What do I think of the World Bank President's call for discussion of a new gold standard?

[ThePythonicCow]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

I need to learn more about currency systems before I can develop my ideas further, but I remain convinced that the gold bug crowd who keep talking about return to a gold standard are missing the points above.

You are correct to note that the goldbug argument that "gold is good because it has always been good" is wrong, because things have changed.

But that doesn't mean gold is wrong because things have changed.

Rather it means we have to re-think things from first principles, not just from habit.

(I suspect I might be just rephrasing your last post, not disagreeing with or illuminating it.)

[DSpencer]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

That is a worthy challenge.

Would you consider yourself to be pro free-markets? Do you recognize the absurdity of central planning?

This a challenge worthy of the market. Why should one individual or worse, a bureaucracy, be able to solve this challenge? They can't determine the appropriate price or production level for any given product. We've seen those failed attempts in action.

We need to give up on the top down approach of creating fiat money or "SDR" or any other nonsense that some bureaucrat can cobble together as the solution.

Why should one person be forced to use an unstable and continuously consumed commodity such as oil as their money? Or be forced to buy things with shiny pieces of metal? Or save for retirement using pieces of paper that continuously decline in value at the discretion of a corrupt group of politicians?

[ThePythonicCow]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

There is thus two functions for money.

1. to lubricate trade which inevitably involves movement of goods over distance.

2. to create the foundation of the underlying trading business, (which does not involve movement of the business) and thus serves to retain the generated prosperity at the location of the foundation of the business.

Yes, there are other (at least one other) uses for money than just lubricating trade.

Moreover, I can be confident that the good Chris Coles will speak up for one of these other uses of money, which is in the forming of a capital equity .

... so what demands does a functional capital equity system place on the monetary system? Do these demands conflict with or suggest alternatives to the demands that a functional trading system places on the monetary system?

[ThePythonicCow]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

Why should one individual or worse, a bureaucracy, be able to solve this challenge? They can't determine the appropriate price or production level for any given product. We've seen those failed attempts in action.

If this is a comment on and objection to what I proposed above, then I'm pretty sure that what we have here is an example of a failure to communicate.

My proposal above moves the locus of control over prices and production levels from a bank vice president granting credit to a customer accepting the bill of trade (payable in 90 days after receipt of order) for some goods at some price. I am confident that you and I would agree that such is a step in the right direction.

I am not an anarchist. It is fitting and proper in my view for people's to join together to form governments and grant those governments specific, limited authorities. This includes the authority to codify and enforce rules of trade and of the monetary system. The government should not decide who buys or sells what at what price, except when the government is properly engaging in commerce for its own duly authorized purposes. But the government has a proper and useful role in establishing and enforcing some of the "rules of the game", by which free and responsible sovereign individuals must operate when in the jurisdiction of that government.

[Chris Coles]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

If this is a comment on and objection to what I proposed above, then I'm pretty sure that what we have here is an example of a failure to communicate.

My proposal above moves the locus of control over prices and production levels from a bank vice president granting credit to a customer accepting the bill of trade (payable in 90 days after receipt of order) for some goods at some price. I am confident that you and I would agree that such is a step in the right direction.

I am not an anarchist. It is fitting and proper in my view for people's to join together to form governments and grant those governments specific, limited authorities. This includes the authority to codify and enforce rules of trade and of the monetary system. The government should not decide who buys or sells what at what price, except when the government is properly engaging in commerce for its own duly authorized purposes. But the government has a proper and useful role in establishing and enforcing some of the "rules of the game", by which free and responsible sovereign individuals must operate when in the jurisdiction of that government.

I have to start by answering this first. Correct me if I am wrong, but government was never the origins of ANY of the trading systems used in the past; they, (the systems), were always the result of the interaction between traders within what today we describe as "The Private Sector". Bills of trade were entirely created by private individuals as a means to allow trade over long distances; particularly due to the advent of long distance shipping across oceans, continent to continent.

It is only at a much later date that "government" per se became involved, usually because of some short term problem requiring that a new law be laid down to place a rule against for everyone to use. What has happened is that governments themselves became the engine for further change and the new banking systems soon discovered that it was in their interest to support "government" rather than the private trader.

Last night we watched a wonderful TV program: Britain's Trillion Pound Horror Story, that sets this all out in detail. In turn showing the way forward to a much reduced government influence by way of using the Hong Kong experience as a benchmark.
http://www.channel4.com/programmes/b...rror-story/4od

[Chris Coles]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

... so what demands does a functional capital equity system place on the monetary system? Do these demands conflict with or suggest alternatives to the demands that a functional trading system places on the monetary system?

