The first step to re-establishing gold and silver as an alternative currency is to remove capital gains tax from gold and silver transactions.
Gold and silver prices fluctuate in relation to our current common currency. If you sell gold, you are required to pay capital gains tax. In some places you have to pay sales tax.
The cost of this extra tax work makes the use of gold and silver in trade untenable.
Goldbugs argue that the "capital gains" of gold are an illusion created by the devaluing of the currency.
CoinInflation reports that the current price of silver in a silver dollar is $25. So, if you held a silver dollar from 1964 to present, you would have to pay capital gains on $24.00.
However, the price of the silver dollar tracks other baskets of goods. You used to be able to get a haircut and shave for two bits (a quarter). A quarter of $25.00 is $6.25. Most barbers these days charge $10 for a haircut.
A basic meal at a sit down restaurant cost two bits as well. It is hard to find a meal at a sit down restaurant for $6.25.
Entry level wages used to be around a dollar a day. Today's minimum wage is around $60 a day.
Since silver is tracking the price of goods, there is a strong argument that gold and silver have not increased in value. One is paying a "capital gains tax" on inflation.
It is an ugly affair. The central authorities devalue the currency by printing dollars. They then tax the people on the inflation that they created. They are taxing the inflation that they created.
This institutionalized dishonesty benefits the rich as the cost of the middle class and poor.
There is a strong argument that the capital gains associated with gold and silver are the result of the devaluation of the currency.
The argument for reviving gold and silver as alternative currencies focuses attention on the inherent dishonesty of the Federal Reserve system.
Wednesday, December 7, 2011
Sunday, December 4, 2011
An Alternative Currency
The gold standard is a losing argument.
"Standard" is a synonym of "regulated." With the gold standard, countries tried to regulate the economy by controlling gold. The regulators failed.
The enemies of freedom use the failure of the gold standard to project the failure of their regulations on an inanimate object.
The wise goldbug recognizes that attempts to regulate the economy by manipulating the price of price metals are doomed to failure.
Rather than arguing for a return to the gold standard, the wise argue to re-establish gold and silver as free floating alternative currencies.
Re-establishing gold and silver as alternative currencies would create a more diverse economic landscape in which commoners could easily place their cash holdings into precious metals.
Re-establishing gold and silver as alternative currencies would also facilitate free trade as people can trade in the commodities without the complications of national currencies.
Re-establishing gold and silver as alternative currency is simply a matter of removing certain taxes and restrictions on the trade in gold and silver.
The Founders of the United States used gold and silver as currency. They were trading in worn pieces of eight that were of different sizes and of dubious origins. The primary goal of the first coinage act was to set standard weights for the coins; so that people could trade in confidence.
Gold and silver were traded as currency up unto the heady days before the Civil War when it was outlawed and heavily taxed.
Allowing people to trade gold and silver as currency would, arguably, lead to a more diverse economic landscape and greater economic stability.
Having more than one currency in play would help Americans become more savvy in their personal finances as people would face on a regular basis decisions about which currency to hold. Greater economic awareness would help improve the conditions of the middle and lower classes.
"Standard" is a synonym of "regulated." With the gold standard, countries tried to regulate the economy by controlling gold. The regulators failed.
The enemies of freedom use the failure of the gold standard to project the failure of their regulations on an inanimate object.
The wise goldbug recognizes that attempts to regulate the economy by manipulating the price of price metals are doomed to failure.
Rather than arguing for a return to the gold standard, the wise argue to re-establish gold and silver as free floating alternative currencies.
Re-establishing gold and silver as alternative currencies would create a more diverse economic landscape in which commoners could easily place their cash holdings into precious metals.
Re-establishing gold and silver as alternative currencies would also facilitate free trade as people can trade in the commodities without the complications of national currencies.
Re-establishing gold and silver as alternative currency is simply a matter of removing certain taxes and restrictions on the trade in gold and silver.
The Founders of the United States used gold and silver as currency. They were trading in worn pieces of eight that were of different sizes and of dubious origins. The primary goal of the first coinage act was to set standard weights for the coins; so that people could trade in confidence.
Gold and silver were traded as currency up unto the heady days before the Civil War when it was outlawed and heavily taxed.
Allowing people to trade gold and silver as currency would, arguably, lead to a more diverse economic landscape and greater economic stability.
