Gold has been around for quite a long time. So too have some of our present leaders - both those who are little more than anecdotes on the pages of history, (Jimmy Carter/Gerald Ford both come to mind) and those of consequence, such as Ronald Reagan. (I am not a Republican but I believe Reagan bought us time and renewed our spirit during a period when it appeared we sorely needed both - not to mention the restoration of our decimated military that, oddly enough, had begun during the Carter administration.)

The case for gold, despite its present economic "malaise" and on-going political disfavor, is in my mind, clear. The excerpts that follow were written by one of our present leaders. Its' copyright is dated 1962, and it was published in 1966.

n the "snips" that I have selected, in addition to being focused on gold, there is also relevant information pertaining to the subject of this forum - particularly in the event of severe economic disruptions.

As an additional contribution to the collective "awareness" of this forum that the article offers, if no one can determine the identity of the author I will post his name tomorrow near whatever the "end" of this thread may have become. I believe the name will be a surprise to many of you. However, the level of knowledge and awareness frequently displayed on this forum will likely result in someone identifying the author sooner than that

GOLD AND ECONOMIC FREEDOM

An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense - perhaps more clearly and subtly than many consistent defenders of laissez-faire - that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other. In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.

Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither ling-range planning nor exchange would be possible.

What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible.

More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.

(snip)

Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has always been considered a luxury good. It is durable, portable, homogenous, divisible, and, therefore, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange.

(snip)

Under a gold standard, the amount of credit an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited.

The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which - through a complex series of steps - the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formally a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets.

(snip)

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.

(snip)

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

END OF ARTICLE

With respect,

-- Dave Walden (wprop@concentric.net), June 13, 1999

Answers

"Deficit spending is simply a scheme for the "hidden" confiscation of wealth."

I have in my files a cartoon showing two fat bankers atop a highrise building drinking and toasting one another over the idea that "With this system it is easy to ROB THE PEOPLE." The cartoon shows $50,000 (fiat money) going into the front door of a home and out the chimney is flowing $250,000.00 into the greedy, open mouth on the side of the high rise bank. And the PEOPLE become slaves to the lender.

-- Mark Hillyard (foster@inreach.com), June 13, 1999.

I am a student of the late Merrill Jenkins from St. Louis Mo.. Jenkins knew that the Govt. was counterfiting when they created they Johnson sluges in 65.

Jenkins was inventer who developed the paper change machines we use today and coin vending machine technology. His machines could distinguish silver coins from copper or steel sluges.

I sell a book by Jenkins called Money The Greatest Hoax.

An economics prof. friend of mine call it the best economics text ever written.

To understand how the money scam was forced on us you need this book.

Ern

-- Ern (edsexcel@ameritec.net), June 13, 1999.

Dave, here is another related article that talks about the current manipulation of gold prices.

The Myth of Free Markets

Ray

-- Ray (ray@totacc.com), June 13, 1999.

One little comment about Merrill Jenkins. I do think that his book is very much worth reading because he brings a perpective to monetary theory that is missed by others that is of great benefit. That's the good news. The bad news is that it is a hard to read book. Not because of what is said, but how it is said. What Dieter DoES tO caPItaLiZAtiOn, Jenkins does to syntax. If you like e.e.cummings and if you can blast through R. Buckminster Fuller's An Untitled Epic Poem to the Industrial Revolution with ease, you'll have no problem with Jenkins. Otherwise you will find it slow going and very laborious at first. I would NOT recommend this book to the beginning student of economics!!! I'ld start with something small and easy like Andrew Dickson White's Fiat Monetary Inflation in France, Road to Serfdom by Hayeck, and various short articles by F.E.E. and F.R.E.E.

-- Ken Seger (kenseger@earthlink.net), June 13, 1999.

Dave Walden:

This post looks to be, verbatim, a treatise by a younger, 1960ish Alan Greenspam....no?

-- Mike T. (anita_martini@hotmail.com), June 13, 1999.

