Dr. Keith Weiner of the Gold Standard Institute US presents the concept of Gold bonds to an Ad Hoc Committee of the Arizona House of Representatives…
The Arizona House of Representatives has convened an Ad Hoc Committee on Gold Bonds. The purpose is to explore if and how the state could sell a gold bond.
This is an exciting development, as the issuance of a gold bond would be a major step towards a working gold standard.
Dr. Keith Weiner is a member of the committee. At the first meeting, he gave a proposal for how a gold bond could work to the benefit of the state and the people.
Here is video of the committee meeting. Dr. Weiner’s presentation begins around 18:18.
The sound quality is not great in parts, but most problems are fixed by the time that Dr. Weiner makes his presentation. It’s quite long, but well worth the listening.
Money Supply Arguments are Flawed
It goes without question, among economists of the central planning mindset, that if a central bank can just set the right quantity of dollars[1], then the price level, GDP, unemployment, and everything else will be right at the Goldilocks Optimum. One such approach that has become popular in recent years is nominal GDP targeting.
How does a central bank affect the quantity of dollars? In discussing a nominal income targeting, Wikipedia gives the usual laundry list of how to do their magic: “…interest rate targeting or open market operations, unconventional tools such as quantitative easing or interest rates on excess reserves and expectations management…”
Other than expectations management—which is just telling the market “blah blah blah”—managing an income aggregate is about manipulating one interest rate or another.
In the real economy, people don’t factor the quantity of dollars into their economic calculations. If you are in the grocery store to buy apples, you do not think about M0 money supply. Whether you are a farmer or miner, whether you operate a factory or trucking company, or even a bank or insurer, the money supply is irrelevant to you.
By contrast, the interest rate figures in every economic calculation in the economy. How much to borrow, how much to save, and how to assess the tradeoff between consumption and investment are all dependent on interest. The rate of interest is a factor in every price and the relationship between all prices in the economy.
For example, to grow apples you need land and you must plant trees. Then you have to wait for the trees to mature before they bear fruit. This requires an investment up front, in expectation of earning a return in the future. How high does this return need to be? It depends on the interest rate.
This decision, made by thousands of current and potential apple farmers, determines the price of apples in the grocery store. And this, in turn, determines the decisions of consumers to buy apples, to buy something else, or to do without fruit if they cannot afford it.
Whether the interest rate is manipulated upwards, whether it is forced downwards, or whether it is artificially locked in stasis, every price in the economy is affected and everyone’s decisions are altered by the rate of interest. I have written a lot on the perverse incentives caused by interest rate manipulation, but today I want to focus on a different aspect of the problem.
So, let’s perform a little thought experiment. Suppose a business must pay 20% interest on its capital. If it somehow manages to eke out a 21% rate of profit, it forks over 95 percent of what it earns to its lenders. If it can’t earn at least 20 percent, then it ends up feeding its capital to its creditors.
Now consider a perverse world where enterprises can borrow at -5 percent. They literally repay investors less capital than they borrow. This case is the opposite of the one above; Lenders feed their capital to enterprises.
If interest is too high, the Fed is sacrificing entrepreneurs to investors. If interest is too low, then investors are sacrificed to entrepreneurs. Either way, our monetary planners pervert lending into a win-lose deal.
So what’s the right rate of interest?
Only a market to determine that. Central planners have never gotten it right, are not right now, and will never get it right. They do, however, inflict collateral damage.
Market Monetarism—the idea of central planning of credit based on a GDP target—promises improved outcomes over what would happen in a free market. However, it’s no better than conventional Keynesianism or Monetarism.
We should not be debating different approaches to central planning. We should be rediscovering the idea of a free market in money and credit.
Keith Weiner
[1] Most commonly this is called money supply. However, there are two problems with this. One, the dollar is credit not money. Two, it is not a supply in the sense of flows—e.g. corn supply or oil supply. It is a measure of stocks, Unlike corn or oil, dollars are not consumed in a transaction.
Arizona Governor Ducey Vetoes Gold
Last update May 13, 2016
by
Follow on:TwitterFacebookGoogle +
In my testimony in support of the gold legal tender bill this year, I discussed failing pension funds. Retirees who count on their pension checks are being told that their monthly check will be reduced by up to 60%. This is devastating to them, obviously. What isn’t obvious is the cause. In the news coverage of this, the angry pensioners are blaming the union, the fund manager, and Wall Street in general.
None of them point the finger where it needs to be pointed. The Fed has centrally planned our interest rate downwards, ever downwards, for 35 years. Now a 10-year bond pays a mere 1.7 percent interest. Pension funds are designed to invest and earn a real return on the money collected from workers’ paychecks. This breaks down when the interest rate collapses.