Having more than one currency in play would help Americans become more savvy in their personal finances as people would face on a regular basis decisions about which currency to hold. Greater economic awareness would help improve the conditions of the middle and lower classes.
Friday, December 2, 2011
Gold and Fractional Reserve Banking
Bankers, and the ruling elite, love fractional reserve banking. With fractional reserve banking, bankers lend multiples of the dollars held in savings.
In the case of gold, bankers would lend out multiple bank notes for the gold they have in reserve. This works great in boom times. It makes them even boomier.
When the market spooks and people run in to redeem their gold certificates, they discover that the bank doesn't have sufficient reserves to cover the notes and chaos ensues.
Banks that use precious metals to back a fractional reserve currency almost always fail.
Our progressives friends love to point to the failure of gold banks using fractional reserve currency and claim it as proof that precious metals cannot work as a currency.
Goldbugs should point to this failure as indication that fractional reserve banking fails.
Central banks printing a fiat currency provide some relief for banks using fractional reserve lending. When a run on a bank occurs, the central bank can simply print up a pile of notes. This externalizes the failure of fractional reserve banking on society at large.
The fact that our unstable system of fractional reserve lending works better with fiat currency than with gold does not mean fiat currency is intrinsically better than hard currency.
The fact that fiat currency allows banks to temporarily mask a corrupt money supply has proven a major defect in that it turns depressions into recessions or into periods of hyper inflation.
Advocates of precious metal currencies need to argue against fractional reserve lending.
For that matter, the reason I am interested in reviving precious metals as a currency is that I realized that fractional reserve lending magnifies business cycles and leads to economic harm to the people at large.
I am not attracted to the glitter of gold. I am attracted to gold to the extent that it is a more honest currency that fiat money.
Fractional reserve banking multiplies the debt of the people and has proven itself, time and time again, to be toxic to a society. Re-establishing gold and silver as currencies directly challenges the financial structures built around fractional reserve lending.
In the case of gold, bankers would lend out multiple bank notes for the gold they have in reserve. This works great in boom times. It makes them even boomier.
When the market spooks and people run in to redeem their gold certificates, they discover that the bank doesn't have sufficient reserves to cover the notes and chaos ensues.
Banks that use precious metals to back a fractional reserve currency almost always fail.
Our progressives friends love to point to the failure of gold banks using fractional reserve currency and claim it as proof that precious metals cannot work as a currency.
Goldbugs should point to this failure as indication that fractional reserve banking fails.
Central banks printing a fiat currency provide some relief for banks using fractional reserve lending. When a run on a bank occurs, the central bank can simply print up a pile of notes. This externalizes the failure of fractional reserve banking on society at large.
The fact that our unstable system of fractional reserve lending works better with fiat currency than with gold does not mean fiat currency is intrinsically better than hard currency.
The fact that fiat currency allows banks to temporarily mask a corrupt money supply has proven a major defect in that it turns depressions into recessions or into periods of hyper inflation.
Advocates of precious metal currencies need to argue against fractional reserve lending.
For that matter, the reason I am interested in reviving precious metals as a currency is that I realized that fractional reserve lending magnifies business cycles and leads to economic harm to the people at large.
I am not attracted to the glitter of gold. I am attracted to gold to the extent that it is a more honest currency that fiat money.
Fractional reserve banking multiplies the debt of the people and has proven itself, time and time again, to be toxic to a society. Re-establishing gold and silver as currencies directly challenges the financial structures built around fractional reserve lending.
Thursday, December 1, 2011
The Gold Standard Failed
The gold standard failed.
The reason for this failure has more to do with "standard" than with the word "gold."
"Standard" is a synonym of the word "regulated."
Using gold as the backing for a nation's currency leads directly to attempts to regulate the economy by manipulating the price of gold. These attempts to regulate economies through buying or selling of gold quickly slammed against harsh economic realities.
Fiat currencies allow extra room to manipulate the economy. If you can convince people that inflation is all well and normal, then the introduction of fiat currencies greatly expand the ability to manipulate the economy.
The history of fiat currencies is bleak, with a large number of deep recessions and currency failures. The extra room that fiat currencies give to manipulate the economy has not led to niravana.
The problem is clearly not the backing of the currency but the attempts to regulate the economy.
Proponents of the free market need to be wary of any discussion involving the term "gold standard." This term implies attempts to regulate the economy by governments and central banks holding large amounts of gold.