The tipoff was "hysterical antagonism". Who else could it be but Mr. Irrational Exuberance?

http://lvdi.net/~willys/gold.htm

-- Linda (lwmb@psln.com), June 13, 1999.

The "best" book on monetary theory, including the importance of gold and the hazards of fiat money, still seems to be The Theory of Money and Credit by Ludwig Mises. I put "best" in quotes because of the difficulty many people would have getting through it; it is not light reading.

Jerry

-- Jerry B (skeptic76@erols.com), June 13, 1999.

Gold is at $260. Your 1999 dollar buys as much gold now as it did in 1978, effectivly there hasn't been any inflation for twenty years. If you consider that $260 in 1999 dollars is about $130 in 1978 dollars. This is only about $30 above the low in 1974!!!

Now if you REALLY belive there hasn't been any inflation for twenty years then by all means DONT BUY GOLD!!

What ever happened to Buy low, sell high?

Tell me more

Where's the next bottom?

-- otay (buckwheat@lilrsacles.com), June 14, 1999.

$260 + y2kaos + Clinton + NWO = Buying Opportunity. (Silver too, perhaps even more so than Gold...)

-- Andy (2000EOD@prodigy.net), June 14, 1999.

Mike T & Linda: You both get the gold stars. The article was indeed written by a young Alan Greenspan.

In my judgment, Greenspan is in a position to know that while gold is untterly essential to any free economy, in the absence of that freedom he is trying to keep the system viable. Viable for the time when/if a satisfactory political environment allows for a reversal of the current system, wherein the federal Reserve bank with its Chairman and governors, "decide" what would otherwise be determined by the politically "immune" laws of supply & demand.

Volker and Greenspan have bought us time. The question that I have is, "is that time about up?"

With respect,

-- Dave Walden (wprop@cncentric.net), June 14, 1999.

Dave,

I must confess that I sometimes find you a little hard to follow. Perhaps it is your erudite way of expressing yourself. At any rate, it is obvious you are "one smart fellow" who really thinks things through and plans well in advance. Am I right? So tell me, what was that other posting all about, where you were wondering if you should travel during the last week of the year? Come on Dave, fess up. What kind of BS question was that, when it's obvious from your posts that you are not the sort to be still puzzled over *that* kind of thingy. Are you here to pull our leg, probe our convictions, what?

-- Gordon (gpconnolly@aol.com), June 14, 1999.

GORDON: Heavens no! In recent days I have simply begun to question my plans for the rollover. I had originally thought that as the year progressed, and preparedness became more and more widespread, the government would act and attempt to assure order out of the growing "disorder." I had considered the kinds of activities by the authorities to initially be confined to banking, (cash management in particular) distribution of foodstuffs, and perhaps foreign exchange.

I am now wondering if indeed, as some on this forum have suggested, rationing of fuel and travel restrictions are also possibilities for initial Governmental responses.

In recent weeks, as I continue to assess the "sureal" situation, (market still thriving, gold falling - in spite of Y2K and all manner of potential problems worldwide) I have begun to question whether or not my plan(s) for the end-of-year holidays are realistic.

One of the benefits of this forum is the marvelous range of perspectives you can get by simply asking a question. In terms of how I benefited from the responses, I would sum it up by saying that the respondents "jolted" me back to the reality that I am being premature in asking the question that I asked. Much too soon for a realistic answer, much more information is needed and, in the next several months, will likely be available.

Gordon, you should never assume that just because someone may strike you as being intelligent, they bring that intelligence in the manner you expect, to all issues. It has been my experience in life that ofter the precise opposite is true. We all have our strengths as well as our weaknesses. One of mine is the "fogging" of my objectivity where my family is concerned. I would not want to leave Houston and fail to arrive at our place north of Atlanta as we have planned. The potential for difficulties that would then be possible are, in my judgment, too great.

I am certain that I will again ask the same question of the forum in the near future.

Thank you for your interest.

With respect,

-- Dave Walden (wprop@concentric.net), June 14, 1999.