Commodity money, gold standard, fiat currency and Abuse

Ok, here's a question. It may have been answered elsewhere, if so I would appreciate a pointer.

I've watched "The Money Masters", a 1995 documentary on money, banking and the Federal Reserve (if I may plug a Mises.org documentary shamelessly), with special attention to the "international banking conspiracy".

http://video.google.com/videoplay?docid=-515319560256183936

The entire 3 hours is well worth watching if you haven't seen it.

But one major charge made in the film concerns a problem of going onto a gold and gold-backed currency: Someone already owns the lion's share of the gold.

The bust of 1836, as informed in the excellent talk "Martin Van Buren, The American Gladstone (or What Greatness Really Means)" was created by the Bank of England pulling in their loans. Even with a gold/silver currency, a central bank far away still disrupted life in the US by leveraging their gold stocks.

Since {insert International Banking Cartel name here} can extend or contract a truly vast quantity of gold at will, going onto a gold standard will enable them to rig more business cycles and depressions, doing the same thing they've been doing for a couple of centuries, and end up owning even more of the world.

The glory-days of this documentary were not the days of the gold standard, but instead the times when the "legal tender" was a pure fiat currency. The "greenbacks" of Lincoln and Colonial Scrip of pre-revolution North America.

While I understand the problems that could be caused by a gold standard when someone else has so much of the gold, it's also obvious that a purely fiat currency could be abused by the Treasure Department's printing presses. So long as the government itself prints the money, it can print itself all the money it wants. Even Rothbard's answer of simply valuing the outstanding FRNs for whatever weight is in Ft. Knox, and letting the chips fall where they may, is no good if there is actually no American gold in Ft. Knox.

If I could wave my magic wand, there would be a complete separation of government and money, along with a separation of government and pretty much everything else. But I don't see that happening any time soon. So... 

So here are my questions: Which do you think is worse?

How could the problems of an un-backed fiat currency be mitigated?

How can government have anything what so ever to do with money, and not have these problems and the corruption that the centralization of such epic power fosters?

And as a seriously unhinged twist, might the International Banking Cartel be leaving Ron Paul alive simply because a return to the gold standard in the US would neither stop nor even slow their accumulation of total power? 

The problem with fiat, above all, is that it allows theft of purchasing power.

Arguable objections to gold money are all in the category of imperfections, and never theft. 

I would not mix that with any imperfections that either fiat or gold systems may or may not have. This is a fundamental distinction. Imperfections are the limitations placed on our reality by the nature of this world. A theft is an unnecessary further abuse of the realities of our given natural world. There is nothing that we can doto remove all the imperfections, but there is absolutely no reason to say the hell with it all, and if we can't ave it perfect then let's just have some people abuse our imperfect system down to absolute dust.

As human beings, we deserve to live in justice with each other, however imperfect that might be. To allow theft by fiat, is to allow injustice, and that is to welcome the brakdown of morality. It is also known as to allow evil.

Nonwithstanding any promissed economic benefits of FIAT, therefore, it simply not the way to go, if you consider yourself a human being deserving justice.

Phrased the other way, an acceptance of fiat is no different than an acceptance of corruption for the economic it's benefits to certain parties. 

I hope this makes for a clear answer to your question. 

Thorgold:

The problem with fiat, above all, is that it allows theft of purchasing power.

Arguable objections to gold money are all in the category of imperfections, and never theft.

So if I may sum it up, any problem there might be with commodity money is a technical problem, while commodity money allows actual direct corruption.

Ok, that's a fair statement. Even with all the leverage the mythical Money Masters might have, they cannot create gold out of nothing.

Of course, in Fantasy Land, there is no state so there is no question of legal tender laws creating corruption. 

Yes. Look at what is going on now...

Chairman Bernanke, even if his mandate wasn't of questionable origin, was supposed to guarantee the deposits of bank's clients.

