Gold in Hoards versus
Gold on the Go
Splitting the Roman Empire into two
halves
Antal E. Fekete
Gold Standard University Live
aefekete@hotmail.com
Apr 3, 2008
How much gold?
Many readers of my column have
asked me how much gold I think there is in Fort Knox, and how
much gold I think is being hoarded by Americans that may be available
for coinage in case the U.S. Mint is re-opened to gold.
I don't have the figures or
estimates. From my perspective these figures do not matter any
more. What matters is whether confidence can be restored to the
extent that gold will start flowing to the Mint. Here the situation
is definitely sad, as shown by the treatment of presidential
candidate Ron Paul by the establishment, his own party, the media,
the investing public, and the electorate. He has been given the
cold shoulder by all in these extraordinary times, just when
the financial world started crumbling all around us. He might
be God's messenger, but he has been treated no better than any
other before him who was sent out to be prophet in his own land.
Even a debate on gold as money, let alone the realization of
it, is strenuously opposed by everybody, including the people
themselves who are going to suffer for their denseness and put-on
deafness as the dollar is ignominiously removed from the stage.
Gold on the go
Gold sitting in vaults is one
thing, and gold on the go is another. Gold on the go is as different
from gold in hoards as day is from night. The former suggests
confidence in the present and radiant optimism about the future.
You dare spend your gold coin as you fully expect it to come
back to you on the same terms. The latter suggests fading confidence
in the present and deep pessimism about the future. The gold
coin is not to be spent. It may never come back to you.
Whenever gold is being hoarded,
there is a danger that the economy will plunge to its worst levels,
possibly all the way back to barbarism. If all the gold is hoarded,
prosperity will collapse regardless of the state of knowledge
and technology. But if the Mint is re-opened, gold will flow
to the Mint and the economy may rise from the dead. People will
be talking about an "economic miracle". Our leaders
fail to see this. To them gold is still the "barbarous relic",
rather than the elixir of life, turning the moribund economy
around from the brink.
Key to confidence
Trade and commerce, and prosperity
that depends on them, hinge upon two primal ingredients: integrity
and confidence. It is the function of money to implement their
existence and interaction. For 63 centuries they have worked
together since the first gold slug was used in exchange by men.
Gold is the key to confidence. The universal acceptability
of gold throughout history has enabled the agencies of production,
consumption, exchange, and distribution to bring about the highest
level of prosperity commensurate with the prevailing level of
knowledge and technology. Take gold out and, lo and behold: knowledge
and technology will no longer uphold prosperity. Sinking back
to the Dark Ages becomes inevitable.
Terror of the error
The United States has missed
its chance, in this election year, to have a grand national debate
on the merit of a metallic currency, and how gold could be pressed
into service at the eleventh hour, to stave off world disaster.
The U.S. Mint will not be reopened to gold, and the "terror
of the error" will run its course to the bitter end. A depression
will engulf the world. Suave qui peut that's the message
from the 2008 presidential election campaign that has aborted
six months too early.
End of the Roman Empire
Maybe a foreign country will
open her Mint to gold and silver. The Chinese could do it, but
like all Orientals they are too suspicious and secretive, and
they totally lack the trust which is the characteristic of the
Western way of doing business. Be that as it may, history appears
to be repeating itself. It conjures up the split of the Roman
Empire into an Eastern and a Westerm half in 395 A.D. By 476
the Western half ceased to exist, entering the Dark Ages. Civilization,
as people had known it, was gone. However, the Eastern half,
partly due to the fact that it could keep its Mint open to gold,
continued in existence for another thousand years. Circulating
gold represented confidence. Confidence in production, confidence
in trade, confidence in the future.
Dark Ages
We no longer talk about deflation
and depression. We face the Second Coming of the Dark Ages. At
the time of the collapse of the Roman Empire all the gold was
still available that had kept a munificient world trade going.
