Author Archives: Luke

Who is Howard Buffett?

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Howard Buffet was a man of the Old Right.  He was a Congressman from Omaha, Nebraska in the middle of the 20th century.  He was firmly opposed to government inflation.  He passionately wanted to restore the dollar’s redeem-ability in gold.  He was for free markets and opposed to foreign adventurism.  He was Warren Buffett’s father and one of the greatest representatives of the 20th century.  To understand how the ideas of conservatism changed from the middle of the 20th century to today, Howard Buffet is a great example of what “conservatism” was and what it may be again.

 

Sometimes it is interesting how life and history bring out connections that a person never expected.   Howard Buffet graduated from the University of Nebraska in 1925.  He also attended Dundee Presbyterian Church, which is a couple of blocks away from my house and is still a beautiful building today.  He was personal friends with the greatest economist of the 20th century, Murray Rothbard, whose works I still find enjoyable and relevant today, even for being decades old.  He was also friends with “Mr. Republican”, Robert Taft, who is almost universally considered one of the top three most influential Senators of the century, and who I also look to for inspiration.  Howard Buffet was considered as the “conservative firebrand” of his time, though most conservatives today would find many of his ideas very different from their own.

 

Conservatives today would find many of Buffet’s ideas strange, quirky, or maybe even isolationist.  This is unfortunate because Buffet’s ideas were mainstream conservatism at the time and still represent true conservatism in its real form as opposed to today’s Neo-conservatism which passes for generic “conservatism” with the general public.   Howard Buffet believed in a firm gold standard and understood that true liberty could not exist without it.   Buffet pointed out that the first thing that dictators such as Mao, Stalin, and Hitler do is to end the gold standard in their respective countries.  This should make any citizen hesitate when considering whether the state should control the money supply or whether it should be independently held by the people.  Howard Buffet’s prediction in the 1950s in which the gold window would collapse were finally proven correct in 1971.  Whether a complete monetary break down happens remains to be seen but, the United States seems to be getting closer every day.  Howard Buffet also pointed out that a gold standard is the only real restraint on government largesse and that scraping the gold standard would lead to runaway deficits financed by inflation.  Most importantly, Howard Buffet understood how a gold standard was important to human liberty as the right to bear arms.  Without the gold standard, man is a slave to the whims of bureaucrats and the banking interests.

 

Howard Buffet was opposed to the Korean War and was “convinced that the United States was largely responsible for the eruption of conflict in Korea”.  Such a statement today would likely draw boos at a republican convention today but, this was the widely held view of most conservative republicans at the time.  Howard Buffet was wise to understand the limits of government intervention at home and abroad.  He correctly looked at the Korean War as an extension of Wilsonian progressivism in the Pacific.  He pointed out correctly that wars such as this also bring about tyranny and socialism back home.   Howard Buffet pointed out that

 

            “Even if it were desirable, America is not strong enough to police the world by military force. If that attempt is made, the blessings of liberty will be replaced by coercion and tyranny at home. Our Christian ideals cannot be exported to other lands by dollars and guns. Persuasion and example are the methods taught be the Carpenter of Nazareth, and if we believe in Christianity we should try to advance our ideals by his methods. We cannot practice might and force abroad and retain freedom at home. We cannot talk world cooperation and practice power politics.”

 

For today’s Neo-conservatives, this talk would be political heresy.  No country is too small to intervene militarily.  Howard Buffet also raised a similar view on the Vietnam War that the socialist Lyndon Johnson dragged us into, “When the American government conscripts a boy to go 10,000 miles to the jungles of Asia without a declaration of war by Congress (as required by the Constitution) what freedom is safe at home? Surely, profits of U.S. Steel or your private property are not more sacred than a young man’s right to life.”  Once again, this would make modern Conservatives cringe:  “Surely it is irresponsible to bring up who is making profits during such a noble crusade?  As far as the constitution goes, we can’t let a dreary old thing like that keep us from carpet bombing a bunch of savages in Cambodia!”  Though maybe strange today, Howard Buffet’s view on war is what conservatism really means.  The constitution is the highest law of the land and should be obeyed.  There is no quicker way to enslave free men at home than to conscript them and send them by force to wars of political convenience abroad.   There is nothing American about conscription, it is a throwback to the European idea that the state owns every citizens’ life and can dispense with it at will.  As Milton Friedman pointed out, and as the wars today demonstrate, there is no real need for conscription, it is simply a way to force people into a life threatening job at below market wage rates.