He supposed to pay up to insured amounts to clients, while leaving bank in crumbles and letting it's shareholders to lose their money. Instead, Chairman Bernanke bails out the banks too, therefore removing all responsibility from the system and setting us all up for even bigger systemic failure.

Why is chairman Bernanke doing this? Because this bail out cost him or central bank nothing. He simply has paid with our money. He has an easy method of reaching into our pockets, including those of foreigners abroad, and grabbing whatever he wants to grab. So, instead of even thinking of performing his mandated function (not that I like that function), he decides to bail out his friends, the people he parties with, the bankers, and letting everybody else to pay for it. Because he can! Everybody's dollar has lost valus, but his friend's accounts are swelling with credits, and it is in billions. He is doing this, because the shareholders of FED do not mind, - they don't need to pay for this idiocy, we, the people pay. They, the shareholders will pay too, a penny or two, just like us, but they stand to keep the wall street running, where as all we stand to see is more work for less pay.

Now, let us say, that Bernanke didn't have an easy access to our pockets. Let us say we were trading in gold coin. Then the shareholders of FED, had do provide the liquidity required to save all of the Ben's friends and buddies. I could be wrong, but I would bet, that they would still want to guarantee the deposits in order to escape the bigger problem of FED perceived weakness, but they would not save Citibank, or Meryll, or any others. They would let them to be destroyed and at least a semblance of fairness would then return to our land. Things out of a communist nightmare, FreddyMac and FannieMae,  wouldn't even exist.

Now, there would be no FED if we were on gold coin, since for every bail out, somebody would have to pay his own money, and nobody likes that. The whole circus, the whole theater of craziness that we see today, is created by nothing else that the availability of everybody's dollars to chairman Bernanke.

If you have crashed your car while riding it for fun over the rocky hills, and you could make everyone in the world poorer by 1/100 of a penny to pay for your new car, you would be doing it over and over again. The only reason you're not careless with your property is because you are the only one to bear the responsibility.

Yes, fat cats can play with their thick pocketbooks of gold and leverage it. But first of all, that is their gold, and why shouldn't they be able to leverage it? Secondly, every time they would attempt to corner the market, there would be a price to pay. And if they make a misjudgement, they stand to lose all that they have leveraged! The gold game is much more fair.

I think, that this is THE reason, why gold coing is preferable to FIAT, no matter what qualities a fiat may have, or what technical problems are associated with gold coin. 

I agree that going to a gold standard offers up its own potential for abuse, but I think anyone that looks at it vs. the fiat system we have today would agree that it is the lesser of two evils.

I do wonder how much gold the hoarders have in their vaults...  I would imagine its astronomical.  Which gives me pause and wonder at how much good would be done when those who have manipulated the world for their advantage would still have this advantage in their pockets, just in a different fashion.

I still don't quite see the point in switching to a 'gold standard' at all. Why not completely abolish the enforcement of a monopoly on any single currency, be that pure gold, gold-backed, silver, fiat etc? Why not just have open competing currencies and let the free-market decide which is better for the consumer and economy? Why would we even need banks at all in a modern digital world, in a *truly* free-market?

CurtHowland:

And as a seriously unhinged twist, might the International Banking Cartel be leaving Ron Paul alive simply because a return to the gold standard in the US would neither stop nor even slow their accumulation of total power?

I'm pretty sure the International Banking Cartel is keeping Paul alive just to drive Niccolo crazy.

What I'm wondering is how much of the gold that existed in private hands (as opposed to government stockpiles) was actually under the ownership of the International Banking Cartel as compared to how much was just simply deposited by private owners into their care before the governments of the world stole it all back in the '30s?

Even if the vast majority of the gold was held in banks this doesn't give them ownership over it (even with limited bailment law that applies to banking) but merely control over it to hatch their world domination schemes. The true owners can withdrawal it at any time and if they are lucky enough to be the first in line during a bank run might actually get it back.

