion and 7% silver, 2% gold and 1% other as hard metal. Today, many do the same thing and also "trade" extensively, thinking it's the way to catch up. What they do not realize is that the mechanics of the entire "gold market" as we know, it has changed dramatically. The risk today is that the whole gold market place,,, and all the equity structure that depends on it,,,,,, will fail and shut down as the dollar reserve currency system suffers the first (and largest portion) phases of its long term downward drift.
In ground reserves (ore),,,,, future delivery against contract gold,,,,, cash delivery against contract gold and its implied later purchase of gold on the open market,,,,,, will all be discounted heavily in a mad scramble to exit dollar assets.
This recent paper evolution of our gold market is the natural, end result of an old dollar / gold relationship being mutated in an effort to prop up and extend our dollar system. Once this strategy was / is abandoned, it will collapse with and before the dollar,,,,,, and in doing so "take out" the perceived "equity" in almost every gold derivative asset.
This is the reason why many major private gold investors today believe physical gold will far outrun all of its modern contemporaries,,,,,, and do so by a huge amount. As such we (that's me too) now place 95% (again this is the hard asset portion of their overall wealth) of their hard money in physical "gold" only! I not only expect gold to keep up with any hyperinflation of the dollar,,,,, but out- pace even that ,,,,,, by a large amount!
This position was promoted and considered very radical only a few years ago. Today, many are reconsidering it. Again, on the Trail I'll build quite a foundation to support this view.
Thanks Trail Guide
Aristotle (02/18/00; 15:34:00MDT - Msg ID:25618)
A little help, please.
In scanning through the posts today, I find myself largely confused by the letter to the NYMEX president from Ted Butler. Doesn't Mr. Butler realize that thousands of people can bet on the very same Superbowl? It doesn't get much clearer than this: where he states "People who buy COMEX contracts have a reasonable expectation of their contracts being fulfilled [the implication is metal delivery]" I offer this alternate view as one more accurate--'People who enter COMEX contracts have a reasonable expectation that their counterparty will pay up [cash] when the price changes.' And what's more, the price changes are based upon the supply and demand for these wager contracts. Metal has very little to do with the COMEX marketplace.
The more clearly a person grasps this, more clearly you'll grasp a portion of the point I was making in my recent series of posts. Or else I am COMPLETELY out to lunch with no grip on reality.
Trail Guide (02/19/00; 10:58:10MDT - Msg ID:25663)
You are right about Ted Butler. I truly think he and many other traders are a generation that grew up thinking that paper trading of all kinds is equal to the real thing. Yet, look around us,,,,, in reality our whole economic structure is always in the courts fighting over contract clauses someone could not make good on. Rents, leases, buy outs! Even on time delivery of new aircraft often defaults! Just because it's in writing,,,, guaranteed,,,,,, and has good counter party support doesn't mean a contract is the same as "in my hand"! Contracts are just agreements between two parties and mean nothing until concluded.
Far too many players take paper gold as a sure thing. They lost the perception that these items are just a bet on the price change performance, not delivery performance. It was barely real in the beginning and has lost even that early perception now,,,, by a factor of 1,000%. Still, we read of how it's all illegal and "they" are doing us in! Yet, I can place $2,000 down and create a contract for delivery ,,,,,, and that could be all the wealth I have ,,,, period. What's illegal about that?
We usually hear these arguments in court when somebody is losing big. They try their best to match a moral concept against a legal concept and hope the jury is out to lunch (smile). It's the same in Las Vegas,,,,,,, a guy loses big,,,,,, then tries to tell the jury that the house should have stopped him,,,,,, because he didn't know the house rules were established against him winning!
The real answer to all of this is,,,,, "boy don't play these games in their house, if you don't want to lose". Yet, people still gamble the futures and options in gold and get mad when they find out that the rules were always against them. Ha! Ha!,,,, they never cry a moral story when they are
Same thing today for the gold mine stock holders. How many would have said a word if the paper gold markets were manipulated in their favour??????? Not a word I bet! Yet, still illegal, no?
ALL: They tell this tale for their own advantage. Gold can't rise that much so use leverage ,,,,,, Gold can't rise that much so buy silver ,,,,, Gold can't rise that much so buy gold stocks. Then gold falls,,, they lose over and over from trading in and out and cry it's all illegal ,,,,,, we pack physical in and wait for the world to swing our way and pray for more of this illegal stuff to keep the price down!
Next play ,,,,, gold spikes way up ,,,, crashes the entire paper marketplace ,,,,,, destroying the finances of most mines and players in the process ,,,,,, same cries again ,,,,,,, it's all illegal ,,,,, they forced it too high!!!!! It will never end!
As Another said "Out bet? They can never cover. Because we play "our" game in "their" house"
Also: Aristotle ,,,,, you write,
"I hope I didn't undermine any natural progression of ideas you had planned by tossing this out on the Table too early"
I saw some while back that you had caught on to what was happening. Funny, there is but a very small group, world-wide, that are working on this. I guess thoughts travel through space and time?