 

For conservatives to understand what conservatism really means, they should look into the history of the conservative movement.  They might be surprised to find that the leaders of conservativism in the last eighty years are very different from most fraudulent politicians that claim the title “conservative” today.  They might even find people like Howard Buffet staring back at them through the pages of history gently reminding us of the true meaning of the constitution.

 

Backdoor Martial Law?

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Just recently the United Sates senate passed a bill that would allow the military to detain any American citizen indefinitely anywhere in the world, including the United States, without presenting any charges.  You read this correctly.  The United States military can pluck anyone off the street at will if the president does not veto this bill.  So far a wide array of government organizations have come out against this to include the Pentagon and the FBI but, the 60 senators voted for this bill anyway.  Many people thought that after the killing of enemy number one, Osama Bin-laden, that such Orwellian legislation would no longer be passed but, I guess this is not the case.   We truly live in bizarre times, such legislation is almost unbelievable! Then again, the state of society today would have almost been unbelievable 20 years ago.  We really do live in a fantastic age.

 

I don’t think I should have to go into how monstrous this legislation is.  It should be obvious to anyone that this totally uproots the constitution and the hundreds of years of precedent not to use the military to police the civilian population.  Instead of focusing on this law that is obviously immoral, I think it would be better to focus on how we got here.

 

To most lovers of liberty that understand the constitution and the law, this bill is unlikely to surprise them.  The eroding of the constitution has been happening for a very long time and no one really seems to care.  Children are not taught about natural law in schools and have no idea what it truly means to have a “right.”  Most people take their freedoms for granted and never expect the institutions that they have grown to respect to betray them.  They are taught that governments are the protectors of liberty but, in reality it is liberty’s major enemy. It can be seen throughout history.  When populations are forced into serf like existence, it is usually by their own government, not a foreign power.  To expect our country to be somehow unique in all of history in this regard is comfortingly naïve but, is not true, especially when one takes a hard look at our own history thus far.  The Federal government deported congressmen in the civil war and used union troops to intimidate Supreme Court justices in the middle of the night.  Woodrow Wilson also locked up thousands of people that wrote articles or spoke critically about our involvement in World War I and the draft.  FDR locked up thousands of Japanese without charge while allowing German Americans to live unmolested.  Though the American people are naturally good human beings, the American government, like any government, often has little qualms about crushing individual liberty if it thinks that it can get away with it.  I think part of this is the kind of people that are attracted to government positions.  They are not the kind of people that want to work or serve the public but, they want to shape society into their ideal image.  They truly think that people are too dumb to rule themselves and must be forced to behave in ways that conform to its rulers ideals.

 

Another reason that we are here today is because the government over the last hundred years has entered into every sphere of human activity.   Slowly the public has become desensitized to government involvement in even the most personal activities.  If the government says who you can marry and what you can put into your body, regulate every single economic activity under the sun, and take a cut of every monetary transaction, is it so hard to believe that the government might treat us as their property?  If I can’t decide what to put into my own body, is it truly mine?   Once you claim that the government has the right to protect you from yourself and violate property rights in every area, it is hard to make the argument that you are still your own person and are entitled to any right whatsoever.

 

For over a hundred years the American government has also been in charge of education and for over a hundred years the old studies of philosophy, law, and natural rights have given way to simple accreditation instead of learning.   The nonsensical idea of appreciating cultural diversity instead of embracing natural law is now the style of education.  The public simply does not have the cognitive tools to deal with such assaults on liberty because reason is no longer taught.  Children are told what to think, not how to think.  Docile consumers are much better than a free thinking public that understands the rule of law.

 

In more recent times the loss of liberty and the flagrant violations of the constitution have accelerated.  The Patriot Act allows roving wire taps and the FBI to search a person’s house without a Judge’s authorization.  The TSA is ruthless in sexually abusing old ladies, house wives, and children, while taking pornographic pictures of them.  SPC Manning was held for almost a year with no charges being filed.  The president has ordered the assassination of an American citizen, an act which also resulted in the death of a sixteen year old, who was an American citizen as well, with no authorization whatsoever.  This recent bill is the next logical step of a government that is slowly ratcheting up its police powers.  It simply codifies into law what the government has been doing anyway.  Hopefully this law is a wakeup call to people telling them where this country is headed.  But for those that love liberty, this bill is shocking only in degree, not in kind.

