The following papers were originally written as a series over 5 months by GSI president Keith Weiner. They are assembled on this page, but have not been edited into a single monolithic paper or otherwise.
The Unadulterated Gold Standard I
In Part I,we look at the period prior to and during the time of what we now call the Classical Gold Standard. It should be underscored that it worked pretty darned well. Under this standard, the United States produced more wealth at a faster pace than any other country before, or since. There were problems; such as laws to fix prices, and regulations to force banks to buy government bonds, but they were not an essential property of the gold standard. (Read More)
The Unadulterated Gold Standard II
In Part II, we discuss the era of heavy-handed intrusion by governments all over the world, central planning by central banks, and some of the destructive consequences of their actions. We covered the destabilized interest rate, foreign exchange rates, the Triffin dilemma with an irredeemable paper reserve currency, and the inevitable gold default by the US government which occurred in 1971. (Read More)
The Unadulterated Gold Standard III
In Part III, we look at the key features of the gold standard, emphasized the distinction between money (gold) and credit (everything else), and looked at bonds and the banking system including fractional reserves. (Read More)
The Unadulterated Gold Standard IV
In Part IV, we discuss the problem of clearing. The problem of clearing arises when merchants deal in large gross amounts, on which they earn small net profits. They would not typically have the gold coin to pay for the gross value of the goods they purchase. This is an intractable problem in a strict gold-coin-only system and it only grows if specialized enterprises are added. We considered the mechanics of Real Bills. It is interesting that goods flow from raw material producer to the consumer but the money flows from consumer to raw material producer. Without government involvement, and without banks, Real Bills circulate spontaneously. (Read More)
The Unadulterated Gold Standard V
In Part V, we look at the economics of Real Bills (or “Bills” for short). In Part IV, we noted that a Real Bill is credit that is not debt, so let’s start here.
The Real Bill is credit provided for clearing, without lending or borrowing. It is different than a bond. To review the bond, in Part III we showed how it arises out of the need to save. People must plan for retirement and senescence during their working years. Even if there is no way to lend at interest, this need still exists. So people hoarded part of their income by buying a commodity with a narrow bid-ask spread that was not perishable. Salt and silver are two commodities that were used for this purpose. For many reasons saving, in which one lends one’s wealth at interest, is superior to hoarding. Thus the bond was born. (Read More)