The primary demand is the release of money from trade to another account altogether; prosperity. The two are completely interconnected. Unless you have a prosperous customer, you cannot prosper yourself. The classic example is you sell cheap brushes door to door to the poor and if you opened a suitcase full of, say, expensive perfume on that same doorstep and asked the going price, you would be completely wasting your time. No sale!

What modern banking and in that I also particularly include investment banking has forgotten is that you have to build an economy upon the prosperity of the people, not the prosperity of the banker.

Perhaps the underlying reason for the misunderstanding is that banking has become so prosperous itself, it has lost sight of the role of prosperity in providing the driving force for a successful economy.

Prosperity is exactly the same as the winter store of food in times past. If you ate all your food and had none left at the onset of winter, you would die of starvation. What banking has done is it has removed that winter store; but this time, of money in store for purchase during uncertain times. The function of equity capital, (Or capital equity), is the replacement of the value of the sale back into production.... NOT .... consumption. The more anyone can trade while at one and the same time leaving behind a prospective customer more prosperous; the greater the product of trade in the future.

The way we have done that in the past was for capital, (money used as equity), to be placed out of direct circulation and into use within the structure of a business that made and traded products. The greater the quantum of capital, the more prosperous the business, the more prosperous the business; the better they can pay better wages to their employees and thus the greater the local prosperity.

Turning back to Gold. Again, everyone forgets that trade is, eventually, the business of selling to the general population. It is their confidence in the value of the currency that in the end dictates the usefulness of the trade. Stability is everything to the family living on a fixed budget. When we return to stability; the pennies saved by that family become the savings of the nation that must be first used as new equity capital to underpin the business that employs them in the first place. THEN and only then is the money released back into circulation to promote trade.

Thus money must be used as equity to promote prosperity BEFORE consumption. let the well fill with water before drinking from it.

[ThePythonicCow]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

I have to start by answering this first. Correct me if I am wrong, but government was never the origins of ANY of the trading systems used in the past; they, (the systems), were always the result of the interaction between traders within what today we describe as "The Private Sector". Bills of trade were entirely created by private individuals as a means to allow trade over long distances; particularly due to the advent of long distance shipping across oceans, continent to continent.

To the extent, perhaps entirely, that our monetary, economic and trading systems can function endogenously, without government involvement, that's all the better.

My previous post stated essentially that government should be involved in setting these rules.

That was a misstatement on my part.

I should have stated that we the people might choose to assign our government(s) some role in these matters.

My likely starting point for a more careful consideration of the proper role of government in these matters would be the U.S. Constitution (as written, not as subsequently misused.)

At present, given the enormous degree to which government powers of legislation, regulation and enforcement have been captured by big banking interests, it seems self-evident to me that our government properly has a role at least to the extent of disentangling itself from this capture and unwinding its present vast, varied and deep facilitation of big bankings capture of other aspects of our civilization (food, medical, education, media, ...)

[ThePythonicCow]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

...

The function of equity capital, (Or capital equity), is the replacement of the value of the sale back into production.... NOT .... consumption.

...

The way we have done that in the past was for capital, (money used as equity), to be placed out of direct circulation and into use within the structure of a business that made and traded products.

...

When we return to stability; the pennies saved by that family become the savings of the nation that must be first used as new equity capital to underpin the business that employs them in the first place. THEN and only then is the money released back into circulation to promote trade.

Thus money must be used as equity to promote prosperity BEFORE consumption. let the well fill with water before drinking from it.

Chris -- my first hunch on reading your post is that you are perhaps not appreciating the roles that (1) real bills of trade and (2) sovereign money each can (and used to) serve in funding prosperity.

Savings (capital equity) are not the sine qua non of prosperity.

Real bills of trade can fund ongoing production, distribution and sales, including paying the wages of the workers who can then become the ultimate consumers of those same products. Real bills of trade represent a 90 day advance on future productivity, and circumvent the short term chicken and egg problem you seem to be describing -- that wealth must be saved before it can be invested to fund production.

Similarly sovereign money, issued by a government and accepted in payment of the taxes it levies, issued without debt, can also fund production. This sovereign money might be paper money, or it might be gold and silver coin -- given that the government runs a functioning mint that offers to convert any such offered metal to coin(s) of the realm, without charge.

Neither of these mechanisms can convert the hovel of an indigenous family into another silicon foundry producing Intel's latest microprocessor.

You can't make something out of nothing.

But you can make more efficient use of the potentially available productive means, resources and labor using these mechanisms.

Capital equity is not the only means of funding increasing prosperity. It does however have a critical role, in the funding of longer term investments in the private sector. Here again we see that the big bankers have taken on a larger role than it should have been allowed to have, excessively replacing equity with long term debt.