 

If there ever was anything to the slippery slope argument, this bill is it.  I generally don’t like using the slippery slope argument because the incredulity of most people usually just results in them rolling their eyes.  But this is a glaring example of how totally true the argument is.  If you let the government kill citizens overseas with no charges, one day they will grant themselves the power to lock up citizens at home without charges.  Predator drones flying over cities might not disturb some people but, in a few years they might by flying up to people’s windows looking to make sure that you are not doing anything in your house that the government deems a crime.  With the list of non-violent nanny state crimes growing everyday, this is truly a scary thought. This is the natural way governments work and when the government starts routinely flying drones up to people’s windows, it is likely most people won’t really care that much, even though we would find it outrageous today.  People would have also found the idea of a President assassinating American citizens outrageous during Reagan’s day but, the people today barely raise an eyebrow.  We have been headed down this slippery slope for a long time now and I don’t like to think about what the bottom looks like. But if history is any guide, it will be pretty darn scary.  Let’s hope we never get there.

 

Liberty is never taken all at once.  It takes years, often decades until one day people start waking up and realizing they are no longer free and have not been for a long time.

Maybe a decade or two from now Americans might wake up thinking the same thing.  Maybe liberty is truly the greatest under-appreciated gift in the history of the world.  Maybe the constitution’s greatest hour of danger is now.

Black Friday

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I don’t really like crowds, shopping, or lines. So Black Friday sounds like complete torture to me; I never really participate in it.  One person even told me that more people shopped on Black Friday than voted.  At first this surprised me and I thought this was yet another indication of how the public has little care for national politics but, then I got to thinking…  Is this not a somewhat rational thing to do?  Shopping might actually be better than voting if you think about it.  If I go shopping, at least I will be getting something cool at a cheap price (assuming I don’t get pepper sprayed or assaulted by the police).  If I vote, I will get more of the same. The creeps in politics never really change. 95% of the people in congress are complete liars.  Whatever party you vote for, they are all corrupt. So hey, if politicians are sending the country to Super Huge Financial Armageddon and can’t even reduce the deficit within a Super Secret Cloak and Dagger Committee that no one has access to except for lobbyists, we might as well go out with a big bang and rack up as much credit card debt as possible on Black Friday!  I guess the shopping public are smarter than I give them credit for. At least they know what a value is when they see it.  If the Republican primaries are any indication of what the mindset of the voting public is it means that the voting public can’t decide what the heck they want.  Primary voters will apparently forgive any transgression for whatever politician that is the media’s darling that week and can be led around like lambs.  Black Friday shoppers on the other hand are hard core idealists that will not let anyone stand in their way to get what they want!  You might not like their ideals, but hey, they have commitment!  Dreary primary voters will apparently clap at any made for TV slogan and like whatever flavor they are told, (sigh), it makes me bored just thinking about it.  Just look at any political debate in the last 30 years, totally boring, the only thing we can hope for is that some candidate will make some kind of gaffe that the media will hound him relentlessly about for a week until the next guy messes up.  Black Friday though, now that is ACTION!  I don’t even have to be there, I can just watch it on TV!  Maybe in the next debate someone will at least bring pepper spray or something, that should make things more fun.

 

