Tag Archives: fractional reserve banking

A Warning of Economic Collapse

Traditional Catholic Bishop Richard Williamson’s latest missive should be a wake- up call for those who naively believe that the worst is behind for the US and Western economies after the March financial sell off and the long-anticipated implosion of the bubble economy. His Excellency asserts that the US and much of the world are on a financial precipice:

At this moment the United States has been brought to the brink of a tremendous

economic crisis, and with the USA, the rest of the world.*

Bishop Williamson contends that it has not only been the response to the virus, but more importantly, the response to the bursting of the financial bubble, created by the Fed, which will ultimately lead to a cataclysmic collapse:

By 2019 as the public was more and more hooked on fantasy money, the

Fed’s public balance sheet took off into complete unreality, seven trillion dollars

and counting, and it is now crashing the real economy with the corona-panic,

then ‘paying’ the crash debts that everybody gets into with its unreal trillions, but

turning the whole world into real slaves.

The bishop’s brief analysis of the history of the Fed is right on as he explains that the central bank has been the engine of monetary mischief since its inception:

These money men had promised that the Fed . . . would solve the problem

of reoccurring economic crises. . . . It did nothing of the kind. On the contrary,

it made them even worse, like the Great Depression of 1929 and the years following,

and now the Depression of the 2020s which risks making 1929 look like a picnic, and

risks stripping the United States of its prosperity and enslaving its liberty by making all

American citizens into debt-slaves. The middle class will soon be no more.

One quibble: Bishop Williamson rightly sees the problem of the money supply controlled by “private individuals” (central banksters):

It is not normal for private citizens to control their State’s money because they risk

doing so in their own interests, and not for the common good.

Yet, the alternative – State control – is no better and, under “democratic conditions,” maybe even worse considering the State’s horrific record in the debasement of money, the creation of booms and busts, hyperinflations, the destruction of savings, etc.

The only economically sound, morally defensible monetary system is one based on gold/silver where money and credit cannot be created “out of thin air” and where competing gold and silver producers vie with one another to produce the “best money.” Such a system requires no central bank while fractional-reserve banking is prosecuted as fraud. The creation of money is what is mined out of the earth not government and central bank fiat.

America’s current financial condition has ominous parallels to ancient Jerusalem before its destruction by the forces of Vespasian and Titus. A couple of years before its final destruction, a Roman army, under Cestius Gallus, had stationed troops under the walls of Jerusalem posed to launch an assault. Yet, Gallus did not attack and ultimately pulled back. This was a clear fulfillment of Christ’s prophecy about the city’s destruction:

And when you shall hear of wars and seditions, be not terrified: these things must first

come to pass, but the end is not yet immediately. [St. Luke Ch. XXI; vs. 9]

And when you shall see Jerusalem compassed about with an army: then know that

the desolations thereof is at hand. [Ibid., vs. 20]

Rome’s hesitation – a clear result of Divine intervention – gave Christians a chance to escape the coming conflagration which many wisely took advantage of:

Then let them that are in Judea, flee to the mountains: and let them that

are in the midst thereof depart out: and let not them that are in the

countries, enter into it. [Ibid., vs. 21]

Destruction of Jerusalem

Since the March lows, Americans have been in a situation not unlike the denizens of ancient Jerusalem. The relief programs and bailouts of businesses (mostly large corporations and banks) has staved off an even greater downturn, however, this has come at a tremendous cost as the Fed has had to print trillions, the consequence of which will mean either a collapse of the dollar or, at the very least, a dramatic loss in its purchasing power.

At present, it does not appear that the US has much time before the final unraveling of the economy takes place. The current debt levels and the new debt that will have to be created to maintain the status quo will lead to a monumental monetary crisis.

Many have interpreted Jerusalem’s fall as a punishment for its sins. Likewise, the coming collapse can also be seen as retribution for the US’s crazed monetary and fiscal policies which have bankrupted the nation while enriching the few at the expense of the many.

While Jerusalem’s destruction had little reverberations on the wider Roman Empire at the time, the demise of the dollar will have global implications since it is the world’s reserve currency. Like those who heeded the Divine prophecy two millennium ago the present generation should take Bishop Williamson’s words to heart and prepare for the coming financial storm.

*His Excellency Richard Williamson, “Economic Reality,” Eleison Comments, 12 September 2020. https://stmarcelinitiative.com/eleison-comments/

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com

The Ethics of a Gold Standard

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goldstandard

The efficacy of a metallic monetary system is beyond dispute at least among real economists which eliminates just about 95% of whom are now engaged in the “profession.” Money, which gold is, allows for specialization, the division of labor, and provides the means for mankind to escape from barter and, thus, a primitive existence. Like free trade, money naturally integrates mankind both among and between peoples.

