The Morality of Gold

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The Telegraph’s Ambrose Evans-Pritchard is out with a notable article predicting the return of a gold standard "as the world order unravels." We notice he’s careful not to write "new world order," though it’s likely the Anglosphere power elites aim at creating one. It was featured at Drudge, LewRockwell.com and elsewhere.

Since 2008, we’ve been suggesting that the dollar reserve system is probably finished and in this article, Evans-Pritchard not only predicts its doom but also suggests that the new monetary order will include gold. We’ve been predicting this for years. We think that what the elites want to set up is a currency basket that includes gold and that will be utilized worldwide, a global currency in other words.

This global currency will accompany what the Anglosphere powers-that-be are building in terms of a global regulatory infrastructure – one world government – or as it has also been called, a new world order. Not that I’m in favor of that. What we’ve suggested is free banking, the availability of competitive currencies and the ability for people to make up their own minds about what currencies they want to use. Let the best money win.

It’s good to see that libertarian-conservative Congressman Ron Paul has suggested the same strategy (competing currencies/money). He’s taken the lead on these all-important issues. In fact, Ron Paul was in the news just the other day for questioning Federal Reserve Chairman Ben Bernanke about fiat money and why the Fed’s various stimuli hadn’t worked. Here’s some of what he said:

You know, we hear that in the future, we are going to have a better economy and everybody hopes so. But it is hard for me to believe because I look back on the past three years and what Congress has done and what the Fed has done, we have literally injected about $5.3 trillion and I don’t think we got very much for it. The national debt went up $5.1 trillion. Real GDP grew less than 1%. So I don’t think we’ve gotten a whole lot.

Ron Paul also asked Bernanke about whether gold was money and Bernanke replied that it was not; though it was an asset. Why do people value gold? Tradition, he averred. Not so, Ben Bernanke! Actually, money metals are valuable because they are seen as fungible, rare, transportable and attractive among other characteristics.

Any hard-money economist knows. Baby Austrians know this. As Murray Rothbard wrote famously, gold (and silver) won the money-competition long ago. After thousands of years, salt, beads, rocks and copper wheels gave way to gold.

It’s not tradition that makes gold valuable. It’s history and a recognition of the inherent value in its discovering, mining, refining, etc. (And yes, value is NOT intrinsic but is merely what humans assign to goods and services at any given time, but history shows us that humans usually value gold as they do not value lesser stores of value.)

Ben Bernanke may not believe this, but his answer gave the impression that he did NOT KNOW IT. Once again, free-market economics clashes with Keynesian sophistry thanks to Ron Paul. It’s the reason the mainstream media carefully keeps Austrian economists off the airwaves. Whenever they get on, they destroy the opposition. Truth, like a knife, cuts to the point and reveals the darkness beneath.

Bernanke will surely not live this down (among so many other things). He sounded foolish. This is nothing new. For several years, Fed officials have been sounding – and acting – foolishly. We even wrote an article about it two years ago entitled Beginning of the End – Fed Cannot Account for $9 Trillion.

The article was sparked by a confrontation between Rep. Alan Grayson (D-Orlando) and Fed Inspector General Elizabeth Coleman at a hearing having to do with some very basic questions about trillions of dollars on the Fed’s expanded balance sheet; Coleman simply didn’t know. She couldn’t answer his questions. She writhed, grimaced, stumbled and several times asked Grayson to repeat what he’d asked. It was must have been horrible for the Fed’s handlers to watch. We wrote the following then:

Just as the removal of Dan Rather was a watershed moment for the rising power of the Internet from a media standpoint, the confrontation between Grayson and Coleman will come to be seen (in our humble opinion) as a watershed moment … By putting Coleman up in front of Congress in such an unprepared manner, the behind-the-scenes leaders of the Federal Reserve have provided an unimpeachable metaphor. Coleman’s testimony punctured the veil of secrecy and her lack of preparedness lance whatever aura of competence Ben Bernanke and others have been able to conjure. Metaphors can NEVER be undone.

You can see the video here: Is Anyone Minding the Store at the Federal Reserve?

Things have only grown worse for the Fed and Bernanke. Here’s an even more important question that Ron Paul asked Bernanke the other day: Why the so-called stimulus money that went to banks around the world (trillions and trillions), when the crisis hit in 2008, could not have been offered to private individuals as well.

This is a crux point. Though it has not been made much of, this issue looms even larger than the incompetence the Fed has been exhibiting when grilled about fundamental free-market economics, or its own balance sheet. The issue is that this is the first crisis that has unfolded under the scrutiny of the Internet Reformation crowd.

In the 21st century Bernanke is no longer afforded the warm comfort of mainstream media protection, given that there are so many other sources of information. Thus, what has gotten through to many is that the Fed, unaccountably, lent perhaps tens of trillions to domestic and overseas financial institutions while Americans lose their homes, businesses and pensions.

This was the subtext of Ron Paul’s question. It’s one that has been rattling around deep in the nation’s psyche for at least two years now, even before Congressman Paul voiced it. Bernanke, predictably, had no answer. He ducked the query by explaining that the Fed hadn’t given the money away; it had loaned it out and received a good return on its lending.