So if we had a return to commodity money and bailment law were made to apply to banking like any other warehouse operation they wouldn't be able to engineer boom-bust cycles for the (alleged) purpose of grabbing wealth at the expense of their depositors.

I would actually like to know how that works other than the government usually letting them out of their contractual obligation of redeeming banknotes while still requiring debtors to pay in specie.

fingolfin:

Why not completely abolish the enforcement of a monopoly on any single currency, be that pure gold, gold-backed, silver, fiat etc?

Because if you are going to open your argument with complete market anarchy, you are going to lose 99% of your audience on the spot.

By pointing out the benefits of a "gold" standard, which is what market anarchy settled upon over time anyway, the stigma of "chaos" is avoided.

fingolfin:

Why would we even need banks at all in a modern digital world, in a *truly* free-market?

Two reasons:

o Who is going to maintain your account with sufficient security and reputation that someone will accept payment from it with no tangible monetary specie transfer? Such agents must be called something, and a bank, by any other name, maintains accounts.

o There will always be people who wish to exercise "the time preference of money", and a bank, by any other name, makes, manages and brokers loans.

By the simple rule of the division of labor, there is always going to be someone who is better at managing money than another. Might as well call him a banker as a rose.

Is every single central bank of each country part of the cartel?  Is there a central bank that is not?  Is there a first world country without a central bank?  Is there a gold or commodity backed currency in existance today?

fingolfin:

I still don't quite see the point in switching to a 'gold standard' at all. Why not completely abolish the enforcement of a monopoly on any single currency, be that pure gold, gold-backed, silver, fiat etc? Why not just have open competing currencies and let the free-market decide which is better for the consumer and economy?

I'll be your 1% audience and agree with you.  Firms have the freedom to back up their money with any commodity.  They also have the freedom to fabricate non-replicable and stable forms of fiat currency.  Consumers have the freedom to choose the currency of their choice. Eventually, a form of commodity backed or sound fiat money will "monopolize" the market for ease of universal transactions.  I think there will be a plethora of local currencies. 

I really don't understand some people's fetish with the gold standard.  Why is it the only way?  Even Hayek made the case to privatize money: http://mises.org/story/1854.  There are some concerns with his argument, but there are concerns relying strictly on a gold standard.

Why would we even need banks at all in a modern digital world, in a *truly* free-market?

A digital world would need digital banks.  I never use cash and I never cash a check.  I always use plastic and direct deposit.  I need a bank to keep my deposits and financial transactions secure, from hacking.

ViennaSausage:

Is every single central bank of each country part of the cartel?

What do you mean by a cartel?

Is there a first world country without a central bank? 

Andorra and Monacco are without CB's.  Northern Cyprus, Somalialand, and Trasnistrian are de facto.

Source: http://en.wikipedia.org/wiki/List_of_central_banks

Is there a gold or commodity backed currency in existance today?

Not that I am aware of.

IDigSluts_ky:

ViennaSausage:

Is every single central bank of each country part of the cartel?

What do you mean by a cartel?

I use cartel in the sense the orginal poster's usage via the linked video, which to be honest, I haven't a clue as to the exact defination, since the defination could be viewed as the collusion of central banks per country, or the founders/current owners of the central banks.

CurtHowland:

How could the problems of an un-backed fiat currency be mitigated?

For the short term, a fiat currency can be mitigated by what the fed has done for the past ~100 years;).  But in the long term, it looks like fiats are bound to collapse.

CurtHowland:

How can government have anything what so ever to do with money, and not have these problems and the corruption that the centralization of such epic power fosters?

I agree with a few other posters on this board, let the market decide on the money.  After reading Rothbard, correct me if I am wrong, but he has is a STRONG advocate for the Gold Standard, but does not necessarily agree that it has to be a government mandate?

CurtHowland:

And as a seriously unhinged twist, might the International Banking Cartel be leaving Ron Paul alive simply because a return to the gold standard in the US would neither stop nor even slow their accumulation of total power? 

Perhaps.  Where is most of the worlds gold now a days?