The trouble was not a shortage of gold. The trouble was that
gold was going into hiding. Had it been put back into circulation,
then the Dark Ages could have been fended off. It did not happen,
because of the ignorance and selfishness of the leaders, and
their self-conceit that a fast-depreciating monetary system will
serve the purposes of their Empire. As gold was going into hiding,
and there was no statesmanship to press it back into service,
there was no way to save civilization in the Western part of
the Roman Empire.
It is important to understand
that the Dark Ages that followed, and gold going into hiding,
are just two sides of the same coin. We have the same double
threat facing us today. This time, too, the Dark Ages could last
several hundred years.
Bezant, savior of civilization
The Eastern half of the Roman Empire, Constantinople, fared better.
There, they kept the Mint open to gold for another thousand years.
Not only did people survive: they prospered. The gold coin of
the Empire, the bezant (named for Byzantium, as Constantinople
was called before Great Constantine renamed it after himself)
saved civilization from ruin to which the Western part of the
Empire succumbed so easily.
If history is repeating itself,
then the Oriental half of our civilization, backed by the born-again
economic strength of China, will have the wisdom to save the
world by opening the Mint to silver. Unfortunately, it will not
benefit the Occident.
People crying out in despair
Our government leaders conducting
our irredeemable currency and credit program do not understand
that people can be faced with tragedy and disaster in the wake
of the collapse of the monetary system. Until such a devastating
catastrophe occurs, they proceed as though some special Providence
will protect this nation from the monetary and social chaos in
which the helpless and hopeless mass of people cry out in despair.
People can do little or nothing but suffer because inept men,
in the area of monetary economics, threw the Constitution to
the winds, usurped unlimited power, and took possession of the
monetary program of the nation.
When monetary statesmanship
is replaced by foolishness, recklessness, irresponsibility, and
related examples of human misbehavior, catastrophe and chaos
await the unfortunate nation caught in that frequent tragedy
of mankind.
Impostors sewing the Emperor's invisible
clothes
The common procedure is to
avoid upright monetary scientists whose efforts in behalf of
the helpless mass of people are generally resented, ridiculed,
taxed out of existence and, sometimes, subjected to other forms
of punishment such as ostracism or worse. At the same time currency
manipulators attempt to persuade the public that they are intelligent
and honorable men acting in the best interest of the nation,
and on the basis of latest scientific evidence. Such people are
wined and dined, given prizes and honors, and otherwise subjected
to effusions of praise and appreciation. The media and financial
press cannot find the superlatives to heap upon them. But all
the hoopla won't change the fact that they are celebrating impostors
who pretend to sew the Emperor's new clothes, "invisible
to all but the wise".
Gold, anathema to Communist creed
as well as to fiat money ideology
The United States is illustrating
once more how a nation, when sufficiently inept and presumptious
in the area of monetary economics, pursues the course based on
irredeemable credit that ends in distress, tragedy, and despair.
Unless, in the last minute, Western political leaders somehow
come to see the light, and beat the Chinese to it, by opening
the Mint to gold first. Don't ask where the gold will come from.
If the Chinese can attract silver, anathema to their Communist
creed, then surely Keynesians and Friedmanites can attract gold,
anathema to their fiat money ideology.
De-industrialization of the United
States
Fiat money has de-industrialized
the United States just as thoroughly as two world wars and fiat
money in their wake had de-industrialized Germany. That country
had to start capital accumulation from scratch at the end of
World War I, only to waste it all in another futile war which
left the country in ruins, divided, and under enemy occupation.
But Germany, at least its Western part, like the mythological
bird Phoenix, rose from her ashes and became the richest country
in Europe by 1965.
Why the German economic miracle has
forgone the gold coin
According to a story reported
by Newsweek magazine on November 11, 1957, under the title
Gold for Sale, Dr. Ludwig Erhard, the Minister of Economics
in West Germany in 1947, even contemplated opening the Mint to
gold. He reportedly said that "Germans prefer the clink
of shiny gold coins to the prosaic rustle of paper money".
He desisted for one reason: he would not want to embarrass the
wealthy, powerful U.S. where gold coins were taboo.