A system of central banking with an unbacked paper currency is the antithesis of a gold standard. Manipulation of currencies by central banks, mostly through debasement, hinders trade, creates distortions, and ultimately leads to the dreaded business cycle. Murray Rothbard aptly describes the baneful results of state intervention in the monetary system:

. . . government meddling with money has

not only brought untold tyranny into the world;

it has also brought chaos and not order. It has

fragmented the peaceful, productive world

market and shattered it into a thousand pieces,

with trade and investment hobbled and hampered

by myriad restrictions, controls, artificial rates,

currency breakdowns, etc. It has helped bring

about wars by transforming a world of peaceful

intercourse into a jungle of warring currency blocs.*

Rothbard Money

While the economic efficiency of a gold standard is important, the ethical case for it is more compelling and was the reason why gold, as money, lasted as a medium of exchange for so long. Gold/money has to be created through honest-to-goodness production and exchange. The often dangerous mining of gold takes labor, capital goods, and land. Turning raw gold into coinage is another process which requires a high level of specialization and production techniques. Both are honest and morally sound activities which make for the betterment of life all around.

The ethical standing of central banking and its issuance of unbacked currency as money through the printing press, stroke of a computer key, or via the expansion of credit cannot stand similar scrutiny. By any appraisal, central banking is immoral. Through the creation of money, banks stealthy transfer wealth to those who control the money supply and those closely associated with it.

The ability of central banks to create unlimited amounts of money and credit has been the greatest redistribution scheme ever conceived. The process ultimately leads to class conflict as the wealth disparity between the politically well-connected and those outside that nexus invariably widen.

Under a gold standard, none of this would take place.

Because of their lack and often distain for economic doctrines, in particular, monetary theory, “economic nationalists” (really “economic ignoramuses”) have wrongly focused on trade as a factor in the continued decline of the middle and working classes. China’s supposed unfair trade practices was a staple of President Trump’s campaign rhetoric and has continued through much of his first term.

The focus on trade has deflected attention from the real cause of worsening economic conditions for American workers and the enrichment of Wall Street. Despite the blatant transfer of wealth via the Fed’s policies of suppressed interest rates and money printing since the 2008 Recession, economic nationalists continue to applaud President Trump’s tariff policies while the President continues to browbeat the Fed to do more of the same even calling for negative interest rates and more Quantitative Easing.

The Left rightly speaks out of the vast and growing inequality of wealth distribution, but like those who espouse economic nationalism, they fail to understand the reason for why the societal imbalance has occurred. One remedy they propose – a “wealth tax” – will not address the problem. Moreover, their “soak-the-rich” schemes would snare in their plunder (not that Leftists particularly care) many of the wealthy outside of the banking and financial sector of their legitimate, just gains.

The case for honest money must be made on ethical grounds. The current system must be exposed and shown for the scam that it is: a massive redistribution scheme enriching the political elites and their closely aligned business and financial allies. While it is undeniable that a gold standard would lead to enormous prosperity, its reinstatement would remedy one of the great injustices that plague the world – central banking!

*Murray N. Rothbard, What Has Government Done To Our Money? BN Publishing, 2012: 84.

Antonius Aquinas@antoniusaquinas

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Bitcoin: A Tower of Monetary Babel

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Bitcoin Fiat Currency

The promoters of crypto currencies have gushingly touted them as the mechanism by which the present central banking cabal and the system of nation states which derive much of their power from will be brought down and replaced by digital money. Despite their meteoric rise as speculative “assets,” there are fundamental economic reasons why they will never act as a general medium of exchange despite the wild enthusiasm for them by the crypto-currency cultists.

Money – a general medium of exchange – is the most marketable (exchangeable) commodity in an economy. As a good, money is not sought after for its direct use – to satisfy individual wants – but to satisfy wants indirectly through exchange for other goods. Over time, one good becomes money since it possesses qualities superior to all other goods as a money. When gold became demanded not for its “use value,” but for its “exchange value,” it became a general medium of exchange – money.

As a consumer good, gold possessed a value or a “price” prior to it becoming a money, as the eminent monetary theorist Murray Rothbard explains:

. . . embedded in the demand for money is knowledge

of the money-prices of the immediate past; in contrast

to directly-used consumers’ or producers’ goods, money

must have pre-existing prices on which to ground a demand.