A free marketeer must start from the position that the price of all items fluctuate.
Advocates of the regulated economy will goad people into conversations about the gold standard and then start slapping you silly with evidence that shows attempts to regulate the price of gold systematically fail.
When a progressives successfully draw a goldbugs into defending the "gold standard," they manage to draw the goldbug into the corner inwhich the goldbug is forced to defend economic regulation.
The goldbug who understands the nature of this trap can take the data progressives use to attack the "gold standard" and show that it was the attempts to regulate gold that led to economic turmoil and not an inherent property of precious metals.
The reason for this failure has more to do with "standard" than with the word "gold."
"Standard" is a synonym of the word "regulated."
Using gold as the backing for a nation's currency leads directly to attempts to regulate the economy by manipulating the price of gold. These attempts to regulate economies through buying or selling of gold quickly slammed against harsh economic realities.
Fiat currencies allow extra room to manipulate the economy. If you can convince people that inflation is all well and normal, then the introduction of fiat currencies greatly expand the ability to manipulate the economy.
The history of fiat currencies is bleak, with a large number of deep recessions and currency failures. The extra room that fiat currencies give to manipulate the economy has not led to niravana.
The problem is clearly not the backing of the currency but the attempts to regulate the economy.
Proponents of the free market need to be wary of any discussion involving the term "gold standard." This term implies attempts to regulate the economy by governments and central banks holding large amounts of gold.
A free marketeer must start from the position that the price of all items fluctuate.
Advocates of the regulated economy will goad people into conversations about the gold standard and then start slapping you silly with evidence that shows attempts to regulate the price of gold systematically fail.
When a progressives successfully draw a goldbugs into defending the "gold standard," they manage to draw the goldbug into the corner inwhich the goldbug is forced to defend economic regulation.
The goldbug who understands the nature of this trap can take the data progressives use to attack the "gold standard" and show that it was the attempts to regulate gold that led to economic turmoil and not an inherent property of precious metals.
Wednesday, October 26, 2011
Move Your Bank Day
Thugs on the left are engaged in a peoples struggle demanding that people take their money out of X bank and put it in Y bank. (MoveYourMoneyProject.
I used to believe that Savings and Loans were good things and banks evil. Then the Federal Savings and Loan Insurance Corporation (FLSIC) imploded and I learned that Savings and Loans were every bit as corrupt as banks.
The problem is not the business structure, but the fractional reserve system created by the Federal Reserve.
The FLSIC was a federal insurance company that socialized the risk of private companies. The result was a large number of risky loans in overbuilt communities that all came crashing down on the taxpayer.
The move your money movement is based on the naive notion that it is the business structure of banks that causes economic problems. Banks use a corporate model while credit unions are buyer's co-ops.
I would have sympathy for the Move Your Money movement if it had a sound reason to move money. But, the problem is the systemic debasing of the currency caused by fractional lending of the Federal Reserve.
Fractional Reserve lending is as likely to take out a credit union as it is to take out a bank or savings and loan.
It is always wise to diversify. But moving money out of an institution for a political statement is apt to do more harm than good.
ADVERTISEMENT: If you are diversifying, it is probably good to have some money on hand in physical or gold coins.
Why, there just happens to be a Buy Gold page on this site with affiliate ads.
If you want to get your mortgage or your savings out of the system, you might try the Lending Club. The Lending Club coordinates person to person loans.
I used to believe that Savings and Loans were good things and banks evil. Then the Federal Savings and Loan Insurance Corporation (FLSIC) imploded and I learned that Savings and Loans were every bit as corrupt as banks.
The problem is not the business structure, but the fractional reserve system created by the Federal Reserve.
The FLSIC was a federal insurance company that socialized the risk of private companies. The result was a large number of risky loans in overbuilt communities that all came crashing down on the taxpayer.
The move your money movement is based on the naive notion that it is the business structure of banks that causes economic problems. Banks use a corporate model while credit unions are buyer's co-ops.
I would have sympathy for the Move Your Money movement if it had a sound reason to move money. But, the problem is the systemic debasing of the currency caused by fractional lending of the Federal Reserve.
Fractional Reserve lending is as likely to take out a credit union as it is to take out a bank or savings and loan.
It is always wise to diversify. But moving money out of an institution for a political statement is apt to do more harm than good.
