THE TRIUMPH OF FREE MARKET MONEY
by Ed Bugos, Dollar Vigilante The world abandoned the system known as the gold standard in the thirties. Nothing resembling it, or especially what the sound money crowd had in mind, would ever be seen again. Some would argue that the US went back to the gold standard after WWII (a.k.a. the Bretton Woods monetary system), and the Swiss didn’t abandon theirs until the eighties. Most everyone else would argue that the gold standard belonged to a different time, a different era, before money evolved –as Greenspan noted in his infamous essay, “Gold and Economic Freedom”, in this author’s opinion a bastardization of Howard Buffet’s 1948 essay, “Human Freedom Rests on Gold Redeemable Money,” the gold standard had its place but it evolved into a sounder centralized banking system that is able to adopt to the needs of a modern world, no longer susceptible to financial volatility or the physical limitations of a coin standard. Okay, that was almost 50 years ago. Anyone with half a sense has got to realize there’s a fly in the soup by now. The central bank lobby in the US gained traction following the panic of 1907, and with the advent of progressivism (the interventionist doctrine of the modern “liberal”) finally pushed through the Federal Reserve Act in 1913, on the grounds that this would stabilize the global financial system. Sure they have reinvented the Fed a few times since, but there’s enough data on this now for even the economically challenged to see that the experiment has failed. The observer could count on one hand the number of crises that preceded the Fed in the prior century and they were all related to attempts to inflate and/or regulate the currency of the nation. Not only have the financial crises multiplied over the last century, they have become deeper, longer and more severe. Never was there so much volatility in commodity prices, interest rates or foreign exchange rates – so frequently – in previous centuries. The purchasing power of the dollar has been destroyed. This institution exists to support the welfare and warfare states –and all other progressive doctrines. Until people realize the failure of 20th century liberalism is rooted in its abandonment of the classical ideas of laissez faire, private property and the non-aggression axiom, we are doomed to experience increasing financial volatility, and ultimately may even bear witness to the disintegration of the west. We will hear over and over again how capitalism is to blame, and we will invent tougher rules… as the crises get deeper, this cycle will continue until we are under Communism and any wealth at all is shamed. Then, when historians wonder about the causes of WWIII, they will point to some specific fact… some catalyst. The culprit will be an evil person, someone after money and power. The real culprit is never admitted into the court of public opinion. It is never on trial. As obvious as is the fact that the financial volatility has never been greater than after the Fed, it is obvious there’d be no wars without the state. These are just facts, okay. One may say, but we can’t abolish the state. Maybe, maybe not. We’re just pointing out the ultimate cause of the most tragic debacles that mankind produces for itself. Maybe there’s a way to live with the state and fix these errors. However, the fact is, as Greenspan noted in his essay, the opposition to the gold standard comes from the statists. While he honed in on welfare statism, the same applies to warfare statism or any doctrine that relies on increasing the scope of government in the lives of its citizens. A small contingent of gold bugs argues that the gold standard did not fail, it was abolished by these very statists, and moreover, it wasn’t even a genuine gold standard… that the world has never seen a genuine gold standard any more than it has ever seen genuine capitalism. But, if that diluted version – limited to central bank and government participation – is considered to be a gold standard, then us gold bugs are going to have to come up with an entirely new phrase to describe what we have in mind. I’m happy with “free market money.” Let the market decide. That is the sound money principle. It states that the government get out. Historically, it was the market that ultimately preferred gold and silver wherever they were the most marketable commodities. It didn’t happen overnight. It took a long time for the market to arrive there… much longer than it took the ruling elite in the new democracies of the 19th century to figure out how first to rig the market, and then eventually to outright outlaw any competition from gold or silver – or any other “money” in their respective jurisdictions (see case about the liberty dollar). It might take time for the market to arrive there again. That’s the thing about the market. You just don’t know. But history is often helpful, as every stock market investor will know. To get there, the first thing that must happen is that there has to be a strong will to abandon the idea of inflationism. People must learn that inflation cannot create a wooden nickel of wealth, or stimulate growth… that it is but a tax on all of us, as well as on savings and growth. Only then will they be open to a simple fact, like how financial volatility has increased exponentially following the inception of the Fed in 1913, a fact that seems to be lost on most people despite the Fed’s over-reaching claim to existence: to provide stability for our financial markets. As long as the allegiance to this fallacious idea holds, the crime of fractional reserve banking (treating a deposit as a loan contract) will never be exposed, and the Medicis, Rothschilds, Warburgs and Morgans will own the world. Think about that the next time you worry about the economy just because credit is not growing. Finally, governments must repeal their legal tender laws, abolish the central bank, or relegate it to some technical duty, deregulate the entire banking and financial services industry and allow free competition in the good, money. Sneer if you must, as it may sound utopian, but anything less is doomed to repeat the failures of the past. Historians may some day marvel at how mankind could have resisted for so long something that provided so much prosperity and happiness, or how it could not get itself out of the cycle of error – the same error – over and over.