But the only way this can happen is by beginning with a useful

commodity under barter, and then adding demand for a

medium to the previous demand for direct use (e.g., for

ornaments in the case of gold.)*

Thus, Bitcoin’s “price” is not in terms of its original commodity price, but its price is in terms of dollars, Euros, yuan, etc. In the dollar’s case, it was at one time linked to gold, but has since been severed from it while Bitcoin has had no such relationship.

Once money is established, then prices are expressed in terms of it and thus economic calculation can rationally take place and the division of labor and specialization can be expanded. Rothbard continues:

The establishment of money conveys another great

benefit. Since all exchanges are made in money, all the

exchange-ratios are expressed in money, and so people

can now compare the market worth of each good to that

of every other good.**

Once gold became money, the price of goods became expressed in gold not in other elements – nickel, zinc, lead, etc. With the proliferation of crypto currencies, there will be a myriad of different price ratios for each good. There will be a Bitcoin price for a car, an Ethereum price for a car, a Dogecoin price of a car, and so on. This is the antithesis of the purpose of money – one unit of account that reflect prices for all commodities as Rothbard shows:

Because gold is a general medium it is most marketable,

it can be stored to serve as a medium in the future as well

as the present, and all prices are expressed in its terms.

Because gold is a commodity medium for all exchanges,

it can serve as a unit of account for present, and expected

future, prices. It is important to realize that money cannot

be an abstract unit of account or claim, except insofar as it

serves as a medium of exchange.*** [my emphasis]

Crypto currencies, therefore, directly violate one of the main principles of monetary theory. The vast array of digital money, all with unique price ratios (to say the least of their volatility), would make economic calculation and rational planning next to impossible. In this sense, the current world of fiat dollars would be preferable to a Tower of Monetary Babel that digital currencies would create.

Central banks and governments do not fear crypto currency challengers to their monetary hegemony. They, of course, jealously monitor the crypto market worried that any gains accrued may not be subject to tax. Central banksters do fear gold for it remains, despite being demonetized, the last check on profligate central bank monetary expansion. And, because countries who wisely understand gold’s importance and seek to get out from under the yoke of King Dollar (most notably China and Russia), continue to voraciously accumulate the yellow metal.

The return of true prosperity will only come about when gold is once again at the center of the monetary order and fiat currencies such as the dollar, Euro, and now Bitcoin are forgettable memories of a misguided and corrupt age.

*Murray N. Rothard, What Has Government Done to Our Money? Novato, CA.: Libertarian Publishers, 8th printing, January 1981.

**Ibid., 4-5.

***Ibid., 5.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com

Bitcoin in an Illusionary Age

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Bitcoin III

It is altogether fitting that crypto currencies, in particular Bitcoin, have witnessed a meteoric rise in this illusionary age. Not only has their monetary value gone to dizzying heights, but they are now being touted as the destroyer of the current, crumbling monetary order and the next paradigm upon which a new money and banking system will emerge.

In an era where sacrifice, hard work, loyalty, ingenuity, tradition, and independent thought are considered anathemas, while affirmative action, sloth, effeminacy, office seeking, and something-for-nothing schemes are endemic in every walk of life, it is not surprising that non-tangible, computer-generated currencies would become a “natural” feature of such a world.

While it has always been a haven for charlatans, traitors, cheats, thieves, liars, and serial adulterers, contemporary political life has become even more of a sham. The most glaring example of politics’ utter corruption can be seen in the recent departed chief executive officer of the US. Unless one abandons all critical thinking, Obummer was unqualified to be president because of the obvious fact that he was not born on American soil. Not only did this disqualify him, but his educational and professional backgrounds have not been verified. Neither his collegiate records nor his supposed teaching career at the University of Chicago Law School have ever been exposed to public scrutiny. From the few utterances he has made about his supposed specialty – constitutional law – it appears that he has only a rudimentary knowledge of the subject.

Cultural life has descended to the basest of levels and has abandoned nearly all of Western Civilization’s glorious achievements. Consider music. The dominant form of what passes as music today is not the works of the great maestros of the past – Bach, Mozart, Beethoven – but instead, noise in the form of rock, hip hop, rap, grunge, or whatever the latest degenerate trend is in vogue.

Modern democracy is also a fallacy. Being sold to the masses as a system where the people rule and personal liberties are guaranteed, democratic governance is anything but, and has instead been craftily used by the elites to amass state power to an unprecedented extent not witnessed in human history. The much maligned monarchial age even during its “absolutist phase” could not come close to the scope and intrusiveness that democratic governments possess today.