Go for it my friend.
Thanks Trail Guide
FOFOA: Then some 15 months later FOA is brought back to the subject of gold lending:
FOA (05/08/01; 20:54:48MT - usagold.com msg#71)
A Tree in the Making #03
I'm going to take parts of your find and comment on it out of sequence. You write in #52646:
------Any system that could possibly be thought of or proposed must include the use of law. Part of the answer (transparency) includes a complete treatise of the "new" laws written in simple, direct English (8th grade level-2 pages instead of 2000). The laws would be directed towards controlling the bankers, not the people for a change. The laws would be written with input from bankers, but not by bankers. Penalties for financial fraud/counterfeiting/etc. would be severe. ---------------------------------This new gold dollar system would function alongside the current FED system. Any large debts (mortgages, business debt, most importantly, govt debt) would be denominated in fiat dollars. That way govt could continue to operate (maybe, ha ha) and the banksters could still have their play money to manipulate and try to capitalize on. A free market would exist to redeem back and forth as necessary. This free market would show the relative worth between the two currencies. ---------------
Excellent thought sir. Econoclast, using your thrust as my platform:
One of the major problems faced by past hard money planners was that any time real wealth, gold, is denominated as credit money, it always placed the relationship between the rule of law and the rule of gold at odds. If our laws defined gold as official money, and lent it, then by association the law had to define a portion of gold that did not exist in circulation. That portion was the contract asset held as bank savings. Yet, a person's claims against it identified said gold as real. This was and is an inherent contradiction because no law can define the value of real wealth held in contract.
This particular fiat form of hard money owed its existence upon a continuous function of the economy. What the above means is that you cannot take something real and lend it over and over, as banks do when lending fiat, and still demand that the law recognize said contract moneys as hard legal tender.
I would state that no form of lent gold be recognizable or enforceable in the court of law as a legal tender contract. One may borrow gold, relend it, or even borrow against it, but that gold would not be valid in the payment of all debts both public or private. It could not, by law be legal tender. This is not to say the trading of gold would not somewhat supplant currency in function. It could and most likely would to a degree, but it would no longer carry a credit quality that fiat would in the form of a time function. Indeed, in our modern economic structure, a credit time function is very valuable and gives digital contract currencies their demand.
To deal in the future,,,,, to borrow,,,,, to capitalize would require the use of a fiat function. Gold could / would be a final trade; I'll give you ten cars (or gold) for your house,,, deal done. If I want more time to pay, I and we must engage a fiat loan.
-------weaving OUR gold supply, literally, into gold dollars--------Contracts could be denominated in gold dollars, however these "gold notes" are strictly non-transferable. If someone wants to sell their gold note, they can't. It is only enforceable between the parties that entered into it originally. All forms of paper gold are illegal-fraudulent. Any debt larger than the legal tender law amount has to be denominated in fiat, smaller can be negotiated.------------
Once again, it looks good at first but later evolves. By mingling your gold currency into the contract / credit realm, it once again creates gold loans that are at odds with human nature. Yes, the gold notes may not be transferable, but the lent gold currency is. It is at once someone's asset while also another's liability. The gold currency in circulation expands thru the nature of loans. When these loans fail on a national scale (major downturn) the legal tender laws defining our new gold currency will be changed. We thin our gold again in an ages old cycle aimed at covering debts that are the common citizen's savings.
Still, we are not far from the position you see. We must remember that neither currencies or gold define society's economy. Business can function using fiat alone. We have been doing just that for a number of decades. Installing a trading medium outside lawful money that acts as a wealth savings and a final trade will not destroy the bankers, governments or paper credit inflation. But, it will allow society a way to judge political efficiency. A nation's productivity will then have two scales to measure with, one it must live with (final payment) and another it cannot live without (future payment).
We shall see (smile)
And also for Atticus:
FOA (5/9/01; 07:20:23MT - usagold.com msg#72)
A Tree in the Making #04
Our modern gold market and the price illusion it creates, is little more than a fiat dollar system that denominates gold credits in contract form. Is it a free market? Why yes, very free. But only free in the sense that supply is unlimited. Investors and the industry in total, bought into paper based gold and yet they fully well knew 90% of it had only cash equity as the collateral on the other side. Then, somehow expected that those contracts were limited in creation by the fixed amount of gold in the world. Their mistake, not the markets.
…Indeed, a currency without a country! In order to implement such a currency, gold would require laws that would keep it within its wealth concept. Gold in possession would be wealth in possession as long as governments could not use it as credit money. In my discussion with Econoclast, I took his legal meanings and applied them to this "wealth without a country" position.
