[Editor's Note: The following post is by TDV senior analyst, Ed Bugos]
Can gold be the money of the free market if the violent monopoly of government gets behind the effort? This utterly wrong notion is what Ralph Benko seems to be suggesting in his recent article on NationalInterest.org titled "How to Go Gold".
Basically Benko sees a return to gold through world government initiative and collaboration, starting with the US president. He appears to cite evidence that this is underway, starting with the central bank's buying of gold. Then Benko concludes by citing Lewis Lehrman's 5 steps back to a "classical" gold standard:
Step 1. America leads by the president announcing unilateral resumption of the gold monetary standard at a certain date, not more than four years in the future (allowing for a market adjustment period).
Step 2. The president issues an executive order eliminating any and all taxes imposed on the buying, selling and circulation of gold.
Step 3. Shortly after the announcement in Step 1, the United States calls for an International Monetary Conference of interested nations to provide for multilateral currency convertibility to gold, and the deliberate termination of the dollar-based official reserve currency system.
Step 4. The conference agreement — attended by representatives of the BIS, IMF, WTO, and the World Bank — would establish gold as the means by which nations would settle residual balance-of-payments deficits.
Step 5. A multilateral international gold standard — the result of the currency convertibility agreement — would effectively terminate floating exchange rates, reestablishing stable exchange rates among the major nations.
Obviously I disagree with this stupid idea. Lehrman is Ron Paul's ally from back in the Reagan days (when they were the only two on Reagan's gold standard commission who actually favored going to gold), though Paul appears to have moved increasingly towards anarcho-capitalism since then.
But the above solution is anything but an anarchist (read "a true free market") one. The obvious reason: there is no mention of doing away with the underpinnings of the Fed, for one (the Fed being backed by the coercion of government). That is to say, there is no repealing the Fed's legal tender and other monopoly privileges or the government's protection of such, and allowing the market to determine what should be the instrument of sound money. (Hint: the market may not choose gold as sound money.)
We may think gold would be the market's first choice as sound money, but the market (i.e. all of us) choosing is different than having the choice imposed via government.
About 10 years ago I wrote an essay about how central banking and sound money are mutually exclusive — that they cannot co-exist in the same economy anymore than lovemaking and rape can co-exist in the same act. It has to be one OR the other. Hence, the return to sound money cannot be achieved without ending the Fed. Keeping the Fed with a gold standard would lead to something like the bad experience Britain had when it tried to return to a preward ratio of gold to the British pound.
What are the steps that we as anarcho-capitalists actually recommend for going back to "sound money"? Here are some basic suggestions off the top of my head:
1. Repudiate the Public Debt
2. End the Fed
3. Liquidate all government regulatory bodies
4. Limit or abolish the taxing power of the federal government
5. Repeal all remaining industry protections and subsidies
6. Let the chips fall where they may.
You may wonder if there would be too much chaos this way. But I have to wonder if there would be too much chaos any other way.
Of course, the world is likely going the "other" way. Governments are probably not going to take my suggestions to get out of the way. They'll keep borrowing, taxing, regulating and monopolizing the money supply. And it will all end painfully. That's why we provide our TDV newsletter subscribers with our best actionable advice to come out wealthier despite the government's attack on their prosperity. You can learn more about that by clicking here.
Regards,
Ed Bugos
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Ed Bugos, with a strong background in Austrian economics, is one of the world's most sought after and respected mining analysts. Based out of the global epicenter for gold mining exploration and financing, Vancouver, Canada, he has been writing publicly since the late ‘90s and is a well known critic of government interventions, central banking and the Federal Reserve since 2000, starting as the original contributing editor for Safehaven.com. Ed founded goldenbar.com in 2001, a website publishing his gold & currency digest portending the collapse of the strong dollar policy and the rise of the secular bull market in gold and commodities. He was one of the first to make the call for $2,000 gold (he now is calling for $5,000-$10,000 gold), back when it was still struggling with $300 per ounce and it was a sin to own it.
The thing about us anarcho-capitalists is that we're utterly peaceful. We figure good ideas don't need coercion. That's why we would like the state to go away. That institution rests entirely on coercion and having the right to initiate all sorts of horrible violence like theft (taxation), laws (prejudices enforced at gunpoint) and wars.
We would no more look to the state to enforce a good goal than we would look to a serial armed robber to guard our piles of jewels and gold bars.
The only good the state could do…would be to stop using violence. You know: regulation, taxation, money supply monopoly… But then, it wouldn't be the state! Even if the state were to enforce a seemingly good idea like the gold standard, the fact that government power was involved would make it go sour (as Ed reminded us in the case of postwar Britain). Government power is just the iniation of violence. It turns out that adding violence to correct the imbalances caused by previous violence is a lot like adding fire to correct the burns caused by fire.
So since we don't expect the state to rub itself out of existence willingly, we have to plan accordingly for the economy-wrecking distortions that will keep coming our way, whether the government gets back on the gold standard or not.
That's where a subscription to the TDV newsletter comes in handy. Ed's expertise and actionable financial advice are just two of the many reasons to get a subscription today. You can find out more about subscribing and how it can make your wealth increase throughout the collapse of the monetary system by clicking here.
Regards,
Gary Gibson
Editor, The Dollar Vigilante