Religion, too, is not immune from its share of hypocrisy. Not only is the supposed head of the Catholic Church a manifest heretic who almost daily blasphemies the Divine Majesty, but he is not qualified to occupy the august chair in which he sits. Jorge Bergoglio was neither ordained as a priest nor consecrated as a bishop in the traditional, Apostolic rite of Holy Orders. He is, therefore, an imposter not a priest, nor the bishop of Rome, and scandalously not a true pope.

Now enter crypto currencies. Not only will they never become money – a general medium of exchange – as gold and silver once were and will become once again, but cryptos lack the necessary requirements to be money. Yet, their “development” is systematic of the times. Cryptos are another variant of fiat currencies which digitally can be created by a stroke of a computer key or in cryptos’ case, a code.

Gold and silver – real money – must be mined from the ground, minted and “marketed” before they can be used to facilitate exchange. This is an arduous, capital-intensive process which takes resources, labor, and time to accomplish. Something as important as money should require an elaborate procedure not be created out of thin air as are all fiat currencies as well as cryptos.

Money must originate as a tangible, sought-after commodity – the great Misesian insight that crypto enthusiasts do not know or do not understand – then, over time, be recognized as having a “second feature” as a good sought after for “exchange value.” Once a good is demanded for its use primarily to facilitate exchange, it then becomes a “money.”

In a fundamental sense, crypto currency cultists are rebelling against the natural order of things. The precious metals were created in their quantity and quality by Divine Wisdom for a purpose – to act as money. While governments have habitually corrupted the monetary order through coin clipping, fractional-reserve banking, and other nefarious schemes, it does not undo this primordial fact. It is for the intellectually honest opponents of monetary chicanery to point this out and decry all governments and banksters’ attempts to eradicate gold and silver as money, not attempt to create another unnatural and false monetary order that mirrors the current fiat system.

Money, like all other institutions of society, will reflect its belief system. Decaying cultures will most likely have debased monetary units. A turnabout in the status of money will only happen when Western Civilization returns to what money is – gold and silver – and abstains from trying to create illusions of it through computer software schemes.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com

Donald & the Dollar

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donald-dollar

John Connally, President Nixon’s Secretary of the Treasury, once remarked to the consternation of Europe’s financial elites over America’s inflationary monetary policy, that the dollar “is our currency, but your problem.” Times have certainly changed and it now appears that the dollar has become an American problem.

In a recent interview with the Wall Street Journal, the soon to be 45^th President of the United States believes that the greenback’s strength – up some 25% against a broad basket of currencies since 2014 – is now “too strong,” “killing us,” and has hurt companies trying to compete overseas.* A top Trump economics advisor, Anthony Scaramucci, reinforced his boss’ sentiment adding that “we must be careful of a rising dollar.”

Apparently, making America great again does not include the nation’s monetary standard. Trump’s belief that the dollar is too strong also shows a distinct lack of historical understanding. Every great nation and empire (which Trump promises to restore America to) had a sound monetary system. It is no coincidence that the pound sterling was the world’s “reserve currency” at the time when the British Empire was at its height. Debasement of it to finance Britain’s insane decision to enter World War I led, in large part, to the eventual loss of its empire. If Trump truly seeks to restore American greatness at home and its prestige throughout the world, devaluating the currency is not the way to go.

Nor does a weakened dollar benefit the middle class whom the president elect throughout the campaign has pledged to help. In fact, it has been the fall in the purchasing power of the dollar due to the inflationary policies of the Federal Reserve which have decimated the living standard of the middle class. And, while the proposed Trumpian middle class tax cuts will help, just as important is a sound monetary system if Middle America is to become a creditor class once again.

Pensioners and retirees, another group that Trump has promised to help, would continue to see their financial condition decline under a policy to weaken the dollar. A fall in the purchasing power of money would devastate the income stream of pensions and social security payments.

While a weaker dollar policy would hurt the middle class, retirees, and savers, it would benefit the most responsible for the continued economic doldrums of America – banksters and the government. A weaker dollar would allow the government to continue to borrow and maintain its profligate spending. Financial houses and the banksters would receive credit at nearly zero cost which would allow them to continue to blow bubbles in the asset markets. Export firms, too, would benefit at least for a while, but would more than likely face retribution from foreign governments and central banks which would retaliate with their own devaluations sparking potential currency wars.