Well, after getting a little side tracked there, what does interest me about Black Friday is how it is touted as some kind of economic gauge for the nation’s economy.  These economists say how great the day was because sales went up something like 6% over last year.  These are likely the same economists that never saw the crash of 2008 coming or thought that TARP and all the other stimulus packages would bring us to a new era of prosperity.  The first thought that came to my mind was the 6% increase has been about the same rate of inflation or lower even when considering real inflation which is around 12%.  So this statistic means nothing really, it is all inflation driven at best and most likely it is a worse year for buying than last year.  Then the next obvious thought that came to mind was, who cares?  Consumption does not equate to economic growth, production does.  If these people saved their money and put it into banks, these banks would lend it to people who would make long term capital intensive projects that produce things like cars and computers.  Instead, all this consumption in the present actually makes us poorer, because we are consuming our stock of capital now, in the present, when it could bring much more wealth in the future.  Lastly, even if consumption was a valuable economic indicator (it isn’t), this could actually mean that people are buying now instead of buying in the future because people are cash strapped in a bad economy. They are buying now when there are good deals rather than over the next month, overall consumption might be the same or even less during this holiday season.  This is similar to the Cash for Clunkers program, when people who were planing to buy cars in the fall, and instead came in during the summer to sell their “clunkers” so the government could pulverize them to save Gaia or something.  That is a whole other topic but, instead of destroying billions in economic wealth, we could have given all those cars to homeless people or single mothers or somebody like that but, Mother Earth comes before mere Human Beings, citizen!  So calm down and watch me poor salt in the gas tank.

Well, anyway, back to Black Friday.  The lack of understanding of economics concerning Black Friday is also pervasive in every other area as can been seen from cockamamie programs like Cash for Clunkers, to the Fed printing of 7.7 trillion in secret (that is currently blowing up the next super bubble).  The list could go on and on but, if people want to know how we got here just look at what pundits and most economists are saying on TV.

The FED pumped in 7.7 Trillion

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The Federal Reserve pumped in 7.7 trillion into the banking system in 2008 to keep the American banking system afloat.  This had been secret information until Bloomberg used a freedom of information act request to get these numbers released (thank god we still use the FIA).  This number is almost unimaginable.  For those that believe that the Federal Reserve should not be audited, they should really think about what a mind boggling sum of money this is.  I heard not so long ago that a trillion dollars in one thousand dollar bills would create a stack of money 67 miles high. 7.7 trillion would make that stack 515 miles high.  I read on another website what 7.7 trillion could buy:

  • 199 Warren Buffets.
  • 22 Apples (the multinational corporation, not the fruit).
  • 10 Manhattans (the major metropolitan area, not the cocktail).
  • 71 times the cost of Hurricane Katrina.
  • 76 percent of the value of all the gold mined in human history.
  • About half the entire U.S. national debt.
  • $24,624 for every man, woman and child in the U.S.

The whole idea that the country and the stock markets are concerned about our national debt when the Federal Reserve can create half of that amount at the stroke of a pen without any congressional oversight is almost unbelievable.  I should not have to remind people that at least a couple trillion went to foreign banks!

The inflation from this huge surge of liquidity into the monetary system has not been felt as of yet in the economy.  The banks are still holding onto large amounts of this money.  But, this can not last forever.  When this money does start finally rushing into the economy, we can expect a massive surge in prices in all the items that people need most, like food and fuel.  If this is not a large enough number to make people wonder about the stability of our banking and monetary system, then I do not know what is.  If you have the resources, you should invest some money in commodities.  If you do not, you should try to buy the necessities that you use everyday ahead of time instead of waiting for the coming inflation. If you like stocks, you should buy them in commodity rich countries with strong currencies like Norway, Australia, and New Zealand.  Or maybe you just want to sit like a bump on a log and trust our wise Federal Reserve bankers.  The choice is yours.

 

 

 

Unmanned Weaponized Drones now fly over US cities.

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Some food for thought when you are in your house and think that you are alone, these unmanned weapons platforms, err, I mean “drones”,  will soon be equipped with thermal imaging and possibly x-ray cameras.  They are already equipped with stun guns and other “less than lethal weapons”.  Calm down citizen, this is for your safety.

 

The Judge Explains

 

 

The Hope and Optimism of the 19th Century

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I have always been amazed at the confidence that mankind has had in itself throughout the 19th century.  Everyone looked to the future with hope.  They knew all the way down to their bones that life would be better for their children than it was for them.  I remember reading old news papers for history papers and being so interested in how optimistic they were.   At the end of the 19th century and at the turn of the 20th century, all the newspapers in the country wrote about how amazing the inventions were and how much progress had taken place in the last century.  People were amazed by technology and wrote how someday soon human beings would invent the “Aeroplane” and reach the heavens for the first time in history.  Human ingenuity seemed limitless.  All the problems of the world seemed solvable (it is interesting to compare this to the yawn that modern civilization let out when we passed into the 21st Century with much greater technology.)