Keeping gold out of the fiat arena would be more simple than many hard school advocates envision. The key to that is found in the implementation of international law. The leading economic countries (EuroZone in the future) would have but to establish a protocol that forbid the enforcement of collateral attachment anytime physical gold is traded, lent or involved in a trade. In this context, no banker would lend you gold to buy a house if, in a default, he could not claim your house in a court of law. Even private parties would never lend gold if the asset behind the loan could not be claimed for nonpayment. It's that simple. With a stroke of written law, the trading of gold as wealth would become a final payment with no possible credit implications. Our official fiats and wealth without a country would never again function as one.
Bron, think of this as more of a natural law, a little like Gresham's law. You save the good money while you lend, or circulate, the bad money. And sometimes you codify natural (good) laws simply to protect the morons from the sharks.
As Atticus wrote, it can be as simple as non-enforcement of gold lending contracts in the courts. The intent of the law would be not so much to prevent you from lending your gold as it would be to protect you from unscrupulous borrowers who would take it and spend it without the ability to get it back.
Why would a rational person want to lend gold? How about two friends; why would you want to lend gold to your friend? So he could spend it into the marketplace? That act alone puts downward pressure on the value of your gold savings, which could have instead been lying very still under your bed.
And then there is the issue that you cannot squeeze blood from a turnip. You cannot force the repayment of something real that someone no longer has. This issue can become especially problematic internationally if you really think about it. Countries have gone to war for less. Which is another good reason for an internationally codified (natural) law to protect the morons from the sharks, as well as the sharks from armed and dangerous morons.
Bron, can you give me a good reason why the morons should have the Libertarian freedom to lend their gold to sharks, presuming that "freedom" destabilizes the foundation on which the rest of the global economy builds?
Aristotle (10/13/03; 23:29:04MT - usagold.com msg#: 110354)
…To say "Gold is money" is to give bankers full license to treat it like money, thus throwing open the door to lost purchasing power of the metal and giving rise to ambiguous notions of OWNERSHIP…
Aristotle (10/14/03; 03:01:32MT - usagold.com msg#: 110359)
on the topic of honest money
To offer up the culmination of a long inquiry into the nature of money from the humblest beginnings, two things come immediately to the fore.
1.) An understanding of money -- Form and Function -- requires *REQUIRES* an understanding of banking. This, to the extent that a person can't hope to claim a mastery of the monetary phenomenon ever exceeding his or her mastery of banking as a System of Practices.
2.) Money is more about the Rule of Law than anything else.
Long trudging will eventually root out even the most entrenched preconceived notions about Gold in all of this. In the end, we're left with this unobstructed view of the horizon: Banking institutionalizes the accounting of Money; Rule of Law provides the vitality of contracts (wages, loans, purchase orders) which, forming an interconnected network of settlements and expectations of settlements, gives rise to (and, at the same time, gives insight into) the Value that a society engenders in its monetary unit.
The role of Gold in the whole affair can be seen naturally as a passing phase in which the universal barter agent of Gold lumps evolved into standard Gold currency serving furthermore as a catalyst helping the Monetary phenomenon to set up and gel as a pure numerical system.
The problem with Gold's low bartering/exchange/market/wealth value today is that it hasn't yet been set free again to behave a pure Property. It remains encumbered in a certain element of the banking system as a token behind an artificial valuation established by derivatives.
As I tend to characterize it, it would seem that the Dollar-brand prototype of Money was never fully and fairly allowed to "gel" under standard Rule of Law within an uncoerced marketplace. As a result, the risk today is that the Dollar would collapse in a heap like so much premature quiche if LOW PRICED Gold were removed (i.e., becomes high priced Gold) as the ongoing stabilizing agent in the dollar's ongoing attempt at earning its own monetary wings.
The euro is trying not to make that mistake. It wants the marketplace to form a stable network of pricing and contracts without false pretenses with respect to Gold. If it succeeds, it will be the world's first fully fledged Money -- in the most Proper use of the word!
The euro could in fact be called honest money, if you like. That is, as honest and as trustworthy as the Rule of Law that stands in the background to enforce contracts.
But as we know, Rule of Law today is not one and the same predictable Rule of Law we want to be able to count on tomorrow. It blows around a bit due to political will. Therefore, we'll always want honest Gold property used as our core Wealth Savings. We'll own it to compensate for our human inabilities to provide ourselves with a PERFECT Money.
In other words, because we have to settle for using, at BEST, a system of honest money which is always humanly flawed, we need Gold to return to its ANCIENT job description as perfect property. The kind of stuff that can be OWNED, not "as money," but rather, OWNED....... (wait for it......).... UNAMBIGUOUSLY!!!!
I hope this doesn't make anyone choke on their breakfast!
Gold. Get you some. --- Aristotle
Belgian (10/14/03; 03:13:19MT - usagold.com msg#: 110361)
THIS IS ONE OF YOUR GREATESTS POSTINGS I HAD THE HONOR OF READING !!!
I am speechless and saw the "unobstructed horizon " !
THANK YOU SIR !