ADVERTISEMENT: If you are diversifying, it is probably good to have some money on hand in physical or gold coins.
Why, there just happens to be a Buy Gold page on this site with affiliate ads.
If you want to get your mortgage or your savings out of the system, you might try the Lending Club. The Lending Club coordinates person to person loans.
Monday, September 26, 2011
Open Source Exchange
I did not get very far writing articles for the Utah Monetary Summit.
A twitter conversation reminded me about how much I dislike the University of Utah and I lost my appetite for writing.
Readers of this blog might remember a few years back I wrote about stock market reform. I suggest the best way to start a general discussion of market reform would be to launch an open source project to create a new exchange.
I called the project the Open Source Real Time Exchange.
Even if the exchange never became a reality, the act of creating a model would help spawn a discussion about market reform.
The second proposal I had for the Utah Monetary Summit was to launch an Open Source project to create an exchange for gold and silver.
Specifically I was interest in creating a project that developed an open source exchange for trading shares of precious metals stored in Nature's Vault.
Such a project would intrique young idealistic minds.
Imagine the excitement of working on a project that combined open source development, the protection of natural resources along with financial reform!!!!!
People would love the idea.
I've been treated like dirt by Utahans for so long, I simply cannot imagine any scenario in which I could communicate a very simple yet compelling idea.
The meeting starts in a few hours and I am sitting here unable to sleep and feeling like I am about to get sick.
A twitter conversation reminded me about how much I dislike the University of Utah and I lost my appetite for writing.
Readers of this blog might remember a few years back I wrote about stock market reform. I suggest the best way to start a general discussion of market reform would be to launch an open source project to create a new exchange.
I called the project the Open Source Real Time Exchange.
Even if the exchange never became a reality, the act of creating a model would help spawn a discussion about market reform.
The second proposal I had for the Utah Monetary Summit was to launch an Open Source project to create an exchange for gold and silver.
Specifically I was interest in creating a project that developed an open source exchange for trading shares of precious metals stored in Nature's Vault.
Such a project would intrique young idealistic minds.
Imagine the excitement of working on a project that combined open source development, the protection of natural resources along with financial reform!!!!!
People would love the idea.
I've been treated like dirt by Utahans for so long, I simply cannot imagine any scenario in which I could communicate a very simple yet compelling idea.
The meeting starts in a few hours and I am sitting here unable to sleep and feeling like I am about to get sick.
Saturday, September 24, 2011
Nature's Vault
You may not know this, but I just happen to be an "eco-jabbering meadow muffin."
Give me a chance to jabber about ecology and I will jabber all day.
My primary objection to reviving the gold standard is that I really dislike the environmental damage done by cyanide-leeching gold mines.
If you could make a gold-backed currency without having to dig it up, I would go for the gold standard.
The fact that my local store is willing to accept Federal Reserve Notes which are backed by nothing less than promises of an independent central bank suggests that people are happy to trade in abstract monetary units.
IMHO a bank note that referenced physical gold in the ground would be a step above a currency note backed by a promise.
My first proposal for the Utah Monetary Summit is a thing I call "Nature's Vault." In this program, one would issue currency backed by mineral resources in an environmentally sensitive area.
The program would buy up the mineral rights for an area, then issue currency based on the estimates of the mineral resources of the area.
I believe that such a currency would be valued by environmentally minded investors seeking a way to hedge their investments ... without the environmental damage done by mining.
Give me a chance to jabber about ecology and I will jabber all day.
My primary objection to reviving the gold standard is that I really dislike the environmental damage done by cyanide-leeching gold mines.
If you could make a gold-backed currency without having to dig it up, I would go for the gold standard.
The fact that my local store is willing to accept Federal Reserve Notes which are backed by nothing less than promises of an independent central bank suggests that people are happy to trade in abstract monetary units.
IMHO a bank note that referenced physical gold in the ground would be a step above a currency note backed by a promise.
My first proposal for the Utah Monetary Summit is a thing I call "Nature's Vault." In this program, one would issue currency backed by mineral resources in an environmentally sensitive area.
The program would buy up the mineral rights for an area, then issue currency based on the estimates of the mineral resources of the area.
I believe that such a currency would be valued by environmentally minded investors seeking a way to hedge their investments ... without the environmental damage done by mining.
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