Guest Post by Antonius Aquinas
It has been theoretically demonstrated and seen in general practice that a monetary system of 100% metallic money devoid of central banking checks monetary inflation, prevents a general rise in the price level, and eliminates the dreaded business cycle while making all sorts of monetary mischief nearly impossible. A gold standard is not only economically superior to any paper money scheme, but is morally just, which is why it is hated by the politically well-connected, academics, politicians, and the rest of the Establishment.
Often not discussed, however, even by its proponents is the beneficial effect that “hard money” has for the middle class.
It is not a coincidence that since the U.S. left the last vestiges of the gold standard in 1971with President Nixon’s nefarious decision to no longer redeem international central bank payments in gold, real wages for Americans have stagnated. Nixon’s decision to put the nation on an irredeemable paper money standard set it on a course of economic ruination, which is why he should have been hounded from office not for his role in the bungled, petty cover up at the Watergate.
Stagnating wage rates have been confirmed by a number of studies, take, for instance one from the Pew Research Center which states that “today’s average hourly wage has just about the same purchasing power as it did in 1979. . . . [I]n real terms the average wage peaked more than 40 years ago: The $4.03-an-hour rate recorded in January 1973 has the same purchasing power as $22.41 would today.”*
While the absence of the gold standard has impoverished laborers, it has benefitted (not surprisingly) the very wealthy – hence, the reason why it was abandoned, as the Pew Study reports: “What gains have been made, have gone to the upper income brackets. Since 2000, usual weekly wages have fallen 3.7% (in real terms) among workers in the lowest tenth of the earnings distribution, and 3% among the lowest quarter. But among people near the top of the distribution, real wages have risen 9.7%.”**
Of course, this was part of Nixon’s plan: redistribution of wealth from the middle class and low income groups via money printing to the political class. Such a scheme, however, could have only happened if the gold standard was eliminated.
Since the start of the abominable Obama Administration in 2009, the adjusted monetary base of the U.S. rose from $1.772 trillion to $3.966 trillion as of March 16, 2016.*** Of course, even these unfathomable figures as well as all other information supplied by the dominant media and government cannot be trusted. It, therefore, can be safely assumed that the real money supply is more than officially reported.
Money, like every other good, is subjected to the immutable law of supply and demand. Every increase in the money supply reduces the purchasing power of the monetary units which are already in circulation. Naturally, since wages are paid in dollars, increases in the supply of them will decrease their purchasing power. Thus, while nominal wages have gone up as the Pew Study shows, real wages (what wages can purchase) have stagnated.
The decline in real wages over the decades from profligate money printing has resulted in lower standard of living for wage earners and those living on fixed incomes. The rise in two income families is, in part, a consequence of a paper money economy and the fact that the financial survival of families now requires two incomes. Two-income families have also profound cultural implications which are now manifesting themselves.
There has been much talk throughout the current presidential campaign about the financial decline of the middle class. Candidates on the Left naturally talk of subsidies and more redistribution of wealth while those on the Right have called for tax cuts. While tax reduction of any kind is always welcomed and leads to economic growth, a sound monetary policy is just as important for a revitalization of the middle class. Moreover, a return to honest money does not require any expansion of government spending or debt.
If policy makers truly want to improve the condition of the middle class, which consists primarily of wage earners, a return to a monetary order of “hard money” is an economic and moral necessity.
*Drew Desilver. “For Most Workers, Real Wages Have Barely Budged for Decades.” Pew Research Center. 9 October 2014.
**Ibid.
***Jerome R. Corsi, “Obama’s Latest Fraud: ‘Economic Recovery’ Disproven in Just 9 Charts.” WND Money. 3 March 2016.
The “gold standard” is an invention of man, made a few hundreds of thousands of years ago when he discovered just how rare it is.
But sound money does not depend on being backed or exchanged upon demand for gold (or silver for that matter).
Sound money is anything that can’t be printed or run off or created at the whim of those who consider themselves as Elite PTB.. There are books on the subject – summarized so-so in this post – that provides wonderful histories of various varieties of money from round flat stones with holes in the middle (I’ve got a piece of Yap money to prove it!) to fairly rare variety of sea shells clear through minted gold and silver rounds – called coins.
Sound money has to have four characteristics: It’s rare (dollar FAILS big time). It must be a store of value over time (dollar FAIL), have intrinsic value (dollar FAIL) and be readily exchanged for goods and services (dollar – works, but less and less as time passes). Three down, one to go and the Fed’s are working on that one as hard as they can..
When the dollar falls in value to zip squat, then something else will rise to replace it. Probably gold and silver, just as it has through and before recorded history. The transition from one to the other is always a bitch..
Muck
Thousands of years of history have proven that gold is the best money. Silver is second best overall.
Upon re-reading the post, the author leaves out a few of the finer points of having a rock (or metal) steady money supply.
One of the biggies is that, over time, prices in a gold-standard monetary system will fall. Why? Because of technology and improvements in everything from supply chain to manufacturing technique. People invent a better mousetrap with a new technology that causes the fabrication price to drop. In a gold standard, the price might be higher for the new mouse trap for a bit (novelty) but will eventually drop as the profit margin on the new one attracts others to make them too and competition takes over.
So a gold standard is, by nature, deflationary as far as prices are concerned. Value of the money, however does not deteriorate as it does now (i.e no inflation), so your unit of money buys more and you’re better off.
There are several more nits I could pick, but they aren’t worth it. Politicians HATE fix money supplies because it prevents them from buying favors, making payoffs of “the hidden kind” and all sorts of nefarious schemes. That’s why the Elite, Rulers of all stripes, TPTB et al, always and always opt for funny money that can be expanded in quantity at their pleasure. Gives them all more bribe room and dubious maneuver room to “do the deal”…
Optimum money supply is one that expands v-e-r-y slowly and never exceeds the growth in GDP of the country your talking about. We produce gold and silver (and other hard stuff) at a slow rate. Guess what? The GDP of an honest country grows at a s-l-o-w rate too because technology and efficiencies in production and manufacturing cannot be improved overnight. It tends to balance out over the long run – and has done so in the past until some asshole cuts down the metallic content of the coinage (think Rome) and starts the inflation party again.
Just some extra thoughts.
Muck
While i’m not much of an expert on this subject.It is hard to imagine there being enough Gold to support the amount of money that exists. Wasn’t this part of the reasoning for Going off the Gold standard? Silver makes more sense for the average person in terms of its cost. The county will have an economic collapse sense common sense is in limited supply.