The Classical Gold Standard, 1815-1914

FROM: What Has Government Done to Our Money?
By Murray N. Rothbard

Uncle Sam, the thief, taking citizens for a ride!!!
"I'm for a flat tax -- as long as the flat rate is zero.
The object is to get rid of big government,
not find a new way of financing it." Harry Browne

9/6/2012: "Wenn wir beginnen würden, möchten die Probleme lösen, die mit der Finanzpolitik über die komfortabler bedeutet der Geldpolitik .. dann hätten wir ein Problem," sagt Herr Schaeble.

("If we were to begin to want to solve the problems of fiscal policy via the more comfortable means of monetary policy ... then we would have a problem," said Mr. Schaeuble)

We can look back upon the “classical” gold standard, the Western world of the nineteenth and early twentieth centuries, as the literal and metaphorical Golden Age. With the exception of the troublesome problem of silver, the world was on a gold standard, which meant that each national currency (the dollar, pound, franc, etc.) was merely a name for a certain definite weight of gold. The “dollar,” for example, was defined as 1/20 of a gold ounce, the pound sterling was slightly less than ¼ of a gold ounce, and so on. This meant that the “exchange rates” between the various national currencies were fixed, not because they were arbitrarily controlled by government, but in the same way that one pound of weight is defined as being equal to sixteen ounces.

The international gold standard meant that the benefits of having one money were extended throughout the world. One of the reasons for the growth and prosperity of the United States has been the fact that we have enjoyed one throughout the large area of the country. We have had a gold standard or at least a single dollar standard within the entire country, and did not have to suffer the chaos of each city and country issuing its own money which would then fluctuate with respect to the moneys of all the other cities and countries. The nineteenth century saw the benefits of one money throughout the civilized world. One money facilitated freedom of trade, investment, and travel throughout that trading area, with the consequent growth of specialization and the international division of labor.

It must be emphasized that gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium. Above all, the supply and provision of gold was subject only to market forces, and not to the arbitrary printing press of the government.

The international gold standard provided an automatic market mechanism for checking the inflationary potential of government. It also provided an automatic mechanism for keeping the balance of payments of each country in equilibrium. As the philosopher and economist David Hume pointed out in the mid-eighteenth century, if one nation, say France, inflates its supply of paper francs, its prices rise; the increasing incomes in paper francs stimulate imports from abroad, which are also spurred by the fact that prices of imports are now relatively cheaper than prices at home. At the same time, the higher prices at home discourage exports abroad; the result is a deficit in the balance of payments, which must be paid for by foreign countries cashing in francs for gold. The gold outflow means that France must eventually contract its inflated paper francs in order to prevent a loss of all of its gold. If the inflation has taken the form of bank deposits, then the French banks have to contract their loans and deposits in order to avoid bankruptcy as foreigners call upon the French banks to redeem their deposits in gold. The contraction lowers prices at home, and generates an export surplus, thereby reversing the gold outflow, until the price levels are equalized in France and in other countries as well.

It is true that the interventions of governments previous to the nineteenth century weakened the speed of this market mechanism, and allowed for a business cycle of inflation and recession within this gold standard framework. These interventions were particularly: the governments’ monopolizing of the mint, legal tender laws, the creation of paper money, and the development of inflationary banking propelled by each of the governments. But while these interventions slowed the adjustments of the market, these adjustments were still in ultimate control of the situation. So while the classical gold standard of the nineteenth century was not perfect, and allowed for relatively minor booms and busts, it still provided us with by far the best monetary order the world has ever known, an order which worked, which kept business cycles from getting out of hand, and which enabled the development of free international trade, exchange, and investment.

Advantages of Gold Standard From Wikipedia. Click Wikipedia link for links to footnoted references:

Long-term price stability has been described as the great virtue of the gold standard.[52]The gold standard makes it difficult for governments to inflate prices through expanding the money supply. Under the gold standard, significant inflation is rare, and hyperinflation is essentially impossible because the money supply can only grow at the rate that the gold supply increases. High inflation under a gold standard is seen only when warfare destroys a large part of an economy, reducing the production of goods, or when a major new gold source becomes available.[53] In the U.S., inflation occurred during the Civil War, which destroyed the economy of the South.[54] Inflation also followed the California Gold Rush that made large amounts of gold available for minting.[55] Historical data shows that the magnitude of swings in prices were far higher under the gold standard.[56][52]
The gold standard provides fixed international exchange rates between participating countries and thus reduces uncertainty in international trade. Historically, imbalances between price levels were offset by a balance-of-payment adjustment mechanism called the "price specie flow mechanism."[53] Gold used to pay for imports reduces the money supply of importing nations, causing deflation, which makes them more competitive, while the importation of gold by net exporters serves to increase their money supply, causing inflation, making them less competitive.[57]
A gold standard does not allow some types of financial repression.[58] Financial repression acts as a mechanism to transfer wealth from creditors to debtors, particularly the governments that practice it. Financial repression is most successful in reducing debt when accompanied by inflation and can be considered a form of taxation.[59][60] In 1966 Alan Greenspan wrote "Deficit spending is simply a scheme for the confiscation of wealth. [Editor's Note: Before his descent to chairman of the Federal Reserve Thiefdom.] Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."[61]

FROM It's the Spending, Stupid

By Ed Moy — Friday, 31 Oct 2014 08:38 AM

U.S. Treasury Secretary Jack Lew proudly announced that for the fiscal year ended Sept. 30, 2014, the federal government collected the most tax revenue ever: $3.013 trillion. But despite record taxes, the federal government spent $483 billion more than it took in.

To paraphrase Ronald Reagan, we don't have a $17.8 trillion debt because we have not taxed enough. We have a $17.8 trillion debt because we spend too much.

Obviously, the federal government's strategy of taxing our way to a balanced budget is not working. The more money that is collected, even more money is spent. Taxes aside, the budget has little chance of ever being balanced (or producing surpluses) unless the government stops spending as much.

There have been recent efforts at spending cuts. There were across the board cuts in discretionary government programs (sequestration) and capping future discretionary spending. Both helped. But they were more than offset by mandatory increases in entitlement programs, expanding populations in the entitlement programs and new programs like Obamacare.

That is because entitlements are the main driver of increased spending. Medicare, Medicaid, Social Security and other entitlements currently account for 55 percent of the federal budget. Without entitlement reform, their mandatory rate of growth will overwhelm the rest of the budget. That means crowding out the defense budget (20 percent) and all other government spending (17 percent).

And when the federal government does not have all the money to pay its bills, it borrows. Interest payments on the federal debt represent 7 percent of the federal budget. By the way, the average interest rate paid on the $17.8 trillion of debt is 2.3 percent. Imagine how much interest would be paid when interest rates normalize, say at 5 percent.

The problem is that cutting spending is hard work and requires unpleasant choices. So instead of tackling them now, the president and Congress are content to kick the can down the road. But soon that road will run out and there will be fewer choices and less time for a solution.

Big spending requires big revenues to pay for that spending. All those tax revenues take hard-earned money away from Americans, who would use their money on what they think is important. And whether they spend it, save it or invest it, the end result is a big boost to the economy.

But when the federal government gets that money, it spends it on what it thinks is important. Because of the political process and bureaucracy, it is inherently an awful and inefficient allocator of resources. Think of it this way: Are Americans better off if a family cannot buy a refrigerator so that mountain lions can be trained to walk on treadmills?

I would rather rely on the people making choices. Cut spending and taxes, and have the people decide on how best to use their money. They and our country will be better off.

FROM ‘The More Power The Government Has…’

July 7, 2014 by Bob Livingston

“The more power the government has, the greater the risk to the people and the more dangerous the abuse.” -- Edmund Burke, 1771.

Big government is organized crime in all but name, and the man in the street is numb to the universal risk in today’s world.

Politicians and bureaucrats are spending the world into oblivion while secretly hoping and expecting to escape debt with depreciated dollars: yours. The public is unaware.

Note that your “elected” politicians never talk about the ongoing depreciation (inflation) of paper money (U.S. dollars). They don’t want you to think about this. They would rather you think about Donald Sterling and his frivolous racial comments.

But you should be on high alert. Liquidity is not only negative; it is at its most negative level in history. Are we facing the second Great Depression or worse?

For the third time in 14 years, U.S. stocks are in a bubble and far more leveraged than ever before. There are now more corporate bonds outstanding in the U.S. than there are mortgage-backed securities. This is significant, and the heart of the next crisis and the debt bubble will be non-financial corporate debt.

Investors beware! Stockholders beware!