Taking poorly concealed sips at the
bottle of inflation
If the Newsweek story
is true, Erhard has made an historic blunder. The attempt to
avoid offending the powerful by pandering to its weaknesses and
lack of respectability is a phenomenon one sees occasionally
in social behavior. Erhard did not want to advertise the lack
of respectability of the occupying power as revealed by its currency
system, by introducing a thoroughly respectable one in West Germany.
He preferred that we continue to regard ourselves as "just
as respectable as the woman across the street" as we slop
around in bedroom slippers, hugging a blousy dressing gown of
irredeemable currency around our flabby figure, hair unkempt,
while we continue "taking poorly concealed sips at the bottle
of inflation" to paraphrase the words of Harold Wincott
writing in The Financial Times of London (article
No Laughing Matter, October 5, 1954.)
Incessant talk about leadership of
the Free World
The officials of the United
States have been talking incessantly of her responsibility as
a leader of the Free World, and of her unmatched know-how in
all fields of human endeavor. Yet here we are treated to a most
humiliating spectre. Germany, a defeated country with benevolent
tolerance in the area of monetary science makes an inferior choice
in reforming its currency system, for fear of embarrassing the
mighty leader who is dissolutely lacking in regard of leadership
in the field of money. So much for leadership of the Free World.
So much for unmatched know-how.
Floating by sinking
You don't need a war on home
soil to de-industrialize your country. The United States has
accomplished that feat bit-by-bit since 1971, the apogee of her
industrial power which, not surprisingly, coincided with severing
the last link between the dollar and gold. The most astounding
part of it was that nothing has been done to arrest the decline
during all those years. The warnings of monetary economists have
been ignored, even ridiculed. The United States persisted with
the Friedmanite program of 'floating by sinking'. The dollar
has been subjected to continuous and conscious debasement ever
since 1972 in spite of the obvious damage it was doing to America's
industrial capital.
Devaluation of the currency
is self-mutilation. Floating is devaluation under a disguise
as if mutilation piecemeal were less painful. Be that as it may,
Milton Friedman's recipe for the floating of the dollar has caused
the greatest capital consumption ever recorded by history. It
turned Americans into prisoners of "instant gratification".
The lesson, that once industrial capital is consumed or otherwise
dissipated it is gone and cannot be replaced by a click of the
mouse (as can misused credit), has been ignored.
It is not war but declaring gold 'taboo'
that destroys industrial capital
The real cause of de-industrialization
of a once flourishing industrial power is not war, but declaring
gold a taboo. Yet, as the example of the German example shows,
the process is not irreversible. With a sound currency backing
producers and savers, the country could re-generate her industrial
base. It could regain its industrial capital. But it takes discipline,
cutback on wasteful consumption, savings and, above all, monetary
leadership.
It is still not too late to
reverse the train of destruction.
Just open the U.S. Mint to gold.
CORRECTION
The date for Session Four was
incorrectly stated in the last announcement. Session Four is
planned to take place in Szombathely, Hungary (at the Martineum
Academy where the first two sessions were held) from July 3 to
6. The subject of the 13-lecture course is The Bond Market
and the Market Process Determining the Rate of Interest (Monetary
Economics 201). For more information please contact GSUL@t-online.hu.
Further announcements will be made on the website www.professorfekete.com.
Apr 1, 2008
Professor
Emeritus
Memorial University of Newfoundland
email: aefekete@hotmail.com
  Professor Antal E. Fekete was born and educated
in Hungary. He immigrated to Canada in 1956. In addition to teaching
in Canada, he worked in the Washington DC office of Congressman
W. E. Dannemeyer for five years on monetary and fiscal reform
till 1990. He taught as visiting professor of economics at the
Francisco Marroquin University in Guatemala City in 1996. Since
2001 he has been consulting professor at Sapientia University,
Cluj-Napoca, Romania. In 1996 Professor Fekete won the first prize
in the International Currency Essay contest sponsored by Bank
Lips Ltd. of Switzerland. He also runs the Gold Standard
University.
Copyright ©2005-2010 by A. E. Fekete<
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