There is no cure for zero interest rates (and negative in Europe and Japan). The central banks have created a monster, a Frankenstein that is now ravaging the economy and especially those who depend on fixed income.
It is no longer possible to earn a yield on paper money, without taking undue risk of precisely the sort that retirement funds should not take.
The only antidote to zero yield on paper is a positive yield on gold.
I explained to the legislators that this bill would not fix the problem in itself. It is a necessary but not sufficient step.
I made a different argument to Governor Ducey. Most legislation creates winners and losers. Those who will be hurt by a new law of course lobby against it, and may become enemies of the governor for signing it. This bill created no losers. No one would be hurt by recognizing gold as money. It would have been good for the state, adding jobs, and even tax revenue.
Unpersuaded by either the plight of the pensioners or the prospect of business growth in Arizona, Ducey vetoed gold. This is his second time to shoot down gold.
I have just two points to make about this. One, let’s stop perpetuating the myth that Republicans—or even pro-business Republicans as Ducey brands himself—are for gold. This is a big reason cited by Democrats for why they are against gold.
Two, Governor Ducey knew he could get away with this veto because few people care. While our monetary system drowns under zero interest and runaway debt, people are worried about the Kardashians and the gender of Bruce-now-Caitlyn Jenner.
You had better start letting your government know that you want to start removing the roadblocks and start moving towards the only honest money: gold. No one knows how much time you have, but it is not that long.
What Good is the Texas Gold Depository?
First published: http://snbchf.com/gold-standard/texas-gold-depository/
by Keith Weiner
You’re getting onto a highway. You want to go to your destination but there are roadblocks. The barriers are stacked up in layers. Even if one is removed, you still can’t get anywhere. So is it worth it to start eliminating obstacles, even though it won’t clear the road yet?
On June 12, 2015 Texas said yes.
The road we’re talking about is the path forward to the gold standard. Texas Governor Greg Abbott signed HB 483, authorizing a state depository for gold (and other precious metals) and a payments system. This bill kicks two roadway barriers to the curb: a lack of infrastructure for gold payments, and widespread distrust.
Banking has evolved since the gold standard. We take for granted that we can swipe a card to pay for a ride, a beer, or anything else. Employees can receive their wages by direct deposit and pay their bills online. Businesses can send cash electronically. Some people wrongly think that in the gold standard we will have to go back to carrying coins, paying with little metal discs, and getting change in return. Opponents of gold paint this caricature to make you think that gold will bring us back to wearing sackcloth robes and rope belts with leather purses dangling.
The Texas bill provides the base layer of infrastructure for gold in the 21st century, by creating a depository to safely store people’s gold. And there’s also a means for payments and transfers, “by the presentment of a suitable check, draft, or digital electronic instruction…”
I should note that Texas is not the only player in the gold payments game. BitGold and AnthemVault are also working on payments solutions, including peer to peer, debit cards, and gold web shopping checkouts. Both companies have recently raised significant capital.
Distrust is an intangible but palpable force keeping gold out of the financial system, and hence out of circulation. Gold owners have at least two reasons to be wary about trusting third parties with their metal. One is simply a repeat of the US government confiscation in 1933. I don’t think this is coming, but opinion has hardened.
The Texas bill contains some extraordinary language, “A purported confiscation, requisition, seizure, or other attempt … [much legalese deleted—read the full text of the bill] is void ab initio and of no force or effect.” Texas will not allow the federal government to confiscate its depositors’ gold. Since you have to keep your gold somewhere, and there are risks to every location, this protection makes a strong argument for the Texas depository.
The other worry is the risk of counterparty default. If you own gold via a bank, or financial product such as GLD, then you’re exposed to a counterparty. The Texas gold depository, by contrast, will not deal in credit. Your gold just sits there, with no risk to the depository’s ability to deliver your metal on demand.
The Texas bill is necessary, but not sufficient. It’s a great first step, though there’s more to do. Texas is working on another bill to formally recognize gold and silver as legal tender and to clarify that they are not subject to state taxes. I testified before a Texas Senate committee about SB 1245. That bill did not pass out of committee, but there’s good reason to hope that a legal tender bill will be enacted into law in Texas soon. This is especially so, with the momentum created by HB 483.
Bit by bit, the road to gold is being cleared. Our friends in Texas are helping lead the way.
Here my testimony for the SB 1245 bill:
http://www.youtube.com/watch?v=oiwIQlRaAIw#t=363
The Gold Standard Institute Presents…
The quality of the audio is not good in parts, but that said, this talk followed with Q&A by Dr Keith Weiner is well worth your time.
- « Previous Page
- 1
- 2
- 3
- 4
- 5
- 6
- …
- 13
- Next Page »