Business Insider headlined their report of Ben Bernanke’s speech on the gold standard with “Ben Bernanke Just Murdered The Gold Standard”. This really must be some sort of a peak in bad journalism. Bernanke’s uninformed gibberish should inspire nothing but mockery. It is a disgrace that the head of the Federal Reserve Bank should have so little knowledge of money, not to mention history.
The idea that pieces of paper backed by government promises can be a store of stable value has been around, on and off, for just twelve years short of one thousand years. Don’t book a venue – birthday celebrations will be muted. The true believers in the paper money fantasy present a sombre example of the depths that human irrationality can plumb.
From the very first paper money produced by the Sung dynasty in China in 1024, they have regularly failed with the subsequent impoverishment of the people. Over the course of the following six hundred years, all five dynasties produced their own paper money. As their monies collapsed so did each of the dynasties. Paper money became so discredited in China that the Manchu emperor belatedly banned it outright in 1661*.
* Fiat Paper Money: the History and Evolution of Our Currency – Ralph Foster
Just over fifty years later the English formalized the use of gold. It stayed in place until it was abandoned in 1914 in order to wage the First World War. From “The Hundred Years Peace”* of the 19th century, we morphed straight into the paper money wars and pseudo-revolutions of the 20th century. Over one hundred million people were killed. From the most prosperous, free and peaceful century under gold, to the most brutal and barbaric under paper. Yet still there are those who defend the indefensible.
*Karl Polanyi – The Great Transformation
Not everyone has the time or maybe even the inclination to study the monetary science, but that is not a valid excuse. A mere glance over history shows that not only are gold and silver money, but that they are the only money. Gold and silver work and nothing else does, or has ever done.
No space will be wasted here on the numerous denigrations of gold that still litter the media and dribble out of the mouths of the uninformed like Bernanke. Six thousand years of history have done a far better job of proving their falsity than any six thousand words that could be written here. Those who remain influenced by such spurious, even childish, stories are so divorced from reality that they cannot be swayed by reason.
Time and time again, paper monies have collapsed and been reduced to dusty piles in bric-a-brac shops and, literally, toilet paper. Mostly we don’t even hear about it; our focus is on West European and the Anglo people. That is why everyone has heard of the Weimar hyperinflation of Germany, which was 91 years ago, but few can name a single one of the eighteen paper monies that have been hyper-inflated into non-existence since the US finally and entirely defaulted on its gold obligations in 1971. Who cares what happens in Africa or South America or Eastern Europe right? Well, soon there will be more paper money collapses and, trust me on this one, West Europeans and the Anglos, even Ben Bernanke, will be able to name all of them.
A variety of reasons will be conjured up to explain why it happened. It will be blamed on war, speculators, profiteers, hoarders, global warming, rogue traders, rogue nations, smokers, peak oil, gun ownership, gold ownership, terrorists, crop failures, Muslims, immigrants, water shortages etc. The list of wrong reasons is endless. The list of right reasons has just one entry.
Paper money is failing – all of it. The reason for that is that this is what paper money consistently does. Gold is the only store of stable value over time and that is why only gold can be money. Attempts by governments to legislate other money into being have always resulted in catastrophic failure, and always will.
The entirety of the reasoning that underpins paper money is that, for as long as people believe that it has value, governments can buy votes and flex their military muscles. Without such nefarious motives there would be no reason to remove gold and silver from circulation.
If gold and silver were still in use the world would not, could not, be submerged in un-payable debt. A major component of the paper money delusion has been that government debt was risk free. Such a belief is a far distance from reality. It is governments who constantly collapse, along with their pseudo monies (and central banks Ben), leaving their creditors and state run pension schemes in ruins. Cultures endure; forms of government do not – fortunately. They eat themselves with their own degraded monetary systems.
The paper money system has turned our world upside down. The incompetent, lazy and greedy have assumed power and wealth. Decent people, those who have produced valuable and exchangeable goods and services, have been reduced to scratching a living with what little is left to them after they had paid their always-increasing taxes.
As has been pointed out many times, the benefits of paper money go to governments, major banks and finance houses – the first pigs at the trough of government largesse. The productive mugs, those who avoid the trough entirely, are the ones who pick up the tab. This, whilst their income buys less and less over time. The constant trend is that the non-productive grow ever richer and the productive grow ever poorer. The eventual outcome is that the gap between rich and poor is artificially widened to breaking point. It is here that the problem of dodgy money morphs into a problem of something else entirely. The productive people become no longer either willing or able to pony up to pay for the excesses of governments, banks and finance houses. This is the built-in endgame for paper money, because it leads to the beginnings of the realization that paper is not a store of stable value over time.
There is no time left for polite, theoretical chinwagging, and no point. Those who still truly believe that paper can stably store wealth and therefore act as a valid medium of exchange are guilty of terminal foolishness. They are beneath rational discourse. Those who know the score, but promote paper for their own personal gain, are beneath contempt.
Paper money is, and always has been, a fraud. Those faultily wired defenders of paper money, despite its proven history of appalling failure, are guilty of much worse than just stupidity or short-term greed. They are guilty of promoting and helping to hold in place a system that has savagely exploited productive people since 1914 (the process sped up in 1971) and that is now on the cusp of destroying western civilization.
Keith Weiner has patiently prepared a point-by-point response to Ben’s speech, which will be up on the site soon.
President of The Gold Standard Institute
24th March, 2012