That’s not the point, as we suggested in an August 2009 article entitled, Have the Immoral Actions of Central Bankers Precipitated the Decline of the West? The story was sparked by an email from one Stewart Dougherty who writes for Market Oracle. We believed he grasped the heart of the matter then, most brilliantly.

The Fed, he wrote to us, and perhaps central banking in general, had seemingly signed its own death certificate when it allowed common knowledge of its disbursement of trillions around the world. Fed bankers have put a brave face on it, saying the money was necessary and that central banking had saved the day, but the damage was done. Here’s how Dougherty analyzed it:

The Metastasis of Moral Hazard and its Effect on Gold … There is accumulating evidence that the Washington – Wall Street moral hazard experiment has gone disastrously wrong, and that just like any other accidental discharge of a deadly virus, the moral hazard virus is now loose and swiftly propagating throughout society. By so blatantly colluding with Wall Street, Washington has lost all moral authority, and the people now have only one place to turn: themselves.

An ethic of, "If they can do it, so can I," is spreading, as people realize that fabric of American society has been shredded and replaced by a free-for-all mentality whereby everyone must fend for oneself in order to survive … Homeowners evicted by foreclosure trash their homes in rage on the way out the door, with an estimated 50% of such dwellings damaged. Looters and squatters destroy many of the rest, stealing copper pipes, wiring, granite counter tops and anything else of value.

Here’s how we responded once he had our attention:

Even though we have often commented on the faux spirituality that seems to surround central banking, we likely never hit on the point of raw IMMORALITY. (Didn’t we? How could we have missed it?) The spectacle of central bankers reaching into their back pockets and pulling out trillions would surely fragment the world as we knew it – yes, we pointed out that plenty of times – but we likely never came out and presented the argument that these actions would inevitably destroy the MORAL fiber of society.

Oh, it likely seemed an obvious point, and somehow, somewhere we must have stated it in our own way, but Dougherty has hit the point hard. It is an intense intellectual endeavor. It is an award winning observation. Gold star to Dougherty and all that. (It is the highest endeavor in fact, in our humble opinion, this sort of commentary.)

You know, way back after the bad, old USSR fell, there were archly fashionable observations about the end of history. But Dougherty has written a REAL article of REAL observations about the end of Western civilization. Sheesh, we do this all day (and night) for a living and here comes Dougherty and he’s written Spengler’s Decline of the West in three darn pages.

Bernanke is no Alan Greenspan when it comes to playing the omniscient wise man. His voice tends to tremble when he is asked a hard question and, despite his beard, he comes off as kind of abashed. Greenspan was all angles and obfuscation; Bernanke is the not the right public face for the Fed at this juncture. (Thus we have decided not to offer him the part of Squealer in our upcoming adaptation of George Orwell’s Animal Farm.)

But, perhaps there is nothing the Fed can do. Ron Paul expressed it well. More than the Fed’s various inabilities to account for the TRILLIONS it prints and lends (or gives away), more than the lack of audits and reasonable book-keeping, more than the questions about how much gold there is or isn’t in Fort Knox, the question that Ron Paul asked is the one that yet resonates in the public ear.

It’s one Dougherty understood and that we comprehended when he drew our attention to it.

"When do I get mine?"

The Fabian-socialist economist John Maynard Keynes famously said not one man in a million could comprehend the workings of the central bank – so large is the lie that the money system is based upon. But Keynes’s statement was pre-Internet.

The giveaway of the Fed’s trillions and trillions has played out under the merciless spotlight of digital coverage. Thousands of bloggers and perhaps millions of articles have commented on these impossible figures. And gradually, around the world – and certainly in America – it has occurred to the jobless, homeless and hopeless that SOMETHING IS NOT RIGHT. This is the question that Ben Bernanke could not answer.

Two years ago Dougherty understood this. What he didn’t quite grasp (maybe he did) was that that the Internet itself was the ultimate complicating factor. Without the exposure of the ‘Net, the professional obfuscators would have gone to work once again and Bernanke and the rest would have been lauded – not grilled.

But this is the era of the Internet Reformation. Bankers are being nailed to the wall like Martin Luther’s theses. The great, grasping mechanism of mercantilist central banking has been exposed for all to see. The bottom line issue is one of fairness. Comity and civil society are at risk when people feel they are being taken advantage of at a fundamental level.

Societies that use some form of gold-as-money are apt to be fairer and healthier than fiat-money societies. The Chinese who have experienced eight ruinous bouts with fiat currency call it "flying money." Gold doesn’t fly. In this sense, it has a morality as well as a utility. It is the antidote to Dougherty’s moral hazard.

Reprinted with permission from The Daily Bell.

Anthony Wile is an author, columnist, media commentator and entrepreneur focused on developing projects that promote the general advancement of free-market thinking concepts. He is the chief editor of the popular free-market oriented news site, TheDailyBell.com. Mr. Wile is the Executive Director of The Foundation for the Advancement of Free-Market Thinking — a non-profit Liechtenstein-based foundation. His most popular book, High Alert, is now in its third edition and available in several languages. Other notable books written by Mr. Wile include The Liberation of Flockhead (2002) and The Value of Gold (2002).

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