Talk of “currency manipulation,” “weakening the dollar,” “trade deals,” and the like do not address what lies at the heart of not only America, but the Western world’s economic problem – too much debt. The reason why the West has been able to incur its current gargantuan level of debt is not because of a “weak” or a “strong” dollar, but because the dollar is a fiat currency not backed by any commodity. A true gold standard, where each currency unit represents either gold or silver, provides monetary discipline which prevents politicians and banksters from incurring ruinous levels of debt.

Since money is the lifeblood of an economy, any hope that one can be turned around without a stable monetary order is, to say the least, delusional. If president-elect Trump and his policy makers do not realize this, they will be severely disappointed in the years to come. Sound money allows for the accumulation of savings and capital formation, the essential elements of the market economy and the only basis upon which real economic growth can occur. More savings and capital are needed to boost production and create employment, not supposedly wiser and more competent international trade negotiators.

Talk of currency devaluation is what is typically heard from banana republics, it should not be advocated by those who have aspirations of making their country great again.

*Tyler Durden, “Dollar Tumbles After Trump Calls Currency ‘Too Strong,’ Slams Border-Adjustment Tax.” Zero Hedge. 17 January 2017.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com/

Don’t Expect a Return to a Gold Standard Any Time Soon

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goldstandard

Despite trillions of paper currency units poured into the world economies since the start of the financial crisis, there has been no recovery, in fact, all legitimate indicators have shown worsening conditions except, of course, for the pocketbooks of the politically -connected financial elites. Yet, despite the utter failure of the current money and banking paradigm to resolve the situation, the chance of a return to a commodity based monetary order is highly unlikely especially when one looks at the anti-gold bias found in typical college economics textbooks.

Macroeconomics: Principles, Problems and Policies by McConnell, Brue and Flynn is a leading introductory level college text which has been through, to date, some 20 editions. Until the financial crisis of 2008, the subject of a commodity- backed money was not discussed, however, after the crisis and the popularity of gold standard enthusiasts like former Congressman and Presidential candidate Ron Paul, the authors of Macroeconomics obviously felt the need to address the resurgence in the interest of metallic money.

McConnell and company’s critique of the gold standard is full of fallacious reasoning that monetary cranks have employed for generations, all of which have been easily refuted by eminent economists. Yet, the lies and distortions about commodity money continues in academia.

The authors admit that:

To many people, the fact that the government does

not back the currency with anything tangible seems

implausible and insecure.

This logical sentiment and realization of the fraudulent nature of unbacked currency by those outside the economics profession is brushed aside by the esteemed trio:

But the decision not to back the currency with anything tangible was made for a very good reason.

Yes, and we know what that reason was: so that the state and central banksters could have a ready and unlimited access to the creation of money to solidify and expand their power. The gold standard was always an impediment to this cherished dream of the political elites – the establishment of an irredeemable, paper monetary order.

The authors, not surprisingly, see things differently:

If the government backed the currency with something

tangible like gold, then the supply of money would

vary with how much gold was available. By not backing

the currency, the government avoids this constraint and

indeed receives a key freedom – the ability to provide

as much or as little money as needed to maintain the

value of money and to best suit the economic needs of

the country.

By all means, the state and central banksters should be given as much “freedom” as possible for we all know that governments would never abuse such license and would always act in the best interests of their citizens. Certainly, the authors are not aware of any cases in history where such “freedom” was ever abused.

Nearly all today’s economists agree that managing the

money supply is more sensible than linking it to gold or

to some other commodity whose supply might change

arbitrary and capriciously. . . . if we used gold to back the

money supply so that gold was redeemable for money . . .

then a large increase in the nation’s gold stock as the

result of a new gold discovery might increase the money

supply too rapidly and thereby trigger rapid inflation. Or

a long-lasting decline in gold production might reduce the

money supply to the point where recession and

unemployment resulted.

Volumes have been written debunking such stupidity. The point, however, is that millions of minds have been exposed to such thinking and while most will not become economists (thank goodness!), what is taught in college and university classrooms about the gold standard is negative, to say the least. Moreover, those who continue in a career in finance or economics will unlikely ever be presented with an accurate assessment of the gold standard.

A return to a sound and just monetary order will only take place after the ideological groundwork has been first laid, just as fiat money and central banking came about after years of proselytizing by inflationists. It is also not enough to show the economic efficacy and moral soundness of commodity money, the ideas of crackpots like McConnell, Brue and Flynn need to be exposed for what they are.

Under the current academic environment, as generations have been misinformed, deceived, and lied to, it is unlikely that a return to a gold standard will take place. Until the intellectual battle is won, paper money and the central banksters that manage it will continue their reign of financial terror.

Antonius Aquinas@AntoniusAquinas

https://antoniusaquinas.com/