It was an era of peace throughout civilization with only small skirmishes happening every so often on the periphery.  There was not a major war between any of the European powers for almost a century.  For the first time in history a middle class rose up and was able to live at and above a bare subsistence level.  They were able to buy things that used to be reserved for the kings of old. The most popular books at the time were about the immigrant from Europe coming over to America to work in a factory and eventually becoming a Titan of the industry.  These were not just stories either, this stuff actually happened.  It was thought that a resourceful individual could accomplish anything with ingenuity, hard work, and a little luck.  No longer did people have to be born with noble blood to become influential in the world.  No longer did people feel that their destinies were somehow manipulated by powers outside their control.  Politics was more like a spectator sport because bureaucrats had such little power to influence people in any significant manner.

How collectivist philosophy eventual brought it all down is a sad story for another day but, here is a good video on what it was like before.

Is Austrian School for the Gold Standard?

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Many people think that the Austrian school is in favor of a gold standard but, this is not entirely true.  While the Austrian school would say that reinstating a true gold standard would be profoundly positive for the economy (ending the boom-bust cycle,  inflation, trade imbalances, malinvestments, and making for a much more prosperous society), they would not ultimately support it as an end goal.

First, it is important to understand how money arose in the first place.  Money arose naturally in the free market through trade.  Direct trade obviously does not lend itself to be very handy when I have something that no one or, only a few people want.  If I raise cows and want to buy a pair of socks, I have to find someone who has socks who will trade for my cow.  Most likely they will not have enough socks or more socks than I need for the cow, thus making direct trading very inefficient.  Every social order arises with some medium of exchange very early on.  At first it just needs to be a good that is widely demanded.  So if I have the same cow, I can now trade it for apples, which in this example enjoy wide demand throughout society.  With these apples I can now go to anyone and buy any good or service because apples are widely known to be high in demand.  Now I can sell my cow for a couple hundred apples and give the guy with the pair of socks maybe a dozen of them.  He can then go and sell his apples and buy something that he wants while I will have apples left over to buy more items for myself.   Apples now have become a “medium of exchange” but ,they would not be considered money under the Austrian definition as I will explain later.  Examples of mediums of exchange naturally coming into existence are common, with the most obvious example at the top of my head being cigarettes in prison being used for trade (whether these prisoners are using a more honest “money” than the Federal Reserve is another matter!)

As a society becomes more complex, apples become insufficient as a medium of exchange.  Apples rot, apples are fairly common (have low value per unit), and the supply of apples changes greatly from season to season.  If apples were the best thing out there for a medium of exchange, we would likely use them, even in today’s complex society.  Luckily, nature offers us a much better medium of exchange, precious metals, specifically gold and silver.  Gold and Silver naturally arose in the free market by the hand of free acting individuals.  When a society starts using precious metals it has finally crossed the threshold from a medium of exchange into “money”.

Money must have certain properties:

1.  Value in itself- A society must widely accept whatever good that is used for money as valuable.  Even if it was no longer used as a medium of exchange it would still be desired by a large amount of people.  This is why Federal Reserve notes are not “money” but are instead currency, because they do not have value in themselves.

2.  Homogeneous- money must be easily divided with all parts being the same thing.  This is why land or diamonds do not make good money(the value of land varies greatly from place to place and each diamond is different and must be appraised individually).

3.  High Value per unit / scarce-  Money must have a high value per unit.  This is why water does not make good money, even though it is critical to life, it is relatively abundant.

4.  Easily Transportable – Money must be easily exchangeable and must be able to be easily transported. This also relates to “High Value per unit.”  It is much easier to move $10,000 of diamonds than $10,000 of iron .

5.  Durable-  It must not be able to rot like seeds, apples or tobacco.  It must be stable and able to last for years without corrosion or rot.

6.  Relatively Stable Supply-  Money can not change in supply by large amounts because of its critical role as a “unit of account”.  Basically, long term capital investment projects require money that stays at a stable value over time in order to calculate financial costs over many years. Any growth in the supply of money should be predictable over time (this is one of the reasons gold can be used as money, its supply grows at a steady rate of about 2%  per year)

For more on money see the works of Mises and Rothbard

As we can see, money naturally arose through free acting individuals.  So how did we come about to having a “gold standard”?