Thanks to the Fed, it now seems that we have a bubble in all asset classes much larger than 2007. The Fed and other central banks with their expansionary monetary policies, all designed to boost asset prices, are similar to a juggler who is trying to keep all his balls in the air. The Big One is coming and there will be no place to hide except in very depressed gold stocks.

Why Do We Need Term Limits?

John Adams said, “Without [term limits] every man in power becomes a ravenous beast of prey”. That being said, here are some of the reasons we believe our country needs Term Limits.

Term Limits can help break the cycle of corruption in Congress. Case studies show that the longer an individual stays in office, the more likely they are to stop serving the public and begin serving their own interests.
Term Limits will encourage regular citizens to run for office. Presently, there is a 94% re-election rate in the House and 83% in the Senate. Because of name recognition, and usually the advantage of money, it can be easy to stay in office. Without legitimate competition, what is the incentive for a member of Congress to serve the public? Furthermore, it is almost a lost cause for the average citizen to try to campaign against current members of Congress.
Term Limits will break the power special interest groups have in Congress.
Term Limits will force politicians to think about the impact of their legislation because they will be returning to their communities shortly to live under the laws they enacted.
Term Limits will bring diversity of people and fresh ideas to Congress.

Term limits for lawmakers: when is enough, enough?

[Editor's Note: If you want to get rich, i.e. advance from a low paying government bureaucrat job on the local or state level, THEN GET ELECTED TO THE US CONGRESS (House or Senate). Once you're elected, it's easy to steal from your campaign contributions or the Congressional budget allocated to your seat and staff. You can go on a government-funded junket with 'lavishly' paid expenses. The list of ways to steal from the government while in office is inexhaustible. There are only a few Congressmen who left Congress just wealthy instead of a multi-millionaire. Of course, there are several who arrived in Congress as multi-millionaires and don't need to steal from the government.]

[Editor's Note: what I have dubbed the "Legislative-Executive-Judicial Cabal" which the American People have caused by ignoring the generational transition from our Constitutional Republic to what now is, in effect, an "elected" dictatorship. Never mind who is elected. Never mind which bogus party is in power. We the People still lose more freedom.

A Constitutional Convention is necessary to amend the Constitution for Congressional Term Limits to twelve (12) years and restrict time in DC to only six (6) months per year. Such an Amendment is only a FIRST step in restoring America to its Constitutional roots. Back in the day when the People still feared kings, the president's term was limited by Constitutional Amendment.
Currently, CONgress is just a group of socialists, progressives, and faux-conservatives (career politicians) that, on a daily basis, ignores the Constitution, many of their own past statutes, and cedes their responsibilities to the president ("elected" dictator). A comparison to the history of Rome becomes more and more credible with the Executive and its "featherbedded" lackeys gaining more power while CONgress sits back all fat-dumb-and-happy.
CONgress has made recent efforts to expose State Dept. failures in Benghazi (inept political leader), Fast-and-Furious gun-running (criminal AG), IRS 1st amendment violations, gov't union Veterans Administration fraud, and whining about Obama(Reid)-killer-Care, but these efforts are mostly politics as usual. Most "citizens" will forget about these infringements from our unaccountable, uncontrollable Executive branch with its tyrannical agencies staffed by socialist unions that extort "juicy" contracts from the "elected" dictatorship.
Most positions in the federal government whether elected, appointed, or hired are nominal, make-work jobs (confidentially) designed merely to grow government, bilk money from private businesses and citizens, and eventually fully transform America into a totalitarian state. When this happens, CONgress will have destroyed the economy and the country by their negligence and counter-liberty policies, and it will be almost impossible to Restore America. The 'Restore America' list is only a beginning too.]

How USA Residents Are Screwed!

FROM Project to RESTORE AMERICA

The FairTax is a consumption tax unilaterally applied to all Americans at the same rate. For businesses, payroll taxes would no longer exist. Our exports would include a heavy tax for overseas buyers purchasing our products, while our imports would be cheaper for us to purchase. I'm not sure how this would affect GDP, as more information is necessary.

According to the FairTax website, "Under the FairTax, every person living in the United States pays a sales tax on purchases of new goods and services, excluding necessities due to the prebate." The prebate gives every legal resident household an "advance refund" at the beginning of each month so that purchases made up to the poverty level are tax-free.

So a family of four making something like $50,000/year should not have to pay taxes, thus preventing an unfair burden on low-income families. Since the FairTax eliminates both federal and payroll taxes, you get to keep your gross pay amount of each paycheck earned.