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SILVER THEN & GOLD
NOW: IS IT REALLY THE SAME?
Gold bears like to
compare the present gold market to silver after 1873. Then, after
the US and Germany had officially demonetised silver, Germany had
loads of excess silver to sell. That cast a pall over the market
for nearly 30 years, driving silver lower and lower. Today (so runs
the attempted analogy) central banks have demonetised gold and are
busy selling it off. That constitutes the dominant condition in the
gold market, and will for decades to come.
SIMILAR, BUT NOT THE
SAME
Nice try,
but circumstances are too different for an analogy. In 1873 the
Germans recalled all their silver coinage to set up a new monetary
system for the new German Empire proclaimed in 1871. The big
question was what they would do with that silver, and how fast. It
was the end of the long fight for bimetallism in which silver and
gold side by side played their separate parts in the monetary
system. In fact, silver played the primary part in most people’s
(and most nations’) daily lives. But it was not a shift to a
monometallic gold standard at all, but rather a shift to a mixed
gold & bank credit standard, somewhat new at that time (on a
cartelised, national basis), but by now, in 2002, an old, old trend.
THAT WAS THEN, THIS IS
NOW
Today we look around us
and see that bank credit and its whole system – fractional reserve,
irredeemable currencies, and central banks – have failed, or are in
the process of failing. Not surprising, that -- it is 17th century
technology and social theory, long past its usefulness in the 21st
century. Where once hundreds of currencies competed, today the
market has been reduced to three, the Euro, the yen, and the US
dollar. Each stands on a precipice, and only political stage
management and fragile “confidence” prop them up. In the wake of
the market liberalisations of the past 20 years, central banks and
national finance ministries have lost the power to seal off their
borders to protect their mismanaged currencies. In fact, the market
tail now wags the central bank dog, and few would dispute it.
THEIR STRENGTH IS
WEAKNESS
So looking at the gold
market, central banks selling off their gold holdings is not a sign
of strength, but weakness. Would it be a sign of strength in
a decayed aristocratic family for them to sell off the family jewels
to keep up appearances? Hardly. Gold is the asset of last resort,
so central banks are announcing, in effect, that the last resort is
gone – the last link with reality and value is broken.
Other analysts look at
the market and see a situation resembling silver’s in 1873. Central
banks [supposedly] have 33,000 tonnes of gold, and want to get rid
of it. Therefore the only questions are, how will they get rid of
it and how fast? (We pass by as irresolvable the larger and
more piquant question, viz., whether they have any
gold left at all, or whether they have leased it all out.)
But unravel the
presuppositions behind that analysis. It presumes that the
historical trend is marching with certain steps toward a system
where value-based money will be banished. It is, in a sense, the
apotheosis of state power, the ultimate realisation of the State
as God. The state speaks, and it is done; the state commands, and
it stood fast. The state says that fiat money will have value, and
it will.
But this is not
progress, except toward tyranny.
THE ONLY TWO THEORIES
There have always been
two and only two theories of money, two explanations or
philosophies: money as value and money as social construct.
By the time of Plato and Aristotle the lines between these two had
already been drawn. The first says that money must have value in
itself, a value all of society accepts. Therefore every
exchange among men, whether it involves money or not, becomes an
exchange of value for value. This sort of money establishes the
security of property, social stability, and self-governing free men.
The second theory, the
social construct theory of money, says that money need not
have value in itself, it only represents value.
Rather “money is whatever we say it is,” which of course leaves a
big question unanswered: who will “we” be? Be sure that the
people who say “we” never include “you” and “me” in that pronoun.
This sort of money leads always to the abolition of property rights,
social instability, and tyranny.
Don’t bother arguing
with me – argue with history.
None of this is new; it
was already old when fiat money brought down the Roman
Empire. Therefore the analysts today who believe that some sort of
inevitable “historical progress’ treads with steady Hegelian steps
toward state-enforced bank credit money merely shows their
ignorance. History does not move in cycles (except as mankind’s
ignorance repeats his mistakes), nor in some sort of inevitable
“progress” that will “fulfil history.” Ahh, the world is
progressing, all right, but in this direction: “The knowledge of
God shall cover the earth as deep as the waters cover the sea.”
And the direction of
that progress does not lead to more theft, more national fraud,
more tyranny, but just the opposite. Thus it is not gold
that is headed for the dustbin of history, but fiat money.
And what about gold sales by central banks eager to flog one more
drop of usury out of their ”assets” stolen from the people? That
only marks the advent of their extinction, not gold’s.
So to central banks I
heartily say, “Sell it! Sell all your gold! Throw it on the market
all at once! Move that much closer and faster to your final
annihilation, and welcome. Once you’re all gone, we can go
back to real progress.”
-- F. Sanders
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