The dollar is a good example of how free market money gradually became subverted by the government.  A brief history:

The “dollar” began in sixteenth-century Bohemia as a one-ounce silver coin minted by the Count of Schlick, who lived in Joachimsthal. The coins were called  Schlichtenthalers. This was shortened to “thalers” and when the coins made their way into Spain, the coins became known as “dollars”.

The Spanish milled Dollar was a silver coin carrying the name Dollar and having a weight in silver of approximately 368 to 374 grains of fine silver. The Spanish Dollar, was the most common coin in circulation in the colonies prior to the American Revolution. In other words, the medium of exchange selected by the free market, became the Dollar of the United States. A silver coin of 368 to 374 grains of fine silver is what the word Dollar means as used in the Constitution. The Constitution and the law at the time merely codified what was already commonly accepted by the people of the United States.

There is some controversy whether gold arose as money naturally in the free market or whether it was a result of government intervention.  What is known for certain is that gold arose during the 19th century United States when there was heavy government intervention into the monetary system.  For simplicity’s sake, we will suppose that gold arose on the free market.

By the end of the 19th century, all the governments in the world were on a gold standard, all money was valued in gold. (It is important to point out that there were other moneys in circulation like silver and copper in coins but they were not valued in their weight like in the past but rather in whatever monetary unit a nation used, like dollars for example.  This created distortions in the monetary system.  We will skip over this for simplicity’s sake.)  So the dollar would be a measurement in weight of gold, specifically 20 dollars could be exchanged for an ounce of gold, or 1 dollar would be 1/20 of an ounce of gold.  The same was true for all of the other currencies in the world.  One hundred Franks could be exchanged for an ounce of gold. Same for German marks or anything else.  So the whole world was in a defacto gold standard.  Even though each country called their money by a different name, it was simply a weight measurement of the same good, gold. To give people an idea of how stable the world’s money supply was, there were hundred year bonds issued by private companies in the beginning of the 20th century and global trade, as a percentage of the global economy, was higher than it is today!

Then the largest disaster in world history happened, World War I, Pax Britannica finally ended in a bloody inferno.  What used to be a sacred contract, the ability of the people to redeem their paper notes in hard specie, was “temporarily” suspended.  Every Western nation had their economies and monetary systems hijacked by their respective central governments.   Today, it is known as Total War or War Socialism. Basically, the idea was that every ounce of the economy of each waring nation would be outright nationalized or remade in the fascist economic model (property remains private in name but, it is totally controlled by the government) by the central government in the “war effort.”  In summary, it was not enough to take over industry, the monetary system of each country had to be undermined as well.  Simply put, their was no way to pay for the war through taxes, the populations of the waring countries would have likely rebelled at such a high cost.  So they had to steal it… through inflation. By ending redemption in specie, governments could print as much paper notes as they wanted and have people accept them as money through force.  Fraudulent paper notes (they no longer were redeemable, thus violating contract law) were used to buy real material wealth for the war effort.  World War I finally ended but not without unimaginable damage.  For this article’s purposes, some of the worst damage came in the loss of faith in government contract and future precedent to manipulate the monetary system.

Although the United States never went off the gold standard during World War I because of its relatively late entrance, all the other countries in the Western World going off the gold standard had a profound effect on the U.S.  Britain expanded its “money” (paper notes) supply during the war even though it had even less gold in its vaults by the time it was done.  The British made a fatal mistake and that was to reinstate the Pound at its “pre-war parity”.  That is, the pound after the war could be redeemed for the same amount of gold as before the war even though there were far more “paper pounds” in circulation.  Next to the war, this was probably one of the worst decisions in the 20th century (interestingly it was Winston Churchill who most pushed for this because of “British Pride”.)  So instead of facing reality and devaluing the pound, they made it seem as though the pound was just as strong as it was before.  To pull this off, the Central Bank of England had to convince the U.S. Federal Reserve to inflate the dollar so that the weakness of the pound would not be exposed.  From 1925 to 1929, the Federal Reserve did just that. Stocks began to sore and everyone was making money hand over fist because they thought they were wealthier than they were.  But this could not last forever. As predicted by a contemporary at the time, Ludwig von Mises, this inflation ended in collapse and later became the Great Depression.