[ThePythonicCow]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

... so what demands does a functional capital equity system place on the monetary system? Do these demands conflict with or suggest alternatives to the demands that a functional trading system places on the monetary system?

Chris -- I don't believe you have answered these questions that I put to you above. Perhaps I missed something in your replies.

You have continued to speak to the importance of capital equity, but I am not yet clear on how that affects what had been the subject of this thread, namely how best to organize our monetary system.

[Chris Coles]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

Chris -- I don't believe you have answered these questions that I put to you above. Perhaps I missed something in your replies.

You have continued to speak to the importance of capital equity, but I am not yet clear on how that affects what had been the subject of this thread, namely how best to organize our monetary system.

Go back and read the first sentence:


The primary demand is the release of money from trade to another account altogether; prosperity. The two are completely interconnected.

You keep making the same mistake that a government makes when proposing to increase research and development by providing a tax refund on profits; when you have to wait for years, until profit flows, before making the profit to be taxed..... Cart before the horse .... again!

By the same token; you assume trade comes before employing the people to make the product to be traded.... again!

What I am arguing is that FIRST you save, at a trickle, (because you are all poor). Then you invest your capital into the means of design and production. THEN you produce, and only then do you trade what you produce.

At the end of the cycle, you must have a surplus, the better to improve the prosperity of everyone, including the employees, your ultimate customers. Greater prosperity, greater potential for profit. What comes around, goes around.

[ThePythonicCow]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

You keep making the same mistake that a government makes when proposing to increase research and development by providing a tax refund on profits; when you have to wait for years, until profit flows, before making the profit to be taxed..... Cart before the horse .... again!

We're suffering from a breakdown in communications, I'm afraid.

As best as I can tell, you haven't understood important parts of what I've written, and rather clearly, you figure the same of myself.

Oh well. I've done what I can do, and you've made a good shot at it from your end, and the twain aren't meeting.

Take care.

[Chris Coles]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

We're suffering from a breakdown in communications, I'm afraid.

As best as I can tell, you haven't understood important parts of what I've written, and rather clearly, you figure the same of myself.

Oh well. I've done what I can do, and you've made a good shot at it from your end, and the twain aren't meeting.

Take care.

In fact, I do understand much that you have written, all of which makes good sense. My rather scratchy record, playing the same tune over and over again is simply that there must be a balance. That all the aspects of the use of money are interlocked and need recognition. You are a trader, I am an inventor. We both look at this from entirely opposite viewpoints.

To change the subject, I once lived in a Champion Grand Slam, with a plastic roof..... must have scrambled my brain too, so you take care too.

[ThePythonicCow]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

I continue to read more bits and pieces by Antal E. Fekete on how real bills of trade worked, as part of a monetary system with gold coins and bank notes. Here's one of his articles, from January 2007, which spells it out as well as any that I've seen: A REVISIONIST THEORY AND HISTORY OF MONEY.

Reading his stuff is rather like my first encounter with whiskey, having previously drunk only of wine and beer. I will not know until sometime later whether it was rot-gut whiskey or fine bourbon.

[Chris Coles]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

I continue to read more bits and pieces by Antal E. Fekete on how real bills of trade worked, as part of a monetary system with gold coins and bank notes. Here's one of his articles, from January 2007, which spells it out as well as any that I've seen: A REVISIONIST THEORY AND HISTORY OF MONEY.

Reading his stuff is rather like my first encounter with whiskey, having previously drunk only of wine and beer. I will not know until sometime later whether it was rot-gut whiskey or fine bourbon.

The link you provided was not usable. Try this:
http://www.24hgold.com/english/contr...redirect=False

Over the weekend, I will try and read what Adam Smith had to say as well and come back to this later.

[ThePythonicCow]

Re: What do I think of the World Bank President's call for discussion of a new gold standard?

The link you provided was not usable.

Thanks for alerting me.

I fixed my link now. Now that it's fixed, my link goes to a two part, longer version of Fekete's article, which I found more valuable than the other web pages with shorter versions.

P.S. -- This fixed link goes to a site that has taken some of Fekete's papers and annotated them. In the particular case of this work, Fekete posted an article in two parts, as two separate PDF documents:

2007-01-11	The Root Cause Of Unemployment Part One
2007-01-15	The Root Cause Of Unemployment Part Two

The (now fixed) link I provided above goes to a single HTML text (no pdf) page combining and annotating both parts.

The originals of these and other Fekete papers can be found at Popular Economics, Scholarly Economics, and Money & Credit.