Although Herbert Hoover tried massive stimulus efforts to revive the economy, like the Hoover Dam and other public works, the economy continued heading south (sound familiar?).  Hoover’s mistake was that he tried to keep the boom going instead of letting the malinvestments clear out.  FDR came in campaigning on returning to the free-market but instead took Hoover’s policies and put them into overdrive.  Getting back to the monetary realm, FDR confiscated all gold from the people in the United Sates to pay for his New Deal programs.  Gold was revalued from 20$ an ounce to 35$ an ounce but, it was no longer redeemable or even legal to own at all in the United States (the government would not make it legal to own gold again until the 1970s).  No longer could people have the comfort of holding gold Eagle coins in their hand, they were at the mercy of whatever the government decided to do with the money supply.  So now the government claimed that thirty five dollars was worth an ounce of gold but, people could no longer own gold so this meant little.  As we shall see, this quasi gold standard was the beginning of the end.

To fast forward a little bit, when World War II ended, the world came up with a new monetary arrangement known as the  Brenton Woods Agreement.  The basics of it were simple.  The United States would back its dollars in gold and every other country in the world would back their currency’s with dollars.  So, the Bank of Japan would keep dollars in its vaults and instead of making Yen redeemable in gold, Japan would make Yen redeemable in dollars.  If Japan wanted gold, they would convert yen to dollars, and then they would send their dollars to the Federal Reserve and the Federal Reserve would send gold back to them (or simply put gold in a new pile that was allotted for Japan within the Federal Reserve Bank). It worked like a giant pyramid with gold on top, then dollars on the next level, and then the fast amount of the rest of the world currencies on the bottom.  The whole thing holding Brenton Woods together was the “good faith” of the United States; that they would not inflate.  The first rule about governments and money, if they can inflate they will, and so the American government did.

The largest inflation came in the 1960’s with Lyndon Johnson’s Great Society program and the Vietnam war. They were not paid through taxes but, instead were paid through inflation (weird huh? Kind of like Afghanistan and Iraq?).  Inflation finally hit during the Nixon administration.  There were way too many dollars floating in the world and it became obvious that the United Sates did not have the gold to back them up.  It was kind of like a bank run with countries as customers and no one wanted to be the last guy to redeem his deposits.  This is when Nixon finally closed the “gold window”, supposedly temporarily, because of the crises. It was basically a global default with all the countries in the world being defrauded out of what was owed to them by contract; the gold in the vaults of the Federal Reserve.

Some people call what we have today as Brenton Woods II because we still live in the same system even though their is no gold backing the dollar.  The pyramid still works the same but, the dollar is at the top.  All the other countries in the world still have dollars in their vaults even though they are no longer redeemable for gold.  This is important to understand because many people think that our monetary system was put together by a bunch of wise economic minds but, this is not true.  It exists the way it does because Lyndon Johnson and Richard Nixon messed up big time.  They inflated too much and the central banks of the world called their bluff.  I guess old tricky Dick gets the last laugh since in the end, the joke was on them.  They never got their gold They just hold dollars that are redeemable for, well, nothing.  Ha ha, what a bunch of suckers!

Today

The government has slowly over time subverted natural money.  As you can see, even with a government gold standard, the government was eventually able to find a way to inflate.  Most Austrian Economists would like to see the free market in charge of money again and have the government completely out of it.  Time and time again, the government has shown itself not to be trusted, so why give them the power again?  A government gold standard would be preferable to what we have today but, ultimately it should be the market that decides what the medium of exchange is.  Most likely, the market will choose gold and silver if the past is any guide but, maybe not.  We simply don’t know for sure.  What we do know for sure is that every fiat money system in history has collapsed.  The odds are not on the Federal Reserve’s side. For some reason, the bureaucrats in DC don’t strike me as the kind of people that beat the odds.

The Sun Causes Global Warming?

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I read this article a few months ago.  I hate to talk about Global Warming because it incites a lot of emotion but, I thought this was interesting because it comes from CERN, a group of physicists that I have a lot of respect for (climatologists, on the other hand, seem more like astrologers divining the universe through observing some kind of mystical Ptolemaic cosmos) .  Warning, this is an article about CERN’s findings, it is not published directly by CERN (though it links to CERN’s articles).